ICI/IDC Draft Report on Funds Use of Proxy Advisory Firms; Comments Requested by January 5th

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December 17, 2014

TO: SEC RULES COMMITTEE No. 43-14
SMALL FUNDS COMMITTEE No. 26-14 RE: ICI/IDC DRAFT REPORT ON FUNDS’ USE OF PROXY ADVISORY FIRMS; COMMENTS REQUESTED BY JANUARY 5TH

 

As previously reported, in June the SEC’s Divisions of Investment Management and Corporation Finance (the “staff”) issued guidance about investment advisers’ proxy voting responsibilities and the exemptions to the federal proxy rules that are commonly relied upon by proxy advisory firms. [1]  The first portion of the Bulletin relates to investment advisers’ proxy voting responsibilities and provides guidance to investment advisers regarding their use of proxy advisory firms. 

The Bulletin recognizes that investment advisers may want or need to evaluate and as necessary make changes to their “current systems and processes” in light of the guidance. [2]  To assist fund advisers as they conduct these evaluations, we and the IDC, in collaboration with a member working group, have prepared a draft report that focuses on funds’ use of proxy advisory firms. This draft report is organized in a Question and Answer format under the following broad topics:  (i) proxy advisory firm services generally; (ii) board oversight of proxy advisory firms; (iii) fund adviser oversight and due diligence of proxy advisory firms; and (iv) miscellaneous considerations related to proxy advisory firm oversight. The Institute’s Executive Committee directed us to prepare this report, and it has been presented to the Committee as well. We plan on releasing the final report in January.

Please provide any comments on this draft report as soon as possible, but no later than Monday, January 5 (close of business), to me at matt.thornton@ici.org or (202) 371-5406.

 

Matthew Thornton
Assistant Counsel

Attachment

endnotes

[1] See Proxy Voting: Proxy Voting Responsibilities of Investment Advisers and Availability of Exemptions from the Proxy Rules for Proxy Advisory Firms, Staff Legal Bulletin No. 20 (June 30, 2014) (the “Bulletin”), available at www.sec.gov/interps/legal/cfslb20.htm.  See Institute Memorandum No. 28238, dated July 7, 2014, for a summary of the Bulletin and related background information.

[2] The staff’s expectation is that this will be done “promptly, but in any event in advance of next year’s [i.e., the 2015] proxy season.”