Broker voting of proxies on uninstructed items
The SEC is proposing changes in the process for electronic delivery of proxies, in recognition of the fact that retail investor proxy votes have dramatically declined under the current electronic notice and access rules. As part of the proposed changes, the SEC is modifying provisions contained in the notices that will be provided to shareholders. Comments are due on November 20, and the rulemaking order is posted at http://www.sec.gov/rules/proposed/2009/33-9073.pdf.
MIght this be an opportunity to ask the SEC to either (a) eliminate the ability of brokers to cast votes on issues where shareholder clients have failed to mark the proxy, or (b) at least provide explict LARGE PRINT notice that failure to vote on all items will result in TRANSFER OF YOUR VOTING RIGHTS TO A THIRD PARTY WHO MAY VOTE YOUR SHARES AGAINST YOUR POSITION WITHOUT YOUR KNOWLEDGE - VOTING PRACTICES OF BROKERS SHOULD BE CONSIDERED WHEN SELECTING A BROKER?
Comments must reference SEC File S7-22-09 and can be submitted to rule-comments@sec.gov.
Keith Johnson
Reinhart Institutional Investor Services
MIght this be an opportunity to ask the SEC to either (a) eliminate the ability of brokers to cast votes on issues where shareholder clients have failed to mark the proxy, or (b) at least provide explict LARGE PRINT notice that failure to vote on all items will result in TRANSFER OF YOUR VOTING RIGHTS TO A THIRD PARTY WHO MAY VOTE YOUR SHARES AGAINST YOUR POSITION WITHOUT YOUR KNOWLEDGE - VOTING PRACTICES OF BROKERS SHOULD BE CONSIDERED WHEN SELECTING A BROKER?
Comments must reference SEC File S7-22-09 and can be submitted to rule-comments@sec.gov.
Keith Johnson
Reinhart Institutional Investor Services
Replies to This Discussion
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Permalink Reply by Tracey Rembert on -
Keith, well Part A will be taken care of by the SEC's July decision on broker voting, no? As to part B, that seems a no brainer, and I hope more investors pay attention to this rulemaking, because it really impacts small shareholders and their rights. Thanks for the update. It is on my calendar to focus on.
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Permalink Reply by Keith Johnson on -
The SEC's July decision on broker votes only dealt with part of the non-votes problem, votes on director candidates. There is another problem relating to partially voted ballots that remains an issue. It was discussed in the following post on TheRaceToTheBottom Blog:
The Problem of Blank Votes
Posted on Tuesday, May 26, 2009 at 06:00AM by J. Robert Brown | 1 Comment | Print
As we debate access, it seems like every time shareholders turn around they find another design flaw in the system that, oddly, favors management. The latest is blank votes.
It seems that when a shareholder executes a proxy and decides not to cast a vote for a particular matter, the proxy tabulator apparently fills it in in a pro-management manner (or, more accurately, in conformity with the recommendations of the soliciting committees). According to a petitioned filed with the Commission by James McRitchie and a group of co-filers: "When a retail shareowner using Broadridge's proxyvote.com platform votes for or against at least one item on a proxy but fails to vote on other items, each item they fail to vote is cast in favor of the company's recommended position."
In other words, the practice goes well beyond the practice of brokers voting uninstructed shares. In those circumstances, brokers cannot vote on any substantive matter deemed controversial. Blank votes, on the other hand, are in fact voted on substantive matters, controversial or otherwise. They affirmatively assist in passing management proposals.
This will be another matter that requires administrative action. Comments encouraging the Commission to act in this area can be sent to rule-comments@sec.gov with File 4-583 included in the subject line.
[Note that the rulemaking petition is on the SEC's website at: http://www.sec.gov/rules/petitions/2009/petn4-583.pdf and comments that have been submitted on the petition can be viewed at: http://www.sec.gov/comments/4-583/4-583.shtml.]
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Permalink Reply by Andrew Shapiro (Lawndale) on -
I like your option A) eliminating the broker's ability to cast the vote as to pursue option B is very little change from status quo where those who make the effort to vote are being outgunned by the broker vote, which as we all know most conveniently or more sinisterly vote management's recommendation.
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Permalink Reply by James McRitchie on
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Kieth: Thanks for bringing attention to this issue. To me it seems to fall under the coming SEC comment release on proxy plumbing. However, I suppose it doesn't hurt to bring it to their attention as a comment to their notice and access rule as well.
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