As I posted last week (see, SEC Rules on Proxy Advisory Firms Starting to Get Interesting!), the SEC held an open meeting on Tuesday at which it approved, by a 3-2 vote, proposed new rules on proxy advisory firms (e.g., ISS, Glass Lewis). I am a couple of days behind schedule on posting because of a rush of work on my day job.
The proposed Rules would require more detailed disclosure on potential conflicts of interest. However, the real game-changer would be the requirements in new paragraph (9) added to Rule 14a-2(b), which would require the proxy voting advice business (PVAB) to provide to the company covered by its advice:
- a copy of the proxy voting advice that the PVAB intends to deliver to its clients for a review and provide a “feedback period” of no less than 5 business days, if the company filed its proxy statement at least 45 calendar days before its annual meeting date, and no less than 3 business days, if the company filed its proxy statement less than 45 calendar days, but at least 25 calendar days before its annual meeting date, and
- a final notice and copy of the proxy voting advice that the PVAB will deliver to its clients, including any revisions to the advice made by the PVAB after the review and feedback period, no later than two business days prior to delivery of the proxy voting advice to its clients and no earlier than the expiration of the 5 or 3 day feedback period, as applicable.
As readers will recall, the lead-up to this story was that the SEC issued interpretative guidance in August. Then ISS sued the SEC in the federal district court in Washington, D.C., claiming that the SECs’ interpretative guidance was unlawful and should be set aside. The proposed rules follow the traditional and more accepted form of rulemaking.
The proposal will have a 60-day public comment period following its publication in the Federal Register. We expect a lot of comments both positive and negative.
We will continue to follow this closely as it gets curiouser and curiouser