Procedural Guidelines for Proxy Advisors
Proxy adviser is a person who provides advice to institutional investors or shareholder of a company, in relation to exercise of their rights in the company including recommendations on public offer or voting recommendation on agenda items. They also play an advisory role by providing analysis on corporate governance practices in companies which helps institutional investors to take prudent investment decisions.
SEBI regulates the activities of proxy advisors in India under SEBI (Research Analyst) Regulations, 2014. Under these regulations, such entities are required to register with SEBI and comply with the provisions pertaining to formation of internal policies and procedures, disclosures in the reports, code of conduct, maintaining record of voting recommendations etc.
Recently, SEBI has envisaged procedural guidelines for proxy advisors which are summarized as below:
- i. The proxy advisors shall formulate a voting recommendation policy, constantly update it and disclose it to their clients. They should also ensure that the policies should be reviewed at least once annually.
- ii. The proxy advisors in their voting recommendation policies shall also disclose the circumstances when a voting recommendation to a client should not be made.
- iii. Proxy Advisors shall share their report with its clients and the company at the same time. This sharing policy should be disclosed by the proxy advisors on their website. If the company has any different view on the report of the proxy advisors, the proxy advisors may after considering the company’s views may either revise it or issue an addendum to the report with its remark.
- iv. While sharing the recommendation in the report, the proxy advisors shall also give a comparative of the legal requirements of its recommendation versus achieving higher standards. It shall disclose the reasons for the recommending higher standards.
- v. Any factual error or any material revisions in the report prepared by the proxy advisors should be communicated to the client within 24 hours of the receipt of such information.
- vi. Finally, the proxy advisors shall also disclose conflict of interest on every specific document where they are giving their advice and also the measures they have taken to mitigate any possible conflict of interest.
