Us Congress 2023-2024 Regular Session

Us Congress Senate Bill SB1799 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	II
2	2	118THCONGRESS
3	3	1
4	4	STSESSION S. 1799
5	5	To amend the Securities Exchange Act of 1934 to require the registration
6	6	of proxy advisory firms, and for other purposes.
7	7	IN THE SENATE OF THE UNITED STATES
8	8	JUNE1, 2023
9	9	Mr. H
10	10	AGERTYintroduced the following bill; which was read twice and referred
11	11	to the Committee on Banking, Housing, and Urban Affairs
12	12	A BILL
13	13	To amend the Securities Exchange Act of 1934 to require
14	14	the registration of proxy advisory firms, and for other
15	15	purposes.
16	16	Be it enacted by the Senate and House of Representa-1
17	17	tives of the United States of America in Congress assembled, 2
18	18	SECTION 1. SHORT TITLE. 3
19	19	This Act may be cited as the ‘‘Putting Investors First 4
20	20	Act of 2023’’. 5
21	21	SEC. 2. DEFINITIONS. 6
22	22	(a) I
23	23	NGENERAL.—In this Act: 7
24	24	(1) C
25	25	OMMISSION.—The term ‘‘Commission’’ 8
26	26	means the Securities and Exchange Commission. 9
27	27	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
28	28	kjohnson on DSK79L0C42PROD with BILLS 2
29	29	•S 1799 IS
30	30	(2) PROXY ADVISORY FIRM.—The term ‘‘proxy 1
31	31	advisory firm’’ has the meaning given the term in 2
32	32	paragraph (81) of section 3(a) of the Securities Ex-3
33	33	change Act of 1934 (15 U.S.C. 78c(a)), as added by 4
34	34	this Act. 5
35	35	(3) S
36	36	TATE.—The term ‘‘State’’ has the mean-6
37	37	ing given the term in section 3(a) of the Securities 7
38	38	Exchange Act of 1934 (15 U.S.C. 78c(a)). 8
39	39	(b) S
40	40	ECURITIESEXCHANGEACT OF1934 DEFINI-9
41	41	TIONS.—Section 3(a) of the Securities Exchange Act of 10
42	42	1934 (15 U.S.C. 78c(a)) is amended by adding at the end 11
43	43	the following: 12
44	44	‘‘(81) P
45	45	ROXY ADVISORY FIRM .—The term 13
46	46	‘proxy advisory firm’— 14
47	47	‘‘(A) means any person who is primarily 15
48	48	engaged in the business of providing proxy vot-16
49	49	ing advice, research, analysis, ratings, or rec-17
50	50	ommendations to clients, which conduct con-18
51	51	stitutes a solicitation within the meaning of sec-19
52	52	tion 14; and 20
53	53	‘‘(B) does not include any person that is 21
54	54	exempt under law or regulation from the re-22
55	55	quirements otherwise applicable to persons en-23
56	56	gaged in such a solicitation. 24
57	57	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
58	58	kjohnson on DSK79L0C42PROD with BILLS 3
59	59	•S 1799 IS
60	60	‘‘(82) PERSON ASSOCIATED WITH A PROXY AD -1
61	61	VISORY FIRM.—The term ‘person associated’ with a 2
62	62	proxy advisory firm— 3
63	63	‘‘(A) means— 4
64	64	‘‘(i) any partner, officer, or director of 5
65	65	a proxy advisory firm (or any person occu-6
66	66	pying a similar status or performing simi-7
67	67	lar functions); 8
68	68	‘‘(ii) any person directly or indirectly 9
69	69	controlling, controlled by, or under com-10
70	70	mon control with a proxy advisory firm; 11
71	71	‘‘(iii) any employee of a proxy advi-12
72	72	sory firm; or 13
73	73	‘‘(iv) any person the Commission de-14
74	74	termines by rule is controlled by a proxy 15
75	75	advisory firm; and 16
76	76	‘‘(B) does not include any person that per-17
77	77	forms clerical or ministerial functions with re-18
78	78	spect to a proxy advisory firm.’’. 19
79	79	SEC. 3. REGISTRATION OF PROXY ADVISORY FIRMS. 20
80	80	(a) A
81	81	MENDMENT.—The Securities Exchange Act of 21
82	82	1934 (15 U.S.C. 78a et seq.) is amended by inserting after 22
83	83	section 15G the following new section: 23
84	84	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
85	85	kjohnson on DSK79L0C42PROD with BILLS 4
86	86	•S 1799 IS
87	87	‘‘SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS. 1
88	88	‘‘(a) C
89	89	ONDUCTPROHIBITED.—It shall be unlawful 2
90	90	for a proxy advisory firm to make use of the mails or any 3
91	91	means or instrumentality of interstate commerce to pro-4
92	92	vide proxy voting advice, research, analysis, ratings or rec-5
93	93	ommendations to any client, unless such proxy advisory 6
94	94	firm is registered under this section. 7
95	95	‘‘(b) R
96	96	EGISTRATIONPROCEDURES.— 8
97	97	‘‘(1) A
98	98	PPLICATION FOR REGISTRATION .— 9
99	99	‘‘(A) I
100	100	N GENERAL.—A proxy advisory firm 10
101	101	shall file with the Commission an application 11
102	102	for registration, in such form as the Commis-12
103	103	sion shall require, by rule or regulation, and 13
104	104	containing the information described in sub-14
105	105	paragraph (B). 15
106	106	‘‘(B) R
107	107	EQUIRED INFORMATION .—An appli-16
108	108	cation for registration under this section shall 17
109	109	contain information regarding— 18
110	110	‘‘(i) a certification that the applicant 19
111	111	is able to consistently provide proxy advice 20
112	112	based on accurate information; 21
113	113	‘‘(ii) the procedures and methodolo-22
114	114	gies that the applicant uses in developing 23
115	115	proxy voting recommendations; 24
116	116	‘‘(iii) the organizational structure of 25
117	117	the applicant; 26
118	118	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
119	119	kjohnson on DSK79L0C42PROD with BILLS 5
120	120	•S 1799 IS
121	121	‘‘(iv) whether or not the applicant has 1
122	122	in effect a code of ethics, and if not, the 2
123	123	reasons therefor; 3
124	124	‘‘(v) any potential or actual conflict of 4
125	125	interest relating to the provision of proxy 5
126	126	advisory services, including those arising 6
127	127	out of or resulting from the ownership 7
128	128	structure of the applicant or the provision 8
129	129	of other services by the applicant or any 9
130	130	person associated with the applicant; 10
131	131	‘‘(vi) the policies and procedures in 11
132	132	place to publicly disclose and manage con-12
133	133	flicts of interest under subsection (f); 13
134	134	‘‘(vii) information related to the pro-14
135	135	fessional and academic qualifications of 15
136	136	staff tasked with providing proxy advisory 16
137	137	services; and 17
138	138	‘‘(viii) any other information and doc-18
139	139	uments concerning the applicant and any 19
140	140	person associated with such applicant as 20
141	141	the Commission, by rule, may prescribe as 21
142	142	necessary or appropriate in the public in-22
143	143	terest or for the protection of investors. 23
144	144	‘‘(2) R
145	145	EVIEW OF APPLICATION.— 24
146	146	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
147	147	kjohnson on DSK79L0C42PROD with BILLS 6
148	148	•S 1799 IS
149	149	‘‘(A) INITIAL DETERMINATION .—Not later 1
150	150	than 90 days after the date on which the appli-2
151	151	cation for registration is filed with the Commis-3
152	152	sion under paragraph (1) (or within such longer 4
153	153	period as to which the applicant consents) the 5
154	154	Commission shall— 6
155	155	‘‘(i) by order, grant registration; or 7
156	156	‘‘(ii) institute proceedings to deter-8
157	157	mine whether registration should be de-9
158	158	nied. 10
159	159	‘‘(B) C
160	160	ONDUCT OF PROCEEDINGS .— 11
161	161	‘‘(i) C
162	162	ONTENT.—Proceedings referred 12
163	163	to in subparagraph (A)(ii) shall— 13
164	164	‘‘(I) include notice of the grounds 14
165	165	for denial under consideration and an 15
166	166	opportunity for hearing; and 16
167	167	‘‘(II) be concluded not later than 17
168	168	120 days after the date on which the 18
169	169	application for registration is filed 19
170	170	with the Commission under paragraph 20
171	171	(1). 21
172	172	‘‘(ii) D
173	173	ETERMINATION.—At the con-22
174	174	clusion of such proceedings, the Commis-23
175	175	sion, by order, shall grant or deny such ap-24
176	176	plication for registration. 25
177	177	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
178	178	kjohnson on DSK79L0C42PROD with BILLS 7
179	179	•S 1799 IS
180	180	‘‘(iii) EXTENSION AUTHORIZED .—The 1
181	181	Commission may extend the time for con-2
182	182	clusion of such proceedings for not longer 3
183	183	than 90 days, if the Commission finds 4
184	184	good cause for such extension and pub-5
185	185	lishes its reasons for so finding, or for such 6
186	186	longer period as to which the applicant 7
187	187	consents. 8
188	188	‘‘(C) G
189	189	ROUNDS FOR DECISION .—The Com-9
190	190	mission shall grant registration under this sub-10
191	191	section— 11
192	192	‘‘(i) if the Commission finds that the 12
193	193	requirements of this section are satisfied; 13
194	194	and 14
195	195	‘‘(ii) unless the Commission finds (in 15
196	196	which case the Commission shall deny such 16
197	197	registration) that— 17
198	198	‘‘(I) the applicant has failed to 18
199	199	certify to the Commission’s satisfac-19
200	200	tion that it is able to consistently pro-20
201	201	vide proxy advice based on accurate 21
202	202	information and to materially comply 22
203	203	with the procedures and methodolo-23
204	204	gies disclosed under paragraph (1)(B) 24
205	205	and with subsections (f) and (g); or 25
206	206	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
207	207	kjohnson on DSK79L0C42PROD with BILLS 8
208	208	•S 1799 IS
209	209	‘‘(II) if the applicant were so reg-1
210	210	istered, its registration would be sub-2
211	211	ject to suspension or revocation under 3
212	212	subsection (d). 4
213	213	‘‘(3) P
214	214	UBLIC AVAILABILITY OF INFORMATION .— 5
215	215	Subject to section 24, the Commission shall make 6
216	216	the information and documents submitted to the 7
217	217	Commission by a proxy advisory firm in its com-8
218	218	pleted application for registration, or in any amend-9
219	219	ment submitted under paragraph (1) or (2) of sub-10
220	220	section (c), publicly available on the Commission’s 11
221	221	website, or through another comparable, readily ac-12
222	222	cessible means. 13
223	223	‘‘(c) U
224	224	PDATE OFREGISTRATION.— 14
225	225	‘‘(1) U
226	226	PDATE.—Each registered proxy advisory 15
227	227	firm shall promptly amend and update its applica-16
228	228	tion for registration under this section if any infor-17
229	229	mation or document provided therein becomes mate-18
230	230	rially inaccurate, except that a registered proxy advi-19
231	231	sory firm is not required to amend the information 20
232	232	required to be filed under subsection (b)(1)(B)(i) by 21
233	233	filing information under this paragraph, but shall 22
234	234	amend such information in the annual submission of 23
235	235	the organization under paragraph (2) of this sub-24
236	236	section. 25
237	237	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
238	238	kjohnson on DSK79L0C42PROD with BILLS 9
239	239	•S 1799 IS
240	240	‘‘(2) CERTIFICATION.—Not later than 90 cal-1
241	241	endar days after the end of each calendar year, each 2
242	242	registered proxy advisory firm shall file with the 3
243	243	Commission an amendment to its registration, in 4
244	244	such form as the Commission, by rule, may prescribe 5
245	245	as necessary or appropriate in the public interest or 6
246	246	for the protection of investors— 7
247	247	‘‘(A) certifying that the information and 8
248	248	documents in the application for registration of 9
249	249	such registered proxy advisory firm continue to 10
250	250	be accurate in all material respects; and 11
251	251	‘‘(B) listing any material change that oc-12
252	252	curred to such information or documents during 13
253	253	the previous calendar year. 14
254	254	‘‘(d) C
255	255	ENSURE, DENIAL, ORSUSPENSION OFREG-15
256	256	ISTRATION; NOTICE ANDHEARING.—The Commission, by 16
257	257	order, shall censure, place limitations on the activities, 17
258	258	functions, or operations of, suspend for a period not ex-18
259	259	ceeding 12 months, or revoke the registration of any reg-19
260	260	istered proxy advisory firm if the Commission finds, on 20
261	261	the record after notice and opportunity for hearing, that 21
262	262	such censure, placing of limitations, suspension, or revoca-22
263	263	tion is necessary for the protection of investors and in the 23
264	264	public interest and that such registered proxy advisory 24
265	265	firm, or any person associated with such an organization, 25
266	266	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
267	267	kjohnson on DSK79L0C42PROD with BILLS 10
268	268	•S 1799 IS
269	269	whether prior to or subsequent to becoming so associ-1
270	270	ated— 2
271	271	‘‘(1) has committed or omitted any act, or is 3
272	272	subject to an order or finding, enumerated in sub-4
273	273	paragraph (A), (D), (E), (H), or (G) of section 5
274	274	15(b)(4), has been convicted of any offense specified 6
275	275	in section 15(b)(4)(B), or is enjoined from any ac-7
276	276	tion, conduct, or practice specified in subparagraph 8
277	277	(C) of section 15(b)(4), during the 10-year period 9
278	278	preceding the date of commencement of the pro-10
279	279	ceedings under this subsection, or at any time there-11
280	280	after; 12
281	281	‘‘(2) has been convicted during the 10-year pe-13
282	282	riod preceding the date on which an application for 14
283	283	registration is filed with the Commission under this 15
284	284	section, or at any time thereafter, of— 16
285	285	‘‘(A) any crime that is punishable by im-17
286	286	prisonment for 1 or more years, and that is not 18
287	287	described in section 15(b)(4)(B); or 19
288	288	‘‘(B) a substantially equivalent crime by a 20
289	289	foreign court of competent jurisdiction; 21
290	290	‘‘(3) is subject to any order of the Commission 22
291	291	barring or suspending the right of the person to be 23
292	292	associated with a registered proxy advisory firm; 24
293	293	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
294	294	kjohnson on DSK79L0C42PROD with BILLS 11
295	295	•S 1799 IS
296	296	‘‘(4) fails to furnish the certifications required 1
297	297	under subsections (b)(2)(C)(ii)(I) and (c)(2); 2
298	298	‘‘(5) has engaged in one or more prohibited acts 3
299	299	enumerated in paragraph (1); 4
300	300	‘‘(6) fails to maintain adequate financial and 5
301	301	managerial resources to consistently offer advisory 6
302	302	services with integrity, including by failing to comply 7
303	303	with subsection (f) or (g); or 8
304	304	‘‘(7) engages in a prohibited act enumerated in 9
305	305	subsection (j). 10
306	306	‘‘(e) T
307	307	ERMINATION OFREGISTRATION.— 11
308	308	‘‘(1) V
309	309	OLUNTARY WITHDRAWAL .—A registered 12
310	310	proxy advisory firm may, upon such terms and con-13
311	311	ditions as the Commission may establish as nec-14
312	312	essary in the public interest or for the protection of 15
313	313	investors, which terms and conditions shall include 16
314	314	at a minimum that the registered proxy advisory 17
315	315	firm will no longer conduct such activities as to 18
316	316	bring it within the definition of proxy advisory firm 19
317	317	in section 3(a)(81), withdraw from registration by 20
318	318	filing a written notice of withdrawal to the Commis-21
319	319	sion. 22
320	320	‘‘(2) C
321	321	OMMISSION AUTHORITY .—In addition to 23
322	322	any other authority of the Commission under this 24
323	323	title, if the Commission finds that a registered proxy 25
324	324	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
325	325	kjohnson on DSK79L0C42PROD with BILLS 12
326	326	•S 1799 IS
327	327	advisory firm is no longer in existence or has ceased 1
328	328	to do business as a proxy advisory firm, the Com-2
329	329	mission, by order, shall cancel the registration under 3
330	330	this section of such registered proxy advisory firm. 4
331	331	‘‘(f) M
332	332	ANAGEMENT OF CONFLICTS OFINTEREST.— 5
333	333	‘‘(1) O
334	334	RGANIZATION POLICIES AND PROCE -6
335	335	DURES.—Each registered proxy advisory firm shall 7
336	336	establish, maintain, and enforce written policies and 8
337	337	procedures reasonably designed, taking into consid-9
338	338	eration the nature of the business of such registered 10
339	339	proxy advisory firm and associated persons, to pub-11
340	340	licly disclose and manage any conflicts of interest 12
341	341	that arise or would reasonably be expected to arise 13
342	342	from such business. 14
343	343	‘‘(2) C
344	344	OMMISSION AUTHORITY .—The Commis-15
345	345	sion shall, within one year of enactment, issue final 16
346	346	rules to prohibit, or require the management and 17
347	347	public disclosure of, any conflicts of interest relating 18
348	348	to the offering of proxy advisory services by a reg-19
349	349	istered proxy advisory firm, including, without limi-20
350	350	tation, conflicts of interest relating to— 21
351	351	‘‘(A) the manner in which a registered 22
352	352	proxy advisory firm is compensated by the cli-23
353	353	ent, any affiliate of the client, or any other per-24
354	354	son for providing proxy advisory services; 25
355	355	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
356	356	kjohnson on DSK79L0C42PROD with BILLS 13
357	357	•S 1799 IS
358	358	‘‘(B) business relationships, ownership in-1
359	359	terests, or any other financial or personal inter-2
360	360	ests between a registered proxy advisory firm, 3
361	361	or any person associated with such registered 4
362	362	proxy advisory firm, and any client, or any af-5
363	363	filiate of such client; 6
364	364	‘‘(C) the formulation of proxy voting poli-7
365	365	cies; 8
366	366	‘‘(D) the execution, or assistance with the 9
367	367	execution, of proxy votes if such votes are based 10
368	368	upon recommendations made by the proxy advi-11
369	369	sory firm in which a person other than the 12
370	370	issuer is a proponent; and 13
371	371	‘‘(E) any other potential conflict of inter-14
372	372	est, as the Commission deems necessary or ap-15
373	373	propriate in the public interest or for the pro-16
374	374	tection of investors. 17
375	375	‘‘(3) D
376	376	ISCLOSURE.—Each registered proxy ad-18
377	377	visory firm shall annually disclose to the Commission 19
378	378	and make publicly available the economic and other 20
379	379	factors that a reasonable investor would expect to in-21
380	380	fluence the recommendations of such proxy advisory 22
381	381	firm, including the ownership composition of such 23
382	382	proxy advisory firm. 24
383	383	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
384	384	kjohnson on DSK79L0C42PROD with BILLS 14
385	385	•S 1799 IS
386	386	‘‘(g) RELIABILITY OFPROXYADVISORYFIRMSERV-1
387	387	ICES.— 2
388	388	‘‘(1) I
389	389	N GENERAL.—Each registered proxy advi-3
390	390	sory firm shall— 4
391	391	‘‘(A) have staff and other resources suffi-5
392	392	cient to produce proxy voting recommendations 6
393	393	that are based on accurate and current infor-7
394	394	mation; 8
395	395	‘‘(B) implement procedures that permit 9
396	396	issuers that are the subject of proxy voting rec-10
397	397	ommendations— 11
398	398	‘‘(i) access in a reasonable time to 12
399	399	data and information used to make rec-13
400	400	ommendations; and 14
401	401	‘‘(ii) a reasonable opportunity to pro-15
402	402	vide meaningful comment and corrections 16
403	403	to such data and information, including 17
404	404	the opportunity to present (in person or 18
405	405	telephonically) details to the person re-19
406	406	sponsible for developing such data and in-20
407	407	formation prior to the publication of proxy 21
408	408	voting recommendations to clients; and 22
409	409	‘‘(C) employ an ombudsman to receive 23
410	410	complaints about the accuracy of information 24
411	411	used in making recommendations from the sub-25
412	412	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
413	413	kjohnson on DSK79L0C42PROD with BILLS 15
414	414	•S 1799 IS
415	415	jects of the proxy advisory firm’s voting rec-1
416	416	ommendations and seek to resolve those com-2
417	417	plaints in a timely fashion and prior to the pub-3
418	418	lication of proxy voting recommendations to cli-4
419	419	ents; 5
420	420	‘‘(D) if such ombudsman is unable to re-6
421	421	solve such complaints prior to the publication of 7
422	422	proxy voting recommendations to clients, in-8
423	423	clude in the final report of the firm to clients 9
424	424	a statement detailing its complaints, if re-10
425	425	quested in writing by the company; and 11
426	426	‘‘(E) provide to clients receiving proxy ad-12
427	427	visory firm recommendations— 13
428	428	‘‘(i) information demonstrating that 14
429	429	draft recommendations (other than rec-15
430	430	ommendations relating to an issuer-spon-16
431	431	sored proposal or recommendations con-17
432	432	sistent with that of the majority of the 18
433	433	board of directors of the issuer) are in the 19
434	434	best economic interest of shareholders; and 20
435	435	‘‘(ii) a certification by the chief execu-21
436	436	tive officer, chief financial officer, and the 22
437	437	primary executive responsible for over-23
438	438	seeing the compilation and dissemination 24
439	439	of proxy voting advice that the draft rec-25
440	440	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
441	441	kjohnson on DSK79L0C42PROD with BILLS 16
442	442	•S 1799 IS
443	443	ommendations (other than recommenda-1
444	444	tions relating to an issuer-sponsored pro-2
445	445	posal or recommendations consistent with 3
446	446	that of the majority of the board of direc-4
447	447	tors of the issuer)— 5
448	448	‘‘(I) are based on internal con-6
449	449	trols and procedures that are designed 7
450	450	to ensure accurate information; 8
451	451	‘‘(II) do not violate applicable 9
452	452	State or Federal law; and 10
453	453	‘‘(III) prioritize economic returns 11
454	454	to shareholders. 12
455	455	‘‘(2) D
456	456	EFINITIONS.—In this subsection: 13
457	457	‘‘(A) D
458	458	ATA AND INFORMATION USED TO 14
459	459	MAKE RECOMMENDATIONS .—The term ‘data 15
460	460	and information used to make voting rec-16
461	461	ommendations’— 17
462	462	‘‘(i) means the financial, operational, 18
463	463	or descriptive data and information on an 19
464	464	issuer used by proxy advisory firms and 20
465	465	any contextual or substantive analysis im-21
466	466	pacting the recommendation; and 22
467	467	‘‘(ii) does not include the entirety of 23
468	468	the proxy advisory firm’s final report to its 24
469	469	clients. 25
470	470	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
471	471	kjohnson on DSK79L0C42PROD with BILLS 17
472	472	•S 1799 IS
473	473	‘‘(B) REASONABLE TIME.—The term ‘rea-1
474	474	sonable time’— 2
475	475	‘‘(i) means not less than 1 week be-3
476	476	fore the publication of proxy voting rec-4
477	477	ommendations for clients, unless otherwise 5
478	478	defined through a final rule issued by the 6
479	479	Commission; and 7
480	480	‘‘(ii) shall not otherwise interfere with 8
481	481	a proxy advisory firm’s ability to provide 9
482	482	its clients with timely access to accurate 10
483	483	proxy voting research, analysis, or rec-11
484	484	ommendations. 12
485	485	‘‘(h) P
486	486	RIVATERIGHT OFACTIONWITHRESPECT TO 13
487	487	I
488	488	LLEGALRECOMMENDATIONS .—Any proxy advisory firm 14
489	489	that endorses a proposal that is not supported by the 15
490	490	issuer but is approved and subsequently found by a court 16
491	491	of competent jurisdiction to violate State or Federal law 17
492	492	shall be liable to the applicable issuer for the costs associ-18
493	493	ated with the approval of such proposal, including imple-19
494	494	mentation costs and any penalties incurred by the issuer. 20
495	495	‘‘(i) D
496	496	ESIGNATION OFCOMPLIANCEOFFICER.—Each 21
497	497	registered proxy advisory firm shall designate an indi-22
498	498	vidual who reports directly to senior management as re-23
499	499	sponsible for administering the policies and procedures 24
500	500	that are required to be established pursuant to subsections 25
501	501	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
502	502	kjohnson on DSK79L0C42PROD with BILLS 18
503	503	•S 1799 IS
504	504	(f) and (g), and for ensuring compliance with the securi-1
505	505	ties laws and the rules and regulations thereunder, includ-2
506	506	ing those promulgated by the Commission pursuant to this 3
507	507	section. 4
508	508	‘‘(j) P
509	509	ROHIBITEDCONDUCT.— 5
510	510	‘‘(1) P
511	511	ROHIBITED ACTS AND PRACTICES .—Not 6
512	512	later than one year after the date of enactment of 7
513	513	this section, the Commission shall issue final rules 8
514	514	to prohibit any act or practice relating to the offer-9
515	515	ing of proxy advisory services by a registered proxy 10
516	516	advisory firm that the Commission determines to be 11
517	517	unfair, coercive, or abusive, including any act or 12
518	518	practice relating to— 13
519	519	‘‘(A) advisory or consulting services (of-14
520	520	fered directly or indirectly, including through 15
521	521	an affiliate) related to corporate governance 16
522	522	issues; or 17
523	523	‘‘(B) modifying a voting recommendation 18
524	524	or otherwise departing from its adopted system-19
525	525	atic procedures and methodologies in the provi-20
526	526	sion of proxy advisory services, based on wheth-21
527	527	er an issuer, or affiliate thereof, subscribes or 22
528	528	will subscribe to other services or product of the 23
529	529	registered proxy advisory firm or any person as-24
530	530	sociated with such organization. 25
531	531	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
532	532	kjohnson on DSK79L0C42PROD with BILLS 19
533	533	•S 1799 IS
534	534	‘‘(2) RULE OF CONSTRUCTION .—Nothing in 1
535	535	paragraph (1), or in any rules or regulations adopt-2
536	536	ed thereunder, may be construed to modify, impair, 3
537	537	or supersede the operation of any of the antitrust 4
538	538	laws (as defined in the first section of the Clayton 5
539	539	Act, except that such term includes section 5 of the 6
540	540	Federal Trade Commission Act, to the extent that 7
541	541	such section 5 applies to unfair methods of competi-8
542	542	tion). 9
543	543	‘‘(k) S
544	544	TATEMENTS OF FINANCIALCONDITION.— 10
545	545	Each registered proxy advisory firm shall, on a confiden-11
546	546	tial basis, file with the Commission, at intervals deter-12
547	547	mined by the Commission, such financial statements, cer-13
548	548	tified (if required by the rules or regulations of the Com-14
549	549	mission) by an independent public auditor, and informa-15
550	550	tion concerning its financial condition, as the Commission, 16
551	551	by rule, may prescribe as necessary or appropriate in the 17
552	552	public interest or for the protection of investors. 18
553	553	‘‘(l) A
554	554	NNUALREPORT.—Each registered proxy advi-19
555	555	sory firm shall, at the beginning of each fiscal year of such 20
556	556	firm, report to the Commission on the number of— 21
557	557	‘‘(1) shareholder proposals its staff reviewed in 22
558	558	the prior fiscal year; 23
559	559	‘‘(2) recommendations made in the prior fiscal 24
560	560	year; 25
561	561	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
562	562	kjohnson on DSK79L0C42PROD with BILLS 20
563	563	•S 1799 IS
564	564	‘‘(3) staff who reviewed and made recommenda-1
565	565	tions on such proposals in the prior fiscal year (and 2
566	566	the qualifications of such staff); and 3
567	567	‘‘(4) recommendations made in the prior fiscal 4
568	568	year where the proponent of such recommendation 5
569	569	was a client of or received services from the proxy 6
570	570	advisory firm. 7
571	571	‘‘(m) T
572	572	RANSPARENT POLICIES.—Each registered 8
573	573	proxy advisory firm shall file with the Commission and 9
574	574	make publicly available its methodology for the formula-10
575	575	tion of proxy voting policies and voting recommendations. 11
576	576	‘‘(n) R
577	577	ULES OFCONSTRUCTION.—Registration under 12
578	578	and compliance with this section does not constitute a 13
579	579	waiver of, or otherwise diminish, any right, privilege, or 14
580	580	defense that a registered proxy advisory firm may other-15
581	581	wise have under any provision of State or Federal law, 16
582	582	including any rule, regulation, or order thereunder. 17
583	583	‘‘(o) R
584	584	EGULATIONS.— 18
585	585	‘‘(1) N
586	586	EW PROVISIONS.—Such rules and regula-19
587	587	tions as are required by this section or are otherwise 20
588	588	necessary to carry out this section, including the ap-21
589	589	plication form required under subsection (a)— 22
590	590	‘‘(A) shall be issued by the Commission, 23
591	591	not later than 180 days after the date of enact-24
592	592	ment of this section; and 25
593	593	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00020 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
594	594	kjohnson on DSK79L0C42PROD with BILLS 21
595	595	•S 1799 IS
596	596	‘‘(B) shall become effective not later than 1
597	597	1 year after the date of enactment of this sec-2
598	598	tion. 3
599	599	‘‘(2) R
600	600	EVIEW OF EXISTING REGULATIONS .—Not 4
601	601	later than 270 days after the date of enactment of 5
602	602	this section, the Commission shall— 6
603	603	‘‘(A) review its existing rules and regula-7
604	604	tions which affect the operations of proxy advi-8
605	605	sory firms; and 9
606	606	‘‘(B) amend or revise such rules and regu-10
607	607	lations in accordance with the purposes of this 11
608	608	section, and issue such guidance as the Com-12
609	609	mission may prescribe as necessary or appro-13
610	610	priate in the public interest or for the protec-14
611	611	tion of investors. 15
612	612	‘‘(p) A
613	613	PPLICABILITY.—This section, other than sub-16
614	614	section (n), which shall apply on the date of enactment 17
615	615	of this section, shall apply on the earlier of— 18
616	616	‘‘(1) the date on which regulations are issued in 19
617	617	final form under subsection (o)(1); or 20
618	618	‘‘(2) 270 days after the date of enactment of 21
619	619	this section.’’. 22
620	620	(b) C
621	621	ONFORMINGAMENDMENT.—Section 17(a)(1) of 23
622	622	the Securities Exchange Act of 1934 (15 U.S.C. 24
623	623	78q(a)(1)) is amended by inserting ‘‘proxy advisory firm,’’ 25
624	624	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
625	625	kjohnson on DSK79L0C42PROD with BILLS 22
626	626	•S 1799 IS
627	627	after ‘‘nationally recognized statistical rating organiza-1
628	628	tion,’’. 2
629	629	SEC. 4. DUTIES OF INVESTMENT ADVISORS, ASSET MAN-3
630	630	AGERS, AND PENSION FUNDS. 4
631	631	(a) R
632	632	EPORTINGREQUIREMENTS.—Not later than 1 5
633	633	year after the date of the enactment of this Act and annu-6
634	634	ally thereafter, any covered entity that retains the services 7
635	635	of a proxy advisory firm with respect to the preceding year 8
636	636	shall provide to the beneficiaries and customers of the cov-9
637	637	ered entity, as applicable, a report that includes— 10
638	638	(1) the percentage of votes cast on shareholder 11
639	639	proposals that follow proxy advisor firm rec-12
640	640	ommendations for each proxy advisory firm retained 13
641	641	by the covered entity; 14
642	642	(2) the percentage of votes cast on environ-15
643	643	mental-, social-, or governance-related shareholder 16
644	644	proposals that follow proxy advisory firm rec-17
645	645	ommendations for each proxy advisory firm retained 18
646	646	by the covered entity; and 19
647	647	(3) an explanation of— 20
648	648	(A) how proxy advisory firm recommenda-21
649	649	tions are used by the covered entity in making 22
650	650	voting decisions; 23
651	651	(B) how such recommendations are rec-24
652	652	onciled with the fiduciary duty of the covered 25
653	653	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
654	654	kjohnson on DSK79L0C42PROD with BILLS 23
655	655	•S 1799 IS
656	656	entity to vote in the best economic interests of 1
657	657	shareholders; 2
658	658	(C) how frequently votes are changed when 3
659	659	an error occurs or due to new information from 4
660	660	issuers; and 5
661	661	(D) the degree to which investment profes-6
662	662	sionals of the covered entity are involved in 7
663	663	such voting decisions. 8
664	664	(b) R
665	665	EQUIREMENTS.—With respect to shareholder 9
666	666	proposals of an issuer, a covered entity with more than 10
667	667	$100,000,000,000 in assets under management shall— 11
668	668	(1) provide customers with a mechanism to in-12
669	669	dicate how the covered entity should vote on their 13
670	670	behalf; 14
671	671	(2) in any materials provided to customers and 15
672	672	related to customers voting their shares, clarify that 16
673	673	shareholders are not required to vote on every pro-17
674	674	posal; and 18
675	675	(3) with respect to each shareholder proposal 19
676	676	for which the covered entity voted (other than an 20
677	677	issuer-sponsored proposal or a vote consistent with 21
678	678	the recommendation of the majority of the board of 22
679	679	directors of the issuer), make publicly available the 23
680	680	economic analysis the covered entity conducted to 24
681	681	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
682	682	kjohnson on DSK79L0C42PROD with BILLS 24
683	683	•S 1799 IS
684	684	determine that the vote is in the best economic inter-1
685	685	est of the customers. 2
686	686	(c) C
687	687	OVEREDENTITYDEFINED.—In this section, the 3
688	688	term ‘‘covered entity’’ means an investment advisor, asset 4
689	689	manager, or pension fund with more than $100,000,000 5
690	690	in assets under management. 6
691	691	SEC. 5. TRANSPARENCY REGARDING ESG FUNDS. 7
692	692	Section 10 of the Securities Act of 1933 (15 U.S.C. 8
693	693	77j) is amended by adding at the end the following: 9
694	694	‘‘(g) T
695	695	RANSPARENCYREGARDINGESG FUNDS.—An 10
696	696	investment company that holds itself out as offering an 11
697	697	index fund under which investments are made pursuant 12
698	698	to a set of environmental, social, or governance standards 13
699	699	shall disclose in tabular form on the first page of each 14
700	700	prospectus required pursuant to this section the 1-, 3-, 15
701	701	and 5-year annual returns and fees charged to investors 16
702	702	with respect to such fund compared with the annual re-17
703	703	turns and fees charged to investors for the most readily 18
704	704	comparable broad-based index fund offered by such invest-19
705	705	ment company under which investments are not made pur-20
706	706	suant to such standards, or if such investment company 21
707	707	does not offer a comparable index fund, a reasonably simi-22
708	708	lar comparison to a readily comparable broad-based index 23
709	709	fund.’’. 24
710	710	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
711	711	kjohnson on DSK79L0C42PROD with BILLS 25
712	712	•S 1799 IS
713	713	SEC. 6. RESUBMISSION THRESHOLDS FOR SHAREHOLDER 1
714	714	PROPOSALS. 2
715	715	Section 14 of the Securities Exchange Act of 1934 3
716	716	(15 U.S.C. 78n) is amended by adding at the end the fol-4
717	717	lowing: 5
718	718	‘‘(k) E
719	719	XCLUSION OFCERTAINSHAREHOLDER PRO-6
720	720	POSALRESUBMISSIONS.—A shareholder proposal may be 7
721	721	excluded from any proxy or consent solicitation material 8
722	722	for an annual meeting of the shareholders of an issuer 9
723	723	if the proposal— 10
724	724	‘‘(1) is not germane (without regard to whether 11
725	725	the proposal involves a significant social policy 12
726	726	issue); or 13
727	727	‘‘(2) addresses substantially the same subject 14
728	728	matter (without regard to whether the proposal in-15
729	729	volves a significant social policy issue) as a proposal 16
730	730	previously included in the proxy or consent solicita-17
731	731	tion material for an annual meeting of the share-18
732	732	holders of an issuer— 19
733	733	‘‘(A) for a meeting of the shareholders con-20
734	734	ducted in the preceding 5 years; and 21
735	735	‘‘(B) if the most recent vote— 22
736	736	‘‘(i) occurred in the preceding 3 years; 23
737	737	and 24
738	738	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
739	739	kjohnson on DSK79L0C42PROD with BILLS 26
740	740	•S 1799 IS
741	741	‘‘(ii)(I) if voted on once during such 1
742	742	period, received less than 5 percent of the 2
743	743	votes; 3
744	744	‘‘(II) if voted on twice during such pe-4
745	745	riod, received less than 15 percent of the 5
746	746	votes; or 6
747	747	‘‘(III) if voted on three or more times 7
748	748	during such period, received less 25 per-8
749	749	cent of the votes.’’. 9
750	750	SEC. 7. PROHIBITION ON ROBOVOTING. 10
751	751	Section 14 of the Securities Exchange Act of 1934 11
752	752	(15 U.S.C. 78n) is further amended by adding at the end 12
753	753	the following: 13
754	754	‘‘(l) P
755	755	ROHIBITION ONROBOVOTING.— 14
756	756	‘‘(1) I
757	757	N GENERAL.—The Commission shall issue 15
758	758	final rules prohibiting the use of robovoting with re-16
759	759	spect to votes related to proxy or consent solicitation 17
760	760	materials. 18
761	761	‘‘(2) R
762	762	OBOVOTING DEFINED .—The term 19
763	763	‘robovoting’ means the practice of automatically vot-20
764	764	ing in a manner consistent with the recommenda-21
765	765	tions of a proxy advisory firm.’’. 22
766	766	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
767	767	kjohnson on DSK79L0C42PROD with BILLS 27
768	768	•S 1799 IS
769	769	SEC. 8. LIABILITY FOR CERTAIN FAILURES TO DISCLOSE 1
770	770	MATERIAL INFORMATION. 2
771	771	Section 14 of the Securities Exchange Act of 1934 3
772	772	(15 U.S.C. 78n) is further amended by adding at the end 4
773	773	the following: 5
774	774	‘‘(m) F
775	775	ALSE ORMISLEADINGSTATEMENTS.—For 6
776	776	purposes of section 18, failure to disclose material infor-7
777	777	mation regarding proxy voting advice that makes a rec-8
778	778	ommendation to a security holder as to its vote, consent, 9
779	779	or authorization on a specific matter for which security 10
780	780	holder approval is solicited, and that is furnished by a per-11
781	781	son that markets its expertise as a provider of such proxy 12
782	782	voting advice, separately from other forms of investment 13
783	783	advice, and sells such proxy voting advice for a fee, shall 14
784	784	be considered to be false or misleading with respect to a 15
785	785	material fact.’’. 16
786	786	SEC. 9. STUDY OF CERTAIN ISSUES WITH RESPECT TO 17
787	787	SHAREHOLDER PROPOSALS AND PROXY AD-18
788	788	VISORY FIRMS. 19
789	789	Not later than 180 days after the date of the enact-20
790	790	ment of this Act, and every 5 years thereafter, the Securi-21
791	791	ties and Exchange Commission, including the Office of the 22
792	792	Advocate for Small Business Capital Formation, shall 23
793	793	carry out a study and submit a report to the Committee 24
794	794	on Banking, Housing, and Urban Affairs of the Senate 25
795	795	and the Committee on Financial Services of the House of 26
796	796	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\S1799.IS S1799
797	797	kjohnson on DSK79L0C42PROD with BILLS 28
798	798	•S 1799 IS
799	799	Representatives on shareholder proposals and proxy advi-1
800	800	sory firms that includes, with respect to, in the case of 2
801	801	the first report, the preceding 10 years, and in the case 3
802	802	of each subsequent report, the preceding 5 years, the fol-4
803	803	lowing: 5
804	804	(1) The costs that issuers incurred in respond-6
805	805	ing to— 7
806	806	(A) politically, environmentally, or socially 8
807	807	motivated shareholder proposals; and 9
808	808	(B) shareholder proposals that failed to be 10
809	809	agreed to more than once. 11
810	810	(2) The amount of fees that public companies 12
811	811	paid to proxy advisory firms and persons associated 13
812	812	with proxy advisory firms. 14
813	813	(3) The source of funds with respect to pay-15
814	814	ment of such fees. 16
815	815	(4) The academic or professional qualifications 17
816	816	of the staff members that provide proxy advisory 18
817	817	services at proxy advisory firms. 19
818	818	(5) The number of shareholder proposals that, 20
819	819	if adopted, would require an issuer to violate a State 21
820	820	or Federal law. 22
821	821	(6) An estimate of the costs that issuers would 23
822	822	incur if such proposals were adopted. 24
823	823	Æ
824	824	VerDate Sep 11 2014 01:01 Jun 17, 2023 Jkt 039200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6301 E:\BILLS\S1799.IS S1799
825	825	kjohnson on DSK79L0C42PROD with BILLS