SEC Issues Guidance on Proxy Voting Responsibilities of Investment Advisers and Interpretation Regarding Applicability of Proxy Voting Rules to Proxy Advisory Firm Voting Recommendations

On August 21, 2019, the Securities and Exchange Commission (the “SEC”) (i) approved new guidance (the “Guidance”) regarding the proxy voting responsibilities of investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and (ii) issued an interpretation and related guidance (the “Interpretation”) regarding the applicability of the federal proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to proxy voting advice provided by proxy advisory firms. The Guidance discusses, among other things, the ability of investment advisers to establish a variety of different voting arrangements with their clients and matters they should consider when they utilize the services of a proxy advisory firm. Specifically, the Guidance clarifies how an investment adviser’s fiduciary duties to its clients and Rule 206(4)-6 of the Advisers Act relate to an investment adviser’s voting authority on behalf of clients, particularly where the investment adviser retains a proxy advisory firm. The Interpretation confirms the SEC’s historical position that proxy voting advice generally constitutes a “solicitation” under Rule 14a-1(l) of the Exchange Act and, as such, falls under the purview of the antifraud provisions of Rule 14a-9 of the Exchange Act. The Guidance and Interpretation will become effective upon publication in the Federal Register. The Guidance and Interpretation were issued after years of advocacy by members of Congress, corporations and others claiming that proxy advisory firms such as Institutional Shareholder Services and Glass Lewis & Co. wield too much power and a regulatory framework should be put in place to address issues related to the services provided by these firms such as conflicts of interest, accuracy of reports, transparency and oversight. Read More ›

Delaware Court Rules That Overbroad Questionnaires “Went Too Far” in Decision to Enjoin Closed-End Funds From Invalidating Shareholder Nominations

On June 27, 2019, the Delaware Chancery Court entered an injunction requiring the boards of trustees of two closed-end investment funds (the “Funds”) to count the votes in favor of director candidates nominated by shareholder Saba Capital at the annual meetings scheduled for July 8, 2019.  Saba Capital had timely given notice of its nominations in compliance with the Funds’ advance notification bylaws.  In a response weeks later, the Funds asked that the nominees complete a supplemental questionnaire, which had “nearly one hundred questions over forty-seven pages, and was due in five business days.”  The Funds declared the nominations invalid after Saba Capital missed the five-day deadline for submitting the questionnaires.  In the case captioned Saba Capital Master Fund, Ltd. v. BlackRock Credit Allocation Income Trust, et al., Vice Chancellor Zurn granted Saba Capital’s request for injunctive relief, finding that the Funds’ rejection of the nominations submitted by Saba Capital violated the Funds’ bylaws. As discussed in this Client Alert, the Court’s ruling is consistent with views recently expressed by Olshan that overzealous defense advisors continue to “cross the line” by using onerous, overbroad questionnaires as traps to thwart shareholder nominations and chill activist campaigns.  Read More ›

Institutional Shareholder Services Releases Voting Policy Updates for 2018

On November 16, 2017, Institutional Shareholder Services released updates for its Global Benchmark Proxy Voting Guidelines that will take effect for shareholders meetings held on or after February 1, 2018.

Institutional Shareholder Services ("ISS") recently released updates for its Global Benchmark Proxy Voting Guidelines that take into account the results of ISS’ Global Policy Survey, which we covered in our previous blog post on September 26, 2017, as well as its examination of relevant research, studies and commentary and various policy roundtables and group discussions held by ISS. This post focuses on ISS’ main updates to its policies for the United States relating to its recommendations on director elections and shareholder proposals. Read More ›

Institutional Shareholder Services Announces Results of its 2017-2018 Global Policy Survey Covering Governance Issues Relevant to Shareholder Activism

On September 25, 2017, Institutional Shareholder Services (“ISS”) issued the results of its survey for its 2017-2018 policy cycle. The survey, which is an important part of ISS’ yearly global benchmark policy formation process, covers five “select high-profile governance” topics, three of which we believe are particularly relevant to shareholder activism and are summarized in this blog post. Read More ›

SEC Takes Initial Step to Require “Universal” Proxy Ballots in Contested Elections

On October 26, 2016, the Commissioners of the Securities and Exchange Commission voted 2-1 to propose to require universal proxy ballots in contested elections. Proponents of universal proxies believe that the current federal proxy regime makes it too difficult for shareholders to mix and match their votes among all candidates, thereby disenfranchising shareholders and undermining corporate governance in the United States.  Universal proxies would include all management and dissident nominees on one proxy card from which shareholders would vote.  Under the current rules and proxy voting mechanics, a shareholder who desires to split votes generally must attend the shareholders meeting and vote by ballot.  Read More ›