SEC Fines Investment Adviser for Violations of Proxy Voting Rule
The SEC has fined and censured an investment adviser and one of its principals because they failed to properly disclose to clients that the adviser utilized a pro-union proxy voting policy in an effort to win Taft-Hartley business. According to the SEC, the adviser used ISS’s proxy voting policy that followed AFL-CIO recommendations in order to score better in the AFL-CIO key votes survey and therefore compete for union-affiliated business. The SEC charged that the adviser failed to adequately address this conflict of interest in its policies and procedures and to adequately disclose the conflict. The adviser was fined $300,000 and the principal was fined $50,000.
OUR TAKE: The SEC has not brought many enforcement actions under the Advisers Act’s proxy voting rule (206(4)-6). In this action, the SEC stresses the importance of disclosure of the rationale for selecting a particular voting policy.