This week, the Securities and Exchange Commission adopted amendments to the proxy rules. The amendments amend the definition of “solicitation” in Exchange Act Rule 14a-1(l) in order to make clear, consistent with the SEC’s longstanding view, that it includes proxy voting advice, with certain exceptions. The amendments also revise Rules 14a-2(b)(1) and (b)(3), which provide exemptions from the information and filing requirements of the proxy rules. Reliance on these exemptions will be available subject to satisfaction of specified conditions, which include conflicts of interest disclosure, and the adoption of and public disclosure of written policies and procedures designed to ensure that registrants that are the subject of proxy advice have available to them such advice when it is disseminated to the proxy advisory firm’s clients. There are several non-exclusive safe harbors in order to provide certainty that the proxy advisory firm’s policies and procedures satisfy the principles-based requirements. The amendments also modify Rule 14a-9 to include examples of when the failure to disclose certain material information in proxy voting advice could, depending upon the particular facts and circumstances, be considered misleading within the meaning of the rule. The amendments will be effective 60 days after publication in the Federal Register, but affected proxy voting advice businesses subject to the final rules are not required to comply with the Rule 14a-2(b)(9) amendments until December 1, 2021.
The SEC supplemented prior guidance issued to investment advisers regarding their proxy voting responsibilities. The SEC’s prior guidance discussed how the fiduciary duty and rule 206(4)-6 under the Investment Advisers Act of 1940 relate to an investment adviser’s exercise of voting authority on behalf of its clients. This supplemental guidance will assist investment advisers in fulfilling their proxy voting responsibilities in light of these amendments to the solicitation rules under the Exchange Act. The guidance will be effective upon publication in the Federal Register.
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