Despite the fact that proxy advisors have long operated in the face of this criticism, there has been no meaningful regulation of these firms that has significantly affected their operations or behavior.
That may be about to change. On November 5, 2019, the U.S. Securities and Exchange Commission (the “SEC”) proposed amendments (the “Proposed Rules”) to the federal proxy rules under the Securities Exchange Act of 1934 (the “Exchange Act”).1 The Proposed Rules, which passed by a 3-2 vote of the SEC’s Commissioners, would impose additional disclosure and procedural requirements on proxy advisory firms under the federal proxy rules.
To outline the Proposed Rules and their potential impact, BNY Mellon Depositary Receipts, in association with Debevoise & Plimpton LLP, has published an overview of the Proposed Rules as part of its IR Best Practices Insight series. This paper is presented in a Q&A format, and outlines key details and provides insights around possible scenarios should the Proposed Rules be adopted. At present, the Proposed Rules are standing for comment in compliance with the SEC’s 60-day comment period that is scheduled to end on February 3, 2020, unless extended.