Putting Investors First Act of 2023 This bill requires a proxy advisory firm to register with the Securities and Exchange Commission and prohibits an unregistered proxy advisory firm from using interstate commerce to provide proxy-voting advice, research, analysis, or recommendations to any client. With respect to these firms, the bill (1) establishes procedures for both registration and termination of registration; (2) requires each firm to employ an ombudsman, designate a compliance officer, and publicly disclose conflicts of interest; (3) allows issuers to assess and comment on proxy voting recommendations; and (4) prohibits unfair, coercive, or abusive practices. The bill establishes a private right of action against a proxy advisory firm that endorses an approved proposal that is not supported by the issuer and is found to be illegal.
If enacted, HB 448 will significantly impact how proxy advisory firms operate and interact with publicly traded companies. By requiring these firms to register, the bill aims to enhance the credibility and reliability of proxy voting advice, potentially reducing instances of misleading or inaccurate recommendations. This could lead to a more transparent environment where shareholders are better informed about the proxy advisory firms they rely on for guidance on shareholder proposals and voting decisions.
House Bill 448, known as the 'Putting Investors First Act of 2023,' aims to reform the regulations surrounding proxy advisory firms under the Securities Exchange Act of 1934. The bill mandates that all proxy advisory firms must register with the Securities and Exchange Commission (SEC) to ensure they are qualified to provide proxy voting advice. It outlines specific requirements for registration, including disclosures related to conflicts of interest, methodologies used for recommendations, and the professional qualifications of staff. Additionally, it introduces penalties for firms that operate without registration or fail to adhere to the mandated guidelines.
The bill has faced criticism and support from various stakeholders. Proponents argue that it will protect investors by ensuring that proxy advisory firms operate under strict regulations, thus enhancing the integrity of the proxy voting process. Conversely, opponents raise concerns about the potential for stifling diversity of opinions in proxy voting recommendations and argue that increased regulation could result in reduced accessibility to valuable advisory services. Another point of contention is the inclusion of additional responsibilities for investment advisors, where they would need to disclose how they utilize proxy advisory recommendations in voting decisions, adding layers of complexity to the voting process.