The Proxy Advisory Firm Disclosure Bill: A Step Towards Transparency

Introduced by Representative L. Oudermilk in the 119th Congress, the bill aims to require certain disclosures by institutional investment managers in connection with proxy advisory firms.
Read the full bill here.

Background and Purpose

The Securities Exchange Act of 1934 is amended to require institutional investment managers to disclose their voting practices in connection with proxy advisory firms. The bill aims to promote transparency and accountability in the proxy voting process.

Key Provisions

Duties of Institutional Investment Managers

Every institutional investment manager which uses the mails, or any means or instrumentality of interstate commerce in the course of its business as an institutional investment manager, which engages a proxy advisory firm…
Economic Analysis Before Voting

For every shareholder proposal for which the institutional investment manager votes (other than votes consistent with the recommendation of a board of directors composed of a majority of independent directors)…

Disclosures Required

The bill requires the following disclosures:

An explanation of how the institutional investment manager voted with respect to each shareholder proposal;
The percentage of votes cast on shareholder proposals that were consistent with proxy advisory firm recommendations, for each proxy advisory firm retained by the institutional investment manager;
An explanation of how often the institutional investment manager voted consistent with a recommendation made by a proxy advisory firm, expressed as a percentage;

Definitions and Effective Date

The bill defines key terms such as “best economic interest” and “proxy advisory firm”. The effective date of the bill is not specified in the text provided.

“The term ‘best economic interest’ means decisions that seek to maximize investment returns over a time horizon consistent with the investment objectives and risk management profile of the fund in which shareholders are invested.”