EXCLUSIVE: SEC proposes amendments to Form N-PX under Investment Company Act
04 October 2021 United Kingdom
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The Securities and Exchange Commission (SEC) is proposing to amend Form N-PX under the Investment Company Act of 1940 to enhance the information mutual funds and exchange-traded funds currently report annually regarding their proxy votes.
The SEC says this is in an effort to make information easier to analyse.
The proposal aims to look at the scope of Form N-PX’s current reporting obligations, a managers’ exercise of voting power, additional scoping matters for manager reporting of say-on-pay, and votes identification of proxy voting matters, among other aspects.
SEC is also proposing rule and form amendments under the Securities Exchange Act of 1934, also known simply as the Exchange Act, that would require an institutional investment manager to report annually on Form N-PX — essentially how it voted for proxies relating to executive compensation matters, as required by Section 14A of the Exchange Act.
The proposed reporting requirements for institutional investment managers, if adopted, would complete implementation of Section 951 of the Dodd-Frank Act, says SEC.
In his statement, acting chairman of the commission Elad Roisman says that while he was voting for the proposal he had some concerns surrounding the provisions related to securities lending.
“[SEC] has clearly stated that advisers and their clients can shape their relationship however they choose, including with respect to how and when advisers vote client shares. This guidance should allow for a wide variety of fund strategies — including those that prioritise voting, for investors who believe influencing corporate governance is important to their investments, and those that prioritise other ways of realising value.
“Maximising revenue for a fund through securities lending is one such value maximisation strategy. Funds can earn billions per year from lending out the securities in their portfolios, which can translate into increased returns for fund investors.”
He adds: “I wish there was greater discussion of this in the proposal and hope commenters provide us with data on this point. This commission is not a merit regulator, and we should not try to tip the scales, via disclosure or otherwise, toward or against any particular strategy.”
The SEC says this is in an effort to make information easier to analyse.
The proposal aims to look at the scope of Form N-PX’s current reporting obligations, a managers’ exercise of voting power, additional scoping matters for manager reporting of say-on-pay, and votes identification of proxy voting matters, among other aspects.
SEC is also proposing rule and form amendments under the Securities Exchange Act of 1934, also known simply as the Exchange Act, that would require an institutional investment manager to report annually on Form N-PX — essentially how it voted for proxies relating to executive compensation matters, as required by Section 14A of the Exchange Act.
The proposed reporting requirements for institutional investment managers, if adopted, would complete implementation of Section 951 of the Dodd-Frank Act, says SEC.
In his statement, acting chairman of the commission Elad Roisman says that while he was voting for the proposal he had some concerns surrounding the provisions related to securities lending.
“[SEC] has clearly stated that advisers and their clients can shape their relationship however they choose, including with respect to how and when advisers vote client shares. This guidance should allow for a wide variety of fund strategies — including those that prioritise voting, for investors who believe influencing corporate governance is important to their investments, and those that prioritise other ways of realising value.
“Maximising revenue for a fund through securities lending is one such value maximisation strategy. Funds can earn billions per year from lending out the securities in their portfolios, which can translate into increased returns for fund investors.”
He adds: “I wish there was greater discussion of this in the proposal and hope commenters provide us with data on this point. This commission is not a merit regulator, and we should not try to tip the scales, via disclosure or otherwise, toward or against any particular strategy.”
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