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Withdrawal of past guidance signals a contentious start to SEC’s proxy process review

Joe Mont | September 25, 2018

Weeks ahead of a Nov. 15 roundtable the Securities and Exchange Commission has scheduled “to hear investor, issuer, and other market participant views about the proxy process and rules,” Chairman Jay Clayton has already dropped a bombshell on proxy advisors and the investment firms that pay for their advice and recommendations.

On the morning of Sept. 14, Clayton, appearing at the monthly meeting of the SEC’s Investor Advisory Committee, released a statement announcing that, in connection with the forthcoming roundtable, the Division of Investment Management was withdrawing two 2004 “no-action” staff letters issued to Egan-Jones Proxy Services and Institutional Shareholder Services, governance and proxy advisers.

The letters, critics say, have long since allowed asset managers to skate past potential conflicts of interests by using third-party recommendations when casting annual meeting votes on behalf of shareholders who invest through their firm or its funds.

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