CII frustrated in seeking SEC proxy adviser data

Jan 10, 2020
Investor group has filed so-far unsuccessful FOIA request

The Council of Institutional Investors (CII) is finding itself frustrated in its efforts to obtain SEC information about alleged errors committed by proxy advisory firms that is being used to help support proposed regulation of those firms.

The investor group in November filed a Freedom of Information Act (FOIA) request seeking the information at issue. Then on December 31 it appealed for dispute resolution services ‘with regard to the lack of response to the… request, which we interpret as constructive denial of the request.’

According to CII executive director Ken Bertsch, the group had not received a response from the agency as of Tuesday afternoon, although a meeting is expected to take place with SEC officials in the coming days to discuss the matter.

Specifically, CII is seeking SEC staff analysis and related materials regarding a table in the proposal that lists figures for what is described as the ‘number of instances registrants indicated particular concerns with respect to the proxy voting advice.’

In the FOIA request, CII director of research Glenn Davis writes: ‘Allegations of errors in shareholder meeting reports delivered to investor clients by proxy advisory firms (PAFs) are a major prong of the SEC’s… basis for proposing new and sweeping regulatory burdens on PAFs, including a system to guarantee that the subjects of PAF reports can access and add content to time-sensitive PAF reports before they become available to PAF clients, many of whom are CII members.

‘Given that registrants are the subjects of PAF reports, the need is clear for independent analysis by SEC staff of registrant allegations of errors in PAF reports. The preparation and presentation of the table, entitled Registrant Concerns Identified in Additional Definitive Proxy Materials, likely involved at least some level of SEC staff analysis to confirm the veracity of errors alleged by registrants.’

The SEC in November proposed amendments to its rules governing proxy solicitations that officials wrote would ‘enhance the quality of the disclosure about material conflicts of interest that proxy voting advice businesses provide their clients.’ It would also allow issuers to review and give feedback on proxy voting advice.

In addition, CII and almost 70 of its members – including CalPERS, CalSTRS, the New York State and New York City comptrollers, Ceres, Elliott Management and Trillium Asset Management – in November requested that the SEC extend the comment period on the proposal from 60 days, which ends on February 3, to 120 days. They requested the same for another proposal seeking changes to Rule 14a-8, which governs the process for determining which shareholder proposals wind up in a company’s proxy statement.

‘The two concurrent proposed rules individually, and collectively, if adopted, would result in the most significant changes to the voting rights of shareowners in decades,’ Bertsch writes in the letter seeking an extension. ‘The proposals are complex, a combined 320 pages in length, and include 345 individual questions for commentators. The proposals explicitly and repeatedly request that commentators provide supporting data. To the extent possible, we intend to be responsive to this request in comment letters.’

An SEC spokesperson did not have immediate comment on the FOIA and comment extension requests.

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