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SEC© close to weighing possible action on proxy advisory firms

Published: Reuters
Author: Sarah N. Lynch

The SEC© Chair Mary Jo White announced that the commission will begin to review recommendations for possible regulatory action targeting proxy advisory firms.

The Chairwoman did not delve into details as to what kind of rules or changes could be in store for proxy advisory firms. Mrs. White had particular interest in hearing discussions about improving disclosure of possible conflicts and about how much investment advisers rely upon proxy advisory firms and what this means for their fiduciary obligations. Some complaints have focused on investment advisers relying too heavily on proxy advisory firms for advice, which can be problematic because investment advisers have a fiduciary obligation to put their customer’s interest first. Most recently, in a March 18 letter, 10 members of Congress, including New Jersey Republican Scott Garrett and North Carolina Republican Patrick McHenry, called on the SEC© to require more disclosures of conflicts. In a letter from members of Congress, the lawmakers said they were concerned that the SEC© does not require proxy advisory firms to disclose whether a proponent of a shareholder proposal or a competing director slate is a client. “In our view, this lack of disclosure calls into question the legitimacy and veracity of the advice dispensed by proxy advisory firms and undercuts the ability of their clients to meet their fiduciary duty to individual investors,” they wrote.

What are your opinions on increased disclosure on proxy advisory firms? Do the costs outweigh the benefits?

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