{"id":156,"date":"2023-05-18T10:52:20","date_gmt":"2023-05-18T10:52:20","guid":{"rendered":"https:\/\/iqeq.com\/us\/u-s-private-fund-managers-new-proxy-voting-reporting-requirements\/"},"modified":"2024-08-07T14:44:20","modified_gmt":"2024-08-07T14:44:20","slug":"u-s-private-fund-managers-new-proxy-voting-reporting-requirements","status":"publish","type":"post","link":"https:\/\/iqeq.com\/us\/insights\/u-s-private-fund-managers-new-proxy-voting-reporting-requirements\/","title":{"rendered":"U.S. private fund managers: new proxy voting reporting requirements"},"content":{"rendered":"
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On October 18, 2022, the SEC issued a final rule and amendments meant to enhance the information that registered funds currently report about their proxy votes, as well as make that information easier to analyze. <\/strong><\/p>\n

Specifically, the SEC will adopt amendments to Form N-PX under the Investment Company Act of 1940, as well as rule and form amendments under the Securities Exchange Act of 1934. The changes, which will be made effective July 1, 2024, will expand proxy voting information that registered funds must report, as well as require managers to report on voted proxies relating to the subject of executive compensation.<\/p>\n

Some of the most important aspects of the ruling include the following:<\/p>\n

Scope of funds\u2019 Form N-PX reporting obligations<\/h2>\n

Funds currently must report on Form N-PX any information for every matter relating to proxy voting. Prior to the ruling, the requirement applied to each matter relating to a portfolio security considered at any shareholder meeting held during the reporting period, and with respect to which the fund was entitled to vote.<\/p>\n

Under the new amendment, for the purposes of Form N-PX, a fund would now be entitled to vote on a matter if its portfolio securities are on loan as of the record date for the meeting. The idea behind this amendment is to properly reflect any effect of securities lending activities on proxy voting, as the reporting fund could recall and vote these loaned securities.<\/p>\n

Scope of managers\u2019 Form N-PX reporting obligations<\/h2>\n

The SEC ruling adopts Form N-PX under the Exchange Act, and, consistent with the reporting obligation of the Exchange Act\u2019s Section 14A(d), requires managers to use Form N-PX to report its \u201csay-on-pay\u201d votes. This includes votes on whether to approve executive compensation, the frequency of executive compensation approval votes, and votes to approve \u201cgolden parachute\u201d compensation in connection with a merger or acquisition.<\/p>\n

Identification of proxy voting matters<\/h2>\n

The ruling will require reporting persons to use the same language on the proxy form to identify the matter on Form N-PX, and report the proxy voting matters in the same order as they\u2019re presented on the issuer\u2019s proxy form. That includes identifying each director separately in the same order, even if the election of directors is presented as a single matter on the proxy form.<\/p>\n

The rule was adopted with two modifications:<\/p>\n

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  1. The requirements will only apply to proxy votes if a proxy form in connection with a matter is subject to Rule 14a-4 under the Exchange Act, which requires \u201cproxy cards\u201d to clearly and impartially identify each voting matter<\/li>\n
  2. In all other cases, reporting persons will be subject to the current requirement to provide a \u201cbrief identification of the matter voted on,\u201d but abbreviations will be limited only to commonly understood terms, which should make it easier for investors to understand and locate identical voting matters on different Form N-PX reports by different reporting persons<\/li>\n<\/ol>\n

    Identification of proxy voting categories<\/h2>\n

    The new rules also require reporting persons to identify the subject matter of each reported proxy voting item as one of several standardized categories covering matters on which funds frequently vote. The final ruling is different from the proposal in that it eliminated subcategories and instead relies on a more streamlined set of categories, including:<\/p>\n