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U.S. markets watchdog to finalize rules on shareholder voting advice

WASHINGTON, July 22 (Reuters) - The U.S. securities regulator on Wednesday is poised to finalize new restrictions on firms which advise investors on how they should vote in corporate elections, following a years-long battle between corporate lobbyists and governance activists over the proposed rules.

The Securities and Exchange Commission (SEC) will, however, walk back the most contentious part of its November 2019 proposal here which would have required such proxy advisers to give companies five days to vet their reports, agency officials told Reuters. That proposal had been fiercely opposed by powerful hedge fund investors including major Republican donors, Reuters reported.

Wednesday’s final rule will instead require proxy advisors, which frequently issue voting recommendations on contentious issues like executive compensation and environmental measures, to let companies see the reports at the same time as its shareholders, two agency officials said.

“Prior review is not required,” an SEC official told Reuters of the new rules. “The agency’s aim is to give flexibility to issuers and proxy advisory firms.”

Corporate groups including the U.S. Chamber of Commerce and the National Association of Manufacturers, had lobbied hard to rein in proxy advisors, which they say have too much power over the shareholder voting process and make often make mistakes in their company reports. They also say proxy advisors are sometimes conflicted because they often provide other services to the companies on which they issue voting recommendations.

The SEC will require proxy advisers to disclose potential conflicts of interest in their proxy voting advice or in the electronic medium used to deliver the advice.

Even so, corporate governance activists and proxy advisors will likely celebrate Wednesday’s final rule as a victory for American shareholders.

Reporting by Katanga Johnson Editing by Nick Zieminski