| WASHINGTON, March 19
WASHINGTON, March 19 The U.S. Securities and
Exchange Commission will soon review recommendations for
possible regulatory action targeting proxy advisory firms, SEC
Chair Mary Jo White said on Wednesday.
White did not offer any details on what kinds of new rules
or changes could be in store for proxy advisory firms like Glass
Lewis and Institutional Shareholder Services, which
help large institutional investors weigh how to vote on critical
company issues such as board elections and compensation.
The SEC previously held a roundtable about the sector, where
stakeholders discussed a variety of concerns such as whether the
firms properly disclose potential conflicts of interest and
whether investment advisers too heavily rely on their advice
when they vote on behalf of clients.
Without signaling what the SEC might do, White, speaking to
an audience at the U.S. Chamber of Commerce, said that she was
"particularly" interested during the roundtable in hearing the
discussions about improving disclosure of possible conflicts and
about how much investment advisers rely upon proxy advisory
firms and what this means for their fiduciary obligations.
The U.S. Chamber of Commerce has been among the most vocal
in pressing the SEC to reform the proxy advisory sector.
"The staff now will be making recommendations to me in the
very near term about what additional action might be taken on
these issues," White told the audience.
Some of White's colleagues on the commission, including Dan
Gallagher, a Republican, have said the SEC has enabled
investment advisers to rely too heavily on proxy advisory firms
for advice after the SEC staff issued letters that permit
advisers to rely on the advice without the fear of possible
This is problematic because investment advisers have a
fiduciary obligation to put their customers' interests first,
Gallagher has said.
Most recently, in a March 18 letter, 10 members of Congress,
including New Jersey Republican Scott Garrett and North Carolina
Republican Patrick McHenry, called on the SEC to require more
disclosures of conflicts.
In the letter, the lawmakers said they were concerned that
the SEC does not require proxy advisory firms to disclose
whether a proponent of a shareholder proposal or a competing
director slate is a client.
"In our view, this lack of disclosure calls into question the
legitimacy and veracity of the advice dispensed by proxy
advisory firms and undercuts the ability of their clients to
meet their fiduciary duty to individual investors," they wrote.
(Reporting by Sarah N. Lynch; Editing by Leslie Adler)