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France has taken further action to control the growing influence of proxy advisory firms. The country's financial regulator told firms to disclose more information about how they operate and said similar rules should be introduced at a European level.

A formal “recommendation” from the Autorité des Marchés Financiers (AMF) said firms must reveal more about how they establish and implement voting policies, issue voting recommendations, and communicate with listed companies. It also wants them to say more about how they prevent conflicts of interest.

The regulator said that proxy firms played an important governance role, but said their power was such that a recommendation from one or two firms could swing a vote at a shareholder meeting.

“This is why the AMF considers it necessary to ensure that this profession is exercised under transparent conditions, by firms that provide high-quality work,” the regulator said.

The recommendation follows the government's introduction of new laws that will make life harder for proxy agencies that exercise votes on behalf of foreign shareholders.

The laws, passed in December, allow a company to refer proxy votes to the French courts if they believe there is any doubt about how the underlying shareholder wanted its votes to be cast.

That would allow the management of French companies to cancel vote instructions that come through proxy agencies, simply by questioning whether the agency is casting votes that reflect the intent of beneficial shareholders, the International Corporate Governance Network argued.