Three things about SEC Chair Lee’s speech on fund voting

Today, Acting SEC Chair Allison Herren Lee delivered this speech about fund voting and disclosure. Here are three things to consider from it:

1. Fund voting regulations need updating – Younger people and those interested in ESG want to keep their funds more accountable. That includes passive index funds where so many people have their money.

2. Index funds don’t always properly harness their voting power – A good example is securities lending – deciding not to exercise a fund’s voting rights might not comport with fiduciary duties. The SEC’s interpretive release on proxy voting responsibilities of investment advisers issued in 2019 might need to be revisited.

3. Form N-PX may need to be updated – Perhaps the update would, for example, standardize voting disclosures, structure and tag the data, provide more clarity in the description of issues voted on, provide the number of shares voted versus shares available to vote, and facilitate more timely disclosure by funds.

Acknowledging the time it takes to adopt amended regulations, the SEC may take action to improve transparency sooner – such as a new SEC webpage that better displays existing N-PX data.