HR Policy-Supported Proxy Advisory Reform Legislation Advances in the House

The House Financial Services Committee passed a package of bills aimed at protecting retirement savings by a vote of 29 to 21, along party lines. The package contains Association-supported legislation that would reform the proxy advisory firm process by promoting greater transparency and accountability and hold proxy advisory firms liable for failure to disclose material information, methodology, and conflicts of interest. 

The Protecting Americans’ Retirement Savings from Politics Act (H.R. 4767) would require all proxy advisory firms to register with the Securities and Exchange Commission (SEC) and prohibits unregistered proxy advisory firms from providing proxy-voting advice, research, analysis, or recommendations to any client. The legislation mandates firms to have an ombudsman, compliance officer, and disclose conflicts of interest to the SEC. The bill prohibits unfair practices and grants issuers a private right of action against proxy advisory firms endorsing illegal proposals.

H.R. 4767 would also amend the Securities Exchange Act of 1934   to focus on false or misleading statements related to proxy voting advice. The amendment would restore proxy advisory firm liability as contained in initial SEC rules, and would require the disclosure of material information, including their methodologies, sources of information, and conflicts of interest. 

HR Policy submitted a letter to the Committee encouraging members to vote in support of the two legislative proposals. 

Outlook: Congress has now adjourned for a month-long August recess. The legislation is expected to receive consideration in the full House in the Fall, but the Democratic-controlled Senate is unlikely to consider it.