New U.S. SEC rules to call on hedge funds, endowments to disclose votes

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WASHINGTON/BOOSTON (Businesshala) – The top US securities regulator on Wednesday will propose requiring large hedge funds and endowments to change how they vote on executive pay, bringing this group of influential investors in line with other top funds that have voted for their salaries. public for a decade.

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Changes proposed by the Securities and Exchange Commission (SEC) would also include a mandate for investors to provide more details on how share lending affects proxy voting and to make certain reports machine-readable, an SEC official told Businesshala. Told on condition of anonymity.

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The simultaneous changes from the Democratic-led agency are meant to bring more transparency to shareholder annual meetings, partly by implementing rules mandated by the 2010 Dodd-Frank financial reforms.

If approved by a majority vote of the five-member commission on Wednesday, the rule change would be subject to a 60-day public comment period before further action.

According to compensation advisor Fariant Advisors, the median total salary among S&P 500 company CEOs rose 52% to $12.18 million in 2020, up from $8 million a decade ago.

Among other things, Dodd-Frank’s mandated shareholders get the chance to cast so-called “say-on-pay” advisory votes on executive compensation, which has focused on CEO pay at several corporate annual meetings for the past decade.

The vote, combined with disclosures filed by large mutual fund firms through Form N-PX from 2004, had already brought scrutiny to the largest asset managers.

But SEC Democratic Commissioner Alison Lee told an industry audience here in March that Form N-PX disclosures are too cumbersome to show retail investors how their money is voted for and because they are currently available at some investment firms. are not filed by

Separately, some managers have waived their rights to vote in exchange for fees on lending shares. to small sellers. According to proxy solicitors, this may have lowered the cost to investors, but it has also changed the outcome of corporate elections.

Industry groups say that if the SEC’s proposals prove too costly, those burdens will be passed on to fund shareholders. He also noted that the success of the SEC’s rule change may depend on how quickly vendors can adopt machine-readable technology.

Critics of the pay-per-pay rule, including its co-authors, say it did little here to slow the growth of awards for top US executives.

Top asset managers still heavily refund executive salaries, according to new data from researcher Insightia, which showed that each of the three largest fund firms lost nearly 95% during the 12 months ended June 30. Management supported on time pay, almost same as prior period .

Reporting by Katanga Johnson in Washington and Ross Kerber in Boston; Editing by Michelle Price and Stephen Coates


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