New SEC rules in US to use hedge funds and endowments to disclose votes


WASHINGTON / BOSTON (Reuters) – The main U.S. securities regulator will propose Wednesday to require large hedge funds and endowments to disclose how they vote on executive compensation, aligning this handful of influential investors in other top funds who have publicly released their pay votes. for a decade.

The changes proposed by the Securities and Exchange Commission (SEC) will also include mandates for investors to provide more detail on how stock lending affects proxy voting and to make certain reports machine-readable, told Reuters an SEC official, speaking on condition of anonymity.

Together, the changes made by the Democratic-led agency aim to bring more transparency to annual meetings of shareholders, in part by implementing rules mandated by the 2010 Dodd-Frank financial reforms.

If approved by a majority of the five-member panel on Wednesday, the rule changes would be subject to a 60-day public comment period before any further action.

According to compensation consultant Farient Advisors, the average total salary of CEOs of S&P 500 companies rose 52% to $ 12.18 million in 2020, from $ 8 million a decade earlier.

Among other things, shareholders mandated by Dodd-Frank have the ability to cast so-called “say-on-pay” advisory votes on executive compensation, which have focused on CEO compensation at many times. annual company meetings over the past decade.

The votes, combined with disclosures that large mutual fund companies have filed since 2004 via Form N-PX, had already caught the attention of top asset managers.

But Democratic SEC Commissioner Allison Lee here told an industry audience in March that the Form N-PX disclosures are too onerous to show retail investors how their money is being voted on and because they are not. currently not filed by some investment companies.

In addition, some managers have renounced their voting rights in exchange for commissions when they lend shares to short sellers. While this may lower costs for investors, it also changed the outcome of corporate elections, the attorneys said.

Industry groups say if the SEC’s proposals turn out to be too costly, those charges would be passed on to shareholders of the funds. They also said the success of the SEC’s rule change may hinge on how quickly vendors can adapt to machine-readable technology.

Critics of the say-on-pay rule, including its co-author, say it hasn’t done much here to slow the growth of awards for top U.S. executives.

Top asset managers still overwhelmingly support executive compensation, according to new data from researcher Insightia showing that in the 12 months ended June 30, three of the largest fund companies each supported around 95 salary management. % of the time, about the same as the previous period. .

Reporting by Katanga Johnson in Washington and Ross Kerber in Boston; Editing by Michelle Price and Stephen Coates

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