[15414]
December 6, 2002
TO: BOARD OF GOVERNORS No. 40-02
DIRECTOR SERVICES COMMITTEE No. 11-02
CLOSED-END INVESTMENT COMPANY MEMBERS No. 64-02
INVESTMENT ADVISER MEMBERS No. 53-02
INVESTMENT ADVISER ASSOCIATE MEMBERS No. 35-02
SEC RULES MEMBERS No. 109-02
SMALL FUNDS MEMBERS No. 54-02
RE: INSTITUTE COMMENT LETTER ON SEC PROPOSALS RELATING TO PROXY
VOTING
Attached is a copy of the Institute’s comment letter, which was filed today, on the SEC’s
proposals relating to proxy voting by investment companies and investment advisers.1
The letter expresses support for most aspects of the Commission’s proposals. In
particular, the letter supports: (1) requiring investment advisers to funds to adopt written
policies and procedures designed to ensure that proxies are voted in the interest of fund
shareholders; (2) requiring those policies and procedures to address potential conflict of interest
situations; (3) requiring funds to make disclosures to shareholders regarding their proxy voting
policies and procedures; and (4) requiring advisers to funds to maintain records regarding
proxy voting. The letter emphasizes that the Commission’s objectives and potential benefits to
fund investors could be achieved by adopting these aspects of the proposals and requiring fund
directors to approve proxy voting policies and procedures and to oversee the implementation of
those policies and procedures.
The letter strongly opposes the Commission’s proposals to require public disclosure of
proxy votes and votes that are “inconsistent” with proxy voting policies and procedures. The
letter argues that there is no evidence of any need that would justify the adoption of rules that
would impose significant harms on funds and their shareholders. The letter asserts that the
requirement to disclose votes cast would impose significant costs on funds (and ultimately their
shareholders), cause funds to lose their ability to vote confidentially, and politicize the proxy
voting process. The letter also objects to the Commission’s intended purpose of using mutual
funds as an instrument to effect changes for the benefit of all investors. Moreover, the letter
1 See Memorandum to Closed-End Investment Company Members No. 44-02, Investment Adviser Members No. 39-
02, SEC Rules Members No. 79-02, and Small Funds Members No. 37-02 (Sept. 24, 2002) (summarizing SEC proposals
relating to proxy voting).
2
states that disclosure of “inconsistent” votes in shareholder reports will incorrectly suggest that
such votes are problematic and result in encouraging funds to adopt general guidelines or to
apply their guidelines in a rigid and mechanical fashion.
Craig S. Tyle
General Counsel
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Attachment (in .pdf format)