SEBI Asks Proxy Advisors To Formulate Voting Recommendation Policies
IANS 03 August 2020
The Securities and Exchange Board of India (SEBI) on Monday came up with a set of procedural guidelines for proxy advisors.
 
Proxy advisory firms advise shareholders on corporate governance-related issues and give recommendations regarding voting on resolutions.
 
In a circular, SEBI said that proxy advisors shall formulate the voting recommendation policies and disclose the updated voting recommendation policies to its clients.
 
"Proxy advisors shall ensure that the policies should be reviewed at least once annually. The voting recommendation policies shall also disclose the circumstances when not to provide a voting recommendation," it said.
 
They would also have to disclose the methodologies and processes followed in the development of their research and corresponding recommendations to its clients, as per the guidelines. The advisors shall alert their clients within 24 hours of receipt of information about any factual errors or material revisions to the report.
 
The market regulator has made it mandatory for the proxy advisors to share their report with their clients and the company at the same time.
 
"This sharing policy should be disclosed by proxy advisors on their website. The timeline to receive comments from the company may be defined by proxy advisors and all comments/clarifications received from the company, within the timeline, shall be included as an addendum to the report," said the SEBI circular.
 
If the company has a different viewpoint on the recommendations stated in the report of the proxy advisors, then the advisors, after taking into account the said viewpoint, may either revise the recommendation in the addendum report or issue an addendum to the report with its remarks, as considered appropriate.
 
Among other requirements, the circular said: "Proxy advisors shall disclose conflict of interest on every specific document where they are giving their advice. Further, the disclosures should especially address the possible areas of potential conflict and the safeguards that have been put in place to mitigate possible conflicts of interest."
 
The new guidelines will come into effect from 1 September 2020.
 
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Comments
ramesh.vuyyuru
1 year ago
Mr. Vivek Shah does not address the issue of how these advisory firms raise resources? Again, who pays them and why?
vivek_shah64
Replied to ramesh.vuyyuru comment 1 year ago
There are many interesting blogs available on the internet on the workings of these advisory firms. Try googling to get your answers. And by the way Proxy advisory firms charge fees for seeking their advise.
vivek_shah64
Replied to ramesh.vuyyuru comment 1 year ago
I'm not the one who can answer this. But I can surely share one fact that one of the most so called prominent advisory firm had Yes Bank as it's stake holder.
vivek_shah64
1 year ago
The importance of the Proxy Advisory firms have gained importance to a great extent because of the failure of Credit Rating agencies in doing thier job with utmost impartiality. One really hopes that these Advisory firms do not end up behaving like Credit Rating agencies. One also hopes for lesser interference and micro management from SEBI into the workings of these firms. SEBI should just stick to making guidelines and it's adherence while treating advisor firms as Market intermediaries.
ramesh.vuyyuru
1 year ago
What is the source of funding for these advisory firms? Who pays them? Their objectivity is questionable.
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