SEC Commissioners Deliver Remarks at Proxy Services Roundtable

SEC Commissioners Michael Piwowar and Luis Aguilar discussed their concerns regarding proxy advisory firms at the SEC's proxy roundtable.

Commissioner Piwowar delivered the opening remarks at the Roundtable, expressing his concern that the 2003 SEC Proxy Voting release, which stated that "the duty of care requires an adviser with voting authority to monitor corporate actions and vote proxies," may have created a regulatory compliance mandate to vote every share. Additionally, Piwowar said that the subsequent SEC staff no-action letters "had the unintended effect of institutionalizing the use of proxy advisory firms to vote shares in compliance with this perceived mandate." He stated that these issues must be addressed immediately, further noting that they are inconsistent with the SEC's investor protection mandate.

Commissioner Aguilar voiced his concern regarding proxy firms' conflicts of interests. He referenced a 2010 concept release on proxy voters which stated that conflicts of interests are not sufficiently disclosed and managed. He explained that potential or actual conflicts of interest can be "cured by disclosure and efforts to insulate proxy advisory recommendations from a firm's consulting business," and echoed Commissioner's Piwowar's sentiment that the SEC's primary focus should be on protecting investors.

See: Commissioner Piwowar's Remarks; Commissioner Alguilar's Remarks. Related News: SEC Commissioner Gallagher Discusses Concerns with Proxy Advisors (December 4, 2013); SEC Chair White Delivers Remarks Regarding Role of Shareholders (with Link to the Cadwalader Quorum) (December 3, 2013); SEC Announces Roundtable on Proxy Advisory Services (with Excerpt from the Cadwalader Quorum) (November 5, 2013); SEC Commissioner Gallagher Discusses Proxy Advisors (with Link to the Cadwalader Quorum) (October 31, 2013); SIFMA Issues Letter Describing Internal Processes and Resources to Proxy Operations (July 30, 2013). See also: External Link to Reuters News Story on the Proxy Roundtable.