SEC Seeks Comment on Proposal for Mutual-Fund Disclosure

The Securities and Exchange Commission (SEC) is currently seeking comment on a proposed rule (published Sept. 19) that would require mutual fund companies to publicly disclose documents related to proxy voting, in which the company votes as a shareholder on behalf of mutual fund owners. The Calvert Group, a mutual fund management company with one of the largest families of socially screened funds, has posted a letter on its web site that can be e-mailed to SEC Secretary Jonathan Katz supporting the proposed rule changes, requiring disclosure of both proxy voting guidelines and actual voting records. Proxy voting disclosure will help ensure that fund managers are supporting corporate governance practices that are consistent with the best interests of their shareholders, and help to eliminate the perception that fund managers may use their proxies to vote in their own business interests instead. It will aid in the continuing effort to make corporate management properly accountable to investors. With disclosure, for example, investors will know how votes are cast on key issues (i.e., executive compensation, stock options, etc.) that directly affect their interests. In addition, disclosure could also encourage mutual funds to become more attentive to the corporate governance of the companies in their portfolios. If the proposed rule is adopted, mutual fund companies will be required to:
  • disclose the policies and procedures they use to determine how to vote proxies of companies in their portfolios;
  • disclose procedures the fund uses when a vote presents a conflict of interest for the fund’s investment adviser;
  • disclose its complete proxy voting record in filings with the SEC;
  • disclose in the annual and semi-annual reports to shareholders any proxy votes that are inconsistent with the fund’s policies and procedures, along with an explanation for the inconsistency; and
  • provide information about its proxy voting policies and procedures and voting record to shareholders upon request.
The SEC will accept public comments on the proposed rule through Dec. 6.
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