SEC Mandates More Oversight Of Proxy Advisory Firms

Investment advisors, pension and employee benefit plans, bank trust departments and others have become increasingly reliant on proxy advisory firms. An update from Sidley Austin looks at a recent SEC staff guidance that says investment advisors should actively monitor, and presumably assess the competence and independence of, any proxy advisory firm that they retain. This is likely to pressure proxy advisory firms to reform their practice and become more rigorous – and to become more expensive as a result. This post looks at what led up to the SEC’s action, what the guidance says, how investment advisers may need to change their practices vis a vis proxy voting and reliance on proxy advisors, and how the guidance will impact the proxy advisors. They are likely to respond, the writers say, “by enhancing their policies, processes and procedures, as well as the transparency of these policies, processes and procedures. In turn, the corporate community may indirectly benefit to some degree.”