SEC Adopts Proxy Voting Policy Rules
- The Securities and Exchange Commission today posted a release adopting rules requiring mutual funds and other registered management investment companies to disclose their proxy voting policies and procedures and their actual proxy votes cast. Release Nos. 33-8188, 34-47304, IC-25922 (Jan. 31, 2003). There was a 4-1 split vote at the SEC, with Commissioner Paul Atkins opposing the new rules. The new rules are effective April 14, 2003, with later compliance dates. The adopting release is available online at
The SEC also posted a release adopting a new rule and rule amendments that would require registered investment advisers to adopt proxy voting policies and procedures, including procedures to address material conflicts of interest that may arise between the adviser and its clients. Release No. IA-2106 (Jan. 31, 2003). This proposal was less controversial, and the SEC acted unanimously. The amendments are effective 30 days after publication in the Federal Register, with compliance required 180 days after publication. The adopting release is available online at
The SEC voted to adopt the rules on January 23, 2003. The SEC press release issued that day is reproduced below:
Securities and Exchange Commission Requires Proxy Voting Policies, Disclosure by Investment Companies and Investment Advisers
FOR IMMEDIATE RELEASE
Washington, D.C., January 23, 2003 - The Securities and Exchange Commission today voted to adopt rule amendments that would require mutual funds and other registered management investment companies to disclose their proxy voting policies and procedures and their actual proxy votes cast. These amendments are designed to enable fund shareholders to monitor their funds' involvement in the governance activities of portfolio companies and to encourage funds to vote their proxies in the best interest of fund shareholders. These rule amendments were adopted by a four-to-one vote of the Commission, with Commissioner Paul Atkins casting the dissenting vote.
The Commission also voted unanimously to adopt a new rule and rule amendments that would require registered investment advisers to adopt proxy voting policies and procedures, including procedures to address material conflicts of interest that may arise between the adviser and its clients. The rule and rule amendments are designed to ensure that advisers vote proxies in the best interest of their clients and provide clients with information about how their proxies are voted.
Investment Company Amendments
The amendments the Commission approved with respect to mutual funds and other registered management investment companies require the following.
Investment Company Proxy Voting Policies and Procedures. The amendments will require a fund to disclose in its registration statement the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities. This disclosure would include the procedures that a fund uses when a vote presents a conflict between the interests of fund shareholders, on the one hand, and those of the fund's investment adviser, principal underwriter, or certain of their affiliates, on the other. Disclosure of proxy voting policies and procedures will apply to filings made on or after July 1, 2003.
Investment Company Proxy Voting Record. The amendments will require a fund to file new Form N-PX, containing its complete proxy voting record for the 12-month period ended June 30 by no later than August 31 of each year. Funds will be required to disclose the following information for each matter with respect to which a fund was entitled to vote: information identifying the matter voted on; whether the matter was proposed by the issuer or by a security holder; whether and how the fund cast its vote; and whether the fund cast its vote for or against management. Funds will be required to make their first proxy voting disclosures not later than August 31, 2004, for the 12 months ending June 30, 2004.
Availability of Proxy Voting Information to Fund Shareholders. A fund will be required to state in its reports to shareholders that information about the fund's proxy voting policies and procedures is available without charge, upon request, by calling a specified toll-free (or collect) telephone number; on the fund's Web site, if applicable; and on the SEC's Web site. A fund will be required to state in its registration statement and reports to shareholders that the fund files its proxy voting record with the SEC and that the record is available on the SEC's Web site and from the fund. A fund will be permitted to make the proxy voting record available either on its Web site or upon request.
Investment Adviser Amendments
The amendments that the Commission adopted with respect to investment advisers will require the following.
Investment Adviser Proxy Voting Policies and Procedures. The new rule will require investment advisers that exercise proxy voting authority over client securities to adopt and implement written policies and procedures for voting client proxies. The policies and procedures must be reasonably designed to ensure the adviser votes client securities in the best interests of clients, and they must address how the adviser addresses material conflicts of interest that may arise between the adviser and its clients.
Proxy Voting Information for Advisory Clients. The new rule will require investment advisers to describe their proxy voting policies and procedures to clients, and furnish a copy of them to clients upon request. The rule also requires investment advisers to tell clients how they can obtain information from the adviser on how the clients' securities were voted.
Investment advisers must have their proxy voting policies and procedures in place, and must have informed their clients of those policies and procedures, within 180 days of the publication of these rule amendments in the Federal Register.
John M. Baker <JMB@...>
Stradley, Ronon, Stevens & Young, LLP Http://www.stradley.com
1220 19th Street, N.W., Suite 600, Washington, DC 20036
(202) 419-8413 Fax (202) 822-0140
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