Chris Bornhorst on how the SEC’s proposed proxy-advisory rules will affect Canadian investors

December 09, 2019

New York Senior Associate Chris Bornhorst has spoken with the Canadian Investment Review on the impact recently proposed rules published by the Securities and Exchange Commission (SEC) to tighten regulations on proxy-advisory firms would have on Canadian institutional investors, noting they would draw out the process for investors who use proxy-advisory firms.

According to Chris, the conduct of proxy-advisory firms has been a matter U.S. companies have been dealing with for years, but it has only been in the past year that the SEC has made some serious moves on the issue.  

“One of the components of the new rule is that in order for a proxy-advisory firm to not have to be filing things with the SEC in respect of its advice, it needs to meet certain criteria,” Chris said.

“One of them is, for example, once it prepares a particular recommendation, it would need to share that with a company. And then that company would potentially have the opportunity to comment on that. And that all takes time.

“If you’re an institutional investor that relies on a proxy-advisory firm to provide a recommendation as to how to vote, and now the proxy-advisory firm has all these hoops it has to jump through before formally issuing its advice, that may delay the time an investment advisor has to understand what the proxy advisory’s position is on a particular issue and then how it wants to react to that.”

The article also references a recent Torys’ bulletin on the topic, read more at U.S. changes affecting your business: ISS and SEC battle over appropriate regulation of proxy advisory firms and U.S. changes affecting your business: The proxy voting system—new SEC guidance.

For more insight on Banking and Debt Finance, Board Advisory and Governance and Securities Regulatory, see the relevant practice pages.


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