SEC issues Staff Legal Bulletin after four-year comprehensive review of proxy system

Abstract

Purpose

To provide an overview of the guidance for proxy firms and investment advisers included in the Staff Legal Bulletin released this year by the Securities and Exchange Commission (SEC) after its four-year comprehensive review of the proxy system.

Design/methodology/approach

Discusses briefly the context in which the SEC’s review was conducted; the general themes of the guidance provided; the most notable aspects of the guidance; and the matters that were expected to be, but were not, addressed by the SEC.

Findings

The guidance does not go as far in regulating proxy advisory firms as many had anticipated it would. The key obligations specified in the guidance are imposed on the investment advisers who engage the proxy firms. The responsibilities, policies and procedures mandated do not change the fundamental paradigm that has supported the influence of proxy firms – that is, investment advisers continue to be permitted to fulfill their duty to vote client shares in a “conflict-free manner” by voting based on the recommendations of independent third parties, and continue to be exempted from the rules that generally apply to persons who solicit votes or make proxy recommendations.

Practical implications

The SEC staff states in the Bulletin that it expects that proxy firms and investment advisers will conform to the obligations imposed in the Bulletin “promptly, but in any event in advance of [the 2015] proxy season.”

Originality/value

Practical guidance from experienced M&A lawyers.

Citation

Sorkin, J.E., Bomba, A.P., Epstein, S., Forbes, J., Golden, P.S., Richter, P., Schwenkel, R.C., Shine, D., Fleischer, A. and Weinstein, G. (2015), "SEC issues Staff Legal Bulletin after four-year comprehensive review of proxy system", Journal of Investment Compliance, Vol. 16 No. 1, pp. 63-65. https://doi.org/10.1108/JOIC-01-2015-0006