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Op-Ed: Don’t Disparage or Restrict Proxy Advisors

This piece originally appeared on September 24, 2018 on The Wall Street Journal and was written by Karen Barr.

Your Sept. 18 editorial “Cracking the Proxy Racket” notes that the SEC recently withdrew guidance regarding proxy advisory firms in an effort “to facilitate the discussion” about “the proxy voting process, retail shareholder participation and the role of proxy advisory firms.”

Investment advisers, large and small, use proxy advisory firms to assist them with their substantial proxy voting duties ranging from voting mechanics to research and recommendations. To the extent that investment advisers have increased their use of proxy advisory firms, it is because of the increase in the complexity and number of votes faced by advisers and not because of the letters that were recently withdrawn by SEC staff.

While proxy advisory firms may provide recommendations, the ultimate responsibility with respect to proxy voting remains with the investment adviser. Investment advisers must have policies reasonably designed to ensure that they vote proxies in their clients’ best interest and must conduct appropriate due diligence on any third-party service providers they use, including proxy advisory firms. These requirements derive from an adviser’s fiduciary duty and SEC rules.

Given the utility of proxy advisory services, policy makers should refrain from measures that would restrict their use or make those services more expensive to advisers and their clients, or further raise barriers to entry for new proxy advisory firms.


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