The proposed amendment is significant because it formalizes the responsibilities of investment advisers regarding proxy voting, thereby reinforcing the notion that shareholders have a direct say in the governance of the companies they own through their funds. By mandating that advisers either vote according to the beneficial owners’ instructions or opt to abstain, the bill intends to foster greater accountability and transparency in the investment advisory industry. This could lead to shifts in how investment advisers approach their voting strategies on behalf of clients.
Summary
House Bill 4645, titled the ‘Empowering Shareholders Act of 2023’, seeks to amend the Investment Advisers Act of 1940 to address issues related to proxy voting for passively managed funds. The bill stipulates that investment advisers with authority to vote proxies for covered securities must act in accordance with the instructions of the beneficial owners or the issuers. This change aims to enhance shareholder empowerment by ensuring that their voting preferences are respected in corporate governance matters.
Contention
Notably, the bill includes a provision that creates a safe harbor for investment advisers, protecting them from liability under various laws for voting in line with issuer instructions or abstaining from voting on routine matters. This aspect of the legislation has been a point of discussion, as critics may argue that it allows investment advisers to sidestep accountability in cases where the interests of shareholders might not be fully aligned with those of the issuers. The balance between shareholder rights and issuer control remains a central theme in the conversations surrounding this bill.
To amend the Securities Exchange Act of 1934 to provide for duties of certain investment advisors, asset managers, and pension funds with respect to voting on shareholder proposals, and for other purposes.