Senator Toomey Urges Congress to Pass the "Investor Democracy is Expected Act"

Senate Banking Committee Ranking Member Pat J. Toomey (R-PA) urged Congress to pass the Investor Democracy is Expected ("INDEX") Act to address "problems of asset managers voting other people's shares and their consolidation of corporate voting power."

In prepared remarks before the U.S. Senate Banking Committee, Mr. Toomey stated that the INDEX Act would return voting power to the true investors in a company by requiring investment advisers of passively managed funds with more than 1 percent of a company's voting shares, to vote those shares in accordance with the instructions of the fund's investors, not at the discretion of the asset manager. He said that the fund or investment adviser would be required to bare all expenses to implement the pass-through voting or refrain from voting completely to avoid the extra costs.

He said that the INDEX Act would:

• bar index fund advisers from voting without instruction from the fund investors, unless it is deemed a "routine matter";

• allow index fund advisers to "mirror vote," where their votes are proportionally cast with other votes in the proxy contest; and

• require index fund advisers to provide proxy statements and other materials to fund investors.

Mr. Toomey said that the proposed legislation would apply to (i) passively managed private funds, (ii) employer-sponsored retirement funds, (iii) defined benefit and contribution pension plans and (iv) thrift savings plan funds.

He urged Congress to pass legislation that will "return voting power to the true investors in a company - the people who put their own money at risk."