New Rules for Proxy Advisors: Ensuring Investor Focus and Transparency.
This law establishes strict registration and conflict-of-interest rules for proxy advisory firms that influence corporate shareholder votes. The goal is to ensure their recommendations are accurate, economically sound, and prioritize the best financial interests of investors, including those with retirement savings. It also mandates greater transparency for ESG funds and prohibits automatic voting practices.
Key points
Proxy advisory firms must register with the SEC and publicly disclose how they manage conflicts of interest to protect investor funds.
The practice of 'robovoting' (automatically following advisor recommendations) is prohibited, requiring large investment funds to justify their voting decisions based on the economic interests of shareholders.
ESG funds must clearly disclose their returns and fees compared to similar non-ESG index funds in their prospectuses.
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