II
118THCONGRESS
1
STSESSION S. 1799
To amend the Securities Exchange Act of 1934 to require the registration
of proxy advisory firms, and for other purposes.
IN THE SENATE OF THE UNITED STATES
JUNE1, 2023
Mr. H
AGERTYintroduced the following bill; which was read twice and referred
to the Committee on Banking, Housing, and Urban Affairs
A BILL
To amend the Securities Exchange Act of 1934 to require
the registration of proxy advisory firms, and for other
purposes.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Putting Investors First 4
Act of 2023’’. 5
SEC. 2. DEFINITIONS. 6
(a) I
NGENERAL.—In this Act: 7
(1) C
OMMISSION.—The term ‘‘Commission’’ 8
means the Securities and Exchange Commission. 9
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 2
•S 1799 IS
(2) PROXY ADVISORY FIRM.—The term ‘‘proxy 1
advisory firm’’ has the meaning given the term in 2
paragraph (81) of section 3(a) of the Securities Ex-3
change Act of 1934 (15 U.S.C. 78c(a)), as added by 4
this Act. 5
(3) S
TATE.—The term ‘‘State’’ has the mean-6
ing given the term in section 3(a) of the Securities 7
Exchange Act of 1934 (15 U.S.C. 78c(a)). 8
(b) S
ECURITIESEXCHANGEACT OF1934 DEFINI-9
TIONS.—Section 3(a) of the Securities Exchange Act of 10
1934 (15 U.S.C. 78c(a)) is amended by adding at the end 11
the following: 12
‘‘(81) P
ROXY ADVISORY FIRM .—The term 13
‘proxy advisory firm’— 14
‘‘(A) means any person who is primarily 15
engaged in the business of providing proxy vot-16
ing advice, research, analysis, ratings, or rec-17
ommendations to clients, which conduct con-18
stitutes a solicitation within the meaning of sec-19
tion 14; and 20
‘‘(B) does not include any person that is 21
exempt under law or regulation from the re-22
quirements otherwise applicable to persons en-23
gaged in such a solicitation. 24
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 3
•S 1799 IS
‘‘(82) PERSON ASSOCIATED WITH A PROXY AD -1
VISORY FIRM.—The term ‘person associated’ with a 2
proxy advisory firm— 3
‘‘(A) means— 4
‘‘(i) any partner, officer, or director of 5
a proxy advisory firm (or any person occu-6
pying a similar status or performing simi-7
lar functions); 8
‘‘(ii) any person directly or indirectly 9
controlling, controlled by, or under com-10
mon control with a proxy advisory firm; 11
‘‘(iii) any employee of a proxy advi-12
sory firm; or 13
‘‘(iv) any person the Commission de-14
termines by rule is controlled by a proxy 15
advisory firm; and 16
‘‘(B) does not include any person that per-17
forms clerical or ministerial functions with re-18
spect to a proxy advisory firm.’’. 19
SEC. 3. REGISTRATION OF PROXY ADVISORY FIRMS. 20
(a) A
MENDMENT.—The Securities Exchange Act of 21
1934 (15 U.S.C. 78a et seq.) is amended by inserting after 22
section 15G the following new section: 23
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 4
•S 1799 IS
‘‘SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS. 1
‘‘(a) C
ONDUCTPROHIBITED.—It shall be unlawful 2
for a proxy advisory firm to make use of the mails or any 3
means or instrumentality of interstate commerce to pro-4
vide proxy voting advice, research, analysis, ratings or rec-5
ommendations to any client, unless such proxy advisory 6
firm is registered under this section. 7
‘‘(b) R
EGISTRATIONPROCEDURES.— 8
‘‘(1) A
PPLICATION FOR REGISTRATION .— 9
‘‘(A) I
N GENERAL.—A proxy advisory firm 10
shall file with the Commission an application 11
for registration, in such form as the Commis-12
sion shall require, by rule or regulation, and 13
containing the information described in sub-14
paragraph (B). 15
‘‘(B) R
EQUIRED INFORMATION .—An appli-16
cation for registration under this section shall 17
contain information regarding— 18
‘‘(i) a certification that the applicant 19
is able to consistently provide proxy advice 20
based on accurate information; 21
‘‘(ii) the procedures and methodolo-22
gies that the applicant uses in developing 23
proxy voting recommendations; 24
‘‘(iii) the organizational structure of 25
the applicant; 26
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 5
•S 1799 IS
‘‘(iv) whether or not the applicant has 1
in effect a code of ethics, and if not, the 2
reasons therefor; 3
‘‘(v) any potential or actual conflict of 4
interest relating to the provision of proxy 5
advisory services, including those arising 6
out of or resulting from the ownership 7
structure of the applicant or the provision 8
of other services by the applicant or any 9
person associated with the applicant; 10
‘‘(vi) the policies and procedures in 11
place to publicly disclose and manage con-12
flicts of interest under subsection (f); 13
‘‘(vii) information related to the pro-14
fessional and academic qualifications of 15
staff tasked with providing proxy advisory 16
services; and 17
‘‘(viii) any other information and doc-18
uments concerning the applicant and any 19
person associated with such applicant as 20
the Commission, by rule, may prescribe as 21
necessary or appropriate in the public in-22
terest or for the protection of investors. 23
‘‘(2) R
EVIEW OF APPLICATION.— 24
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 6
•S 1799 IS
‘‘(A) INITIAL DETERMINATION .—Not later 1
than 90 days after the date on which the appli-2
cation for registration is filed with the Commis-3
sion under paragraph (1) (or within such longer 4
period as to which the applicant consents) the 5
Commission shall— 6
‘‘(i) by order, grant registration; or 7
‘‘(ii) institute proceedings to deter-8
mine whether registration should be de-9
nied. 10
‘‘(B) C
ONDUCT OF PROCEEDINGS .— 11
‘‘(i) C
ONTENT.—Proceedings referred 12
to in subparagraph (A)(ii) shall— 13
‘‘(I) include notice of the grounds 14
for denial under consideration and an 15
opportunity for hearing; and 16
‘‘(II) be concluded not later than 17
120 days after the date on which the 18
application for registration is filed 19
with the Commission under paragraph 20
(1). 21
‘‘(ii) D
ETERMINATION.—At the con-22
clusion of such proceedings, the Commis-23
sion, by order, shall grant or deny such ap-24
plication for registration. 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 7
•S 1799 IS
‘‘(iii) EXTENSION AUTHORIZED .—The 1
Commission may extend the time for con-2
clusion of such proceedings for not longer 3
than 90 days, if the Commission finds 4
good cause for such extension and pub-5
lishes its reasons for so finding, or for such 6
longer period as to which the applicant 7
consents. 8
‘‘(C) G
ROUNDS FOR DECISION .—The Com-9
mission shall grant registration under this sub-10
section— 11
‘‘(i) if the Commission finds that the 12
requirements of this section are satisfied; 13
and 14
‘‘(ii) unless the Commission finds (in 15
which case the Commission shall deny such 16
registration) that— 17
‘‘(I) the applicant has failed to 18
certify to the Commission’s satisfac-19
tion that it is able to consistently pro-20
vide proxy advice based on accurate 21
information and to materially comply 22
with the procedures and methodolo-23
gies disclosed under paragraph (1)(B) 24
and with subsections (f) and (g); or 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 8
•S 1799 IS
‘‘(II) if the applicant were so reg-1
istered, its registration would be sub-2
ject to suspension or revocation under 3
subsection (d). 4
‘‘(3) P
UBLIC AVAILABILITY OF INFORMATION .— 5
Subject to section 24, the Commission shall make 6
the information and documents submitted to the 7
Commission by a proxy advisory firm in its com-8
pleted application for registration, or in any amend-9
ment submitted under paragraph (1) or (2) of sub-10
section (c), publicly available on the Commission’s 11
website, or through another comparable, readily ac-12
cessible means. 13
‘‘(c) U
PDATE OFREGISTRATION.— 14
‘‘(1) U
PDATE.—Each registered proxy advisory 15
firm shall promptly amend and update its applica-16
tion for registration under this section if any infor-17
mation or document provided therein becomes mate-18
rially inaccurate, except that a registered proxy advi-19
sory firm is not required to amend the information 20
required to be filed under subsection (b)(1)(B)(i) by 21
filing information under this paragraph, but shall 22
amend such information in the annual submission of 23
the organization under paragraph (2) of this sub-24
section. 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 9
•S 1799 IS
‘‘(2) CERTIFICATION.—Not later than 90 cal-1
endar days after the end of each calendar year, each 2
registered proxy advisory firm shall file with the 3
Commission an amendment to its registration, in 4
such form as the Commission, by rule, may prescribe 5
as necessary or appropriate in the public interest or 6
for the protection of investors— 7
‘‘(A) certifying that the information and 8
documents in the application for registration of 9
such registered proxy advisory firm continue to 10
be accurate in all material respects; and 11
‘‘(B) listing any material change that oc-12
curred to such information or documents during 13
the previous calendar year. 14
‘‘(d) C
ENSURE, DENIAL, ORSUSPENSION OFREG-15
ISTRATION; NOTICE ANDHEARING.—The Commission, by 16
order, shall censure, place limitations on the activities, 17
functions, or operations of, suspend for a period not ex-18
ceeding 12 months, or revoke the registration of any reg-19
istered proxy advisory firm if the Commission finds, on 20
the record after notice and opportunity for hearing, that 21
such censure, placing of limitations, suspension, or revoca-22
tion is necessary for the protection of investors and in the 23
public interest and that such registered proxy advisory 24
firm, or any person associated with such an organization, 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 10
•S 1799 IS
whether prior to or subsequent to becoming so associ-1
ated— 2
‘‘(1) has committed or omitted any act, or is 3
subject to an order or finding, enumerated in sub-4
paragraph (A), (D), (E), (H), or (G) of section 5
15(b)(4), has been convicted of any offense specified 6
in section 15(b)(4)(B), or is enjoined from any ac-7
tion, conduct, or practice specified in subparagraph 8
(C) of section 15(b)(4), during the 10-year period 9
preceding the date of commencement of the pro-10
ceedings under this subsection, or at any time there-11
after; 12
‘‘(2) has been convicted during the 10-year pe-13
riod preceding the date on which an application for 14
registration is filed with the Commission under this 15
section, or at any time thereafter, of— 16
‘‘(A) any crime that is punishable by im-17
prisonment for 1 or more years, and that is not 18
described in section 15(b)(4)(B); or 19
‘‘(B) a substantially equivalent crime by a 20
foreign court of competent jurisdiction; 21
‘‘(3) is subject to any order of the Commission 22
barring or suspending the right of the person to be 23
associated with a registered proxy advisory firm; 24
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 11
•S 1799 IS
‘‘(4) fails to furnish the certifications required 1
under subsections (b)(2)(C)(ii)(I) and (c)(2); 2
‘‘(5) has engaged in one or more prohibited acts 3
enumerated in paragraph (1); 4
‘‘(6) fails to maintain adequate financial and 5
managerial resources to consistently offer advisory 6
services with integrity, including by failing to comply 7
with subsection (f) or (g); or 8
‘‘(7) engages in a prohibited act enumerated in 9
subsection (j). 10
‘‘(e) T
ERMINATION OFREGISTRATION.— 11
‘‘(1) V
OLUNTARY WITHDRAWAL .—A registered 12
proxy advisory firm may, upon such terms and con-13
ditions as the Commission may establish as nec-14
essary in the public interest or for the protection of 15
investors, which terms and conditions shall include 16
at a minimum that the registered proxy advisory 17
firm will no longer conduct such activities as to 18
bring it within the definition of proxy advisory firm 19
in section 3(a)(81), withdraw from registration by 20
filing a written notice of withdrawal to the Commis-21
sion. 22
‘‘(2) C
OMMISSION AUTHORITY .—In addition to 23
any other authority of the Commission under this 24
title, if the Commission finds that a registered proxy 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 12
•S 1799 IS
advisory firm is no longer in existence or has ceased 1
to do business as a proxy advisory firm, the Com-2
mission, by order, shall cancel the registration under 3
this section of such registered proxy advisory firm. 4
‘‘(f) M
ANAGEMENT OF CONFLICTS OFINTEREST.— 5
‘‘(1) O
RGANIZATION POLICIES AND PROCE -6
DURES.—Each registered proxy advisory firm shall 7
establish, maintain, and enforce written policies and 8
procedures reasonably designed, taking into consid-9
eration the nature of the business of such registered 10
proxy advisory firm and associated persons, to pub-11
licly disclose and manage any conflicts of interest 12
that arise or would reasonably be expected to arise 13
from such business. 14
‘‘(2) C
OMMISSION AUTHORITY .—The Commis-15
sion shall, within one year of enactment, issue final 16
rules to prohibit, or require the management and 17
public disclosure of, any conflicts of interest relating 18
to the offering of proxy advisory services by a reg-19
istered proxy advisory firm, including, without limi-20
tation, conflicts of interest relating to— 21
‘‘(A) the manner in which a registered 22
proxy advisory firm is compensated by the cli-23
ent, any affiliate of the client, or any other per-24
son for providing proxy advisory services; 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 13
•S 1799 IS
‘‘(B) business relationships, ownership in-1
terests, or any other financial or personal inter-2
ests between a registered proxy advisory firm, 3
or any person associated with such registered 4
proxy advisory firm, and any client, or any af-5
filiate of such client; 6
‘‘(C) the formulation of proxy voting poli-7
cies; 8
‘‘(D) the execution, or assistance with the 9
execution, of proxy votes if such votes are based 10
upon recommendations made by the proxy advi-11
sory firm in which a person other than the 12
issuer is a proponent; and 13
‘‘(E) any other potential conflict of inter-14
est, as the Commission deems necessary or ap-15
propriate in the public interest or for the pro-16
tection of investors. 17
‘‘(3) D
ISCLOSURE.—Each registered proxy ad-18
visory firm shall annually disclose to the Commission 19
and make publicly available the economic and other 20
factors that a reasonable investor would expect to in-21
fluence the recommendations of such proxy advisory 22
firm, including the ownership composition of such 23
proxy advisory firm. 24
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 14
•S 1799 IS
‘‘(g) RELIABILITY OFPROXYADVISORYFIRMSERV-1
ICES.— 2
‘‘(1) I
N GENERAL.—Each registered proxy advi-3
sory firm shall— 4
‘‘(A) have staff and other resources suffi-5
cient to produce proxy voting recommendations 6
that are based on accurate and current infor-7
mation; 8
‘‘(B) implement procedures that permit 9
issuers that are the subject of proxy voting rec-10
ommendations— 11
‘‘(i) access in a reasonable time to 12
data and information used to make rec-13
ommendations; and 14
‘‘(ii) a reasonable opportunity to pro-15
vide meaningful comment and corrections 16
to such data and information, including 17
the opportunity to present (in person or 18
telephonically) details to the person re-19
sponsible for developing such data and in-20
formation prior to the publication of proxy 21
voting recommendations to clients; and 22
‘‘(C) employ an ombudsman to receive 23
complaints about the accuracy of information 24
used in making recommendations from the sub-25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 15
•S 1799 IS
jects of the proxy advisory firm’s voting rec-1
ommendations and seek to resolve those com-2
plaints in a timely fashion and prior to the pub-3
lication of proxy voting recommendations to cli-4
ents; 5
‘‘(D) if such ombudsman is unable to re-6
solve such complaints prior to the publication of 7
proxy voting recommendations to clients, in-8
clude in the final report of the firm to clients 9
a statement detailing its complaints, if re-10
quested in writing by the company; and 11
‘‘(E) provide to clients receiving proxy ad-12
visory firm recommendations— 13
‘‘(i) information demonstrating that 14
draft recommendations (other than rec-15
ommendations relating to an issuer-spon-16
sored proposal or recommendations con-17
sistent with that of the majority of the 18
board of directors of the issuer) are in the 19
best economic interest of shareholders; and 20
‘‘(ii) a certification by the chief execu-21
tive officer, chief financial officer, and the 22
primary executive responsible for over-23
seeing the compilation and dissemination 24
of proxy voting advice that the draft rec-25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 16
•S 1799 IS
ommendations (other than recommenda-1
tions relating to an issuer-sponsored pro-2
posal or recommendations consistent with 3
that of the majority of the board of direc-4
tors of the issuer)— 5
‘‘(I) are based on internal con-6
trols and procedures that are designed 7
to ensure accurate information; 8
‘‘(II) do not violate applicable 9
State or Federal law; and 10
‘‘(III) prioritize economic returns 11
to shareholders. 12
‘‘(2) D
EFINITIONS.—In this subsection: 13
‘‘(A) D
ATA AND INFORMATION USED TO 14
MAKE RECOMMENDATIONS .—The term ‘data 15
and information used to make voting rec-16
ommendations’— 17
‘‘(i) means the financial, operational, 18
or descriptive data and information on an 19
issuer used by proxy advisory firms and 20
any contextual or substantive analysis im-21
pacting the recommendation; and 22
‘‘(ii) does not include the entirety of 23
the proxy advisory firm’s final report to its 24
clients. 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 17
•S 1799 IS
‘‘(B) REASONABLE TIME.—The term ‘rea-1
sonable time’— 2
‘‘(i) means not less than 1 week be-3
fore the publication of proxy voting rec-4
ommendations for clients, unless otherwise 5
defined through a final rule issued by the 6
Commission; and 7
‘‘(ii) shall not otherwise interfere with 8
a proxy advisory firm’s ability to provide 9
its clients with timely access to accurate 10
proxy voting research, analysis, or rec-11
ommendations. 12
‘‘(h) P
RIVATERIGHT OFACTIONWITHRESPECT TO 13
I
LLEGALRECOMMENDATIONS .—Any proxy advisory firm 14
that endorses a proposal that is not supported by the 15
issuer but is approved and subsequently found by a court 16
of competent jurisdiction to violate State or Federal law 17
shall be liable to the applicable issuer for the costs associ-18
ated with the approval of such proposal, including imple-19
mentation costs and any penalties incurred by the issuer. 20
‘‘(i) D
ESIGNATION OFCOMPLIANCEOFFICER.—Each 21
registered proxy advisory firm shall designate an indi-22
vidual who reports directly to senior management as re-23
sponsible for administering the policies and procedures 24
that are required to be established pursuant to subsections 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 18
•S 1799 IS
(f) and (g), and for ensuring compliance with the securi-1
ties laws and the rules and regulations thereunder, includ-2
ing those promulgated by the Commission pursuant to this 3
section. 4
‘‘(j) P
ROHIBITEDCONDUCT.— 5
‘‘(1) P
ROHIBITED ACTS AND PRACTICES .—Not 6
later than one year after the date of enactment of 7
this section, the Commission shall issue final rules 8
to prohibit any act or practice relating to the offer-9
ing of proxy advisory services by a registered proxy 10
advisory firm that the Commission determines to be 11
unfair, coercive, or abusive, including any act or 12
practice relating to— 13
‘‘(A) advisory or consulting services (of-14
fered directly or indirectly, including through 15
an affiliate) related to corporate governance 16
issues; or 17
‘‘(B) modifying a voting recommendation 18
or otherwise departing from its adopted system-19
atic procedures and methodologies in the provi-20
sion of proxy advisory services, based on wheth-21
er an issuer, or affiliate thereof, subscribes or 22
will subscribe to other services or product of the 23
registered proxy advisory firm or any person as-24
sociated with such organization. 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 19
•S 1799 IS
‘‘(2) RULE OF CONSTRUCTION .—Nothing in 1
paragraph (1), or in any rules or regulations adopt-2
ed thereunder, may be construed to modify, impair, 3
or supersede the operation of any of the antitrust 4
laws (as defined in the first section of the Clayton 5
Act, except that such term includes section 5 of the 6
Federal Trade Commission Act, to the extent that 7
such section 5 applies to unfair methods of competi-8
tion). 9
‘‘(k) S
TATEMENTS OF FINANCIALCONDITION.— 10
Each registered proxy advisory firm shall, on a confiden-11
tial basis, file with the Commission, at intervals deter-12
mined by the Commission, such financial statements, cer-13
tified (if required by the rules or regulations of the Com-14
mission) by an independent public auditor, and informa-15
tion concerning its financial condition, as the Commission, 16
by rule, may prescribe as necessary or appropriate in the 17
public interest or for the protection of investors. 18
‘‘(l) A
NNUALREPORT.—Each registered proxy advi-19
sory firm shall, at the beginning of each fiscal year of such 20
firm, report to the Commission on the number of— 21
‘‘(1) shareholder proposals its staff reviewed in 22
the prior fiscal year; 23
‘‘(2) recommendations made in the prior fiscal 24
year; 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 20
•S 1799 IS
‘‘(3) staff who reviewed and made recommenda-1
tions on such proposals in the prior fiscal year (and 2
the qualifications of such staff); and 3
‘‘(4) recommendations made in the prior fiscal 4
year where the proponent of such recommendation 5
was a client of or received services from the proxy 6
advisory firm. 7
‘‘(m) T
RANSPARENT POLICIES.—Each registered 8
proxy advisory firm shall file with the Commission and 9
make publicly available its methodology for the formula-10
tion of proxy voting policies and voting recommendations. 11
‘‘(n) R
ULES OFCONSTRUCTION.—Registration under 12
and compliance with this section does not constitute a 13
waiver of, or otherwise diminish, any right, privilege, or 14
defense that a registered proxy advisory firm may other-15
wise have under any provision of State or Federal law, 16
including any rule, regulation, or order thereunder. 17
‘‘(o) R
EGULATIONS.— 18
‘‘(1) N
EW PROVISIONS.—Such rules and regula-19
tions as are required by this section or are otherwise 20
necessary to carry out this section, including the ap-21
plication form required under subsection (a)— 22
‘‘(A) shall be issued by the Commission, 23
not later than 180 days after the date of enact-24
ment of this section; and 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00020 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 21
•S 1799 IS
‘‘(B) shall become effective not later than 1
1 year after the date of enactment of this sec-2
tion. 3
‘‘(2) R
EVIEW OF EXISTING REGULATIONS .—Not 4
later than 270 days after the date of enactment of 5
this section, the Commission shall— 6
‘‘(A) review its existing rules and regula-7
tions which affect the operations of proxy advi-8
sory firms; and 9
‘‘(B) amend or revise such rules and regu-10
lations in accordance with the purposes of this 11
section, and issue such guidance as the Com-12
mission may prescribe as necessary or appro-13
priate in the public interest or for the protec-14
tion of investors. 15
‘‘(p) A
PPLICABILITY.—This section, other than sub-16
section (n), which shall apply on the date of enactment 17
of this section, shall apply on the earlier of— 18
‘‘(1) the date on which regulations are issued in 19
final form under subsection (o)(1); or 20
‘‘(2) 270 days after the date of enactment of 21
this section.’’. 22
(b) C
ONFORMINGAMENDMENT.—Section 17(a)(1) of 23
the Securities Exchange Act of 1934 (15 U.S.C. 24
78q(a)(1)) is amended by inserting ‘‘proxy advisory firm,’’ 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 22
•S 1799 IS
after ‘‘nationally recognized statistical rating organiza-1
tion,’’. 2
SEC. 4. DUTIES OF INVESTMENT ADVISORS, ASSET MAN-3
AGERS, AND PENSION FUNDS. 4
(a) R
EPORTINGREQUIREMENTS.—Not later than 1 5
year after the date of the enactment of this Act and annu-6
ally thereafter, any covered entity that retains the services 7
of a proxy advisory firm with respect to the preceding year 8
shall provide to the beneficiaries and customers of the cov-9
ered entity, as applicable, a report that includes— 10
(1) the percentage of votes cast on shareholder 11
proposals that follow proxy advisor firm rec-12
ommendations for each proxy advisory firm retained 13
by the covered entity; 14
(2) the percentage of votes cast on environ-15
mental-, social-, or governance-related shareholder 16
proposals that follow proxy advisory firm rec-17
ommendations for each proxy advisory firm retained 18
by the covered entity; and 19
(3) an explanation of— 20
(A) how proxy advisory firm recommenda-21
tions are used by the covered entity in making 22
voting decisions; 23
(B) how such recommendations are rec-24
onciled with the fiduciary duty of the covered 25
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 23
•S 1799 IS
entity to vote in the best economic interests of 1
shareholders; 2
(C) how frequently votes are changed when 3
an error occurs or due to new information from 4
issuers; and 5
(D) the degree to which investment profes-6
sionals of the covered entity are involved in 7
such voting decisions. 8
(b) R
EQUIREMENTS.—With respect to shareholder 9
proposals of an issuer, a covered entity with more than 10
$100,000,000,000 in assets under management shall— 11
(1) provide customers with a mechanism to in-12
dicate how the covered entity should vote on their 13
behalf; 14
(2) in any materials provided to customers and 15
related to customers voting their shares, clarify that 16
shareholders are not required to vote on every pro-17
posal; and 18
(3) with respect to each shareholder proposal 19
for which the covered entity voted (other than an 20
issuer-sponsored proposal or a vote consistent with 21
the recommendation of the majority of the board of 22
directors of the issuer), make publicly available the 23
economic analysis the covered entity conducted to 24
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 24
•S 1799 IS
determine that the vote is in the best economic inter-1
est of the customers. 2
(c) C
OVEREDENTITYDEFINED.—In this section, the 3
term ‘‘covered entity’’ means an investment advisor, asset 4
manager, or pension fund with more than $100,000,000 5
in assets under management. 6
SEC. 5. TRANSPARENCY REGARDING ESG FUNDS. 7
Section 10 of the Securities Act of 1933 (15 U.S.C. 8
77j) is amended by adding at the end the following: 9
‘‘(g) T
RANSPARENCYREGARDINGESG FUNDS.—An 10
investment company that holds itself out as offering an 11
index fund under which investments are made pursuant 12
to a set of environmental, social, or governance standards 13
shall disclose in tabular form on the first page of each 14
prospectus required pursuant to this section the 1-, 3-, 15
and 5-year annual returns and fees charged to investors 16
with respect to such fund compared with the annual re-17
turns and fees charged to investors for the most readily 18
comparable broad-based index fund offered by such invest-19
ment company under which investments are not made pur-20
suant to such standards, or if such investment company 21
does not offer a comparable index fund, a reasonably simi-22
lar comparison to a readily comparable broad-based index 23
fund.’’. 24
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 25
•S 1799 IS
SEC. 6. RESUBMISSION THRESHOLDS FOR SHAREHOLDER 1
PROPOSALS. 2
Section 14 of the Securities Exchange Act of 1934 3
(15 U.S.C. 78n) is amended by adding at the end the fol-4
lowing: 5
‘‘(k) E
XCLUSION OFCERTAINSHAREHOLDER PRO-6
POSALRESUBMISSIONS.—A shareholder proposal may be 7
excluded from any proxy or consent solicitation material 8
for an annual meeting of the shareholders of an issuer 9
if the proposal— 10
‘‘(1) is not germane (without regard to whether 11
the proposal involves a significant social policy 12
issue); or 13
‘‘(2) addresses substantially the same subject 14
matter (without regard to whether the proposal in-15
volves a significant social policy issue) as a proposal 16
previously included in the proxy or consent solicita-17
tion material for an annual meeting of the share-18
holders of an issuer— 19
‘‘(A) for a meeting of the shareholders con-20
ducted in the preceding 5 years; and 21
‘‘(B) if the most recent vote— 22
‘‘(i) occurred in the preceding 3 years; 23
and 24
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 26
•S 1799 IS
‘‘(ii)(I) if voted on once during such 1
period, received less than 5 percent of the 2
votes; 3
‘‘(II) if voted on twice during such pe-4
riod, received less than 15 percent of the 5
votes; or 6
‘‘(III) if voted on three or more times 7
during such period, received less 25 per-8
cent of the votes.’’. 9
SEC. 7. PROHIBITION ON ROBOVOTING. 10
Section 14 of the Securities Exchange Act of 1934 11
(15 U.S.C. 78n) is further amended by adding at the end 12
the following: 13
‘‘(l) P
ROHIBITION ONROBOVOTING.— 14
‘‘(1) I
N GENERAL.—The Commission shall issue 15
final rules prohibiting the use of robovoting with re-16
spect to votes related to proxy or consent solicitation 17
materials. 18
‘‘(2) R
OBOVOTING DEFINED .—The term 19
‘robovoting’ means the practice of automatically vot-20
ing in a manner consistent with the recommenda-21
tions of a proxy advisory firm.’’. 22
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 27
•S 1799 IS
SEC. 8. LIABILITY FOR CERTAIN FAILURES TO DISCLOSE 1
MATERIAL INFORMATION. 2
Section 14 of the Securities Exchange Act of 1934 3
(15 U.S.C. 78n) is further amended by adding at the end 4
the following: 5
‘‘(m) F
ALSE ORMISLEADINGSTATEMENTS.—For 6
purposes of section 18, failure to disclose material infor-7
mation regarding proxy voting advice that makes a rec-8
ommendation to a security holder as to its vote, consent, 9
or authorization on a specific matter for which security 10
holder approval is solicited, and that is furnished by a per-11
son that markets its expertise as a provider of such proxy 12
voting advice, separately from other forms of investment 13
advice, and sells such proxy voting advice for a fee, shall 14
be considered to be false or misleading with respect to a 15
material fact.’’. 16
SEC. 9. STUDY OF CERTAIN ISSUES WITH RESPECT TO 17
SHAREHOLDER PROPOSALS AND PROXY AD-18
VISORY FIRMS. 19
Not later than 180 days after the date of the enact-20
ment of this Act, and every 5 years thereafter, the Securi-21
ties and Exchange Commission, including the Office of the 22
Advocate for Small Business Capital Formation, shall 23
carry out a study and submit a report to the Committee 24
on Banking, Housing, and Urban Affairs of the Senate 25
and the Committee on Financial Services of the House of 26
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS 28
•S 1799 IS
Representatives on shareholder proposals and proxy advi-1
sory firms that includes, with respect to, in the case of 2
the first report, the preceding 10 years, and in the case 3
of each subsequent report, the preceding 5 years, the fol-4
lowing: 5
(1) The costs that issuers incurred in respond-6
ing to— 7
(A) politically, environmentally, or socially 8
motivated shareholder proposals; and 9
(B) shareholder proposals that failed to be 10
agreed to more than once. 11
(2) The amount of fees that public companies 12
paid to proxy advisory firms and persons associated 13
with proxy advisory firms. 14
(3) The source of funds with respect to pay-15
ment of such fees. 16
(4) The academic or professional qualifications 17
of the staff members that provide proxy advisory 18
services at proxy advisory firms. 19
(5) The number of shareholder proposals that, 20
if adopted, would require an issuer to violate a State 21
or Federal law. 22
(6) An estimate of the costs that issuers would 23
incur if such proposals were adopted. 24
Æ
VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6301 E:\BILLS\S1799.IS S1799
kjohnson on DSK79L0C42PROD with BILLS