SEC Issues New Guidance and Proposed Amendment

The SEC has been busy this past month issuing new information for asset managers. On July 10th, it issued a proposed amendment to Form 13F filings. Then, last week, the SEC issued guidance on proxy voting for investment advisers. The Form 13F change is significant for institutional equity trading advisers.

Section 13(f) Proposed Amendment

The SEC has decided to amend the reporting threshold under Section 13(f) in order to provide relief for smaller equity managers. Under the new proposal, the threshold for reporting will change from $100 million in discretionary reportable equity securities to $3.5 billion. This is a significant change for money managers and would allow many smaller firms to be exempt from the quarterly reporting requirement. According to the SEC, approximately eighty-nine percent (89%) of current filers would be relieved under the proposal. A huge compliance and cost burden would be removed from smaller equity managers.

Those advisers that meet the higher threshold and must file would have additional reporting obligations imposed. Additional data to be collected from these advisers under the revised Form 13F includes:

  • New numerical identifiers
  • Changes to the type and format of information collected
  • Additional information from a manager if requesting confidentiality under FOIA

New Proxy Guidance

On July 22nd, the SEC adopted amendments to the Proxy Voting Rules. The rule changes mainly apply to proxy voting advice firms that solicit proxies. New Rule 14a-2(b)(9) provides an exemption for proxy voting service firms under the information and filing requirements of proxy solicitors. Proxy firms must meet a number of conditions related to their policies and procedures in order to take advantage of the exemption.

Since the primary customers of proxy voting advice companies are investment advisory firms, the SEC also published written guidance for investment advisers regarding their use of proxy advice firms. Under Rule 206(4)-6 of the Advisers Act, registered investment advisers are required to have written policies regarding their proxy voting process. In light of the changes to Section 14(a), the SEC has established new guidelines for investment adviser proxy voting policies.

The SEC has stated that registered advisers should consider taking the following actions in order to prove compliance under Rule 206(4)-6:

  • Review all agreements with proxy advisory firms to determine if they have the ability (simply due to access) to utilize non-public information against the RIA’s clients
  • Update Form ADV proxy voting disclosure to include:
    • How and when it utilizes automated voting via a proxy service
    • Actions the firm takes when it becomes aware of new information on an issuer (issuer has or will file new proxy material) just prior to the submission deadline for automated proxies

Registered investment advisers that utilize proxy voting advice firms should review their written proxy voting policies and client disclosures around proxy voting so that clients have the information they need to provide informed consent to the use of automated proxy voting.

View proposed new Form 13F amendments, Reporting Threshold for Institutional Investment Managers

View new proxy guidance, Supplement to Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers