Regulators adopted a new rule Wednesday that will change the way fund managers report how they vote on potentially controversial proxy questions ranging from executive pay to corporate environmental policy.
Fund managers have had to report such votes since 2003, but prior to the adoption of the rule at a meeting of the Securities and Exchange Commission on Wednesday, they have done so in a way that has made it difficult for investors to analyze the data. The rule adopted Wednesday will standardize the disclosures and require them to be presented in a “machine readable” format that can make comparing votes within or across funds easier.
SEC Commissioners voted to implement the new regulation along a 3-2, party-line vote, and will apply to proxy votes occurring on or after July 1, 2023.
The rule will also require funds to report their votes on certain questions about executive pay, fulfilling a mandate given by Congress through the Dodd-Frank financial reform law of 2010.
The rules “will allow investors to better understand and analyze how their funds and managers are voting on shares held on their behalf,” SEC Chairman Gary Gensler said in a statement.
Funds will also be responsible for disclosing the number of shares they have loaned to short sellers but have not yet recalled. In such a scenario, the funds would not have the right to vote on behalf of those shares.
“This would provide investors with additional information on how a filer’s securities lending activities may affect its proxy voting,” Gensler said.