In the making for a long time, the SEC proposed rules yesterday that would change how mutual funds disclose their proxy voting – and would require institutional investors to disclose their say-on-pay voting records for the first time. Here’s the 174-page proposing release.

It’s been 18 years since the SEC first started requiring public disclosure of mutual fund voting – on Form N-PX – and many believe that changes have been long overdue (there was a SEC proposal in 2010 that didn’t go anywhere). That’s because the Form N-PXs can be difficult to parse – some are hundreds of pages long – even a thousand pages long – and in a format that is challenging to the lay reader.

Each fund can format their N-PX any way they choose under the SEC’s existing rules. The reports also aren’t machine readable, a “must” in today’s world. It’s a real scattershot framework that doesn’t produce disclosure that can be readily consumed.

Here are six things to know about the SEC’s proposal:

1. More Uniformity for Agenda Item Descriptions – Funds would be required to use the same language to describe each voting matter as is used on the company’s form of proxy – and to categorize each matter by category and subcategory.

2. More Uniformity for How N-PX Is Organized – Funds would be required organize their reports a certain way in order to make the disclosures easier to read and compare across funds.

3. “Machine Learning” Enabled – Funds would be required to use a structured data language.

4. Disclosure About Securities Lending Activities – Funds would be required to disclose how their securities lending activities impact voting. Some funds “loan” their holdings in a manner that allows others to vote their shares – this activity would be disclosed under this proposal.

5. Institutional Investor Disclosure About “Say-on-Pay” Voting – Institutional investment managers, as defined by Section 13(f) of the Exchange Act, would be required to disclose how they voted on executive compensation, or “say-on-pay,” matters, something that funds already disclose in their N-PXs.

6. Form N-PXs Still Due Annually By August 31st – Leading up to the proposal, there was speculation that the SEC would propose more frequent – or at least, a shorter – deadline for reporting. However, the SEC proposes to leave the August 31st annual deadline as it is.

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Photo of Allison Handy Allison Handy

Allison Handy is the firmwide co-chair of the Corporate & Securities practice. Her extensive experience includes advising public and private companies in connection with corporate governance practices, disclosure issues, and capital markets transactions, such as equity offerings, debt offerings and tender offers. She…

Allison Handy is the firmwide co-chair of the Corporate & Securities practice. Her extensive experience includes advising public and private companies in connection with corporate governance practices, disclosure issues, and capital markets transactions, such as equity offerings, debt offerings and tender offers. She is also a leader of the firm’s Environmental, Social, and Governance advisory team.

Allison provides counsel to companies on a broad range of issues faced by management and directors in connection with the many compliance aspects of securities laws, including governance rules adopted by the Securities and Exchange Commission (SEC) and stock exchanges. She advises boards and committees in matters related to internal investigations and the efforts of shareholder activists, and works closely with in-house counsel, financial personnel, and outside auditors and advisors to help her clients prepare proxy statements and other reports to investors that meet complex disclosure obligations.

Photo of Gwen Williamson Gwen Williamson

Gwen Williamson represents registered investment companies and their independent directors, as well as investment advisers, family offices, and nonprofit organizations. She advises clients on governance and compliance responsibilities under the federal securities laws, including the Investment Company Act of 1940 and the Investment…

Gwen Williamson represents registered investment companies and their independent directors, as well as investment advisers, family offices, and nonprofit organizations. She advises clients on governance and compliance responsibilities under the federal securities laws, including the Investment Company Act of 1940 and the Investment Advisers Act of 1940. Gwen has significant experience in the ESG and principles-based investing space.