November 15, 2019
In a move strongly supported by our Center On Executive Compensation, the Securities and Exchange Commission approved proposed rules that would require proxy advisory firms to take additional steps in order to qualify for the exemption to the federal proxy solicitation rules.
Background: The federal proxy solicitation rules are the same rules companies must follow when filing a proxy statement—and are very onerous and expensive to comply with. Under current rules, however, proxy advisory firms are provided with an exemption that allows them to issue proxy voting advice without enduring the same compliance burdens and expenses. The Center has been a strong advocate of imposing requirements for proxy advisory firms to obtain this exemption.
The proposed rules add requirements proxy advisory firms must meet in order to take advantage of that exemption and avoid significant compliance costs and burdens. These additional requirements include:
Proxy Filing Compared to Annual Meeting Mandated Days of Review More than 45 days prior to the Annual Meeting At least 5 business days Between 25 and 45 days, but more than 25 days prior to the Annual Meeting At least 3 business days Fewer than 25 days prior to the Annual Meeting No mandated review
The SEC also included a rulemaking proposal that would update the federal securities laws to explicitly include proxy voting advice from proxy advisory firms as a proxy solicitation. The inclusion of this component is aimed at a lawsuit recently filed by ISS.
Center to weigh in: The Center is generally supportive of the proposed rules and will provide comments while encouraging the SEC to finalize the rules within the next few months.