The Securities and Exchange Commission has proposed a new regulation, which would force large hedge funds, pensions, and endowments to disclose executive-pay votes.
The idea for the new regulation stems from over a decade ago, however due to resistance from investment firms the rule was never applied. Publicly traded companies need to be more transparent than private firms.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, requires public companies to give shareholders a say in top executive compensation. The Act was created by the Commodity Futures Trading Commission, of which Gary Gensler was the chairman at the time.
Now the US watchdog is looking to take the rule to the next level. Currently, funds file Form N-PX reports disclosing voting proxies, however these are usually done in an inconsistent manner and format, making it impossible to be machine read and putting the burden on investors.
The proposed regulation also suggests way for funds to more clearly show proxy votes and stock-lending activity. If on Wednesday the proposals are approved by a majority of its five members, the changes will then be open to public comment for 60 days.
The US financial regulator is ticking off items on its checklist of consumer protection. Since Gary Gensler has taken over as chairman of the watchdog, he has made clear that protecting consumers is his main priority.
He has recently harnessed in the exploding SPAC market and has put a lot of efforts into keeping crypto in check. Gensler said about the proposal:
“This proposal will make it easier and more efficient for investors to get crucial information about proxy votes from funds. I am pleased to support the staff’s recommendations and look forward to putting them out to public comment.”
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Lee, Isabelle (29. September 2021). Business Insider: Hedge funds may have to disclose executive-pay votes under SEC plan. Last viewed on 30.09.2021 on https://markets.businessinsider.com/news/funds/sec-hedge-funds-disclose-executive-pay-dodd-frank-act-rules-2021-9.
