• SEC Approves Proxy Voting Disclosure Rules for Registered Investment Companies and Investment Advisers
  • May 6, 2003
  • Law Firm: Kramer Levin Naftalis & Frankel LLP - New York Office
  • Despite widespread opposition from the fund industry, the SEC approved new rules and rule amendments on January 23, 2003, requiring registered management investment companies to disclose their proxy voting policies and procedures and their actual proxy votes cast. The SEC also approved rules requiring registered investment advisers to adopt proxy voting policies and procedures, including procedures to address material conflicts of interest.

    Investment Companies

    With respect to fund filings made on or after July 1, 2003, funds must:

    • disclose, in their registration statements, their proxy voting policies, including how they resolve conflicts between shareholders, on one hand, and fund advisers, underwriters and their affiliates, on the other.

    • disclose their complete voting record on new Form N-PX. The disclosure must include, with respect to each proxy voted: the nature of the matter; whether the issuer or a shareholder proposed the matter; how the fund voted; and whether the vote was in favor of management. Funds must file their first disclosures on Form N-PX not later than August 31, 2004, for the 12 month period ending June 30, 2004.

    • inform shareholders that they may receive a free copy of the proxy voting record and policies upon request by calling a toll-free (or collect) telephone number, at the fund's web site, or at the SEC's website.

    It appears that the SEC did not require funds to disclose whether particular proxy votes vary from disclosed proxy voting policies.

    Investment Advisers

    • Investment advisers with proxy voting authority must adopt written policies and procedures for voting proxies reasonably designed to ensure that they vote proxies in the best interests of their clients. The policies and procedures must explain how they will resolve material conflicts of interest. This requirement becomes effective 180 days after the Federal Register publishes the final rules.

    • Investment advisers must describe their proxy voting policies and procedures to their clients. They must provide copies of the policies and procedures to their clients upon request.

    • Investment advisers must tell clients how they can obtain information from the adviser on how proxies were voted.