Representative Bryan Steil, R-Wisconsin, advocated for the registration of proxy voting firms with the Securities and Exchange Commission on Thursday.
His remarks were made at the 2023 Security Traders Association’s 90th Annual Market Structure Conference in Washington, in response to a moderator’s question asking what additional regulations would benefit the markets.
Steil answered that Congress has a “real opportunity to look at how proxy advisers are providing advice,” and that “we really have a duopoly of proxy advisers with ISS and Glass Lewis”, and these “two proxy advisers are often agreeing with each other.”
CIO is owned by proxy service provider Institutional Shareholder Services Inc.
Steil proposed legislation in July that would require proxy advisers to register as such with the SEC. Registration would require the proxy firm to provide information on its methodology for coming to recommendations, which the SEC would then be required to make public.
The “duopoly” characterization of the proxy advisory business has been common among Republicans on the House of Representatives’ Committee on Financial Services, and they have proposed other bills designed to reduce shareholder proposals that focus on political issues and to add public scrutiny to the proxy voting industry’s methods and analysis. Steil’s legislation was accompanied by several other bills designed to regulate the shareholder proposal process.
Steven Friedman, the general counsel for ISS, was asked by Congressman John Rose, R-Tennessee, if he thought proxy advisers should have to register with the SEC and disclose conflicts of interest at a related hearing in July. Friedman answered, “Yes,” though he did not specifically comment on Steil’s legislation.
Steil’s bill has not progressed to a floor vote in the House, nor has any of the other proxy legislation. However, it remains a strong focus of the Financial Services Committee’s attention on environmental, social and governance and sustainable investing practices, which members have called “woke investing” that they have said discounts the economic interest of advisory firms’ clients in favor of political and ethical goals.
Tags: Glass Lewis, proxy votes, registered investment advisor, SEC, voting