InvestorQ : What are the highlights of the new disclosure standards for proxy advisory firms?
Archita Jajjoo made post

What are the highlights of the new disclosure standards for proxy advisory firms?

Answer
user profile image
Rashi Mehra answered.
1 month ago


After the controversy in a recent board meeting involving the directorship of the reputed Mr. Deepak Parekh, SEBI has now issued disclosure standards for proxy advisory firms. There will be a clear cut policy for managing conflict of interest and companies must be given a chance to respond. This is the first time SEBI has issued disclosure standards for such proxy firms. These proxy firms are governed by research analyst norms.

Proxy advisory firms give information support to institutional investors including research, data and recommendations on management and shareholder proposals that are voted on at a company's AGM and EGMs. They also comment on governance practices in companies which helps institutional investors take investment decisions.

Under the new rules, proxy advisors will have to formulate voting recommendation policies and disclose it to their clients. In addition, it must also disclose methodologies adopted for their research. One of the top proxy advisory firms, InGovern, opined that most of these guidelines were already adopted by them in some form. Effective 01 September, proxy firms have to also disclose conflict of interest, if any.

Essentially, the proxy advisory norms codify the standards which were already being followed in some form. Quite often, companies find that the recommendations of proxy firms go beyond what the scope of their role. Greater disclosure will be helpful. Some proxy firms have objected to the idea of giving the report to the company and seeking comments.