‘Procedural Guidelines’ issued by Sebi for Proxy Advisory Firms
Securities Exchange Board of India (SEBI) said, today, that Proxy Firms that advice shareholders on corporate governance-related issues and assists them in voting on resolutions need to follow “procedural guidelines.”
The voting recommendation policies shall be framed by them and must be disclosed to the clients. It must be ensured by the proxy advisory firms that the policies are reviewed at least once per year.
The regulatory body said that the voting recommendation policies shall be disclosed the circumstances when not to provide a voting recommendation.
The methodologies and processes of research must be disclosed to the clients by the proxy advisors along with any factual error or material revision within 24 hours.
A stated process must be there to communicate with the clients and company and the reports must be shared at the same time.
The website should have this sharing policy disclosed. The proxy advisors define the timeline to receive comments and all comments/ clarifications received must be included in the report as an addendum.
The proxy advisors must disclose the legal requirement vis-a-vis higher standard being suggested if any, and the rationale behind it.
There should be a disclosure for the proxy advisors if there is any conflict of interest while giving the advice. Areas of potential conflict along with the safeguards put in place to mitigate them must be addressed in the disclosure.
Proxy advisory firms have gained prominence by bringing out several key corporate governance-related issues in companies. These guidelines shall be applicable from September 1st.