UPDATE 2-SEC's Lee seeks more proxy vote details from powerhouse funds

Reuters · 03/17/2021 15:22
UPDATE 2-SEC's Lee seeks more proxy vote details from powerhouse funds

New throughout, adds comments from SEC acting chair, details on N-PX filings and commentaries, criticism of fund voting practices and share lending activities, bylines

By Chris Prentice and Ross Kerber

- The acting chair of the U.S. securities regulator on Wednesday called for clearer disclosures on how asset managers cast the votes that dominate most corporate elections.

Securities and Exchange Commission acting chair Allison Herren Lee said disclosure rules have failed to help everyday investors, and called the N-PX forms that companies file "unwieldy, difficult to understand, and difficult to compare across fund complexes."

"It is high time to revisit this critical form and make it useful in creating needed transparency around the fundamental exercise of shareholder voting," Lee said in a speech to the Investment Company Institute, the fund industry's main trade group.

Top asset managers now file only limited details to the SEC about how they vote for the shares they oversee for investors and can give up their rights to vote in exchange for fees when they lend out shares to short-sellers.

The forms are unwieldy and can run to hundreds of pages for large funds owning many companies. Every year each may hold votes on a half-dozen or more ballot items like director elections, executive pay and shareholder proposals such as on climate issues or workforce diversity topics.

Under pressure for approving the vast majority of items, top asset managers BlackRock Inc BLK.N and Vanguard Group Inc now provide more explanations in a sampling of cases.nL1N2DS27F Some activists have pressed for more explanations and more timely ones since N-PXs are only filed in late August, months after most meetings.

Funds have also developed new revenue streams lending out shares to short-sellers. Many did so for GameStop Corp GME.N, a year before a short-selling rally driven by interest from retail investors on social media. nL1N2K406K

Often those shares come with control of voting rights, which can skew corporate elections. <https://reut.rs/30OrCy2> Lee said fiduciaries should "be mindful" the revenue not undermine the power of shareholder votes.


(Reporting by Chris Prentice in Washington and Ross Kerber in Boston; Editing by David Gregorio)

((Reuters.Briefs@thomsonreuters.com;))