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  • Rita Rhodes

Proxies: To Vote, or Not to Vote?


On August 21, 2019, the Securities and Exchange Commission ("SEC") issued some guidance to assist investment advisers on proxy voting and an interpretation regarding proxy rules.


The SEC has spent some time considering the proxy rules and engaging with the public on the proxy voting process, the history of which is discussed at length in the guidance linked above. Investment advisers have the ability to choose to not vote proxies at all, or to assume the authority to vote all proxies, or to reach some agreement with the client that lands somewhere in between - they will vote on certain matters, but not others.


If an investment adviser assumes responsibility for voting proxies, they also have the ability to engage a third-party to assist with the process. These third-party vendors provide solutions that range from simply providing an electronic platform to facilitate voting, to providing research and analysis, to assuming complete responsibility on behalf of the adviser, and ultimately, the client.


The SEC's guidance and interpretation provides further clarification on the Commission's expectations when it comes to proxy voting. As a fiduciary, an investment adviser has a duty of loyalty to always act in the client's best interest, including when it comes to proxy voting. This means that the investment adviser has an obligation to make sure that the proxy votes - whether made by the investment adviser or by a third-party vendor - are made in the client's best interest.


As an investment adviser, your Form ADV, your client agreement, and your policies and procedures should clearly state what responsibility you are assuming with regard to proxy voting. The SEC encourages investment advisers to review their policies and procedures in advance of next year's proxy season. (Because most companies have a December 31 fiscal year end, their annual shareholder meetings typically occur in April.)


Now's a good time to take a look at your documents to make sure your proxy voting policies are clear and transparent. If changes need to be made, we recommend implementing them with your annual update in the first quarter of 2020. If you need assistance with this process, please let us know. We're happy to help!

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