DECEMBER 6, 2018 / 11:33 AM
regulator should demand more voting disclosure from fund managers:
WASHINGTON (Reuters) - The U.S. securities
regulator should consider imposing stricter disclosure requirements on
institutional fund managers relating to how they vote in corporate
elections, a Securities and Exchange Commission (SEC) official said on
FILE PHOTO: A general exterior view
of the U.S. Securities and Exchange Commission (SEC) headquarters in
Washington, June 24, 2011. REUTERS/Jonathan Ernst/File Photo
The growing power of passive index funds in
corporate elections posed governance and investor-protection concerns,
with most investors unaware of how fund managers vote on their behalf, SEC
Commissioner Robert Jackson said at an inter-regulatory audience of the
Federal Trade Commission.
“There are serious investor protection and
corporate governance issues that are implicated by the common ownership of
stocks by a handful of institutional index fund managers,” Jackson said at
the gathering at New York University’s School of Law.
“Each year, institutional investors cast
votes in corporate elections on behalf of more than 100 million American
families, wielding significant power in the future of our companies and
communities,” he added.
Jackson, a Democratic commissioner who was
sworn in at the SEC in January, said investors did not get enough useable
information about how fund managers vote on matters regarding their money
and consequently, they cannot hold those managers accountable for how they
vote in those elections.
“It’s time for that to change.”
Jackson’s comments are likely to intensify a
broader debate over corporate democracy in the United States which has
heated up in recent months.
Industry groups are pushing the SEC to
overhaul its rules on how shareholders are able to vote on special issues
like climate change and diversity, while investors worry any changes will
undermine their ability to hold company managers to account.
Citing recent academic research, Jackson, a
professor who is on public service leave from the New York University’s
School of Law, said institutional investor voting patterns fall into three
distinct camps and investors ought to be aware of the distinct biases when
deciding which funds to park their money with.
Jackson has become a persistent voice for
investor protection issues at the regulator, pushing for change on other
issues such as voting rights and stock exchange fees and competition.
(The story refiles to match headline to lead
Reporting by Katanga Johnson; Editing by Bernadette Baum
Thomson Reuters Trust Principles.
© 2018 Reuters.