Proxy Voting Responsibilities

The Division of Investment Management and the Division of Corporation Finance issued a joint Staff Legal Bulletin on June 30, 2014. The Bulletin provides guidance about investment advisers’ responsibilities in voting client proxies and retaining proxy advisory firms. It also provides guidance on the availability and Votingrequirements of two exemptions to the federal proxy rules that are often relied upon by proxy advisory firms.

  • An investment adviser and its client have flexibility in determining the scope of the investment adviser’s obligation to exercise proxy voting authority.
  • If an investment advisers exercises voting authority with respect to client securities, it must adopt written policies and procedures that are reasonably designed to ensure that the investment adviser votes proxies in the best interest of its clients and these should be reviewed at least annually for adequacy, effective implementation, and to ensure that proxies are voted in the best interests of its clients.
  • If an investment adviser has retained a third party (such as a proxy advisory firm) to assist with its proxy voting responsibilities, in order to comply with the Proxy Voting Rule, it must adopt and implement policies and procedures that are reasonably designed to provide sufficient, ongoing oversight of the third party to ensure that the investment adviser, acting through the third party, continues to vote proxies in the best interests of its clients.
  • These policies and procedures should establish and implement measures reasonably designed to identify and address the proxy advisory firm’s conflicts that can arise on an ongoing basis.
  • The guidance provides suggestions for steps that an adviser can take to demonstrate that proxy votes are cast in accordance with clients’ best interests and the adviser’s proxy voting procedures.
  • The guidance also provides suggested considerations that an investment adviser may wish to take into account if it retains a proxy advisory firm to assist in its proxy voting duties.

If you delegate the proxy voting to a third-party proxy voting firm, you still have a fiduciary responsibility to ensure that the proxies are voted in accordance with firm, client, or the third-party’s proxy voting policy, and to check on an ongoing basis that the proxy voting policy is in the clients’ best interest.

Staff Legal Bulletin No. 20 (IM/CF)



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