Mutual Fund Group Issues Report to Aid Proxy Voting in Line With SEC Guidance

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Jan. 22 — The Investment Company Institute Jan. 22 issued a report to help mutual fund boards and fund advisers vote their proxies in light of the SEC's recent guidance on proxy advisory firms.

Mutual funds, as investors in many public companies, vote on proxy proposals offered by corporate management or shareholders. Fund boards generally delegate their voting responsibilities to fund advisers, which—subject to the boards' oversight—are required to vote in the best interests of the funds and fund shareholders.

The Securities and Exchange Commission guidance—IM/CF Staff Legal Bulletin No. 20—was issued in June to clarify certain issues in the wake of concerns raised by companies responding to the commission's 2010 concept release on the U.S. proxy voting infrastructure.

Among other matters, the SEC guidance clarified that investment advisers need not vote every proxy. It further spelled out investment advisers' duties on retaining proxy advisory firms with respect to the accuracy of the facts upon which the firms base their voting recommendations.

Three Broad Areas 

The ICI report focuses on three broad topics:

• the use of proxy advisory firm services generally;

• board oversight of proxy advisory firms; and

• fund adviser oversight and due diligence of proxy advisory firms.


In a related release, ICI President and Chief Executive Officer Paul Schott Stevens said that fund advisers and boards take their voting responsibilities seriously.

“They have long recognized that hiring proxy advisory firms involves ongoing oversight and due diligence responsibilities,” Stevens said. “This report is intended to complement this guidance by providing practical assistance to fund advisers and boards as they evaluate their funds’ proxy voting practices.”

Voting their proxies is a large undertaking for mutual funds given the number of portfolio securities they hold. According to an ICI study spanning 2007 to 2009, there were more than 20,000 proxy proposals for 3,000 of the largest public companies during a 12-month period. In that same time, the largest fund families cast almost 4 million separate proxy votes for these companies, which averages to about 5,000 unique proposals per fund family.

The ICI report is available at

The SEC guidance is available at


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