29 June 2021

Proxy adviser reform proposals: Report on consultation

This article was written by Tim Bednall

The Federal Government has recently conducted consultation on proposed reforms to the regulation of proxy advisers. The reform proposals also included new obligations concerning trustees of superannuation funds in relation to voting at shareholder meetings of investee companies.

The reform proposals included:

  • Greater “transparency” of voting by superannuation trustees, including annual reports detailing how the trustees voted, whether they received advice from proxy advisers, and whether they followed that advice
  • Proxy advisers to be independent from superannuation trustee clients.
  • Proxy advisers to provide research and voting recommendations to the relevant company before distributing to subscriber investors.
  • Proxy advisers to advise subscriber investors how to access the company’s response to the proxy adviser’s research and voting recommendations
  • Proxy advisers to be required to hold an Australian Financial Services Licence (AFSL).

Consultation closed on 1 June 2021. Treasury has not yet made available the submissions in response to the consultation.

It is apparent from the submissions that have been published that across the spectrum of responders, including superannuation funds themselves, there is little support for the reforms concerning trustees of superannuation funds.

The major proxy advisers have made submissions, and some have been vocal in the media, opposing the proposed reforms concerning transparency and independence.

By contrast, the “governance sector” has welcomed proposals that would require proxy advisers to provide copies of reports to companies in advance of publication, and also to facilitate access by their subscribers to the company’s response.

As for a requirement to hold an AFSL, the major proxy advisers already hold AFSLs. The governance community has supported the proposal for all proxy advisers to hold an AFSL, but the consultation paper did not disclose any particular additional licensing requirements or conditions for proxy advisers that may be imposed by this reform, and proxy advisers have opposed the imposition of any requirements in addition to those that already apply to providers of financial advice.

We await the Treasurer’s response.

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