Enhanced Reporting of Proxy Votes by Registered Management Investment Companies; Reporting of Executive Compensation Votes by Institutional Investment Managers, 57478-57524 [2021-21549]

Download as PDF 57478 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 232, 240, 249, 270, and 274 [Release Nos. 34–93169; IC–34389; File No. S7–11–21] RIN 3235–AK67 Enhanced Reporting of Proxy Votes by Registered Management Investment Companies; Reporting of Executive Compensation Votes by Institutional Investment Managers Securities and Exchange Commission. ACTION: Proposed rule. AGENCY: The Securities and Exchange Commission (‘‘Commission’’) is proposing to amend Form N–PX under the Investment Company Act of 1940 (‘‘Investment Company Act’’) to enhance the information mutual funds, exchange-traded funds (‘‘ETFs’’), and certain other funds currently report annually about their proxy votes and to make that information easier to analyze. The Commission also is proposing rule and form amendments under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) that would require an institutional investment manager subject to the Exchange Act to report annually on Form N–PX how it voted proxies relating to executive compensation matters, as required by the Exchange Act. The proposed reporting requirements for institutional SUMMARY: investment managers, if adopted, would complete implementation of those requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘Dodd-Frank Act’’). DATES: Comments should be received on or before December 14, 2021. ADDRESSES: Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/submitcomments.htm); or • Send an email to rule-comments@ sec.gov. Please include File Number S7– 11–21 on the subject line; or Paper Comments • Send paper comments to, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number S7–11–21. This file number should be included on the subject line if email is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s website (http:// www.sec.gov/rules/proposed.shtml). Comments are also available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Room 1580, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Operating conditions may limit access to the Commission’s public reference room. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission’s website. To ensure direct electronic receipt of such notifications, sign up through the ‘‘Stay Connected’’ option at www.sec.gov to receive notifications by email. FOR FURTHER INFORMATION CONTACT: Nathan R. Schuur, Senior Counsel; Angela Mokodean, Branch Chief; or Brian M. Johnson, Assistant Director, at (202) 551–6792, Investment Company Regulation Office; Terri G. Jordan, Branch Chief, at (202) 551–6825 or IMOCC@sec.gov, Chief Counsel’s Office, Division of Investment Management, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. The Commission is proposing new 17 CFR 240.14Ad–1 [new rule 14Ad–1] under the Exchange Act.1 We are also proposing amendments to the following rules and forms: SUPPLEMENTARY INFORMATION: CFR citation [17 CFR] Commission reference Investment Company Act: Rule 30b1–4 .......................................................................................................................................................... Exchange Act and Investment Company Act: Form N–PX 2 .......................................................................................................................................................... Securities Act of 1933 (‘‘Securities Act’’) 3 and Investment Company Act: Form N–1A ............................................................................................................................................................ Form N–2 ............................................................................................................................................................... Form N–3 ............................................................................................................................................................... Securities Act: Rule 101 of Regulation S–T .................................................................................................................................. Table of Contents I. Introduction and Background II. Discussion A. Scope of Funds’ Form N–PX Reporting Obligations B. Scope of Managers’ Form N–PX Reporting Obligations 1. Managers Subject to Form N–PX and Categories of Votes They Must Report 2. Managers’ Exercise of Voting Power 1 15 U.S.C. 78a et seq. N–PX was adopted under the Investment Company Act only. In this release, we are proposing 2 Form VerDate Sep<11>2014 18:45 Oct 14, 2021 Jkt 256001 3. Additional Scoping Matters for Manager Reporting of Say-on-Pay Votes C. Proxy Voting Information Reported on Form N–PX 1. Identification of Proxy Voting Matters 2. Identification of Proxy Voting Categories 3. Quantitative Disclosures 4. Additional Proposed Amendments to Form N–PX to amend Form N–PX under both the Exchange Act and the Investment Company Act. 15 U.S.C. 80a– 1 et seq. PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 § 270.30b1–4. §§ 274.129 and 249.326. §§ 239.15A and 274.11A. §§ 239.14 and 274.11a–1. §§ 239.17a and 274.11b. § 232.101. D. Joint Reporting and Related Form N–PX Amendments To Accommodate Manager Reporting 1. Joint Reporting Provisions 2. The Cover Page 3. The Summary Page 4. Other Proposed Amendments to Form N–PX To Accommodate Manager Reporting E. Form N–PX Reporting Data Language F. Time of Reporting 3 15 E:\FR\FM\15OCP2.SGM U.S.C. 77a et seq. 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules G. Requests for Confidential Treatment H. Proposed Website Availability of Fund Proxy Voting Records I. Compliance Dates J. Transition Rules for Managers K. Technical and Conforming Amendments III. General Request for Comments IV. Economic Analysis A. Introduction B. Economic Baseline and Affected Parties 1. Funds’ Reporting of Proxy Voting Records 2. Managers’ Reporting of Say-on-Pay Votes C. Costs and Benefits 1. Amendments to Funds’ Reporting of Proxy Votes 2. Amendments To Require Manager Reporting of Say-on-Pay Votes D. Effects on Efficiency, Competition, and Capital Formation 1. Amendments to Funds’ Reporting of Proxy Votes 2. Amendments To Require Manager Reporting of Say-on-Pay Votes E. Reasonable Alternatives 1. Scope of Managers’ Say-on-Pay Reporting Obligations 2. Amendments to Proxy Voting Information Reported on Form N–PX 3. Amendments to the Time of Reporting on Form N–PX or Placement of Funds’ Voting Records F. Request for Comment V. Paperwork Reduction Act VI. Regulatory Flexibility Act Certification for Managers and Initial Regulatory Flexibility Analysis for Funds A. Regulatory Flexibility Act Certification for Managers B. Initial Regulatory Flexibility Act Analysis for Funds 1. Reasons for and Objectives of the Proposed Actions 2. Legal Basis 3. Small Entities Subject to the Rule 4. Projected Reporting, Recordkeeping, and Other Compliance Requirements 5. Duplicative, Overlapping, or Conflicting Federal Rules 6. Significant Alternatives 7. General Request for Comment VII. Consideration of Impact on the Economy VIII. Statutory Authority I. Introduction and Background Mutual funds, ETFs, and other registered management investment companies (collectively, ‘‘funds’’) hold substantial institutional voting power that they exercise on behalf of millions of fund investors.4 Funds own around 4 Mutual funds and most ETFs are open-end management investment companies registered on Form N–1A. An open-end management investment company is an investment company, other than a unit investment trust or face-amount certificate company, that offers for sale or has outstanding any redeemable security of which it is the issuer. See sections 4 and 5(a)(1) of the Investment Company Act [15 U.S.C. 80a–4 and 80a–5(a)(1)]. The amendments proposed in this release would also apply to registered closed-end management investment companies (which register on Form N– 2) and insurance company separate accounts organized as management investment companies VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 30 percent of U.S. corporate equities and in some cases funds hold a larger percent of a single company’s stock.5 As a result, funds can influence the outcome of a wide variety of matters that companies submit to a shareholder vote, including matters related to governance, corporate actions, and shareholder proposals. Funds’ proxy voting decisions can play an important role in maximizing the value of their investments, affecting the more than 45 percent of U.S. households that own funds, as well as other investors in U.S. equity markets.6 For certain types of funds and their investors, proxy voting can have particularly heightened importance. For example, because index funds’ investment policies typically do not permit them to sell investments in the relevant index, these funds cannot sell a stock if they are dissatisfied with management. Instead, index funds may use their voting power to become active in corporate governance in order to increase the value of their investments.7 Index funds have grown significantly in recent years. Index funds make up nearly half of the assets in equity funds.8 More generally, the net assets of index funds as a share of mutual funds and ETFs have more than doubled since 2010.9 Due to funds’ significant voting power and the effects of funds’ proxy voting practices on the actions of corporate issuers and the value of these issuers’ that offer variable annuity contracts (which register on Form N–3). 5 ICI 2021 Fact Book, available at https:// www.ici.org/system/files/2021-05/2021_ factbook.pdf, at figure 2.7 (stating that mutual funds and other registered investment companies held 30 percent of U.S. corporate equities as of year-end 2020). 6 Id., at figure 7.1 (stating that 45.7 percent of U.S. households owned funds in 2020). 7 See Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies, Investment Company Act Release No. 25922 (Jan. 31, 2003) [68 FR 6563 (Feb. 7, 2003)] (‘‘Form N–PX Adopting Release’’) at nn.17–18 and accompanying text (noting that, because passive funds have investment policies that do not permit them to sell their shares, they may become more active in corporate governance as a way to maximize value for their shareholders). 8 See Kenechukwu Anadu, Mathias Kruttli, Patrick McCabe, and Emilio Osambela, ‘‘The Shift from Active to Passive Investing: Potential Risks to Financial Stability?’’, Finance and Economics Discussion Series 2018–060r1, Washington: Board of Governors of the Federal Reserve System (2020), available at https://doi.org/10.17016/ FEDS.2018.060r1 (citing statistics as of March 2020); see also ICI 2021 Fact Book, supra footnote 6, at figure 2.8 (stating that index funds represented 40% of the mutual fund and ETF market, excluding money market funds, in 2020). 9 See ICI 2021 Fact Book, supra footnote 5, at figure 2.8 (noting index fund growth as a share of the mutual fund and ETF market between 2010 and 2020, excluding money market funds). PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 57479 securities, investors have an interest in how funds vote.10 In addition, in recent years, investors have increased their focus on how funds vote on environmental, social, and governanceoriented matters (i.e., ESG matters). Many funds now incorporate sustainability or other ESG factors or put these factors at the center of their investment approach. In most cases, a fund’s adviser votes proxies relating to the fund’s portfolio securities on the fund’s behalf.11 Investment advisers are fiduciaries that owe duties of care and loyalty to each client.12 To satisfy its fiduciary duty in making any voting determination on behalf of a fund, an investment adviser must make determinations in the best interest of its client. Further, an investment adviser cannot place its own interests ahead of the interests of its client.13 An investment adviser that assumes proxy voting authority must adopt and implement policies and procedures reasonably designed to ensure it votes client securities in the best interest of clients.14 In 2003, the Commission adopted Form N–PX, which requires funds to report publicly their proxy voting records annually. Form N–PX is designed to improve transparency and enable fund shareholders to monitor their funds’ involvement in the governance activities of portfolio companies.15 Since its adoption, Form 10 Some investors review funds’ voting practices by accessing Form N–PX reports directly on EDGAR, while others may obtain information about funds’ voting practices through analysis or synthesis of Form N–PX reports by data aggregators or others. A variety of market participants and other stakeholders also use data reported on Form N–PX. See infra Section IV.C.1.a. 11 See Form N–PX Adopting Release, supra footnote 7, at nn.11–13 and accompanying text (recognizing that while the fund’s board of directors, acting on the fund’s behalf, has the right and the obligation to vote proxies relating to the fund’s portfolio securities, this function is typically delegated to the fund’s investment adviser). 12 Commission Interpretation Regarding Standard of Conduct for Investment Advisers, Investment Advisers Act Release No. 5248 (June 5, 2019) [84 FR 33669 (July 12, 2019)] (‘‘2019 Fiduciary Interpretation’’). 13 Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers, Investment Advisers Act Release No. 5325 (Aug. 21, 2019) [85 FR 55155 (Sept. 3, 2019)] (‘‘Proxy Voting Interpretation’’). 14 See 17 CFR 275.206(4)–6. 15 See Form N–PX Adopting Release, supra footnote 7, at paragraph accompanying n.34. Although the Commission proposed to require funds to disclose their proxy voting records in their annual and semiannual shareholders reports, after considering comments, the Commission adopted a separate form—Form N–PX—for funds to use in filing this information with the Commission. See id. at Section II.B. In the same release, the Commission also adopted amendments to require funds to E:\FR\FM\15OCP2.SGM Continued 15OCP2 57480 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules N–PX has advanced transparency into fund voting. However, these reports can be difficult for investors to use and can provide an incomplete picture of a fund’s voting practices. Investors may face difficulties using Form N–PX reports to find a particular fund’s voting record, find a specific vote or type of vote that is of interest, or compare funds’ voting records for several reasons. First, the organization and presentation of funds’ proxy voting records in Form N–PX reports can vary significantly. For example, funds may provide unclear and inconsistent descriptions of voting matters (e.g., by using abbreviations or other shorthand). As another example, although the instructions to the form require separate presentations for each fund, some funds interpret this requirement as providing flexibility to organize voting information first by security, with each fund holding that security listed separately.16 As a result, a given fund’s voting record can be spread throughout the report instead of presented together in one place. Second, Form N–PX reports can be overwhelmingly long due to the number of voting matters and funds the reports often cover.17 A single fund may own hundreds of securities, each of which may have ten or more proposals each year, and a single Form N–PX report often includes information about several different funds’ voting records.18 Third, reports on Form N–PX are not currently filed in a machine readable, or ‘‘structured,’’ data language. disclose the policies and procedures they use to determine how to vote proxies. In that release, the Commission discussed several benefits of providing transparency on how funds vote, including illuminating potential conflicts of interest, discouraging voting that is inconsistent with fund shareholders’ best interests, and encouraging funds to become more engaged in corporate governance of issuers held in their portfolios. Id. at Section I. 16 Many fund complexes include information about several different funds in a single Form N–PX report, given the structure of many funds as series of a trust. See Instruction 1 to current Form N–PX (‘‘In the case of a registrant that offers multiple series of shares, provide the information required by this Item separately for each series. The term ‘series’ means shares offered by a registrant that represent undivided interests in a portfolio of investments and that are preferred over all other series of shares for assets specifically allocated to that series in accordance with Rule 18f–2(a) under the Act (17 CFR 270.18f–2(a)).’’). 17 Based on staff analysis of reports on Form N–PX, larger funds can have filings in excess of 1,000 pages. 18 For example, during the 2017 proxy season, funds cast more than 7.6 million votes for proxy proposals, and the average fund voted on 1,504 separate proxy proposals for U.S. listed portfolio companies. Letter dated Mar. 15, 2019, from Paul Schott Stevens, President and CEO, Investment Company Institute, submitted in response to the Statement Announcing SEC Staff Roundtable on the Proxy Process, available at https://www.sec.gov/ comments/4-725/4-725.htm. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 This can make it more difficult for investors to analyze efficiently the reported data, particularly in light of the inconsistencies and length of Form N–PX reports.19 In addition to difficulties in accessing and analyzing the data provided on Form N–PX, certain gaps in the required disclosure may result in an incomplete picture of a fund’s proxy voting practices. Funds commonly engage in securities lending activities to generate additional revenue for the fund.20 When a fund lends its portfolio securities, it transfers incidents of ownership relating to the loaned securities, including proxy voting rights, for the duration of the loan. As a result, while the securities are on loan, the fund is not able to vote the proxies of such securities. If a fund determines that it wants to vote loaned securities, it must recall the securities and receive them prior to the record date for the vote. Recalling loaned securities may decrease the revenue a fund generates from securities lending activity. The decision of whether to recall a security on loan to vote it is not currently disclosed on Form N–PX, although some investors have expressed interest in information about the relationship between a fund’s securities lending and proxy voting.21 To improve the utility of Form N–PX information for investors, we are proposing amendments to enhance the information funds currently report about their proxy votes on Form N–PX and to make that information easier to analyze. For example, we are proposing to require funds to tie the description of the voting matter to the issuer’s form of proxy and to categorize voting matters 19 While some structured data is available commercially, investors seeking to use this information may incur costs, as well as potential limits on the comprehensiveness and timeliness of available information. 20 According to Form N–CEN filings, 67.2% of funds were authorized to engage in securities lending in their most recent fiscal year, and 40.2% of funds reported lending securities over that same period. These funds reported, in the aggregate, net income from securities lending of $2.663 billion. See also Reena Aggarwal et al., The Role of Institutional Investors in Voting, J. of Finance, at 2310 (2015) (noting that ‘‘[m]ost large pension funds, mutual funds, and other institutional investors have a lending program and consider it an important source of revenue, with estimates of $800 million in annual revenue for pension funds.’’). 21 See, e.g., Letter of the Shareowner Education Network (Oct. 20, 2010) (File No. S7–14–10) (‘‘Shareowner Education Letter on Concept Release’’) (‘‘Funds should disclose all aspects of securities lending that affect their investors, such as the number of shares on loan over the record date and lending fees, as well as the number of shares from any other missed voting opportunities and the actual number of shares that were voted for each meeting. This information is important to investors who are monitoring the stewardship responsibilities of funds.’’). See also infra footnote 99. PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 by type. We are also proposing to require reporting of information on Form N–PX in a structured data language either via a Commissionsupplied web-based form or as an Extensible Markup Language (‘‘XML’’) file.22 In addition, we are proposing to require disclosure of the number of shares that were voted (or, if not known, the number of shares that were instructed to be cast) and the number of shares that were loaned and not recalled. To enhance investors’ access to funds’ proxy voting records, we also are proposing to require a fund to provide its voting record on (or through) its website. In addition to proposing to amend Form N–PX to enhance disclosure of funds’ proxy voting records, we are proposing rule and form changes to require an institutional investment manager subject to section 13(f) reporting requirements (‘‘manager’’) to report annually on Form N–PX how it voted proxies relating to shareholder advisory votes on executive compensation (or ‘‘say-on-pay’’) matters.23 Similar to funds, managers have substantial voting power. As of March 31, 2021, managers exercised investment discretion over approximately $39.79 trillion in section 13(f) securities.24 This aspect of the 22 Cf. Recommendations of the Investor Advisory Committee Regarding the SEC and the Need for the Cost Effective Retrieval of Information by Investors (adopted July 25, 2013), available at https:// www.sec.gov/spotlight/investor-advisorycommittee-2012/data-tagging-resolution-72513.pdf, at 5 (recommending amendments to Form N–PX to provide for the tagging of data). 23 The term ‘‘institutional investment manager’’ includes any person, other than a natural person, investing in or buying and selling securities for its own account, and any person exercising investment discretion with respect to the account of any other person. See section 13(f)(6)(A) of the Exchange Act [15 U.S.C. 78m(f)(6)]. The term ‘‘person’’ includes any natural person, company, government, or political subdivision, agency, or instrumentality of a government. See section 3(a)(9) of the Exchange Act [15 U.S.C. 78c(a)(9)]. Entities serving as managers could include, for example: Banks, insurance companies, and broker-dealers that invest in, or buy and sell, securities for their own accounts; corporations and pension funds that manage their own investment portfolios; or investment advisers that manage private accounts, mutual fund assets, or pension plan assets. In addition to amendments to Form N–PX, we are proposing new rule 14Ad–1 under the Exchange Act to require managers to annually report their say-on-pay votes on Form N–PX. 24 This number does not include put or call options and is based on staff review of managers’ reports on Form 13F covering the first quarter of 2021. Section 13(f) of the Exchange Act requires a manager to file a report with the Commission if it exercises investment discretion with respect to accounts holding certain equity securities (‘‘section 13(f) securities’’) having an aggregate fair market value on the last trading day of any month of any calendar year of at least $100 million. Rule 13f–1 requires that managers file quarterly reports on Form 13F if the accounts over which they exercise E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules proposal is aimed at completing implementation of section 951 of the Dodd-Frank Act. The Commission first proposed rule and form changes in October 2010 to implement the DoddFrank Act’s manager reporting requirements.25 This proposal takes into account the comments we received in response to that proposal. Section 951 of the Dodd-Frank Act added new section 14A to the Exchange Act. This section generally requires public companies to hold non-binding shareholder advisory votes to: (1) Approve the compensation of its named executive officers; (2) determine the frequency of such votes, with the option of every 1, 2, or 3 years; and (3) approve ‘‘golden parachute’’ compensation in connection with a merger or acquisition (collectively, ‘‘say-on-pay votes’’).26 Section 14A(d) of the Exchange Act requires that every manager report at least annually how it voted on say-onpay votes, unless such vote is otherwise required to be reported publicly. The Commission’s 2010 proposal to implement this provision would have required managers to file their record of say-on-pay votes with the Commission annually on Form N–PX, and would have amended Form N–PX to accommodate the new manager filings.27 Most commenters on the 2010 proposal expressed overall support for the Commission’s proposal to implement this requirement through reporting on modified Form N–PX.28 As investment discretion hold an aggregate of more than $100 million in section 13(f) securities. See 17 CFR 240.13f–1. Section 14A(d) of the Exchange Act requires that ‘‘every institutional investment manager subject to section 13(f)’’ of the Exchange Act report its say-on-pay votes. 25 See Exchange Act Release No. 63123 (Oct. 18, 2010) [75 FR 66622 (Oct. 28, 2010)] (‘‘2010 Proposing Release’’). 26 See section 14A(a) and (b) of the Exchange Act; 17 CFR 240.14a–21; see also Item 402(a)(3) of Regulation S–K (defining the term ‘‘named executive officers’’). 27 See 2010 Proposing Release, supra footnote 25. Unless otherwise indicated, comments cited in this release are the public comments the Commission received in response to the 2010 Proposing Release, which are available at http://www.sec.gov/ comments/s7-30-10/s73010.shtml. In addition, to facilitate public input on the Dodd-Frank Act, the Commission provided a series of email links, organized by topic, on its website. The public comments received on section 951 of the DoddFrank Act are available at http://www.sec.gov/ comments/df-title-ix/executive-compensation/ executive-compensation.shtml. 28 See, e.g., Letter of California Public Employees’ Retirement System (Nov. 18, 2010) (‘‘CalPERS Letter’’); Letter of Council of Institutional Investors (Nov. 12, 2010) (‘‘CII Letter’’); Letter of Glass Lewis & Co. (Nov. 18, 2010) (‘‘Glass Lewis Letter I’’); Letter of Investment Company Institute (Nov. 18, 2010) (‘‘ICI Letter’’); Letter of Senator Carl Levin (Nov. 18, 2010) (‘‘Levin Letter’’); Letter of Heidi Preston (Oct. 26, 2010). Two commenters acknowledged that the VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 discussed further below, some commenters expressed concerns with particular aspects of the proposal. The rule and form amendments we are proposing include certain modifications from the 2010 proposal, including modifications that take into consideration commenters’ suggestions. In response to comments, we propose to require managers to report say-on-pay votes for securities over which the manager exercised voting power. The proposed definition of exercise of voting power focuses on instances when the manager uses voting power to influence a voting decision. To reduce the potential for duplicative reporting when more than one manager exercises voting power or when a manager exercises voting power on behalf of a fund, we propose to allow managers to rely on joint reporting provisions under these circumstances. We also propose that the amendments to Form N–PX for funds would apply to managers reporting sayon-pay votes on Form N–PX. II. Discussion A. Scope of Funds’ Form N–PX Reporting Obligations Currently, every registered management investment company, other than a small business investment company registered on Form N–5, must file its proxy voting record annually on Form N–PX.29 We are not proposing to modify the scope of registered investment companies subject to Form N–PX reporting requirements. We are, however, proposing to amend the scope of voting decisions these funds must report. Currently, funds are required to report information for each matter relating to a portfolio security considered at any shareholder meeting held during the reporting period and with respect to which the fund was entitled to vote.30 We are proposing to amend this standard to provide that, for purposes of Form N–PX, a fund would be entitled to vote on a matter if its portfolio securities are on loan as of the record date for the meeting because the fund could recall them and vote them.31 This proposed amendment is designed to ensure that a fund’s filings on Form N–PX reflect the effect of its securities lending activities on its proxy voting, providing context to the information Commission’s proposal was required under the Dodd-Frank Act. Letter of Investment Adviser Association (Nov. 16, 2010) (‘‘IAA Letter’’); Letter of Oli Stone (Nov. 17, 2010) (‘‘Stone Letter’’). One commenter generally opposed the proposal. Letter of Dennis Reiland (Nov. 8, 2010) (‘‘Reiland Letter’’). 29 See rule 30b1–4 under the Investment Company Act [17 CFR 270.30b1–4]. 30 See Item 1 of current Form N–PX. 31 See Item 1 of proposed Form N–PX. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 57481 funds already provide about revenue from securities lending. We request comment on the proposed amendments to the scope of funds’ reporting obligations on Form N–PX, including the following: 1. Should we continue to require all registered management investment companies, other than small business investment companies registered on Form N–5, to report on Form N–PX? Are there other types of registered investment companies, such as unit investment trusts, that we should require to report their proxy votes on Form N–PX? If we do so, would these other types of investment companies face unique challenges in reporting their proxy votes? If we extended Form N–PX reporting requirements to unit investment trusts, should we exclude unit investment trusts that invest exclusively in mutual funds, such as those that offer variable annuities and variable life insurance, since the underlying mutual funds would be covered? 2. As proposed, should we amend Form N–PX to provide that a fund will be entitled to vote on a matter if its portfolio securities are on loan as of the record date? If not, why should the form not consider a fund to be entitled to vote loaned securities where the fund could recall the securities in order to vote them? B. Scope of Managers’ Form N–PX Reporting Obligations 1. Managers Subject to Form N–PX and Categories of Votes They Must Report We are proposing that Form N–PX reporting obligations for say-on-pay votes would extend to each person that (i) is an ‘‘institutional investment manager’’ as defined in the Exchange Act; and (ii) is required to file reports under section 13(f) of the Exchange Act.32 This is consistent with the scope of the reporting obligation in section 14A(d) of the Exchange Act. Thus, a manager that is otherwise required to report on Form 13F would be required to disclose its say-on-pay votes on Form N–PX.33 We are proposing, consistent with the 2010 proposal, to require a manager’s report on Form N–PX to include the manager’s voting record for say-on-pay votes.34 The types of votes that the 32 See proposed rule 14Ad–1(a); 15 U.S.C. 78m(f). rule 14Ad–1(a). 34 Proposed rule 14Ad–1(a); Item 1 of proposed Form N–PX. Shareholder votes on executive compensation that are not required by sections 14A(a) and (b), such as in the case of foreign private issuers (as defined in rule 3b–4(c) under the Exchange Act [17 CFR 240.3b–4(c)]) that are exempt 33 Proposed E:\FR\FM\15OCP2.SGM Continued 15OCP2 57482 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules proposal would require managers to report are the same as the types provided by section 14A(d) of the Exchange Act. The manager, therefore, would be required to report votes required by section 14A(a) on the approval of executive compensation and on the frequency of such executive compensation approval votes, as well as votes required by section 14A(b) on the approval of executive compensation that relates to an acquisition, merger, consolidation, or proposed sale or other disposition of all or substantially all the issuer’s assets. A few commenters expressed support for broader disclosure of managers’ proxy votes, beyond say-on-pay votes.35 In the 2010 proposal, the Commission did not propose to require reporting of votes other than say-on-pay votes by managers because the purpose of that rulemaking was primarily to implement a statutory mandate.36 We continue to believe that it is appropriate to focus on managers’ say-on-pay votes, consistent with the statutory mandate. We request comment on the class of managers who would be required to file reports on Form N–PX and the types of votes they would be required to report under the proposal: 3. Is the proposed scope of managers that would be required to report say-onpay votes on Form N–PX appropriate? Does it sufficiently capture all managers? Does it capture managers that should not be covered? Why or why not? 4. Is there a more appropriate standard for proposed rule 14Ad–1’s manager reporting requirements? If so, please explain. 5. Should we, as we are proposing, require managers to report all of their say-on-pay votes? Are any exclusions warranted? If so, please explain. 6. Should we require managers to report say-on-pay votes on Form N–PX, as proposed? Should managers use a different form for reporting these votes? For example, would there be advantages to requiring managers to report say-onpay votes on Form 13F instead? 7. In addition to requiring managers to report their say-on-pay votes, should we from the proxy solicitation rules, would not be required to be reported on proposed Form N–PX. 35 See ICI Letter (expressing the belief that all institutional investors should be required to disclose every proxy vote they cast, as funds currently do); Stone Letter (suggesting that manager reporting requirements should cover all proxy items over which the manager has voting authority, rather than just say-on-pay votes). 36 See, e.g., 2010 Proposing Release, supra footnote 25, at Section II.B.1 (‘‘The scope of votes that would be required to be reported under the proposal is the same as the scope provided by new Section 14A(d) of the Exchange Act.’’). VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 require managers to report any votes other than say-on-pay votes? If so, please identify any other votes that managers should be required to report and the basis for the Commission to introduce such a reporting requirement. 8. Are there circumstances in which managers may want to voluntarily disclose other types of votes, beyond say-on-pay votes, on Form N–PX? If so, are there any impediments in the proposal that would prevent or discourage managers from voluntarily disclosing information about other types of votes? 2. Managers’ Exercise of Voting Power We are proposing to require that a manager report a say-on-pay vote for a security only if the manager ‘‘exercised voting power’’ over the security—that is, if the manager both has voting power and exercises that power.37 Under the proposal, voting power would exist when a manager has the ability to vote the security or direct the voting of the security, including the ability to determine whether to vote the security at all, or to recall a loaned security before a vote.38 The proposal would define exercise of voting power to mean the actual use of voting power to influence a voting decision.39 Voting power could exist or be exercised directly or through a contract, arrangement, understanding, or relationship, and multiple parties could have voting power over the same securities. For example, a party could exercise voting power if it influences the way a third party votes the security, even where the manager is not the sole decision-maker.40 The proposed rule thus adopts a two-part test for determining whether a vote must be reported, requiring both power to vote a security (or to cause another party to vote such security) and the actual use of such power to influence the voting decision in the case of the specific vote.41 The proposed voting power standard differs from the approach the Commission proposed in 2010 and from how the Commission has identified voting power in certain other contexts. In 2010, the Commission proposed to require that a manager report a say-on37 See proposed rule 14Ad–1(a). proposed rule 14Ad–1(d)(1) (defining voting power). 39 See proposed rule 14Ad–1(d)(2) (defining exercise of voting power). 40 If two managers exercise voting power over the same security, they could rely on the joint reporting provisions in the proposal to reduce reporting burdens and address duplicative reporting. See infra Section II.D.1. 41 Proposed rule 14Ad–1(a); Item 1 of proposed Form N–PX. 38 See PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 pay vote for a security only if the manager ‘‘had or shared the power to vote, or to direct the voting of’’ the security, using language similar to 17 CFR 240.13d–3(a) (rule 13d–3(a)) under the Exchange Act.42 Some commenters on the 2010 Proposing Release supported the proposed focus on voting power as the standard for determining whether a manager must report say-onpay votes, with one noting that in practice, shared voting arrangements are rare.43 Other commenters suggested that it would be more appropriate to focus on who actually voted the security, rather than who had the power to vote the security.44 Another commenter noted that in certain cases, managers cast votes based on client instructions, and that in such cases the manager’s voting power is ministerial in nature.45 The revised standard we are proposing is intended to clarify the scope of the say-on-pay vote reporting obligation by focusing more specifically on the exercise, rather than mere possession, of voting power. Our proposed standard is intended to align responsibility for deciding how to vote securities with responsibility for reporting such votes.46 The proposed approach is tailored to considerations associated with section 14A(d) of the Exchange Act and the scope of say-onpay vote reporting obligations. As a result, our proposed definition of ‘‘voting power’’ and the ‘‘exercise’’ of voting power do not affect the meaning of these or similar terms used in other Commission rules. The proposed test focuses on exercise, rather than mere possession, of voting power to address shared voting power situations and to make managers’ reports of say-on-pay votes more useful for clients and other investors. As an example of the proposed approach, if a manager votes a client’s separate account’s shares based on its own judgment or in accordance with its own guidelines, the manager exercised voting power over the security and would be required to report those votes. Conversely, if the manager’s voting decision on a say-on-pay vote is entirely determined by its client, either because the client communicates its wishes directly to the manager or because the client has a written policy regarding the voting decision that does not call for 42 See 2010 Proposing Release, supra footnote 25, at n.18 and accompanying text. 43 See, e.g., Letter of Chris Barnard (Nov. 13, 2010) (‘‘Barnard Letter’’); CalPERS Letter; CII Letter. 44 See, e.g., Stone Letter; Letter of Managed Funds Association (Dec. 22, 2010) (‘‘MFA Letter’’); ABA Letter; Glass Lewis Letter I. 45 See, e.g., Mayer Brown Letter. 46 Glass Lewis Letter I (supporting this approach). E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules any independent judgment by the manager, the manager is not exercising voting power over the security because the manager is not influencing the voting decision. The proposal would not require a manager to report these votes. This is the case even if the manager is the party that carries out the actual vote in accordance with its client’s wishes. However, if the manager influences the voting decision in this context by, for example, exercising its own judgment in determining how the client’s policies should apply to the say-on-pay vote, then the manager would exercise voting power when it carries out the policy and report the vote accordingly. This may be the case, for instance, if a client has a policy of opposing pay packages that are unreasonable but determining if a package is ‘‘unreasonable’’ involves exercise of the manager’s judgment. When determining whether the manager exercised voting power, the manager should assess whether it was using its voting power to influence the voting decision—such as by exercising independent judgment or expertise in a way that affects how the security was voted—or whether it was instead simply applying a policy on a formulaic or mechanical basis. As another example, a manager would exercise voting power where the manager casts a vote in accordance with voting policies developed by the manager and adopted by the client. A manager with voting power may also exercise that voting power through other influence over the voting decision, separate from any discretion the manager may have in determining or applying a client’s voting policies. The fact patterns in this discussion are meant to be illustrative examples and are not meant to cover all scenarios in which a manager would be required to report say-on-pay votes because it has voting power and uses that power to influence a voting decision. The proposed test also provides that a manager exercises voting power when it influences the decision of whether to vote a security. For example, a manager that determines not to vote on a say-onpay matter would exercise voting power under the proposal. A manager also would exercise voting power when it decides whether to recall loaned securities in advance of a vote in order to vote the shares.47 A manager would not exercise voting power if a third party makes all decisions of whether to vote the security. For example, certain clients may have relationships with securities lending agents, and the client or the securities lending agent would determine whether to recall loaned securities, without any involvement by the manager.48 In this case, the manager would not exercise voting power with respect to the loaned securities because it would not influence the decision of whether to recall the loaned shares. The framework we are proposing is intended to provide additional insight into how managers are exercising the voting discretion they have been granted by their clients without attributing to managers votes that are dictated fully by their clients or by other managers. The framework is intended to avoid potential confusion that could result from a manager reporting votes where the manager did not influence the voting decision. We believe requiring a manager who does not exercise voting power, for instance because its votes are entirely dictated by a client’s policy, to report those votes on Form N–PX would be of limited benefit to the manager’s clients and potential clients, as well as other investors. It would not provide insight into—and in fact may obscure— how a manager exercises its discretion.49 In certain cases, we expect our proposed framework will result in multiple parties determining they exercise voting power (e.g., because more than one manager provides input on applying a client’s voting policies). In these circumstances, all such managers would come within the scope of the reporting requirements under the proposal, although they could rely on the joint reporting provisions discussed below to reduce reporting burdens. The focus on a manager’s exercise of voting power could result in the manager’s reports on Form N–PX differing from its reports on Form 13F. For example, if a manager exercises investment discretion over a particular section 13(f) security held in a client’s account, but the client retains all rights to vote proxies for that security, the manager generally would report that security on its holdings report on Form 13F. However, it would not be required to report any say-on-pay votes with respect to that security. Conversely, a manager that exercises voting power over a security, but is not required to report the security on Form 13F because it does not have investment discretion 48 See ABA Letter. e.g., ISS Letter; Mayer Brown Letter (commenting that managers sometimes effectuate client voting decisions by completing the proxy card, but do not have control over or decide how shares will be voted). 49 See, 47 See also infra Section C.3.b (discussing proposed disclosure about the number of shares a reporting person has loaned and not recalled, and the benefits of that disclosure). VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 57483 over the security or because it did not hold the security at the end of a calendar quarter, would nonetheless be required to report say-on-pay votes on Form N–PX for that security.50 The 2010 proposal asked whether it would be appropriate to use a different standard, such as investment discretion, as the test for reporting say-on-pay votes.51 We believe that using investment discretion as the test would result in managers having to report votes cast by clients in cases where the manager retains investment discretion but not voting power. We believe this would be confusing to investors and could inaccurately imply that the manager filing the report actually made or influenced the decision it was reporting.52 We also are not proposing to base the reporting requirement upon whether a manager, in fact, votes rather than on whether the manager exercises voting power.53 A test based on who physically marks the proxy card (or its electronic equivalent) would omit from its scope managers that participated in determining how to cast the vote, but would simplify the reporting obligation.54 We request comment on the proposed approach of requiring managers to report say-on-pay votes when they exercise voting power over the security, and in particular, on the following issues: 9. Should the reporting requirement be based on exercising the power to vote with respect to say-on-pay votes as proposed, or should we use some other basis? For example, should we base the reporting requirement on the possession of investment discretion, the identity of who in fact votes, or the identity of who receives the ballot? As another example, should a vote that was dictated entirely by a client’s mandate be treated as an exercise of voting power by the manager, even if the manager did not influence the vote? What are the advantages and disadvantages of the different potential approaches? 50 See also discussion infra Section II.B.3 (discussing differences in reporting between Form 13F and Form N–PX). 51 See 2010 Proposing Release, supra footnote 25, at Section II.B.2. 52 CII Letter. 53 Glass Lewis Letter I (only the ‘‘voting entity’’ should report); MFA Letter (require reporting only when the manager has instructed an intermediary to vote its shares); Letter of Seward & Kissel LLP (Nov. 18, 2010) (‘‘Seward Letter’’) (require reporting by manager that ‘‘actually voted’’ the proxy); Stone Letter (party who votes should bear the burden of disclosure and the Commission should not require reporting on the basis of shared voting authority). 54 ISS Letter (suggesting that the manager who receives the ballot should be the primary filer with respect to the votes covered by that ballot). E:\FR\FM\15OCP2.SGM 15OCP2 57484 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules 10. Should we modify the proposed definitions of voting power or exercise of voting power? For example, instead of considering a manager to exercise voting power when it uses voting power to influence a voting decision, should we use a different standard, such as using voting power to ‘‘significantly’’ influence a voting decision or to ‘‘primarily’’ make a voting decision? If so, what factors would be relevant for determining if a manager’s role in a voting decision meets the revised standard? 11. Should we, as proposed, consider a manager to exercise voting power when it has the ability to determine not to vote or to recall loaned securities? Would this provision present challenges to managers? If so, what are those challenges, and are there changes to the reporting requirement that would address such challenges? 12. Should we provide additional guidance concerning the circumstances under which a manager exercises voting power? If so, please specify the type of guidance that managers would find helpful. 13. Does our proposed exercise of voting power standard cover circumstances that should be covered or should not be covered? If so, what are the circumstances that should or should not be covered? 3. Additional Scoping Matters for Manager Reporting of Say-on-Pay Votes We are proposing to require that a manager report say-on-pay votes with respect to any security over which it meets the voting power test described above.55 As was the case in the 2010 Proposing Release, we are not proposing to modify the scope of securities to align with those reported on Form 13F or to provide exceptions where the manager does not vote. Some commenters supported the requirement that managers report any security.56 Other commenters requested that the Commission limit the reporting obligation to securities that had previously been reported publicly on Form 13F or adopt a de minimis threshold below which reporting of sayon-pay votes would not be required.57 A 55 Proposed rule 14Ad–1(a). Letter; Levin Letter. 57 See, e.g., ABA Letter (recommending nondisclosure of say-on-pay votes for securities not previously reported because they were below the de minimis threshold for Form 13F); Seward Letter (suggesting limiting the securities to which the reporting requirements apply to those securities previously reported publicly, or, in the alternative, adopting a threshold position size below which a reporting person need not report proxy votes); Barnard Letter (excluding securities where the manager holds less than 10,000 shares); Reiland 56 CII VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 commenter requesting a de minimis threshold argued that not providing an equivalent exemption from Form N–PX reporting as is available from Form 13F reporting would reduce the value of the 13F exemption and raise costs for managers.58 While we acknowledge commenters’ suggestion that a de minimis threshold could reduce record keeping and reporting burdens on managers for smaller position sizes that currently do not require reporting on Form 13F, a de minimis threshold could reduce the value of the say-on-pay disclosure because a fund or manager’s full voting record would not be available when the threshold applied. We therefore are not proposing to provide a de minimis threshold for institutional managers reporting their say-on-pay votes on Form N–PX. Because Form 13F reports only disclose holdings as of the close of a calendar quarter, these reports are not required to include securities held during the quarter but subsequently disposed of prior to the end of the quarter. Form 13F reports also do not reflect when a manager increased or decreased its position during a quarter but returned to the ‘‘baseline’’ level reported on its previous Form 13F report by the end of the quarter. As a result, although some commenters requested that the Commission limit say-on-pay reporting to securities that had previously been reported publicly on Form 13F, this approach could exclude a significant number of say-onpay votes, which we believe would be inconsistent with the purpose of section 14A. The proposed rule therefore would require a manager to report say-on-pay votes without regard to whether the manager had previously reported or been required to report the security as a holding on Form 13F. In addition to comments suggesting that Form N–PX reporting obligations should more closely align with Form 13F, some commenters suggested other exceptions from Form N–PX reporting for managers who do not vote. For example, two commenters recommended that we not require a manager to report on Form N–PX if, under certain or all circumstances, the Letter (suggesting to limit to holdings on which persons are required to file statements on Schedule 13D or Schedule 13G under the Exchange Act). 58 See Letter of Intel Corporation (Nov. 19, 2010) (‘‘Intel Letter’’). On Form 13F, a manager is permitted to omit holdings of fewer than 10,000 shares (or less than $200,000 principal amount in case of convertible debt securities) and less than $200,000 aggregate fair market value. See Special Instruction 10 to Form 13F. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 manager does not vote.59 These commenters stated that some investment strategies (such as algorithmic strategies with short holding periods) are unrelated to the economic interests served by voting proxies. One of these commenters stated that, with respect to certain strategies, voting proxies could be characterized as ‘‘empty voting.’’ 60 One of these commenters suggested that, in some cases, securities are held for insufficient periods (such as less than one day) to perform the requisite analysis for proxy voting, and where the manager disclosed a policy not to vote proxies to its clients, the manager’s Form N–PX report would contain little information and would not further the policy objectives of the proposed rule.61 The other commenter expressed concern about the burdens of developing and implementing technology to track record date holdings in cases where the manager does not vote.62 We believe that an exception from Form N–PX reporting requirements when a manager does not cast a vote on say-on-pay matters may limit the ability of investors to understand fully how a manager votes its shares. In addition, we believe the burden of reporting when the manager does not vote its shares would be lower under our current proposal, as compared to the burden of the equivalent aspect in the 2010 proposal, because the current proposal would not require the manager to track record date holdings to disclose the number of shares the manager was authorized to vote.63 A few commenters requested exceptions from Form N–PX reporting requirements in situations where a manager discloses certain information about how it votes to its clients, such as formulaic voting criteria developed by the manager which have been disclosed to clients or where the manager distributes its voting record to a client who had provided the manager its own 59 See Seward Letter (requesting an exception from the reporting requirement where the manager maintains a policy not to vote proxies and discloses that policy to clients); ABA Letter (requesting a blanket exception for holdings that were not voted). 60 See ABA Letter; see also Exchange Act Release No. 62495 (July 14, 2010) [75 FR 42982, 43017–20 (July 22, 2010)] (‘‘Proxy Mechanics Concept Release’’) (discussing the concept of ‘‘empty voting’’). This release cites some comment letters on the Proxy Mechanics Concept Release. These comment letters are available at https:// www.sec.gov/comments/s7-14-10/s71410.shtml. 61 Seward Letter. 62 ABA Letter. 63 See supra Section II.C.3 (discussing how the quantitative information contained in this proposal differs from the 2010 proposal, including no longer proposing to require the number of shares the manager was authorized to vote). E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules proxy policies or guidelines to follow.64 We do not believe that an exception would be warranted in these circumstances because, in addition to benefiting the direct clients of managers, public disclosure of say-on-pay votes could benefit other investors, such as plan participants of employee benefit plans that hire managers. Finally, to the extent a manager did not exercise voting power over any securities that held say-on-pay votes during a given reporting period, we are proposing to require the manager to file a Form N–PX report affirmatively stating this fact. The Commission also proposed this requirement in 2010.65 One commenter opposed this requirement, stating that it would not contribute to the objective of increased transparency regarding any possible influence over shareholder votes and corporate governance.66 However, we believe this disclosure would help investors and the Commission differentiate managers with no reportable say-on-pay votes from those that failed to file a Form N–PX report to disclose say-on-pay votes. We request comment on the circumstances in which the proposal would require a manager to file a Form N–PX report, and, in particular, on the following issues: 14. Should we permit managers to omit votes otherwise reportable where the manager’s ownership is below a specific threshold? What are the potential advantages or disadvantages if we permit a manager that holds, on the record date, fewer than 10,000 shares and less than $200,000 aggregate fair market value to omit say-on-pay votes on such securities? Would such an exception impede investors from understanding how shares were voted? Why or why not? 15. Should we permit managers to omit votes on a particular type of security? Do managers have substantial holdings of securities that are not ‘‘section 13(f) securities’’ as defined by 17 CFR 240.13f–1(c), but are registered pursuant to section 12 of the Exchange Act and thus would have say-on-pay votes? Would there be potential advantages or disadvantages if we required managers to report only their say-on-pay votes on section 13(f) securities? Would such an approach be consistent with the public interest, and how would it impact investor protection? 64 ABA Letter (formulaic voting criteria); Mayer Brown Letter (distribution to clients). 65 Item 1 of proposed Form N–PX. 66 Seward Letter. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 16. Should we permit managers to omit votes on securities that were not held as of the end of a calendar quarter (and thus would not be reported on Form 13F)? Should we permit or require any disclosure on Form N–PX or elsewhere to explain differences between information reported on Form N–PX and information reported on Form 13F or related circumstances (e.g., where a manager has significantly more or less voting power on the record date of a say-on-pay vote than its Form 13F report would otherwise suggest)? If so, under what circumstances would this disclosure be helpful? What would the disclosure entail, and should it be permissive or required? 67 17. Should we expand or limit in any other way the securities with respect to which managers would be required to report say-on-pay votes? 18. Should we modify the proposed approach for managers that do not vote their shares? For example, should we permit these managers to not file Form N–PX reports? Should we exempt nonvoting managers from certain disclosure requirements on Form N–PX concerning the various securities they did not vote on say-on-pay matters during the reporting period? What conditions or limitations, if any, should apply? For instance, to rely on a modified approach, should a manager be required to disclose to its clients that it does not vote? Would a modified approach be particularly applicable to certain categories of managers, such as those whose trading strategies involve relatively short-term ownership? 19. As proposed, should we require a manager without any say-on-pay votes to disclose to file a report on Form N–PX stating that fact? Would such filings effectively distinguish managers that missed a required filing from managers without say-on-pay votes to report? C. Proxy Voting Information Reported on Form N–PX We are proposing to enhance funds’ current Form N–PX disclosures so investors can more easily understand and analyze proxy voting information. These proposed changes include, for example, more clearly tying the description of the voting matter to the issuer’s form of proxy and categorizing voting matters by type. In addition, we are proposing to extend many of these 67 Under the proposal, a manager would be permitted to disclose additional information on the cover page of its Form N–PX report, so long as it does not, either by its nature, quantity, or manner of presentation, impede the understanding or presentation of the required information. See General Instruction C.3 of proposed Form N–PX. PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 57485 proposed enhancements to the Form N–PX reports that managers would file under this proposal. 1. Identification of Proxy Voting Matters We are proposing to require reports on Form N–PX to identify proxy voting matters using the same language as disclosed in the issuer’s form of proxy. In 2010, the Commission proposed to require standardized descriptions for say-on-pay votes and brief identifications of other votes.68 At that time, the Commission requested comment on alternative methods of standardizing descriptions of these voting matters. As part of the Proxy Mechanics Concept Release, the Commission also solicited comment regarding methods for uniform identification of proxy voting matters in Form N–PX reports.69 In particular, the Commission asked about ways to standardize identifications if issuers do not themselves create and assign unique interactive data ‘‘tags’’ for each matter on their proxy statements.70 Several commenters on the Commission’s 2010 proposal supported requiring standardized descriptions for say-onpay votes, and one commenter on the Proxy Mechanics Concept Release expressed support for standardizing descriptions more broadly.71 Two commenters expressed concern with standardized descriptions for matters other than say-on-pay votes. These commenters cited the practical challenges posed in uniformly identifying different matters, given both the variety of voting matters before shareholders and the absence of standardized data tags in issuer proxy materials.72 68 See 2010 Proposing Release, supra footnote 25, at paragraph accompanying n.89. 69 Proxy Mechanics Concept Release, supra footnote 60, at Section III.C.3. 70 Id., at requests for comment subsequent to n.237 (‘‘Whether or not we permit or require interactive data tagging, should Form N–PX require standardized reporting formats so that comparisons between funds are easier?’’). 71 See CalPERS Letter; Fidelity Letter; Letter of Michael Ostrovsky (Sept. 5, 2013) (File No. S7–14– 10) (‘‘Ostrovsky Letter on Concept Release’’) (supporting a standardized classification system for voting matters). 72 See Fidelity Letter (citing difficulty ‘‘given the wide variety of votes placed before shareholders’’ and stating that ‘‘as a general matter, the variable nature of proxy-related disclosures do not lend themselves to uniform standardization’’); Letter of Fidelity Investments (Oct. 20, 2010) (File No. S7– 14–10) (‘‘Fidelity Letter on Concept Release’’) (questioning feasibility of providing for a uniform identification of each matter voted in reports on Form N–PX); Letter of Investment Company Institute (Oct. 20, 2010) (File No. S7–14–10) (‘‘ICI Letter on Concept Release’’) (citing a ‘‘significant practical issue’’ of ‘‘how to provide for uniform E:\FR\FM\15OCP2.SGM Continued 15OCP2 57486 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules We are proposing to require reporting persons to use the same language from the issuer’s form of proxy to identify proxy voting matters on Form N–PX.73 In addition, each voting matter (including say-on-pay votes and other voting matters) would be required to be reported in the same order as presented on the issuer’s form of proxy.74 We believe these proposed requirements would facilitate identification of identical matters included on different Form N–PX filings by different reporting persons even though there is no interactive data tagging in issuer proxy materials.75 We are proposing to apply the identification requirement to all voting matters in order to facilitate the ability of investors to better understand fund and manager proxy disclosure and compare voting records. We believe that reflecting the descriptions and ordering used on an issuer’s form of proxy, which is publicly available and must identify clearly and impartially each separate matter intended to be acted upon, would address the previously identified practical issues associated with standardized descriptions.76 We request comment on the proposed requirement to identify proxy voting matters, including the following: 20. Should we require, as we are proposing, that Form N–PX use the descriptions and ordering used on an issuer’s form of proxy? Are there practical considerations we should consider with respect to tying Form N– PX disclosure to forms of proxies? 21. Does using the descriptions and ordering used on an issuer’s form of proxy, which is publicly available, overcome the previously identified practical issues associated with standardized descriptions? Why or why not? Should we revert to the standardized language approach for sayon-pay votes, as was proposed in the 2010 proposal? If so, why? identification of each matter voted across different funds’’). 73 Special Instruction D.3 to proposed Form N– PX. 74 Id. For matters involving the election of more than one director, reporting persons would be required to identify each director separately in the same order as on the form of proxy, even if the election of directors is presented as a single matter on the form of proxy. Id. 75 See 2010 Proposing Release, supra footnote 25, at requests for comment subsequent to n.90 (requesting comment on alternatives that could result in uniform tags being assigned by all reporting persons). 76 See Securities Exchange Act rule 14a–4(a)(3) (requiring that the form of proxy identify clearly and impartially each separate matter intended to be acted upon). See also Division of Corporation Finance, Compliance and Disclosure Interpretations, Section 301 (Mar. 22, 2016), available at https://www.sec.gov/divisions/corpfin/ guidance/exchange-act-rule-14a-4a3-301.htm. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 22. Would the proposed requirement to use the description and ordering from an issuer’s form of proxy facilitate the comparison of Form N–PX data, or otherwise enhance the usefulness of information reported on Form N–PX for users? What obstacles, if any, might prevent reporting persons from being able to comply with the proposed requirement? 2. Identification of Proxy Voting Categories We are proposing that Form N–PX reporting persons select from standardized categories to identify the subject matter of each of the reported proxy voting items. This requirement would apply to managers and funds. The proposal would require a reporting person to categorize each proxy voting matter from a specified list of categories and subcategories. The proposed categories and subcategories are designed to cover matters on which funds frequently vote, based on our staff’s experience and review of the matters on which funds voted in 2020, including say-on-pay votes: • Board of directors (subcategories: Director election, term limits, committees, size of board, or other board of directors matters (along with a brief description)); • Section 14A say-on-pay votes (subcategories: 14A executive compensation, 14A executive compensation vote frequency, or 14A extraordinary transaction executive compensation); 77 • Audit-related (subcategories: Auditor ratification, auditor rotation, or other audit-related matters (along with a brief description)); • Investment company matters (subcategories: Change to investment management agreement, new investment management agreement, assignment of investment management agreement, business development company approval of restricted securities, closed-end investment company issuance of shares below net asset value, business development company asset coverage ratio change, or other investment company matters (along with a brief description)); • Shareholder rights and defenses (subcategories: Adoption or modification of a shareholder rights plan, control share acquisition provisions, fair price provisions, board 77 The proposed Form N–PX categorizations include a separate category for say-on-pay votes to make it easier for investors to identify these votes, which require special disclosure under the DoddFrank Act. The Commission similarly proposed to require managers to use standardized descriptions to identify these votes in the 2010 proposal. PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 classification, cumulative voting, or other shareholder rights and defenses matters (along with a brief description)); • Extraordinary transactions (subcategories: Merger, asset sale, liquidation, buyout, joint venture, going private, spinoff, delisting, or other extraordinary transaction matters (along with a brief description)); • Security issuance (subcategories: Equity, debt, convertible, warrants, units, rights, or other security issuance matters (along with a brief description)); • Capital structure (subcategories: Stock split, reverse stock split, dividend, buyback, tracking stock, adjustment to par value, authorization of additional stock, or other capital structure matters (along with a brief description)); • Compensation (subcategories: Board compensation, executive compensation (other than Section 14A say-on-pay), board or executive antihedging, board or executive antipledging, compensation clawback, 10b5–1 plans, or other compensation matters (along with a brief description)); • Corporate governance (subcategories: Articles of incorporation or bylaws, board committees, codes of ethics, or other corporate governance matters (along with a brief description)); • Meeting governance (subcategories: Approval to adjourn, acceptance of minutes, or other meeting governance matters (along with a brief description)); • Environment or climate (subcategories: Greenhouse gas (GHG) emissions, transition planning or reporting, biodiversity or ecosystem risk, chemical footprint, renewable energy or energy efficiency, water issues, waste or pollution, deforestation or land use, say-on-climate, environmental justice, or other environment or climate matters (along with a brief description)); • Human rights or human capital/ workforce (subcategories: Workforcerelated mandatory arbitration, supply chain exposure to human rights risks, outsourcing or offshoring, workplace sexual harassment, or other human rights or human capital/workforce matters (along with a brief description)); • Diversity, equity, and inclusion (subcategories: Board diversity, pay gap, or other diversity, equity, and inclusion matters (along with a brief description)); • Political activities (subcategories: Lobbying, political contributions, or other political activity matters (along with a brief description)); • Other social (subcategories: Data privacy, responsible tax policies, charitable contributions, consumer protection, or other social matters (along with a brief description)); or E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules • Other (along with a brief description). Some categories would contain specific subcategories which a reporting person must select when filing a report on Form N–PX. For example, a reporting person would need to distinguish section 14A executive compensation votes from section 14A executive compensation frequency votes. When categorizing a particular voting matter, a reporting person would be required to select multiple categories or subcategories for the matter if applicable. If a vote did not fall within a specified subcategory, the reporting person would select the ‘‘other’’ subcategory and provide a brief description. The brief description need only identify the subject matter of the vote, consistent with the level of detail in the specified subcategories. We believe that requiring reporting persons to categorize their proxy votes would help investors understand how funds and managers are voting by helping them readily identify votes on matters that are important to them. It also would allow investors to compare how different managers or funds voted on specific types of matters. We request comment on the proposed requirement to categorize proxy votes reported on Form N–PX, and, in particular, on the following issues: 23. Should we require reporting persons to categorize their votes, as proposed? What are the advantages and disadvantages of this approach? 24. Do the proposed categories or subcategories adequately capture the range of proxy voting matters? Are there other categories or subcategories of votes that we should require reporting persons to identify? Will these categorizations enhance the usefulness of the information reported on Form N– PX for investors and facilitate the comparison of reporting persons’ proxy voting records? Are there categories or subcategories we should eliminate? 25. Should we require reporting persons to use high-level categories to identify different types of votes, or should we require reporting persons to use subcategories, as proposed? Are there particular areas where subcategories are more or less difficult for reporting persons to use for purposes of identifying different types of votes? Are there particular areas where subcategories are more or less useful for investors? 26. Are there particular types of votes where the categorization would be unclear or where reporting persons may reasonably categorize the same vote differently? To what extent would the ability to select more than one category VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 for a given vote address these types of issues? Would the use of subcategories help address or contribute to potentially differing approaches to categorizing a particular vote among reporting persons? 27. Are the proposed categories and subcategories sufficiently clear? Are there any categories or subcategories where additional guidance or definition would be helpful for understanding the parameters of a category or subcategory? 3. Quantitative Disclosures We are proposing changes to Form N– PX that would require disclosure of information about the number of shares that were voted (or, if not known, the number of shares that were instructed to be cast). We are also proposing a requirement to disclose the number of shares the reporting person loaned and did not recall. These quantitative disclosure requirements would apply to a manager’s say-on-pay votes and to all of a fund’s votes. In 2010, the Commission proposed to require that both funds and managers report: (1) The number of shares that the reporting person was entitled to vote (for funds) or had or shared voting power over (for managers); (2) the number of shares voted; and (3) how the reporting person voted the shares and, if the votes were cast in multiple manners (e.g., for and against), the number of shares voted in each manner.78 Comments regarding these quantitative disclosure requirements were mixed. Some commenters supported the proposed quantitative disclosures or stated that they were acceptable.79 Some commenters stated that providing quantitative disclosures would be burdensome.80 One commenter opposed requiring funds to quantify votes in particular and stated that quantitative disclosures might cause confusion for investors or result in competitors gaining insight into fund strategies.81 Some commenters, while opposing any requirement that reporting persons 78 See 2010 Proposing Release, supra footnote 25, at Section II.E.3. 79 See Levin Letter (stating that quantitative disclosure will allow investors to monitor, understand, and hold their proxies accountable for their votes); CalPERS Letter (finding disclosure of the number of shares voted acceptable). 80 See ICI Letter; Fidelity Letter; Mayer Brown Letter. One commenter, however, while opposing quantitative disclosures for other reasons, noted that from a purely technological perspective, disclosing share positions voted would be straightforward. See ISS Letter. 81 See ICI Letter (noting that complying with the quantitative disclosure requirements as proposed would be burdensome and difficult, and questioning the value to shareholders). PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 57487 report quantitative information, agreed that the use of the existing Form N–PX disclosure (e.g., for, against, or abstain) without quantification is not meaningful for ‘‘split votes,’’ i.e., if different votes are cast on the same matter by a reporting person.82 These commenters suggested, should the Commission determine to adopt quantitative reporting requirements, that it limit such reporting to instances of actual split votes, and allow reporting persons to report the number of shares instructed to be cast.83 Another commenter suggested that the Commission consider alternative indications of ‘‘magnitude’’ in lieu of requiring disclosure of the number of votes cast.84 As discussed in greater detail below, as compared to the 2010 proposal, there are three primary differences in the proposed quantitative disclosures requirements: (1) Clarifying that the reporting person’s records could be used to determine the number of shares voted, even where those records do not reflect a confirmed number of actual votes cast and received by the issuer; (2) requiring disclosure of the number of shares the reporting person has loaned and not recalled; and (3) not proposing the previously proposed provisions requiring disclosure of the number of shares the reporting person was entitled to vote (for funds) or had or shared voting power over (for managers). a. Disclosure of Number of Shares Voted We are proposing, substantially as proposed in the 2010 proposal, a requirement that both funds and managers disclose: (1) The number of shares voted (or instructed to be voted); and (2) how those shares were voted (e.g., for or against proposal, or abstain).85 If the votes were cast in multiple manners (e.g., both for and against), we propose requiring disclosure of the number of shares voted (or instructed to be voted) in each manner.86 We are proposing to require 82 See Fidelity Letter (stating that ‘‘a mere notation of ‘split’ may not be rich disclosure’’); ICI Letter (stating that ‘‘simply reporting ‘split’ does not provide much meaningful information about the way the reporting entity voted, and additional information may be useful to put the split vote in context’’). 83 See ICI Letter; Fidelity Letter; MFA Letter. 84 See Mayer Brown Letter. 85 Items 1(h) and 1(j) of proposed Form N–PX. 86 Item 1(j) of proposed Form N–PX. As proposed in the 2010 release, in the case of a shareholder vote on the frequency of executive compensation votes, a reporting person would be required to disclose the number of shares, if any, voted in favor of each of 1-year frequency, 2-year frequency, or 3-year frequency, and the number of shares, if any, that abstained. We are clarifying that the number zero E:\FR\FM\15OCP2.SGM Continued 15OCP2 57488 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules disclosure of the number of shares voted or instructed to be voted because, where a manager votes in multiple ways on the same matter, disclosure of that fact alone is largely meaningless without providing a measure of the magnitude of the different votes.87 In addition, and in contrast to the 2010 proposal, we are also proposing to require disclosure of the number of shares the reporting person loaned and did not recall.88 We believe that the context given by disclosing the number of shares voted would allow investors to better understand how securities lending activities affect the voting practices of the reporting person. Without disclosing the amount voted, the amount of shares on loan for a given vote would not provide meaningful insight into how a fund or manager voted. As suggested by some commenters, we are proposing to modify the 2010 proposal with respect to the disclosure of the number of shares voted because reporting persons may not be able to determine with certainty how many of the votes they instructed to be cast were actually voted in a particular matter.89 This change would permit a reporting person to use the number of shares voted as reflected in its records at the time of filing a report on Form N–PX. If a reporting person has not received confirmation of the actual number of votes cast, we are proposing that Form N–PX instead may reflect the number of shares instructed to be cast on the date of the vote.90 The proposal would not (‘‘0’’) would be entered if no shares were voted, so that responses to this item would be uniformly numeric in nature. Item 1(h) of proposed Form N– PX. 87 While we understand that funds do not split votes regularly, we believe investors would benefit from parity in disclosure between funds and managers in cases where funds do split votes. 88 Item 1(i) of proposed Form N–PX. See also infra Section II.C.3.b for more information with respect to this proposed requirement. 89 See ICI Letter; Fidelity Letter; MFA Letter. See also Memorandum from the Division of Investment Management regarding November 29, 2010 telephone call with BlackRock, Inc., representatives (November 30, 2010), available at http:// www.sec.gov/comments/s7-30-10/s73010-33.pdf (in which BlackRock representatives indicated that the burden associated with providing quantitative disclosures may be significantly reduced to the extent that the proposed quantitative disclosure requirement was modified to only require disclosure of the number of votes instructed to be cast). In addition, we recognize that this may be an issue when a manager’s client enters an arrangement with a securities lending agent to loan the client’s securities without any involvement by the manager. 90 Special Instruction D.5 to proposed Form N– PX. See Fidelity Letter (suggesting quantitative disclosure be limited to votes instructed to be cast); ICI Letter (same); MFA Letter (same); Stone Letter (same). See also Proxy Mechanics Concept Release, supra footnote 60, at Section II.B.1 (discussion of issues surrounding confirmation of proxy votes). VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 require a reporting person to seek confirmation of the actual number of votes cast if this information is not otherwise readily available.91 However, should the reporting person learn prior to filing its Form N–PX that a different number of shares were voted, the reporting person would be required to report the actual number of votes cast.92 If confirmation of the actual number of votes cast occurs after the reporting person files the Form N–PX report, we are not proposing to require an amendment to the filing. We believe that this approach would reduce the compliance burden of providing information regarding the number of shares voted. At the same time, this disclosure would still achieve the goal of providing meaningful information to investors about how a reporting person voted its shares. Although suggested by a commenter, we are not proposing disclosure of the number of shares voted only in split voting situations.93 We believe that requiring different disclosures for votes, depending on whether a reporting person split its vote on a particular matter, could result in potentially confusing inconsistencies within each report on Form N–PX. Providing information about the number of shares voted, in addition to shares on loan and not recalled, also would present a more complete picture of a reporting person’s voting, including by allowing an investor to understand the extent to which a reporting person determines not to vote. We also disagree with commenters that disclosure of the number of votes cast could result in competitors gaining insight into reporting persons’ holdings.94 Given the alignment of filing deadlines among forms, this disclosure likely will be publicly available via Form 13F (for managers) and Form N– PORT (for funds) before the reporting person is required to file on Form N– PX.95 Even for securities reported on Form N–PX that are not reported on 91 Special Instruction D.5 to proposed Form N– PX. 92 Id. 93 See ICI Letter. ISS Letter; ICI Letter (noting that quantitative disclosure information might be useful to competitors looking for information about fund holdings). 95 To the extent securities reported on Form N– PX are included on Form 13F, reports from managers on Form 13F for the quarter ending June 30 would be required to be filed no later than August 14. This means that public disclosure of such holdings on Form 13F generally would predate the August 31 deadline for filing Form N–PX. Similarly, funds must publicly disclose their holdings on a quarterly basis on Form N–PORT. See 17 CFR 270.30b1–9 (requiring filing no later than 60 days after the end of the relevant fiscal quarter). 94 See PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 Form 13F or Form N–PORT, proxy votes reported on Form N–PX generally occur up to several months (including as many as 14 months) before the August 31 Form N–PX reporting date. As a result, we do not believe the disclosure would materially affect competition.96 Reporting persons would also be permitted to request confidential treatment of filed information, as discussed further below. We are also not proposing the approach advocated by one commenter who suggested that the Commission consider alternative indications of ‘‘magnitude’’ in lieu of requiring disclosure of the number of votes cast. This commenter suggested, for example, that a manager could report how a majority (or plurality) of the shares the manager was entitled to vote was actually voted or managers could report the percentage of total votes cast for each position.97 We are not proposing these approaches because we believe they do not sufficiently demonstrate how a manager exercised its voting power (including any shares on loan and not recalled). We believe this context is important to present a more complete picture of how the manager votes, and these alternatives do not provide additional information relative to our proposal. Further, these methods would not alleviate any burden in retaining and reporting quantitative data regarding the number of votes cast. We request comment on the proposed disclosure of the number of shares voted, and, in particular, on the following issues: 28. Should we, as proposed, require funds and managers to report the number of shares voted (or instructed to be cast)? Does disclosing the number of shares voted allow investors to understand better how securities lending activities impact the voting practices of the reporting person? Why or why not? 29. As proposed, should we require a reporting person to report the actual number of votes cast if it learns prior to filing its Form N–PX that a different number of shares were voted than the reporting person instructed to be cast? Should we require this reporting only if the reporting person receives information about the actual number of shares voted within a specified period before its Form N–PX filing is due? If so, what should the specified period be (e.g., at least 5, 10, or 30 days before the Form N–PX filing is due)? 30. Are there other ways to promote investor understanding of reporting 96 See also infra Section IV. Brown Letter. 97 Mayer E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules persons’ voting practices (e.g., the occurrence of split voting) that we should require instead of, or in addition to, disclosure of the number of shares voted (or instructed to be cast)? For example, would investor understanding be promoted if we required reporting of another metric, such as the percentage of total shares held that were voted (or instructed to be cast), to be disclosed? Why or why not? 31. We are proposing that, if a reporting person has not received confirmation of the actual number of votes cast, the reporting person instead may reflect the number of shares instructed to be cast on the date of the vote. Does this alleviate concerns about the burden on reporting persons with respect to quantitative disclosures? Is the information disclosed still of utility to data users? Why or why not? 32. Should the requirement to disclose the number of shares voted only apply to certain types of votes or to a subset of reporting persons? For example, should this disclosure be required only in the case of say-on-pay votes or split votes? 33. Does the proposed requirement to disclose the number of shares voted complement the proposed requirement to disclose the number of shares the reporting person loaned and did not recall? Would investors need both figures to understand how securities lending activities affect a reporting person’s proxy voting? Are there other figures or types of information one would need to understand the interaction between these two activities? 34. Are there additional quantitative disclosures we should consider that would provide utility to investors? b. Disclosure of Number of Shares the Reporting Person Loaned and Did Not Recall In addition to the number of shares a reporting person voted, we are proposing to require disclosure of the number of shares the reporting person loaned and did not recall.98 We understand from commenters that this information about securities lending is important to understand a reporting person’s voting record because the reporting person cannot affirmatively cast a vote for or against a matter if the security is on loan over the record date. Several commenters on the 2010 Proposing Release and Proxy Mechanics Concept Release stated that it was important to know how many shares were not voted because they were on 98 Item 1(i) of proposed Form N–PX. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 loan.99 The proposed requirement is designed to provide transparency into how a reporting person’s securities lending affects its proxy voting. We also believe the proposed requirement to disclose the number of shares the reporting person loaned and did not recall would help address commenters’ concerns with a requirement in the 2010 proposal to disclose the total number of shares a fund was entitled to vote or a manager had or shared voting power over. Some commenters opposed the requirement in the 2010 proposal because of the cost and effort that would be required to aggregate and reconcile the total number of shares a fund is entitled to vote or a manager has or shared voting power over.100 These commenters noted complexities in the current proxy system, including the intermediation between issuers and shareholders, and the multitude of entities involved (such as transfer agents, proxy vendors, and tabulators).101 Some commenters also raised concern that there could be potentially confusing or misleading discrepancies between the reported number of shares voted and the reported number of shares which the reporting person was entitled to vote or over which it had or shared voting power.102 For example, commenters discussed scenarios in which discrepancies between these figures could arise despite the reporting person’s intent to vote all available shares (e.g., discrepancies resulting from differing proxy frameworks in certain jurisdictions or limitations on a manager’s ability to vote shares that its client has loaned as part of an agreement solely between the client and its custodian).103 We are proposing a requirement that focuses solely on shares a reporting person loaned and did not recall. Under federal law, an investment adviser is a 99 Levin Letter; Letter of InterOrganization Network (Oct. 13, 2010) (File No. S7–14–10); Shareowner Education Letter on Concept Release; Letter of Society of Corporate Secretaries & Governance Professionals (Nov. 22, 2010) (File No. S7–14–10) (‘‘SCSGP Letter on Concept Release’’). 100 See, e.g., ABA Letter; ICI Letter; Fidelity Letter; Stone Letter. See also Letter of Institutional Shareholder Services, Inc. (Oct. 20, 2010) (File No. S7–14–10) (‘‘ISS Letter on Concept Release’’); Letter of Sullivan & Cromwell LLP (Oct. 20, 2010) (File No. S7–14–10) (‘‘Sullivan & Cromwell Letter on Concept Release’’); Fidelity Letter on Concept Release; Letter of BlackRock (Oct. 29, 2010) (File No. S7–14–10) (‘‘BlackRock Letter on Concept Release’’); Letter of CFA Institute (Nov. 22, 2010) (File No. S7–14–10); ICI Letter on Concept Release. 101 See ICI Letter; Sullivan & Cromwell Letter on Concept Release. 102 See Fidelity Letter; ICI Letter; Mayer Brown Letter. 103 See Fidelity Letter; Mayer Brown Letter. PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 57489 fiduciary.104 With respect to securities lending, advisers have a fiduciary duty to consider the tradeoffs between continuing to keep securities on loan, or recalling loaned securities in order to vote.105 The disclosure we are proposing to add to Form N–PX would provide transparency regarding whether a reporting person has opted to recall a security and vote the accompanying proxy or to keep the security out on loan. Absent this disclosure, investors would not have information about a manager’s decision not to recall a loaned security, which is similar to the decision not to vote on a matter, which currently is reported on Form N–PX.106 Our proposal also takes into account commenters’ concerns on the prior proposal, and we believe the quantitative information we are proposing to require is easier for reporting persons to obtain than the information the 2010 proposal would have required. For instance, the proposal does not implicate the complexities in the current proxy system with determining the number of shares the reporting person was entitled to vote or over which it had or shared voting power that commenters described. The disclosure we are proposing would be required only where the reporting person has loaned the securities. This would include scenarios where the reporting person loans the securities directly or indirectly through a lending agent.107 However, it would not include scenarios where the manager is not involved in lending shares in a client’s account because, for 104 2019 Fiduciary Interpretation, supra footnote 12, at text accompanying n.2. See also SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194 (1963); Investment Adviser Codes of Ethics, Investment Advisers Act Release No. 2256 (July 2, 2004); Compliance Programs of Investment Companies and Investment Advisers, Investment Advisers Act Release No. 2204 (Dec. 17, 2003); Electronic Filing by Investment Advisers; Proposed Amendments to Form ADV, Investment Advisers Act Release No. 1862 (Apr. 5, 2000). 105 See Proxy Voting Interpretation, supra footnote 13, at response to question 1 and at n.34 (indicating that while the application of the investment adviser’s fiduciary duty in the context of proxy voting will vary with the scope of the voting authority assumed by the investment adviser, the relationship in all cases remains that of a fiduciary to the client, and an investment adviser must make any determination regarding whether to retain a security and vote the accompanying proxy or lend out the security in the client’s best interest). 106 See Item 1(g) of current Form N–PX. 107 See Special Instruction D.7 of proposed Form N–PX. To the extent a reporting person allocates an amount of securities to the lending agent for lending purposes and treats that amount of securities as being on loan when determining how many shares it can vote in a matter, the reporting person should report all of the allocated shares as being on loan and not recalled (excluding any shares the reporting person recalled for the vote). E:\FR\FM\15OCP2.SGM 15OCP2 57490 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules example, the manager is not a party to the client’s securities lending agreement and has not itself (rather than the client) loaned the securities. As recognized above, a manager would not exercise voting power over loaned securities when its client hires a securities lending agent to loan securities in the client’s account and the manager has no involvement in the securities lending arrangement or in decisions to recall loaned securities.108 Thus, the manager would not have any say-on-pay reporting obligations with respect to those loaned securities. We request comment on the proposed requirement to disclose the number of shares loaned and not recalled, and, in particular, on the following issues: 35. Should we require disclosure of the number of shares a reporting person loaned and did not recall, as proposed? Is this information valuable to investors? Does the value of the information differ between institutional and retail investors? Are there any changes we could make to enhance the utility of the information for investors? 36. Are there limitations we should be aware of regarding the ability of reporting persons to disclose the number of shares loaned and not recalled? If so, are there ways would could address those limitations? 37. We understand that proxy statements typically are not delivered until after the record date.109 Does this create challenges for reporting persons to determine whether they want to recall loaned securities before the record date? 110 If so, how might these challenges affect disclosure of the number of shares loaned and not recalled, or other aspects of this proposal? Are there any changes we should make to the proposed rule to recognize these challenges? 38. Would the proposed requirement to disclose the number of shares a reporting person loaned and did not recall affect decisions a fund or manager currently makes on when to recall a loaned security for purposes of voting and when to keep a security on loan? If so, how might the proposal affect the revenues funds or managers (and, by extension, their investors or clients) 108 See supra paragraph accompanying footnote receive from securities lending? Would disclosure of this effect be helpful to a fund’s investors or a manager’s clients? If so, what form should this disclosure take? 39. Beyond information about how securities lending activities affect proxy voting, are there other types of information that would help investors understand a reporting person’s approach to voting? If so, are there ways we could capture that information in Form N–PX reports or elsewhere? Similar to the 2010 proposal, should we require that the reporting person disclose the total number of shares a fund was entitled to vote or a manager exercised voting power over? 40. Commenters raised concerns that the quantitative disclosure requirements in the 2010 proposal may lead to investor confusion.111 Does our proposed approach limit the potential for confusing discrepancies by focusing more directly on the number of shares voted and the number of shares on loan? If not, what areas of potential confusion remain under our current proposal, and are there changes we could make to reduce the potential for confusion? 4. Additional Proposed Amendments to Form N–PX In addition to proposing new categories of disclosure on Form N–PX, we are proposing certain other amendments to enhance the usability of Form N–PX reports and to modernize or clarify existing form requirements. For instance, we are proposing to require a standardized order to the Form N–PX disclosure requirements.112 We are also proposing an amendment to require a fund that offers multiple series of shares to provide Form N–PX disclosure separately by series (for example, provide Series A’s full proxy voting record, followed by Series B’s full proxy voting record).113 We believe these proposed changes will make Form N– PX disclosure easier to review and compare among reporting persons. Several commenters supported standardized order requirements, stating the importance of displaying data in a consistent manner to assist in analyzing multiple votes.114 One commenter, in 111 See supra footnote 103 and accompanying 48. text. 109 See Proxy Mechanics Concept Release, supra footnote 60, at Section III.C.2. 110 Some commenters on the Proxy Mechanics Concept Release suggested that the lack of a meeting agenda prior to a record date generally does not affect their ability to anticipate many kinds of voting matters and to make arrangements to recall loaned securities in advance of a record date, if they determine to do so. See, e.g., ICI Letter on Concept Release; Letter of American Bar Association (Dec. 17, 2010) (File No. S7–14–10). 112 See Special Instruction D.1 to proposed Form N–PX. 113 See Special Instruction D.9 to proposed Form N–PX. 114 See Levin Letter (supporting standardized order and stating that ‘‘[r]equiring the data to be displayed in a consistent manner will assist analysis of multiple votes’’); CalPERS Letter (finding standardized order to be acceptable); Letter of the State Board of Administration of Florida (Oct. 20, 2010) (File No. S7–14–10) (‘‘Florida Board VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 contrast, stated that we should not adopt a standardized order requirement and that it was not aware of shareholders having any difficulty in deciphering or locating Form N–PX information.115 However, we are reproposing the requirement because we continue to believe it would make the disclosure easier to review and compare among reporting persons, and believe it will aid our overall objective to increase transparency. In the 2010 Proposing Release, the Commission proposed to retain the current form’s requirement to report both the relevant security’s CUSIP number and its ticker symbol. One commenter recommended that a ticker symbol be required only if a CUSIP number was unavailable since certain securities listed on more than one exchange have multiple ticker symbols.116 In response to this comment, we are proposing to require reporting of only one security identifier. Reporting persons would be required to report the security’s CUSIP number unless it is not available through reasonably practicable means (e.g., in the case of certain foreign issuers).117 If the CUSIP number is not reported, then Form N–PX would require the security’s ISIN, unless it also is not available through reasonably practicable means.118 Consistent with current Form N–PX, a filer may omit disclosure of both the CUSIP and ISIN identifier if neither is reasonably available through practicable means.119 In addition, we are proposing two general amendments related to the cover page of Form N–PX.120 Consistent with the 2010 proposal, amended Form N–PX would contain a new section on the cover page to be used where the filing is an amendment to a previously filed Form N–PX report (e.g., to correct errors Letter on Concept Release’’) (supporting standardization of reporting for Form N–PX); Shareowner Education Letter on Concept Release (same); Letter of the United States Proxy Exchange (Oct. 20, 2010) (File No. S7–14–10) (‘‘Proxy Exchange Letter on Concept Release’’) (same). 115 See Fidelity Letter. 116 ABA Letter (noting the difficulties in determining which exchange is the principal exchange for the securities for purposes of the disclosure). 117 See Item 1(b) of proposed Form N–PX; Special Instruction D.2 to proposed Form N–PX. 118 See Item 1(c) of proposed Form N–PX; Special Instruction D.2 of proposed Form N–PX. If the security’s CUSIP number is reported, then the ISIN would not be required to be reported. 119 See Instruction 2 to Item 1 of current Form N– PX; Special Instruction D.2 of proposed Form N– PX. 120 We are also proposing a few other amendments to the cover page of Form N–PX to accommodate manager reporting on Form N–PX. See infra Section II.D.2 (discussing these proposed cover page amendments). E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules in a previous filing or as part of the confidential treatment process).121 Amendments to a Form N–PX report would be required to either restate the original Form N–PX report in its entirety or include only the additional information that supplements the information already reported in a Form N–PX report for the same period.122 We also propose to amend the form to allow for additional information so long as it does not, either by its nature, quantity, or manner of presentation, impede the understanding or presentation of the required information.123 This optional disclosure would be placed at the end of the cover page or, if it relates to a particular vote, a reporting person could provide additional information about the matter or how it voted after disclosing the required information about that vote.124 Form 13F provides similar flexibility, where filers use it, among other things, to explain the reasons for an amendment to an earlier filing.125 We believe this flexibility would also be useful in Form N–PX and would facilitate a reporting person’s ability to provide additional information about a particular vote, or about its voting practices in general.126 Further, we propose to amend the current disclosure in Form N–PX requiring a fund to identify whether a matter was proposed by the issuer or by a security holder.127 To provide additional information about matters proposed by security holders, we propose to require funds to identify whether such matters are proposals or counterproposals. In addition, we propose to clarify that the disclosure requirement would apply to funds only, and not to managers. We are not proposing that managers make this disclosure because say-on-pay votes relate exclusively to matters proposed by issuers and not by security holders.128 We are also proposing a technical amendment to Form N–PX that would require reporting persons to disclose 121 See, e.g., Confidential Treatment Instruction 7 to proposed Form N–PX (regarding the filing of amendments upon the final adverse disposition of a confidential treatment request or the expiration of confidential treatment); see also Section II.G infra. 122 See Special Instruction B.1 to proposed Form N–PX. 123 Special Instruction B.4 to proposed Form N– PX. 124 See Special Instructions B.4 and D.10 and Item 1(m) of proposed Form N–PX. 125 See Special Instruction 5 to Form 13F. 126 Cf. ABA Letter (observing that Form N–PX does not readily permit explanatory disclosure). 127 See Item 1(f) of current Form N–PX; Item 1(g) of proposed Form N–PX. 128 See 2010 Proposing Release, supra footnote 25, at text accompanying n.77. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 whether each reported vote was ‘‘for or against management’s recommendation.’’ Current Form N–PX requires funds to disclose whether a vote was ‘‘for or against management.’’ 129 The proposed amendment is intended to clarify that Form N–PX should disclose how the vote was cast in relation to management’s recommendation on a particular proxy voting matter, as opposed to how the vote may have affected management. In recognition that there are some circumstances in which management may not provide a voting recommendation on a given matter, we are also proposing an instruction that would direct reporting persons to disclose ‘‘none’’ for the applicable matter in response to this disclosure requirement.130 The Commission similarly proposed to amend the current Form N–PX item to refer to whether a vote was ‘‘for or against management’s recommendation’’ in the 2010 proposal.131 Commenters generally supported the proposed change.132 One commenter stated that we should replace this item instead with a narrative description of what management recommended for the vote, and allow readers to determine on their own if the reporting person voted with or against management.133 However, our intent in this proposal is to provide useful and easily comparable information to shareholders. As a result, we are proposing to update the required disclosure to clarify that the report is required to disclose how the vote was cast in relation to management’s recommendation.134 Unlike the 2010 proposal, which would have removed the definitions section in the instructions to Form N– PX, we are proposing to amend Form N– PX to include a section containing definitions for purposes of identifying terms used in Form N–PX.135 The terms for which definitions are included are ‘‘fund,’’ ‘‘institutional manager,’’ ‘‘reporting person,’’ and ‘‘series.’’ The current version of Form N–PX also has a definitions section, but it refers filers to the definitions in the Investment Company Act and the rules and regulations thereunder.136 The terms used in the definitions section are the 129 See 130 See Item 1(i) of Form N–PX. Special Instruction D.8 of proposed Form N–PX. 131 See 2010 Proposing Release, supra footnote 25, at text accompanying n.90. 132 See CalPERS Letter; Levin Letter. 133 See Stone Letter. 134 Item 1(k) of proposed Form N–PX. 135 See General Instruction E to proposed Form N–PX. 136 General Instruction E to current Form N–PX. PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 57491 same as those used in this release. We believe the proposed definitions would clarify the terms used on Form N–PX and, in doing so, make the application of the form’s requirements to different categories of reporting persons clear. The proposed definitions are also intended to make the proposed form more concise and readable (e.g., by referring to funds, rather than registered management investment companies, throughout the form). We request comment on the additional proposed amendments to Form N–PX, and, in particular, on the following issues: 41. Should we, as proposed, require the information in Form N–PX reports to be disclosed in a standardized order? Would this facilitate comparisons or be otherwise useful to users of this information? What costs, if any, would be associated with standardization? Should the requirement to standardize apply to managers, funds, or both? If we standardize the order of the information in Form N–PX reports, should we use the order set forth in our proposal, or would some other order of information be more appropriate? 42. In proposing to require a standardized order to the information in Form N–PX, we are also proposing clarifying language with respect to the placement in a report for a fund containing multiple series. Would this requirement make it easier for investors to review reports more efficiently? Is there a different method of disclosing the votes of multiple series that would assist our goal of providing useful and comparative information? 43. Are there other ways we could make the disclosure in Form N–PX easier to review and compare among reporting persons? If so, what are they? 44. We are proposing to require reporting of only one security identifier (either the CUSIP or the ISIN) on Form N–PX. Should we require reporting persons to disclose both identifiers? If so, why? Should we also require the ticker symbol in order to identify a security? Why or why not? Is there a more appropriate identifier of securities? 45. Should the cover page permit, as proposed, the inclusion of optional information in addition to the information required by Form N–PX? Are the conditions proposed with respect to the optional information sufficient? Why or why not? In what instances might the inclusion of additional information on the cover page impede the comprehension of the required disclosure? For example, should we limit this additional information by length? Or by E:\FR\FM\15OCP2.SGM 15OCP2 57492 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules presentation? Are there other limits we should consider? 46. Should we allow reporting persons to provide additional information relating to a particular vote after disclosing the required information about that vote, as proposed? What types of information might reporting persons wish to provide about particular votes? Does the proposal provide sufficient flexibility for reporting persons to provide such information, while also limiting the potential for optional disclosure that would impede the understanding or presentation of the required information? 47. To what extent do filers amend Form N–PX filings? What are the typical reasons for an amendment? Should all amended Form N–PX filings be required to restate all information in the prior filing? Should we require any additional clarifying language on amendment filings? 48. As proposed, should we require funds to distinguish between proposals and counterproposals when identifying matters proposed by security holders? Is it sufficiently clear to a fund when a matter proposed by a security holder should be classified as a proposal or counterproposal? 49. Should we, as proposed, clarify that managers are not required to disclose whether a matter was proposed by the issuer or by a security holder? Are there other requirements in Form N–PX that should only apply to funds? Are there requirements that should only apply to managers? 50. Does the change of required disclosure on Form N–PX to ‘‘for or against management’s recommendation’’ clarify the intended purpose of the disclosure? Why or why not? Is additional clarification necessary? Should we instead require a narrative disclosure, as suggested by a commenter? 51. We are proposing to amend Form N–PX to add specific definitions to the instructions. Are the proposed definitions effective? Should we modify or remove any of the proposed definitions? Are there other definitions we should add to Form N–PX? Should we instead retain the current definitions section or remove this section, as proposed in the 2010 proposal? 52. Should we modify the proposed content requirements in any way for either managers or funds? Is there any information that we are proposing to require that should not be required? Is there additional information that should be required? 53. Should we provide any additional guidance on the contents of the proposed Form N–PX requirements? VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 D. Joint Reporting and Related Form N– PX Amendments To Accommodate Manager Reporting 1. Joint Reporting Provisions Section 14A(d) of the Exchange Act requires a manager to report any say-onpay vote unless such vote is otherwise required to be reported publicly by rule or regulation of the Commission. In order to implement this provision and prevent duplicative reporting, we are proposing three sets of amendments to Form N–PX to permit joint reporting, as well as associated disclosure requirements to identify all of a given manager’s votes. The Commission proposed similar joint-reporting provisions in the 2010 proposal, and commenters supported this reporting framework.137 Based on our experience with Form 13F reports, we believe that allowing consolidated reporting in this manner would yield reported data that would be at least as useful as separately reported data while reducing burden for reporting persons who may prefer to report jointly. Furthermore, we expect that the instructions we are proposing that require reports on Form N–PX to be structured and machine-readable would allow tools to be developed so that investors can sort and filter the data to view votes by the relevant manager. The first amendment would permit a single manager to report say-on-pay votes in cases where multiple managers exercise voting power.138 This method for preventing duplicative reporting is similar to that employed by Form 13F, which permits a single manager to include information regarding securities with respect to which multiple managers exercise investment discretion.139 In response to a similar provision in the 2010 proposal, one commenter suggested that we require a manager who receives a ballot be the primary filer that all other managers may reference in their filings.140 We are not proposing this approach because we believe that the joint-reporting provisions should provide flexibility to address different types of voting arrangements. Moreover, under our current proposal, the manager who receives the ballot would not be 137 See, e.g., ABA Letter; Letter of The Colorado Public Employees’ Retirement Association (Nov. 18, 2010) (‘‘COPERA Letter’’); CII Letter; IAA Letter. 138 General Instruction C.1 to proposed Form N– PX. 139 See 15 U.S.C. 78m(f)(6)(B) (directing the Commission to adopt such rules as it deems necessary or appropriate to prevent duplicative reporting by two or more managers exercising investment discretion with respect to the same amount); General Instruction 2 to Form 13F. 140 See ISS Letter. PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 required to report a say-on-pay vote on Form N–PX under all circumstances (e.g., if it does not exercise voting power). Another commenter requested guidance on whether an adviser or a sub-adviser should be the primary filer when both exercise voting power. We do not believe it is necessary to specify who should report under these circumstances, because the joint reporting provisions are designed to provide flexibility to reporting persons to divide that responsibility among themselves or to each report independently.141 This may in certain circumstances result in two managers reporting the same vote, for instance if two managers provide voting advice regarding the same securities and have not coordinated with each other regarding who will make a report on Form N–PX. Because both managers would exercise voting power (i.e., would influence the voting decision) under these circumstances, we do not believe it would be inappropriate or confusing for those managers to report the same vote separately. Like reports on Form N–PX that rely on the joint reporting provisions, reports that separately disclose the same votes would provide insight to clients and other investors into how a manager voted. The second proposed amendment would permit a fund to report its sayon-pay votes on behalf of a manager exercising voting power over some or all of the fund’s securities.142 This provision avoids a fund and its adviser each having to file duplicative reports regarding the same votes. Under our proposed approach, if a manager’s sayon-pay votes are reported by one or more funds over whose securities the manager exercises voting power or by one or more other managers, the nonreporting manager would be required to file a Form N–PX report that identifies each manager and fund reporting on its behalf.143 The third proposed amendment would permit affiliates to file joint reports on Form N–PX notwithstanding that they do not exercise voting power over the same securities. The Commission did not propose a similar provision in 2010, but a few commenters suggested that we broaden the circumstances where affiliates may file joint reports.144 These commenters 141 See Brown Letter. Instruction C.3 to proposed Form N– 142 General PX. 143 General Instruction C.4 to proposed Form N– PX. See infra Section II.D.2 (discussing this proposed requirement). 144 See Letter of Fidelity Investments (Nov. 18, 2010) (‘‘Fidelity Letter’’) (suggesting flexibility for E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules suggested that, to further promote operational efficiencies and ease potential administrative burdens, the Commission should permit affiliated managers to file jointly even where they do not jointly exercise voting power, and allow managers to report at the holding company level if they so choose.145 After considering these comments, we are proposing to permit two or more persons who are affiliated persons to file a single report on Form N–PX for all affiliated persons in the group.146 This joint reporting provision is designed to provide operational efficiencies without negatively affecting the quality or accessibility of the information reported on Form N–PX. In all three cases, where another reporting person reports say-on-pay votes on a manager’s behalf, the report on Form N–PX that includes the manager’s votes would be required to identify the manager (and any other managers) on whose behalf the filing is made and separately identify the securities over which the non-reporting manager exercised voting power.147 The manager’s report on Form N–PX also would have to identify the other managers or funds reporting on its behalf.148 This approach is designed to allow managers’ clients and investors to easily search for all votes where the manager exercised voting power, whether or not those votes are reported on the manager’s own Form N–PX. Use of the proposed joint reporting provisions would be optional. For example, where multiple managers exercise voting power over the same securities, the managers could choose to report the relevant say-on-pay votes individually instead of relying on the joint reporting provisions. If a manager does not rely on the joint reporting provisions, it would not be subject to the disclosure requirements tied to joint reporting that facilitate identification of all of a manager’s say-on-pay votes.149 affiliated managers to jointly file Form N–PX even where they do not share voting power); IAA Letter (suggesting flexibility for corporate groups to report at the holding company or subsidiary level regardless of whether they share voting authority). 145 Id. 146 See General Instruction C.2 to proposed Form N–PX; section 2(a)(3) of the Investment Company Act (defining ‘‘affiliated person’’). 147 For example, in the case of a Form N–PX report that includes votes of multiple affiliated managers, the filing must identify each affiliate the report covers and separately identify the securities for which each affiliate exercised voting power. 148 General Instructions C.5 and C.6 to proposed Form N–PX; Special Instructions C.2 and D.6 to proposed Form N–PX. See infra Sections II.D.3 and II.D.4 (discussing these proposed requirements in more detail). 149 In this case, the manager would report on its own behalf and would not have to analyze if any other manager also is required to report the vote. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 In this case, the manager’s report on Form N–PX would provide its complete proxy voting record for say-on-pay votes during the reporting period, without reference to any other reports on Form N–PX, and would not include any votes where the manager did not exercise voting power. We request comment on the proposal to address duplicative reporting and, in particular, on the following issues: 54. Should we, as proposed, permit a single manager to report say-on-pay votes in cases where multiple managers exercise voting power? Should we, as proposed, permit a manager to satisfy its reporting obligations by reference to the Form N–PX report of a fund that includes the manager’s say-on-pay votes? Is there any reason not to permit joint reporting? For example, would joint reporting confuse investors or make Form N–PX harder to use? Would the potential for confusion or for reduced usability decline if, as proposed, Form N–PX reports were reported in a structured data language? 150 Are there other ways to address potentially duplicative reporting that are consistent with section 14A(d) of the Exchange Act that we should consider? 55. Should the rule and form amendments provide, as we are proposing, that two or more managers that are affiliated persons may file a joint report on a single Form N–PX notwithstanding that the managers do not exercise voting power over the same securities? Does this standard permit a level of consolidated reporting by corporate groups that is sufficient to address common arrangements? Are there other frameworks for consolidated reporting that would be more appropriate? Rather than use the Investment Company Act definition of ‘‘affiliated person,’’ is there a different standard we should use? For example, similar to Form 13F, should we deem a manager to exercise voting power over any securities over which any person under its control exercises voting power? 56. Would the ability of a manager to report say-on-pay votes that another manager or a fund also reports lead to investor confusion or inappropriate double-counting? Should we prohibit a manager from reporting say-on-pay votes that another manager or a fund also reports? Should any such prohibition be qualified based on a manager’s knowledge, belief, or some other standard? Should a manager be required to take any steps to determine 150 Proposed rule 14Ad–1(a); Item 1 of proposed Form N–PX. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 57493 whether another manager or fund is reporting say-on-pay votes for the same securities? Would it confuse investors if, as provided in our proposal, joint reporting of say-on-pay votes is optional? 57. Are the joint reporting provisions necessary in light of differences between our current proposal’s standard for exercising voting power and the 2010 proposal’s standard of directly or indirectly having or sharing the power to vote or to direct the voting of a security? If so, are there any changes we should make to the joint reporting provisions to better align with our proposed standard of exercising voting power over a security? 2. The Cover Page The Commission proposed changes to the cover page of Form N–PX in the 2010 proposal to address the addition of managers as a class of reporting persons and to help operationalize the joint reporting provisions. Commenters did not address these cover page changes, and we are proposing the same changes. Consistent with current Form N–PX cover page requirements, the proposed cover page of Form N–PX would require the name of the reporting person, the address of its principal executive offices, the name and address of the agent for service, the telephone number of the reporting person, identification of the reporting period, and the reporting person’s file number.151 We also propose that a manager provide its CRD number and other SEC file number, if any, which we believe would facilitate identification of other regulatory filings of the manager and interrelationships between managers who rely on the proposed joint reporting provisions.152 We are proposing to require that the cover page include information to identify more readily whether the reporting person is a fund or a manager. If the reporting person is a manager, this information would also help investors identify reports filed by other managers and funds that contain say-on-pay votes of the reporting person under the joint reporting provisions. Specifically, the reporting person would be required to 151 In the case of a fund, the file number would be an Investment Company Act number beginning with ‘‘811–.’’ In the case of a manager, the file number would be a Form 13F number beginning with ‘‘028–.’’ 152 A CRD number is a number assigned by the Financial Industry Regulatory Authority’s Central Registration Depository system or by the Investment Adviser Registration Depository system. The SEC file number would be any file number (e.g., 801– , 8–, 866–, 802–) assigned by the Commission to the manager other than the manager’s 13F file number, which all managers would be required to provide on the cover page. See Special Instruction B.3 of proposed Form N–PX. E:\FR\FM\15OCP2.SGM 15OCP2 57494 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules check a box in order to identify the report as one of the following four types: • Registered management investment company report; • Manager ‘‘voting’’ report when the report contains all say-on-pay votes of the manager; • Manager ‘‘notice’’ when the report contains no say-on-pay votes of the manager and all say-on-pay votes are reported by other managers or funds under the joint reporting provisions; and • Manager ‘‘combination’’ report when the report contains some say-onpay votes of the manager and some sayon-pay votes of the manager are reported by other managers or funds under the joint reporting provisions. In addition, the cover page of a ‘‘notice’’ or ‘‘combination’’ report would include a list of the file numbers and names, as well as CRD numbers (if any), of the other managers and funds whose Form N–PX reports include say-on-pay votes of the reporting manager.153 This cross-referencing, which is modeled after Form 13F requirements, will help investors locate the reports of say-onpay votes by other such managers.154 We request comment on the proposed cover page of Form N–PX and, in particular, on the following issues: 58. Should we adopt the cover page of Form N–PX as proposed, or should we modify it in any way, e.g., by adding or removing information? For example, should we require managers to include their CRD numbers and SEC file numbers, if any, as proposed? Should we also require managers to include their legal entity identifiers (‘‘LEIs’’), if any? 155 Would the proposed cover page adequately identify the reporting person and the reporting period? Would the proposed cover page sufficiently enable investors to identify a reporting person’s Form N–PX report for a given period and any amendments to that report? Would the proposed cover page enable users to identify the type of reporting person? 59. In the case of a ‘‘notice’’ or ‘‘combination’’ report filed by a manager, would the proposed cover page adequately enable investors to identify reports filed by other persons that contain say-on-pay votes for which the manager exercised voting power? Should these reports be required to include a list of the file numbers and 153 Special Instruction B.2 to proposed Form N– PX. 154 See Special Instruction 6 to Form 13F. LEI is a unique identifier generally associated with a single corporate entity and is intended to provide a uniform international standard for identifying counterparties to a transaction. 155 An VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 names, as well as CRD numbers (if any), of the other managers and funds whose Form N–PX reports include say-on-pay votes of the reporting manager, as proposed? Is there other information that would help investors find a given manager’s votes? 60. Should ‘‘notice’’ filings contain any additional required disclosure? As currently contemplated, does the proposed notice filing requirement provide useful information to investors? 61. Is there additional information that would be helpful to include on the cover page of Form N–PX? 3. The Summary Page We are proposing to add a new summary page to Form N–PX to enable investors to readily identify any additional managers (besides the reporting person) with say-on-pay votes included on the Form N–PX report.156 The summary page would be required in any fund’s Form N–PX report, as well as any manager’s Form N–PX other than a ‘‘notice’’ filing.157 Commenters did not address the proposed summary page requirements, and we are proposing the summary page requirements largely without any changes from the 2010 proposal. The summary page of Form N–PX would require reporting persons to identify the names and total number of additional managers with say-on-pay votes included in the report in list format.158 The proposed instructions to Form N–PX specify the contents of this information, including the title, column headings, and format.159 If a Form N–PX report includes the say-on-pay votes of additional managers, the summary page list would be required to include all such managers together with their respective Form 13F file numbers and, if any, CRD numbers and other SEC file numbers.160 In addition, and similar to Form 13F, the proposal would require the reporting person to assign a number (which need not be consecutive) for each such manager, and present the list in 156 For example, this disclosure might contain managers included under the joint reporting requirements. See Special Instruction B.2.b–d of proposed Form N–PX. 157 Special Instructions B.2.a–d of proposed Form N–PX. The summary page would not be required in a ‘‘notice’’ report by managers because, since the notice report would not contain any say-on-pay votes at all, it would not report any say-on-pay votes of other managers. 158 Special Instruction C.1 to proposed Form N– PX. 159 Special Instruction C.2 to proposed Form N– PX. 160 Special Instruction C.2.b to proposed Form N– PX. PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 sequential order.161 These numbers would help identify the particular manager(s) who exercised the power to vote the securities. While we are proposing the sequential numbering requirement to make the list easier to use, the proposal would permit nonconsecutive numbering to allow managers to retain the same number across filings of different reporting persons and different time periods. If a Form N–PX filing does not disclose the proxy votes of a manager other than the reporting person, the reporting person would enter the word ‘‘NONE’’ under the title and would not include the column headings and list entries.162 To the extent a fund’s report on Form N–PX includes the votes of multiple series, the summary page would require the name and the series identifier (if any) of each series.163 We believe this would assist investors in discerning the funds covered by the Form N–PX report. While the Commission did not propose this requirement in 2010, the Commission has since adopted Form N– CEN and Form N–PORT, which contain similar series identification requirements for funds.164 We request comment on the proposed summary page of Form N–PX and, in particular, on the following issues: 62. Should we adopt the summary page of Form N–PX, as proposed, or should we modify it in any way? For example, should we require the inclusion of additional information with respect to the additional managers in the list? What information would be helpful for investors to review in summary format? Would such information be practicable for the reporting person to acquire and report? Should we remove any of the proposed information requirements, such as the requirements for CRD numbers and other SEC file numbers for managers, if any? 63. Would the proposed sequential and/or non-consecutive listing of other managers in the summary page help investors identify specific managers? Is the other identifying information we are proposing to require (including a manager’s 13F file number and, if any, CRD number and other SEC file numbers) sufficient for purposes of identifying managers whose votes are included in a given report? 161 Id.; see also Special Instruction 8.b to Form 13F. 162 Special Instruction C.2.a to proposed Form N– PX. 163 Special Instruction C.3 to proposed Form N– PX. 164 Item B.6.a.ii of Form N–CEN; Item A.2 of Form N–PORT. E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules 64. Would the proposed summary page enable investors to readily identify any managers whose say-on-pay votes are included in a Form N–PX report? Would additional formatting constraints be helpful? 65. Should there be additional summary page requirement differences between funds and managers? 66. Should we, as proposed, require fund Form N–PX reports that include the votes of multiple series to identify on the summary page the names and EDGAR identifier of each series that the report covers? Is there other information we should require of funds that would enable investors to more easily identify which funds the report covers? For example, should we also require disclosure of the series’ LEI? 67. Should we provide any exceptions to the summary page reporting requirement? If so, how should any such exception be defined? 68. We request information on how clients of managers or other investors would utilize the information contained on the summary page. Would it provide useful data? 4. Other Proposed Amendments to Form N–PX To Accommodate Manager Reporting We are proposing other modifications to the format and content of the information currently required by Form N–PX to accommodate the proposed requirement for managers to report on Form N–PX. Specifically, we are proposing to require a manager to report the number of shares the manager is reporting on behalf of another manager pursuant to the joint reporting provisions separately from the number of shares the manager is reporting only on its own behalf.165 A manager would also be required to separately report shares when the groups of managers on whose behalf the shares are reported are different. For example, if the reporting manager is reporting on behalf of Manager A with respect to 10,000 shares and on behalf of Managers A and B with respect to 50,000 shares, then the groups of 10,000 and 50,000 shares must be separately reported. Similarly, a fund would be required to separately report shares that are reported on behalf of different managers or groups of managers.166 We believe this 165 See Special Instruction D.6 to proposed Form N–PX. See also supra Section II.D.1 (discussing the proposed joint reporting provisions). 166 See id. We are also clarifying, as a commenter suggested, that reporting persons would not be required to report shares separately when they are not relying on the joint reporting provisions, even if another manager exercised voting power over some of the shares reported. See IAA Letter. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 requirement would further our goal of providing meaningful information to investors by allowing investors to clearly see how a particular manager exercised voting power. One commenter suggested limiting disclosure regarding manager shared voting power to the summary page of Form N–PX.167 We are not proposing this approach because we believe it would make it difficult for investors to identify which entities are responsible for the particular say-on-pay votes reported, which would undermine the purpose of reporting say-on-pay votes. The summary page is intended to identify any additional managers (besides the reporting person) with sayon-pay votes included on the Form N– PX report. We believe disclosure with respect to shared voting power should be included in the body of Form N–PX containing proxy voting information, in order to assist identifying which of the votes reported on Form N–PX were those over which the manager exercised voting power. We request comment on the other proposed amendments to Form N–PX to accommodate new reporting requirements for managers, including the following: 69. Should we, as proposed, require a reporting person relying on the joint reporting provisions to identify, for each applicable vote reported, each manager who exercised voting power as to the securities voted? Why or why not? Alternatively, would it be sufficient to require a reporting person to disclose on the summary page the managers for whom it is reporting, without identifying, for each vote reported, the managers that exercised voting power? 70. Are there other changes we should make to Form N–PX to accommodate manager say-on-pay vote reporting requirements? E. Form N–PX Reporting Data Language We are proposing to require reporting persons to file reports on Form N–PX in a structured data language.168 In particular, and as discussed in more 167 See ISS Letter. General Instruction D.2. of proposed Form N–PX (specifying that reporting persons must file reports on Form N–PX electronically on EDGAR, except as provided by the form’s confidential treatment instructions, and consult the EDGAR Filer Manual for EDGAR filing instructions). See also 17 CFR 232.301 (requiring filers to prepare electronic filings in the manner prescribed by the EDGAR Filer Manual). We are also proposing to amend rule 101(a)(1)(iii) of Regulation S–T to provide that reports filed pursuant to section 14A(d) of the Exchange Act must be submitted in electronic format. Reports filed pursuant to section 30 of the Investment Company Act are already subject to electronic filing. See rule 101(a)(1)(iv) of Regulation S–T. 168 See PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 57495 detail below, we are proposing to require filing of Form N–PX reports in a custom eXtensible Markup Language (‘‘XML’’)-based structured data language created specifically for reports on Form N–PX (‘‘custom XML’’).169 We believe use of a custom XML language would make it easier for reporting persons to prepare and submit the information required by Form N–PX accurately, and would make the submitted information more useful. Reports on Form N–PX are currently required to be filed in HTML or ASCII.170 We understand that, in order to prepare reports in HTML and ASCII, reporting persons generally need to reformat required information from the way the information is stored for normal business uses. In this process, reporting persons typically strip out incompatible metadata (i.e., syntax that is not part of the HTML or ASCII specification) that their business systems use to ascribe meaning to the stored data items and to represent the relationships among different data items. The resulting code, when rendered in an end-user’s web browser, is comprehensible to a human reader, but it is not suitable for automated validation or aggregation. The Commission requested comment in both the 2010 Proposing Release and the Proxy Mechanics Concept Release on whether to require reporting of the information required by Form N–PX in a structured data language.171 Among other things, we requested comment on the feasibility of identifying proxy voting matters in a uniform way and on the costs of providing data in a 169 This would be consistent with the approach used for other XML-based structured data languages created by the Commission for certain EDGAR Forms, including the data languages used for reports on each of Form N–CEN, Form N–PORT, and Form 13F. 170 See Regulation S–T, 17 CFR 232.101(a)(1)(iv); 17 CFR 232.301; EDGAR Filer Manual (Volume II) version 58 (June 2021), at 5–1 (requiring EDGAR filers generally to use ASCII or HTML for their document submissions, subject to certain exceptions). 171 2010 Proposing Release, supra footnote 25, at text subsequent to footnote 91 (‘‘Are there methods other than standardizing the order of information that would render the information reported on Form N–PX more useful? Should we require reporting persons to provide the information reported on Form N–PX in interactive data format?’’); Proxy Mechanics Concept Release, supra footnote 60 at text accompanying n. 225. The 2010 Proposing Release and the Proxy Mechanics Concept Release referred to an ‘‘interactive data format.’’ Some comments on these releases similarly referred to an ‘‘interactive data format.’’ For purposes of this release, we consider the terms ‘‘interactive data format’’ and ‘‘structured data language’’ to be synonymous and use the terms ‘‘structured data language’’ or ‘‘structured data’’ throughout for consistency. E:\FR\FM\15OCP2.SGM 15OCP2 57496 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules structured data language.172 Commenters on these releases were mixed. Commenters that expressed support suggested that structured data would: Improve investor analysis or allow for more informed decisionmaking, improve third-party analyses of voting information or reduce the costs associated with preparing them, and generally benefit investors or improve the usefulness and accessibility of reported data.173 The Commission’s Investor Advisory Committee also recommended that reports on Form N– PX be filed in a structured data language, stating that investors would be better able to assess the voting records of mutual funds.174 We believe that the modifications we are proposing regarding the identification of proxy voting matters would result in reported data that is sufficiently standardized to make structured data useful for interested parties.175 Two commenters on the Proxy Mechanics Concept Release urged the Commission to evaluate its then-new structured data requirements before adopting similar requirements elsewhere.176 In the time since the Commission issued the 2010 Proposing Release and the Proxy Mechanics Concept Release, we have gained additional experience with different reporting data languages, including with reports in an XML-based structured data language. For example, we have used customized XML data languages for reports filed on Form N–CEN, Form N– PORT, and Form 13F.177 We have found 172 2010 Proposing Release, supra footnote 25, at requests for comment subsequent to n. 91; Proxy Mechanics Concept Release, supra footnote 60, at requests for comment at n. 225. 173 Letter of Broadridge Financial Solutions (Oct. 19, 2010) (File No. S7–14–10) (‘‘Broadridge Letter on Concept Release’’); Florida Board Letter on Concept Release,; ISS Letter on Concept Release; Letter of Dominic Jones (Nov. 2, 2010) (‘‘Jones Letter’’); Ostrovsky Letter on Concept Release; Proxy Exchange Letter on Concept Release; Letter of Shareowners Education Network (Oct. 20, 2010) (File No. S7–14–10) (‘‘Shareholder Education Letter on Concept Release’’); Towns Letter on Concept Release; Letter of VoterMedia.org (Sept. 29, 2010) (File No. S7–14–10) (‘‘VoterMedia Letter on Concept Release’’). 174 See supra footnote 22. 175 See supra Section II.C.1 (Identification of Proxy Voting Matters). Some commenters agreed with statements in the 2010 Proposing Release and the Proxy Mechanics Concept Release suggesting that having uniform identification of proxy voting matters would make structured data more useful. See Fidelity Letter on Concept Release; ICI Letter on Concept Release; see also Ostrovsky Letter on Concept Release (indicating that uniform identification is essential, but feasible). 176 Fidelity Letter on Concept Release; ICI Letter on Concept Release. 177 See e.g., Investment Company Reporting Modernization, Investment Company Act Release No. 32314 (Oct. 13, 2016) [81 FR 81870 (Nov. 18, 2016)] (adopting Form N–CEN and Form N–PORT); VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 the XML-based structured data languages used for those reports allow investors to aggregate and analyze reported data in a much less laborintensive manner than data filed in ASCII or HTML. Based on our consideration of comments and our understanding of how fund and managers currently disclose required information in a structured data language, we believe that requiring a custom XML language for Form N–PX would minimize reporting costs while yielding reported data that would be more useful to investors. Reporting persons would be able to, at their option, either submit XML reports directly or use a web-based reporting application developed by the Commission to generate the reports, as managers are able to do today when submitting holdings reports on Form 13F. Some commenters observed that interested data users can procure structured voting data from third-party service providers.178 Another commenter, however, expressed concerns with the cost, comprehensiveness, and timeliness of the data cited by those commenters.179 While similar data may be available commercially, we believe that this information should be made freely available to investors and that current users of data made available by thirdparties could nonetheless benefit from structured Form N–PX reports if the costs associated with third-party data analysis fell. One commenter stated that it did not believe shareholders were interested in proxy voting information using a structured data language.180 Other commenters and the Investor Advisory Committee, however, have indicated that investors would benefit from proxy voting data reported in a structured data language. Among other things, commenters have noted that structured data would improve investor analysis or allow for more informed decisionmaking.181 We believe that reporting in custom XML language will allow investors to aggregate and analyze the reported data in a much less laborintensive manner. Adoption of Updated EDGAR Filer Manual, Securities Act Release 9403 (May 14, 2013) [78 FR 29616 (May 21, 2013)] (requiring managers to report their holdings in an XML-based structured data language on Form 13F). 178 Fidelity Letter on Concept Release; ICI Letter on Concept Release. 179 See Ostrovsky Letter on Concept Release. 180 ICI Letter on Concept Release. 181 See supra footnote 173 and accompanying text. PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 One commenter stated that a structured data reporting requirement would increase reporting costs, noting the costs of reporting data in both the current ASCII or HTML markup language, as well as any structured data language.182 Another commenter suggested it would not be necessary to continue to require ASCII or HTML reporting, in addition to reporting in a structured data language, because data in a structured data language could be translated to human-readable form in an automated manner and at low cost.183 In order to minimize reporting burdens, we are proposing to replace the ASCII or HTML reporting requirement with the custom XML reporting requirement. We recognize that current Form N–PX filers could bear some additional reporting costs related to adjusting their systems to a different data language. However, in the intervening time period since the 2010 proposal, many reporting persons have acquired substantial experience with reporting on web-based applications (or directly submitting information in a structured data language). We believe that aligning Form N–PX’s reporting data language with the type of data language of other required reports may reduce costs and introduce additional efficiencies for reporting persons already accustomed to reporting using structured data and may reduce overall reporting costs in the longer term.184 Finally, a commenter indicated that there would be costs associated with rendering the reported data in a form that could be comprehensible to a human reader.185 We agree that there would be some costs associated with rendering XML data in a humanreadable format, and we believe that it is appropriate for the Commission to bear these costs. We are proposing that the Commission would develop electronic ‘‘style sheets’’ that, when applied to the reported XML data, would represent that data in humanreadable form. We developed similar style sheets for holdings data reported by managers in XML on Form 13F, and they have yielded useful, consistently formatted documents. We request comment on the reporting data language we are proposing to require for reports filed on Form N–PX, and, in particular, on the following issues: 182 ICI Letter on Concept Release. Letter on Concept Release. 184 See infra Section IV. 185 ICI Letter on Concept Release (noting that the Proxy Mechanics Concept Release did not make clear who would bear those costs); but see Ostrovsky Letter on Concept Release (characterizing these costs as ‘‘trivial’’). 183 Ostrovsky E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules 71. Should we require, as we are proposing, Form N–PX reports to be filed in a custom XML language? Is a custom XML language the appropriate type of data language for Form N–PX reports? Why or why not? If another structured data language would be more appropriate, which one, and why? 72. Would this proposed requirement yield reported data that is more useful to investors, compared with not requiring Form N–PX to be filed in a custom XML language, or requiring Form N–PX to be filed in a structured data language other than a custom XML language? 73. Are the standardized identification requirements we are proposing compatible with the proposed reporting data language? 74. Should any subset of funds or managers be exempt from the proposed structured data reporting requirement? If so, what subset and why? F. Time of Reporting Currently, funds must report their proxy voting records annually on Form N–PX no later than August 31 of each year, for the most recent 12-month period ended June 30.186 We are proposing to retain the same reporting timeframe for funds and to apply this reporting timeframe to managers’ reporting of say-on-pay votes.187 Commenters on the 2010 proposal generally supported retaining the current reporting timeframe, though certain commenters advocated for longer or shorter timeframes.188 We preliminarily believe that the proposed reporting timeframe for managers—and retaining the current reporting timeframe for funds— appropriately balances the benefits of prompt reporting and the burdens associated with that reporting. We are not proposing to require, as suggested by one commenter, that managers and funds report their votes shortly after the 186 See rule 30b1–4 under the Investment Company Act. We refer to this twelve-month period ending on June 30 of each year as the ‘‘reporting timeframe’’ or the ‘‘timeframe.’’ 187 Proposed rule 14Ad–1(a); General Instruction A to proposed Form N–PX. The timing of a manager’s Form N–PX filing obligations would differ when the manager enters and exits from the obligation to file Form 13F reports. See infra Section II.J. 188 See, e.g., ABA Letter; CalPERS Letter; CII Letter; COPERA Letter; Glass Lewis Letter I; but see Jones Letter (requesting that managers and funds be required to report their votes on Form N–PX within four business days of each shareholder meeting); Letter of Adrienne Brown of Nationwide Investment Management Group (Nov. 18, 2010) (‘‘Brown Letter’’) (suggesting a later filing deadline, such as September or October); Fidelity Letter (suggesting the filing deadline be moved from August 31 to October 31). VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 relevant shareholder meeting.189 We preliminarily believe that the benefits of public reporting of proxy votes by funds and managers would not significantly increase with faster reporting and that publicly reporting each vote individually would make it difficult for investors reading a manager’s Form N– PX reports to evaluate overall patterns in the manager’s voting behavior. As it relates to managers’ reporting of say-on-pay votes, the relevant proposals are typically unique to the issuer in question and votes may be heavily dependent on the particular facts and circumstances applicable to that issuer. Moreover, because such votes are reported on a retrospective basis, investors will not necessarily be able to use the information reported by managers on Form N–PX to engage in a dialogue with their manager about its voting policies or to switch to a manager who will vote differently with respect to any specific say-on-pay vote.190 In the context of fund reporting of proxy votes, however, we are mindful of the fact that similar proposals often appear on the ballots of many issuers in a given proxy season, especially those issuers within the same industry. In these instances, timelier public reporting of funds’ proxy votes has the potential to facilitate fund shareholders’ ability to monitor their funds’ involvement in the governance activities of portfolio companies, including within a single proxy season.191 We request comment below on whether the benefits of timelier reporting of proxy votes—including those of both managers and funds— might outweigh any potential drawbacks. We also are not proposing, as some commenters on the 2010 proposal suggested, to extend the deadline for filing reports from August 31 to a later date because of additional proposed disclosure requirements.192 We believe that further delay after the close of the reporting period is unnecessary, particularly in light of other changes from the 2010 proposal that we believe should result in reporting persons having sufficient time to gather the data 189 See Jones Letter. managers to disclose their intended votes on a prospective basis would allow investors to make such a change, but such an approach would be inconsistent with the statute and we are not proposing it here. 191 Shareholders of a given fund may be able to monitor the fund’s proxy voting record to evaluate whether the fund’s votes are consistent with its disclosure. This information would promote shareholders’ ability to engage with fund management on timely issues in the midst of proxy season, including as it relates to future votes on the same subject matter at another issuer. 192 See Brown Letter; Fidelity Letter. 190 Requiring PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 57497 necessary to make the filing, such as the reduction in the quantitative information required to be disclosed.193 We request comment on the proposed reporting timeframe for filing Form N– PX reports and, in particular, on the following: 75. Should we, as proposed, require funds to file their proxy voting records on the same reporting timeline as currently required? Would investors benefit from more timely reporting of funds’ proxy votes? Please explain. Do funds need more time than currently permitted to file Form N–PX reports that include the new disclosure this proposal would require? If so, why, and how much time? 76. Should we, as proposed, require managers to report their say-on-pay votes annually on Form N–PX not later than August 31, for the most recent 12month period ended June 30? Should we instead require reporting as of some other period end date (e.g., May 31 or December 31), or with a shorter or longer lag period after the end reporting period (e.g., a 45-day lag period to align with Form 13F)? 77. Should we require reporting for managers and funds to occur more frequently than annually, such as monthly, quarterly, or close in time to each vote? Should we require more frequent voting to be reported on firm websites and annual reporting on Form N–PX? For example, should we require funds and managers to report their votes on a monthly or quarterly basis on their websites, and annually on Form N–PX? Would requiring more frequent reporting to occur on managers’ and funds’ websites rather than on Form N– PX mitigate any of the potential issues with more frequent reporting, such as the cost of reporting or the ability of investors to read and identify patterns in fund or manager voting records? 78. Would investors benefit from more frequent voting disclosure? For example, would more frequent disclosure enhance fund shareholders’ ability to monitor their funds’ involvement in the governance activities of portfolio companies? Conversely, would investors generally be most interested in analyzing a reporting person’s voting record more holistically rather than focusing on individual votes on more frequent intervals or shortly after a vote is held? What are the advantages and disadvantages of more frequent reporting of proxy votes? 79. Certain types of funds, such as index funds and the majority of 193 See supra Section II.C.3 (discussing modifications to the proxy voting information required on Form N–PX). E:\FR\FM\15OCP2.SGM 15OCP2 57498 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules exchange-traded funds, provide a degree of transparency as to their holdings more frequently than required by Form N–PORT. Transparency as to these funds’ holdings arises as a result of either: (1) Full portfolio disclosure (in the case of transparent ETFs), or (2) the tracking of an index whose constituents and weightings are transparent (in the case of index funds). Because of this transparency, more frequent disclosure of these funds’ proxy voting records might not contribute to the potential risks otherwise associated with such a requirement. Should the Commission require more frequent or timely disclosure of proxy voting information for these or other types of funds whose characteristics mitigate the risks of such a requirement? 80. Should funds and managers file Form N–PX reports on the same schedule, as proposed? Are there reasons they should be subject to different reporting schedules? G. Requests for Confidential Treatment The information filed on Form N–PX would be publicly available through the Commission’s EDGAR system, as is information filed on Form 13F.194 Certain managers filing reports on Form 13F request confidential treatment of certain or all the positions reported on their Form 13F, and those managers may request that confidential information reported on their Form 13F also be treated as confidential on their Form N–PX.195 Pursuant to 17 CFR 240.24b–2 under the Exchange Act (‘‘rule 24b–2’’), which governs requests for confidential treatment of information required to be filed under the Act, a manager can request confidential treatment of information reported on proposed Form N–PX.196 194 See rule 80(c)(3) promulgated under the Freedom of Information Act [17 CFR 200.80(c)(3)] (stating that filings made through the EDGAR system are publicly available on the Commission’s website). 195 Requests for confidential treatment can be based either on a claim that the information would identify securities held by the account of a natural person or an estate or trust, other than a business trust or investment company, in which case the Commission is required to keep the information confidential indefinitely, or on a claim that the information is confidential commercial or financial information (consistent with the requirements of Freedom of Information Act (‘‘FOIA’’) Exemption 4), in which case the grant is discretionary and generally only for a period of time. See generally sections 13(f)(4) and (5) of the Exchange Act [15 U.S.C. 78m(f)(4)] [15 U.S.C. 78m(f)(5)]; Form 13F Instructions for Confidential Treatment Requests; Rulemaking for EDGAR System, Investment Company Act Release No. 23640 (Jan. 12, 1999) [64 FR 2843]. 196 See 17 CFR 240.24b–2; Confidential Treatment Instruction 1 to proposed Form N–PX. The confidential treatment instructions we are proposing for Form N–PX are based on the Form VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 Managers seeking confidential treatment for information on their Form 13F are required to file multiple lists of securities. One, filed publicly, lists only those securities for which it is not seeking confidential treatment, as well as a statement indicating that confidential information has been omitted and filed with the Commission. Managers must also file a separate list including those securities positions for which the manager seeks confidential treatment. Confidential treatment granted by the Commission may be subject to an expiration date, as is often the case when confidential treatment is granted to protect commercial information, such as a position that is still being built. Therefore, when the confidential treatment period ends, or if the confidential treatment request is denied, the manager must file an additional report on Form 13F publicly disclosing those securities for which confidential treatment expired, or was denied. We are proposing instructions in Form N–PX that are designed to provide a similar opportunity to prevent confidential information that is protected from disclosure on Form 13F from being disclosed on Form N–PX.197 These instructions provide that a person requesting confidential treatment of information filed on Form N–PX should follow the same procedures set forth in Form 13F for filing confidential treatment requests. They also prescribe the required content of a confidential treatment request and the required filing of information that is no longer entitled to confidential treatment.198 For 13F confidential treatment instructions, which apply in similar circumstances. See Form 13F Instructions for Confidential Treatment Requests. 197 Section 13(f)(4) of the Exchange Act provides that the Commission, as it determines to be necessary or appropriate in the public interest or for the protection of investors, may delay or prevent public disclosure of information filed on Form 13F in accordance with the Freedom of Information Act. Section 13(f)(4) also provides that any information filed on Form 13F that identifies the securities held by the account of a natural person or an estate or trust (other than a business trust or investment company) shall not be disclosed to the public. As a result, we are unable to conclude, in advance, that confidential treatment of information filed on Form N–PX could, under no circumstances, be appropriate as suggested by one commenter. See Barnard Letter. 198 Confidential Treatment Instructions to proposed Form N–PX. Upon the final adverse disposition of a request for confidential treatment, or upon the expiration of the confidential treatment, a reporting person would be required to electronically submit within six business days an amendment to its Form N–PX reporting the previously confidential proxy voting information. See Confidential Treatment Instruction 7 to proposed Form N–PX. Such amendment specifically would make publicly available through the Commission’s EDGAR system the proxy voting information that previously was confidential. In the PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 instance, the confidential treatment request would be required to provide enough factual support for the request, including a demonstration that the information is both customarily and actually kept private by the reporting person, and that release of this information could cause harm to the reporting person. Although this differs somewhat from the current language in Form 13F regarding confidential treatment requests, we are proposing this standard in Form N–PX to conform to a June 2019 U.S. Supreme Court decision that overturned the standard for determining whether information is ‘‘confidential’’ under Exemption 4 of the FOIA on which the current Form 13F instruction is based.199 In light of the public disclosure intent of section 14A(d) and the confidential treatment requirements of rule 24b–2 under the Exchange Act, we believe that confidential treatment generally would not be merited solely in order to prevent proxy voting information from being made public. One commenter on the 2010 Proposing Release suggested that we should expand the standards for requesting and obtaining confidential treatment to cover situations in which a manager has a confidentiality agreement with a client regarding disclosure of portfolio information.200 We do not believe that such a private agreement should override the requirement to report proxy voting information publicly. We believe that confidential treatment could be justified only in narrowly tailored circumstances. For example, confidential treatment may be justified when a manager has filed a confidential treatment request for information reported on Form 13F that is pending or has been granted and where confidential treatment of information filed on Form N–PX would be necessary in order to protect information that is the subject of such Form 13F confidential treatment request, and the information is also event that the required amendment is not filed, the Commission could make the proxy voting information available to the public through other means. 199 5 U.S.C. 552(b)(4). See Food Marketing Institute v. Argus Leader Media, 139 S.Ct. 2356 (2019) (‘‘Food Marketing v. Argus Leader’’) (stating that ‘‘[a]t least where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is ‘confidential’ within the meaning of Exemption 4’’); see also Reporting Threshold for Institutional Investment Managers, Exchange Act Release No. 89290 (July 10, 2020) [85 FR 46016 (July 31, 2020)] (proposing a similar conforming amendment to the confidential treatment instructions in Form 13F). 200 Mayer Brown Letter. E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules customarily treated as private, nonpublic information by the manager.201 Existing Form N–PX does not include any confidential treatment instructions and, apart from Form N–PX, funds already disclose their portfolio holdings.202 As a result, we are not aware of any situation in which confidential treatment would be justified under rule 24b–2 for information filed by funds on Form N– PX. We request comment on the proposed provisions regarding confidential treatment requests, including the following: 81. Should we modify the proposed confidential treatment provisions in any way? Would it be appropriate to tie the confidential treatment provisions for Form N–PX to the confidential treatment provisions for Form 13F, for example by automatically granting confidential treatment for positions reported on Form N–PX when confidential treatment has been granted for those positions on Form 13F? 82. As proposed, should we require reporting persons to file confidential treatment requests for Form N–PX in the same manner as Form 13F requires? Are there reasons for the filing processes for confidential treatment requests to differ between the two forms? If so, what approach should we permit or require reporting persons to use to file confidential treatment requests for Form N–PX? 83. Do the proposed instructions for confidential treatment requests appropriately reflect the current requirements of FOIA, including the effect of the U.S. Supreme Court’s June 24, 2019, decision in Food Marketing Institute v. Argus Leader Media on the type of information that is required to substantiate confidential treatment in accordance with rule 24b–2 under the Exchange Act? 201 In the case of information that is not reported on Form 13F but would have been the subject of a Form 13F confidential treatment request if it were required to be reported (for example, a de minimis position that is not required to be reported on Form 13F but would have been eligible for confidential treatment if it were required to be reported on the form), we would follow similar procedures and apply similar standards to those followed for reports on Form 13F in processing requests for confidential treatment of information filed on Form N–PX. 202 Portfolio holdings information is required to be disclosed by funds on a quarterly basis with a 60-day lag, through semiannual shareholder reports pursuant to rule 30e–1 under the Investment Company Act [17 CFR 270.30e–1] and Form N– PORT [17 CFR 274.150]. An exception exists for ‘‘miscellaneous securities’’ comprising less than 5% of a fund’s portfolio and held for less than one year, but the number of votes relating to the securities in that category is generally expected to be small because of its short-term nature. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 84. Are there circumstances in which say-on-pay votes should be publicly disclosed but our proposal could permit confidential treatment? Alternatively, are there circumstances in which our proposal would require public disclosure of a say-on-pay vote but where confidential treatment should be granted? Please explain. 85. Should we allow funds to request confidential treatment under some circumstances? For example, should we allow a fund to request confidential treatment of votes on securities that were reported in the ‘‘miscellaneous securities’’ category of its most recent disclosure of its portfolio holdings? If so, why should the result under the proposed rule differ from the result under current Form N–PX? H. Proposed Website Availability of Fund Proxy Voting Records When the Commission adopted Form N–PX in 2003, it also required a fund to disclose that its proxy voting record is available to shareholders, either on (or through) the fund’s website or upon request.203 We understand that, currently, most funds make their proxy voting records available to shareholders upon request but do not provide this information on their websites. We are proposing amendments to Forms N–1A, N–2, and N–3 to require a fund to disclose that its proxy voting record is publicly available on (or through) its website and available upon request, free of charge in both cases.204 We believe this proposed change would make a fund’s proxy voting record more accessible to investors. Investors’ access to the internet has increased substantially since 2003, and many investors go to fund or intermediary websites to get information about a 203 See Form N–PX Adopting Release, supra footnote 7; Items 17(f) and 27(d)(5) of Form N–1A; Items 18.16, 24.6.d, and 24.8 of Form N–2; Item 23(f) and Instructions 4(d) and 6 to Item 31(a) of Form N–3. 204 See proposed amendments to Items 17(f) and 27(d)(5) of Form N–1A; proposed amendments to Items 18.16, 24.6.d, and 24.8 of Form N–2; proposed amendments to Item 23(f) and Instructions 4(d) and 6 to Item 31(a) of Form N–3. The Commission has proposed other amendments that would replace current Item 27(d)(5) of Form N– 1A with disclosure about the availability of different types of information for investors, including proxy voting information. See Tailored Shareholder Reports, Treatment of Annual Prospectus Updates for Existing Investors, and Improved Fee and Risk Disclosure for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements, Investment Company Act Release No. 33963 (Aug. 5, 2020) [85 FR 70716 (Nov. 5, 2020)] (‘‘Tailored Shareholder Reports Proposing Release’’). If those amendments were to be adopted, we would not amend current Item 27(d)(5) of Form N–1A as part of this rulemaking because it would no longer exist in its current form. PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 57499 fund.205 Because the proposal would require funds to file Form N–PX reports in a custom XML language, we are proposing to specify that the proxy voting record the fund posts on its website and provides upon request must be in a human-readable format. A fund could comply with this requirement by using the human-readable version of its Form N–PX report that would appear on EDGAR (e.g., by providing a direct link on its website to the HTML-rendered Form N–PX report on EDGAR). We also propose to make conforming changes to Form N–1A and Form N–3 provisions that discuss how a fund may make its proxy voting record available on request to require a fund to provide the email address, if any, that an investor may use to request the proxy voting record. Form N–2 currently includes a similar provision, while Form N–1A and Form N–3 only refer to a fund providing a toll-free telephone number. We request comment on our proposed amendments to Forms N–1A, N–2, and N–3 to require funds to disclose that their proxy voting records are available on websites and upon request, including the following: 86. Should we require funds to disclose that their proxy voting records is publicly available on (or through) their websites, free of charge and in a human-readable format, as proposed? Why or why not? 87. Should we only require a fund to disclose that its proxy voting record is publicly available on (or through) its website, and not also require disclosure that the record is available upon request? Do investors need the option to request a copy of a fund’s proxy voting record, or is website availability sufficient? If we retain the availability upon request provisions, should we require a fund to provide the email address, if any, that investors can use to request the proxy voting record, as proposed? If not, why not? Are there any other changes we should make that relate to an investor’s ability to request delivery of a fund’s proxy voting record, including that relate to the timeframe in which a fund delivers the voting record? 88. Are there other ways we could improve the accessibility of funds’ proxy voting records for investors? Please explain. 205 See, e.g., ICI Research Perspective, ‘‘Ownership of Mutual Funds, Shareholder Sentiment, and Use of the internet, 2020’’ (Nov. 2020) (noting that 96 percent of households owning mutual funds had internet access in 2020, up from 68 percent in 2000), available at https:// www.ici.org/system/files/attachments/per26-08.pdf; Tailored Shareholder Reports Proposing Release, supra footnote 204, at n.69 and accompanying text. E:\FR\FM\15OCP2.SGM 15OCP2 57500 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules I. Compliance Dates As described above, we are proposing that managers would be required to report their say-on-pay votes annually on Form N–PX not later than August 31 of each year, for the most recent 12month period ended June 30.206 We are proposing compliance dates that would vary depending on when the amendments become effective relative to the form’s reporting deadline. In the 2010 Proposing Release, we proposed that the first reports under then-proposed rule 14Ad–1 and amended Form N–PX would be required to be filed by August 31, 2011 (the same calendar year as the earliest anticipated adoption date). A number of commenters requested a delay in filing due to the compliance burden during initial implementation, with some commenters suggesting a compliance date as late as August 31, 2012 (i.e. one calendar year after the proposed compliance date),207 or covering votes beginning no earlier than six months after such proposed rule’s effective date.208 We agree with commenters that a longer compliance period is appropriate to provide reporting persons with a sufficient transition period to implement the changes that would be needed to record and report the information required by amended Form N–PX. We similarly provided a period between the effective date and the beginning of required compliance when we adopted proxy vote reporting requirements for funds.209 We are therefore proposing that, if the amendments are effective six months before June 30, the first reports on amended Form N–PX would be required to be filed by the August 31 that follows the rule’s effective date. For a fund, the first report would disclose votes occurring at least six months after the effective date in conformance with the amended form, while applicable votes occurring before this period could be reported in conformance with current form requirements. A manager’s requirement to report votes would begin six months after the effective date, since managers are not currently subject to Form N–PX reporting requirements. For example, if the amendments become effective on September 1, 2022, reporting persons would be required to 206 Proposed rule 14Ad–1(a); General Instruction A to proposed Form N–PX. For further discussion of the time of reporting provisions, see the discussion in Section II.F. 207 See, e.g., ICI Letter; ISS Letter; Glass Lewis Letter I. 208 See Letter of Glass Lewis & Co. (June 3, 2011). 209 See Form N–PX Adopting Release, supra footnote 7, at Section III. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 report votes occurring between March 1, 2023 and June 30, 2023 in compliance with the amended form and include those votes in a report filed by August 31, 2023. If the amendments are not effective six months before June 30, funds and managers would be required to file their first reports on amended Form N–PX by August 31 of the first complete reporting timeframe following the effective date of the proposed rule. As with the prior compliance date alternative, the first reports would be required to disclose votes occurring six months after the effective date of the amendments and thereafter in conformance with the amended form. That is, if the proposed rule takes effect on February 1, 2022, the first reports on amended Form N–PX would be due on August 31, 2023. For a fund, the first report would cover the reporting period of July 1, 2022 through June 30, 2023, with votes occurring between August 1, 2022 and June 30, 2023 reported in conformance with the amended form. For a manager, the first report would cover votes occurring between August 1, 2022 and June 30, 2023. We believe that, under either alternative, the initial reporting period would allow reporting persons and their third-party service providers additional time to develop or modify the necessary systems in order to record and report information on amended Form N–PX. We are proposing to require funds to comply with the amendments to Form N–PX at the same time as managers. This also allows funds additional time to implement applicable new Form N– PX requirements in the current proposal, including structured data reporting requirements, new quantification requirements, and new requirements to identify proxy voting matters and proxy voting categories. The proposed compliance date also is intended to provide a uniform mechanism of reporting votes at meetings that occur during the first reporting timeframe after the effective date of the proposed rule, because funds would be permitted to report say-on-pay votes for managers. As is currently the case, funds would be required to comply with current Form N–PX requirements until the end of the compliance period. We request comment on the proposed compliance dates, and in particular, on the following issues: 89. Would the proposed compliance dates provide adequate time for managers that would be required to file Form N–PX for the first time and for funds that would be required to comply with the proposed amendments to Form PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 N–PX? What, if any, implementation issues would managers and funds encounter in complying with the proposed rule and form amendments, and how should we address those issues (e.g., permit delayed filing for the first full reporting period after the rule is enacted)? 90. Should we provide different compliance dates for managers or funds to comply with certain provisions of the proposal? For example, should the compliance date for structured data reporting differ from the compliance date for other amendments to Form N– PX? J. Transition Rules for Managers We are proposing, as we did in the 2010 proposal, transition rules that govern the timing of a manager’s Form N–PX filing obligations whenever the manager enters and exits from the obligation to file Form 13F reports.210 In particular, the proposal would not require a manager to file a Form N–PX report for the 12-month period ending June 30 of the calendar year in which the manager’s initial filing on Form 13F is due.211 Instead, the manager would be required to file a report on Form N–PX for the period ending June 30 for the calendar year following the manager’s initial filing on Form 13F. For example, assume that a manager does not meet the $100 million threshold test on the last trading day of any month in 2023 but does meet the $100 million threshold test on the last trading day of at least one month in 2024. As a result, under the rules that currently apply to Form 13F, the manager would be required to file a Form 13F report no later than February 15, 2025, for the period ending December 31, 2024.212 Additionally, under proposed rule 14Ad–1(b), the manager would be required to file a Form N–PX report no later than August 31, 2026, for the 12month period from July 1, 2025, through June 30, 2026.213 The following chart 210 For commenters supporting the transition rule, see ABA Letter; Fidelity Letter. 211 Proposed Rule 14Ad–1(b); General Instruction F to proposed Form N–PX. For this purpose, an ‘‘initial filing’’ on Form 13F means any quarterly filing on Form 13F if no filing on Form 13F was required for the immediately preceding calendared quarter. Id. 212 Currently, under rule 13f–1, the obligation to file Form 13F arises when a manager exercises investment discretion over accounts holding at least $100 million in section 13(f) securities as of the ‘‘last trading day of any month of any calendar year.’’ However, the manager’s obligation to file Form 13F commences with the report for December 31 of that year, which is required to be filed within 45 days after December 31. Rule 13f–1(a)(1); General Instruction 1 to Form 13F. See rule 0–3 under the Exchange Act [17 CFR 240.0–3]. 213 Proposed Rule 14Ad–1(b); General Instruction F to proposed Form N–PX. E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules illustrates the timing of the entrance of a manager to its obligation, under the proposed rule, to file Form N–PX. 57501 a manager to its obligation, under the proposed rule, to file Form N–PX. INITIAL FORM N–PX FILING Date filer exceeds reporting threshold First Form 13F filing due First proxy reporting period Mar. 31, 2023 ................................ Dec. 31, 2023 ................................ Jan. 31, 2024 ................................. Feb. 15, 2024 ............................... Feb. 15, 2024 ............................... Feb. 15, 2025 ............................... July 1, 2024–June 30, 2025 ......... July 1, 2024–June 30, 2025 ......... July 1, 2025–June 30, 2026 ......... In addition we are proposing, as we did in the 2010 Proposing Release, to not require a manager to file a report on Form N–PX with respect to any shareholder vote at a meeting that occurs after September 30 of the calendar year in which the manager’s final filing on Form 13F is due.214 Instead, the manager would be required to file a report on Form N–PX for the period July 1 through September 30 of the calendar year in which the manager’s final filing on Form 13F is due. This short-period Form N–PX filing would be due no later than March 1 of the immediately following calendar year.215 A manager’s obligation to file Form 13F reports always terminates with the September 30 report, and the transition rule we are proposing conforms the ending date for reporting say-on-pay votes with the ending date for Form 13F reporting.216 The proposed February 28 due date would provide a two-month period for filing after December 31, when the manager’s Form 13F filing status would be conclusively determined for the coming year.217 For example, assume that a manager ceases to meet the $100 million threshold in 2023. In other words, the manager meets the threshold on at least First Form N–PX due Aug. 31, 2025. Aug. 31, 2025. Aug. 31, 2026. one of the last trading days of the months in 2022, but does not meet the threshold on any of the last trading days of the months in 2023. The manager’s final report on Form 13F would be filed for the quarter ended September 30, 2023. The manager’s final report on Form N–PX would include all say-onpay votes cast during the period from July 1, 2023, through September 30, 2023, and would be required to be filed no later than March 1, 2024. The following chart illustrates the timing of the exit of a manager from its obligation to file Form N–PX. FINAL FORM N–PX FILING Date filer ceases to meet threshold Final Form 13F filing due Final Proxy reporting period Mar. 30, 2023 ................................ Dec. 30, 2023 ................................ Feb. 1, 2024 .................................. Nov. 14, 2024 ............................... Nov. 14, 2024 ............................... Nov. 14, 2025 ............................... July 1, 2024–Sept. 30, 2024 ........ July 1, 2024–Sept. 30, 2024 ........ July 1, 2025–Sept. 30, 2025 ........ We request comment on the proposed transition rules for managers required to file Form N–PX reports and, in particular, on the following: 91. The proposal would not require a manager to file a Form N–PX report for the 12-month period ending June 30 of the calendar year in which the manager’s initial filing on Form 13F is due. Is this transition rule appropriate for managers entering the Form 13F and Form N–PX filing requirements, or is some other rule more appropriate? For example, should we require a manager to report say-on-pay votes for the period commencing January 1 (rather than July 1) of the calendar year in which the manager’s initial filing on Form 13F is due? Instead should we require a manager to report say-on-pay votes for the period commencing on the first day of the month immediately following the date on which it meets the $100 million threshold? 92. Should we, as proposed, not require a manager to file a Form N–PX report with respect to any shareholder vote at a meeting that occurs after September 30 of the calendar year in which the manager’s final filing on Form 13F is due? Should we instead require a manager to report say-on-pay votes cast at meetings that occur during some period after September 30 of the calendar year in which the manager’s final filing on Form 13F is due? If so, what should that period be? 214 Proposed Rule 14Ad–1(c); General Instruction F to proposed Form N–PX. For this purpose, a ‘‘final filing’’ on Form 13F means any quarterly filing on Form 13F if no filing on Form 13F is required for the immediately subsequent calendar quarter. Id. 215 Proposed Rule 14Ad–1(c); General Instruction F to proposed Form N–PX. 216 See rule 13f–1(a) (manager that meets $100 million threshold on last trading day of any month of any calendar year is required to file Form 13F for December 31 of that year and the first three calendar quarters of the subsequent calendar year). 217 A manager is required to file a report on Form 13F in the coming year if it meets the $100 million threshold on the last trading day of any month of VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 K. Technical and Conforming Amendments We are proposing, as we did in the 2010 Proposing Release, two technical PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 Final Form N–PX due Mar. 1, 2025. Mar. 1, 2025. Mar. 1, 2026. and conforming amendments. First, we are proposing to amend the heading of Subpart D of Part 249 of the Code of Federal Regulations to include new section 14A of the Exchange Act and to indicate that Exchange Act reports are filed by both issuers and other persons (e.g., managers). We are also proposing amendments to reflect the fact that Form N–PX would be an Exchange Act form, as well as an Investment Company Act form.218 III. General Request for Comments The Commission requests comment on the rule and form amendments proposed in this release, whether any changes to our rules or forms are necessary or appropriate to implement the objectives of our proposed rule and form amendments, and other matters the current calendar year. As a result, in cases where the manager does not meet the threshold in January through November, its status will not be determined until December 31. 218 Rule 30b1–4; 17 CFR 249.326 and 274.129. E:\FR\FM\15OCP2.SGM 15OCP2 57502 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules that might affect the proposals contained in this release. IV. Economic Analysis A. Introduction The Commission is proposing to amend Form N–PX to enhance the information funds currently report annually about their proxy votes on both executive compensation and other matters to make these reports more informative and easier to analyze. The proposed amendments to Form N–PX would standardize the order in which reporting persons disclose information, categorize votes, structure and tag the data reported, and make the description of proxy voting issues consistent across multiple filings. The proposed amendments would also provide additional information about the extent to which a fund votes or loans its shares. The Commission is also proposing rule and form amendments that would complete the implementation of section 951 of the Dodd-Frank Act by requiring a manager to report how it voted proxies relating to executive compensation matters. Specifically, the proposed rule and form amendments would require managers to report their say-on-pay votes annually on Form N–PX. The Commission is sensitive to the economic effects, including the costs and benefits, imposed by the proposed rule and form amendments. At the outset, the Commission notes that, where practicable, we have attempted to quantify the costs, benefits, and effects on efficiency, competition, and capital formation expected to result from the proposed rule and form amendments. In some cases, however, data needed to quantify these economic effects are not currently available to the Commission or otherwise publicly available. For example, there would be costs and benefits associated with managers disclosing information about their votes on executive compensation. Those costs and benefits may depend on existing levels of voluntary disclosure by managers and the extent to which they exercise voting power on behalf of funds because such votes are already reported on Form N–PX, and the proposal would not require managers to report them separately. Furthermore, costs associated with the proposal may depend on existing systems and levels of technology expertise within the funds and managers, which could differ substantially across reporting persons.219 219 We do not anticipate any significant costs associated with the technical and conforming amendments discussed in supra Section II.K. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 B. Economic Baseline and Affected Parties The economic baseline against which we measure the economic effects of this rule, including its potential effects on efficiency, competition, and capital formation, is the state of the world as it currently exists. 1. Funds’ Reporting of Proxy Voting Records Due to funds’ significant voting power and the effects of funds’ proxy voting practices on the actions of corporate issuers and the value of these issuers’ securities, investors have an interest in how funds vote.220 Since 2003, funds have used Form N–PX to report their proxy voting records annually for each matter relating to a portfolio security considered at any shareholder meeting held during the reporting period and with respect to which the fund was entitled to vote. In 2020, we estimate that there were approximately 2,087 funds with total assets of $29.86 trillion that were required to file reports on Form N–PX.221 On the current Form N–PX, among other things, a fund discloses whether it cast its votes on each proposal, how it voted (e.g., for or against the proposal, or abstained), and whether any votes cast were for or against management recommendations. Although the form specifies the information that each fund must provide, it does not specify the format of the disclosure or how funds must present or organize the information. Reports on Form N–PX also are not currently filed in a machine-readable, or ‘‘structured,’’ data language. Investors can access a fund’s Form N–PX filings online through the EDGAR website. Funds also must disclose that their proxy voting records are available to investors either upon request or on (or through) their websites, with most funds disclosing that this information is available upon request. Current Form N–PX reports advanced transparency into fund voting. However, these reports can be difficult for investors to read and analyze. For example, under the current rules, Form N-PX is routinely filed as a large HTML or plain-text (ASCII) file. Many funds use automated systems to produce their Form N-PX records, which is often a simple output from a database 220 See, e.g., Stuart Gillan and Laura Starks, ‘‘The Evolution of Shareholder Activism in the United States.’’ Journal of Applied Corporate Finance, Volume 19 (2007). 221 These estimates are based on staff review of Form N–CEN filings of management investment companies registered with the Commission as of December 2020. PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 maintained by the filer that covers meetings, proposals, and votes over a given period. A fund may own hundreds of securities, sorted by firm, each of which may have ten or more proposals each year. As a result, Form N–PX reports disclosing proxy voting records for all securities and proposals can be overwhelmingly long.222 Investors also may have difficulty finding a particular fund’s voting history within a single Form N–PX filing. Many fund complexes include information about several different funds in a single Form N–PX report, given the structure of many funds as series of a trust. Funds also often use their own descriptions and abbreviations when describing a particular voting matter, which differ from the descriptions on an issuer’s form of proxy. This can make it difficult for investors to identify a particular voting matter or category of similar voting matters, and to compare funds’ voting records. In addition to difficulties to collect and analyze the data provided on Form N–PX, certain gaps in the required current disclosure may provide an incomplete picture of a fund’s proxy voting practices. For example, current Form N–PX does not require funds to provide information about the potential effects of a fund’s securities lending activities on its proxy voting. A fund’s securities lending activities can generate additional income for the fund and its shareholders. However, when a fund lends its portfolio securities, it transfers incidents of ownership, including proxy voting rights, for the duration of the loan. As a result, the fund loses its ability to vote the proxies of such securities, unless the securities are recalled, the loan is terminated and the securities are returned to the fund before the record date for the vote. Current Form N–PX does not provide information about this effect. 2. Managers’ Reporting of Say-on-Pay Votes Section 951 of the Dodd-Frank Act added new section 14A to the Exchange Act requiring issuers to provide shareholders with a vote on say-on-pay matters, and requires managers to report how they voted on those matters. Section 14A generally requires public companies to hold non-binding say-onpay shareholder advisory votes to: (1) Approve the compensation of its named executive officers; (2) determine the frequency of such votes; and (3) approve ‘‘golden parachute’’ compensation in connection with a merger or acquisition. 222 See E:\FR\FM\15OCP2.SGM supra footnote 17. 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules Section 14A(d) requires that every manager report at least annually how it voted on say-on-pay votes, unless such vote is otherwise required to be reported publicly. However, there are currently no rules or forms in place governing how managers are to comply with their reporting obligation under section 14A(d).223 Some managers, such as public pension funds, do disclose their proxy voting records on their websites, although we understand that their disclosures generally do not contain quantitative information and presentation practices of website reporting vary across managers. Adopting say-on-pay vote reporting requirements for managers would complete implementation of section 951 of the Dodd-Frank Act. As of March 31, 2021, 7,550 managers with investment discretion over approximately $39.79 trillion in section 13(f) securities.224 C. Costs and Benefits 1. Amendments to Funds’ Reporting of Proxy Votes a. Benefits The fund-related proposed amendments to Form N–PX would benefit fund investors, other market participants, and other proxy voting data users,225 by enhancing the information funds currently report about their proxy votes and making that information easier to collect and analyze. The proposed amendments include the following principal elements: (1) Requiring the disclosure of information about the number of shares that were voted (or instructed to be voted) and the number of shares that a fund loaned and did not recall before the record date for the vote; (2) requiring that funds describe a voting matter using the description in the issuer’s form of proxy; (3) requiring funds to categorize voting matters by type; (4) requiring funds to report information in a standardized order and provide disclosure separately by series of shares; (5) requiring the reporting of information on Form N–PX in a custom XML language created specifically for Form N–PX; and (6) requiring funds to 223 Although managers are not currently required to file reports on Form N–PX, there is a subset of managers that advise funds, and each of these funds is required to report its own proxy voting record, including say-on-pay votes, annually on Form N– PX. 224 These estimates are based on staff review of Form 13F filings covering the first quarter of 2021. See also supra footnote 24 and infra footnote 265. 225 Other proxy voting data users include, for example, regulators such as the Commission, proxy voting advisers, equity analysts, corporate issuers, and third-party data providers. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 disclose that their proxy voting records are publicly available on (or through) their websites and available upon request, free of charge in both cases. The amendments are designed to facilitate the benefits the Commission sought to provide with Form N–PX as articulated in the adopting release, namely: (1) To provide better information to investors who wish to determine to which fund managers they should allocate their capital, and whether their existing fund managers are adequately maximizing the value of their shares; (2) to deter fund voting decisions that are motivated by considerations of the interests of a fund’s adviser rather than the interests of the fund’s investors; and (3) to provide stronger incentives for fund managers to vote their proxies carefully.226 One academic study suggests that, currently, investors may be less inclined to use information provided in Form N–PX because the costs of gathering and understanding more granular details about the fund’s proxy voting exceed the benefits.227 We expect that the proposed amendments to the Form N–PX format and content would help investors and other data users more easily collect and analyze proxy voting information, resulting in lower costs of gathering and understanding this information. Specifically, the proposed amendments would require funds to use a consistent and standardized description, categorize voting matters, report in a custom XML data language, and make the form available on the fund’s website and provide it to investors upon request, free of charge in both cases. We also expect these amendments could facilitate comparisons of voting patterns across a wide range of funds or within an individual fund over time. To the extent that investors choose among funds based on their proxy voting policies and records, in addition to other factors such as expenses, performance, and investment policies, we expect that investors would be able to select funds that suit their preferences more efficiently. 226 Form N–PX Adopting Release, supra footnote 7. The discussion of the interests of funds’ investors is not intended to describe the interests of any particular investor or investors, but instead refers to the fund’s investors, considered as a whole. 227 See Jonathon Zytnick, ‘‘Do Mutual Funds Represent Individual Investors?’’ NYU Law and Economics Research Paper No. 21–04 (March 7, 2021) at page 4, (finding ‘‘evidence consistent with limited attention, in which the costs [to shareholders] of acquiring more granular detail about funds, as compared to readily available information, exceed the benefits’’), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_ id=3803690. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 57503 We expect additional benefits to investors and other proxy voting data users from accessing the new information on the amended Form N– PX regarding the number of shares voted and the number of shares loaned. We believe that this additional information could benefit investors and other data users by helping them understand the scope of a fund’s participation in proxy voting activities, the fund’s voting preferences, and the fund’s ability to affect the outcome of shareholder votes and influence the governance of corporate issuers. As an example, the additional transparency the proposal would provide may help assess concerns regarding the extent to which loaned shares could be used to sway proxy votes towards outcomes that enhance borrowers’ private benefits instead of outcomes considered beneficial for funds’ shareholders.228 In light of the increased transparency the amendments would provide on fund voting, the proposal may also provide an incentive for fund managers to devote additional time and resources to their participation in voting proxies, which could lead to an improvement in the performance of corporate issuers and enhance shareholder wealth.229 Academic research provides some evidence that actively voting funds help sway shareholder votes toward valuemaximizing outcomes when voting on the matters such as CEO turnover, executive compensation, anti-takeover provisions, and mergers.230 We note that 228 It may be possible that investors who borrow securities primarily to obtain votes could sway proxy votes towards outcomes that enhance their private benefits instead of outcomes considered beneficial for funds’ shareholders. Hu and Black (2008) provide examples of situations when the use of borrowed shares may have swayed the outcome of a shareholder vote. See Henry Hu and Bernard Black, ‘‘Equity and Debt Decoupling and Empty Voting: II Importance and Extensions.’’ University of Pennsylvania Law Review, Volume 156 (2008). To date, we are not aware of evidence on whether such voting with borrowed shares occurs on a regular basis or whether it has a significant effect on proxy voting outcomes. 229 See Peter Iliev and Michelle Lowry, ‘‘Are Mutual Funds Active Voters?’’ Review of Financial Studies, Volume 28 Issue 2 (2015); Vincente Cunat, Mireia Gine, and Maria Guadalupe, ‘‘The Vote is Cast: The Effect of Corporate Governance On Shareholder Value.’’ Journal of Finance, Volume 67 Issue 5 (2012). (finding that passing a governance provision is associated with an increase in shareholder value, and more so when proposals are sponsored by institutional investors). 230 See, e.g., Angela Morgan, Annette Poulsen, Jack Wolf, and Tina Yang, ‘‘Mutual Funds as Monitors: Evidence from Mutual Fund Voting.’’ Journal of Corporate Finance, Volume 17 (2011). (finding that, ‘‘in general, mutual funds vote more affirmatively for potentially wealth-increasing proposals and funds’ voting approval rates for these beneficial resolutions are significantly higher than those of other investors’’). See also Jean Helwege, E:\FR\FM\15OCP2.SGM Continued 15OCP2 57504 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules these potential corporate governance improvements resulting from more active participation in proxy voting by funds could have a positive externality effect as the benefits would be accessible to all equity holders, and not limited to fund investors. In addition, the proposed amendments to the format and content of Form N–PX may also help deter fund votes motivated by conflicts of interest that compromise the fund’s voting on proposals considered beneficial for the fund’s investors.231 For example, some academic research finds that mutual funds’ proxy voting may be affected by their business ties with the portfolio firms where the fund’s adviser also manages the firm’s pension plan, as well as through personal connections between fund managers and corporate executives.232 More generally, fund managers’ proxy voting decisions may be driven by their economic interest in attracting more business for the fund.233 Vincent Intintoli, and Andrew Zhang, ‘‘Voting with Their Feet or Activism? Institutional Investors’ Impact on CEO Turnover.’’ Journal of Corporate Finance, Volume 18 Issue 1 (2012) for a review of the literature. 231 See, e.g., Gerald Davis and Han Kim, ‘‘Business Ties and Proxy Voting by Mutual Funds.’’ Journal of Financial Economics, Volume 85 Issue 2 (2007) (‘‘To the extent that good corporate governance leads to higher valuations, fund managers have incentives to use their voting power to demand good corporate governance and accept (reject) proposals that may benefit (harm) investors. However, such fiduciary responsibilities may be compromised if mutual fund parents manage employee benefit plans (such as 401(k) plans) for their portfolio firms at the behest of management.’’). According to the article, on average, earnings from 401(k)-related business equal 14% of the revenues that mutual fund families earn from their equity funds, and such income can represent as much as 25% of fund family revenues. 232 See, e.g., Ashraf, Jayaraman, and Ryan (2012) find that ‘‘fund families support management when they have pension ties to the firm’’ and Cvijanovic, Dasgupta, and Zachariadis (2016) find that ‘‘business ties significantly influence promanagement voting at the level of individual pairs of fund families and firms.’’ Butler and Gurun (2012) observe that ‘‘mutual funds whose managers are in the same educational network as the firm’s CEO are more likely to vote against shareholderinitiated proposals to limit executive compensation than out-of-network funds are.’’ See Rasha Ashraf, Narayanan Jayaraman, and Harley Ryan, ‘‘Do Pension-Related Business Ties Influence Mutual Fund Proxy Voting? Evidence from Shareholder Proposals on Executive Compensation.’’ Journal of Financial Quantitative Analysis, Volume 47 Issue 03 (2012); Dragana Cvijanovic, Amil Dasgupta, and Konstantinos Zachariadis, ‘‘Ties That Bind: How Business Connections Affect Mutual Fund Activism’’, Journal of Finance, Volume 71 Issue 6 (2016); Gerald Davis and Han Kim, ‘‘Business Ties and Proxy Voting by Mutual Funds.’’ Journal of Financial Economics, Volume 85 Issue 2 (2007); and Alexander Butler and Umit Gurun, ‘‘Educational Networks, Mutual Fund Voting Patterns, and CEO Compensation.’’ Review of Financial Studies, Volume 25 Issue 8 (2012). 233 See, e.g., Lucian Bebchuk, Alma Cohen, and Scott Hirst, ‘‘The Agency Problems of Institutional Investors.’’ Journal of Economic Perspectives, VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 A fund’s proxy voting also may be affected by the fund manager’s personal preferences that do not align with the best interests of the fund’s investors.234 To the extent that the increased transparency about fund’s proxy votes, resulting from the proposed amendments, would provide an incentive for fund managers to focus more on shareholder value maximization, this could lead to an improvement in the performance of corporate issuers and enhance shareholder value. We note that assets held in funds account for approximately 30% of the market capitalization of all publicly traded U.S. corporations as of year-end 2020, and therefore funds have the ability to exercise a considerable amount of influence in proxy votes which could affect the value of these corporations.235 b. Costs The proposed amendments to Form N–PX would lead to some additional costs for funds. Any portion of these costs that is not borne by a fund’s adviser or other sponsor would ultimately be borne by the fund’s shareholders. Direct costs for funds would consist of both internal costs (for compliance attorneys and other nonlegal staff of a fund, such as computer programmers, to prepare and review the required disclosure) and external costs (such as any costs associated with thirdparty service providers to collect and report the information disclosed in Form N–PX).236 Volume 31 Number 3 (2017) (discussing that fund managers’ proxy voting decisions may be driven by their economic interest in attracting more business for the fund rather than engaging in generating governance gains at portfolio companies.) The Commission has brought at least one enforcement action against a registered investment adviser for having proxy voting policies that did not address material potential conflicts when the adviser selected voting guidelines explicitly favored by certain clients to vote all its clients’ securities, in order to improve the adviser’s ranking in a thirdparty proxy voting survey. See, In the Matter of INTECH Investment Management LLC, Investment Advisers Act Release No. 2872 (May 7, 2009) (settled order). 234 See, e.g., Paul Mahoney and Julia Mahoney, ‘‘The New Separation of Ownership and Control: Institutional Investors and ESG.’’ Columbia Business Law Review, Volume 2 Number 2 (2021). 235 ICI 2020 Fact Book, supra footnote 5, Figure 2.7. 236 Based on the results of the PRA analysis provided in Table 2, it is estimated that the annual direct costs attributable to information collection requirements in the proposed amendments for funds that hold equity securities would be approximately $6,577 per fund, which consists of $6,077 in internal costs and $500 in external costs. For funds not holding equity securities, the direct costs are not expected to change. For funds of funds, the direct costs would comprise internal and external costs and are estimated at $414 per fund. These annual direct costs include both ongoing, and PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 We anticipate that any additional direct costs associated with the proposed amendments aimed at reducing the costs of accessing and gathering proxy voting information for investors and other users of the data— the requirements to use a custom XML language and to publish proxy voting records on the fund’s website—would be relatively low given that funds already accommodate similar requirements in their other reporting and can utilize their existing capabilities for preparing and publishing an updated Form N–PX. Indirect costs for funds would include the costs associated with additional actions that funds may decide to undertake in light of the increased transparency of their voting records and practices. To the extent that the proposed amendments provide an incentive for fund managers to devote additional time and resources to voting proxies, this may result in additional expenses for funds, some of which may be passed on to funds’ investors. Also, as a result of the increased scrutiny by investors, a fund may be incentivized to vote against an issuer firm’s management with whom the fund has business ties. This could jeopardize the fund’s relationship with the client firm and result in lost revenue if the firm decides to relocate their employee benefit accounts elsewhere. The proposed requirement for funds to disclose the number of shares a fund voted and the number of shares the fund loaned and did not recall for voting could reduce the fund’s proceeds from securities lending, which would reduce returns to the fund’s investors.237 Specifically, in light of the increased transparency the amendments would provide on funds’ securities lending activities, some funds may decide to recall their loaned securities to be able to vote the proxies of these securities. A change in the fund’s lending activity could also affect the fund’s adviser and its affiliates. For example, some funds use securities lending agents that are affiliated with the fund’s adviser and that are compensated in their role as agent with a share of the proceeds generated by the lending program. However, we expect the scope of the possible impact of the proposed amendments on funds’ securities initial costs, with the latter being amortized over three years. 237 Based on Form N–CEN filings received through May 2021, 67% of funds were authorized to engage and 40% participated in lending their securities. Funds that lent their securities reported aggregate net income from securities lending in the last year of $2.663 billion, representing an average of 0.036% of average total net assets in the last year. E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules lending practices and income would be limited for the following reasons: • First, according to a survey of institutional investors referenced in one academic study, 37.9% of the respondents stated that a formal policy on securities lending is part of their proxy voting policy, with some institutional investors requiring a total recall of shares ahead of proxy voting, while others weigh the lost income from securities lending against the benefits of voting on a specific proposal.238 For funds with such existing securities lending policies, we expect no changes to their lending practices as a result of the proposed amendments. • Second, even if some funds decide to recall loaned securities ahead of proxy voting, we anticipate that these funds would lend their shares again immediately after the vote record date, thus resuming the income stream obtained through security lending. This is consistent with findings in academic research showing that the supply of shares available to lend starts to decrease about 20 days before the vote record date and it increases to its preevent levels immediately after the vote record date.239 Therefore, we expect that the lost income to the funds from recalling their loaned shares to participate in proxy voting would be limited to the income from securities lending that could have been generated over the recall period. • Third, we expect that funds would factor income from securities lending, among other considerations, into their lending decision and recall loaned securities when they expect the value of their voting rights would exceed lost income from securities lending. This is consistent with findings in academic research showing that the recall of shares ahead of the voting record date is sensitive to the borrowing fee and that recall is lower if the fee paid by borrowers is higher.240 Therefore, if, under the proposed amendments, some funds decided to recall their loaned shares to be able to participate in proxy voting, we anticipate that the fund managers will have determined that the benefits to these funds associated with their decision would outweigh the potential loss of lending income. Since stock loans can be used for many different purposes, including short selling and arbitrage and hedge trading strategies, changes in funds’ securities lending practices could have an impact on these activities, which 238 See, e.g., Aggarwal et al. (2015) at page 2314, supra footnote 20. 239 See id at page 2316. 240 See id at page 2328. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 may impose additional costs on market participants. However, as discussed earlier, we would expect the securities lending supply to be largely unaffected by the proposed amendments and, therefore, we would expect other market activities that rely on securities lending to be largely unaffected too. If, as a result of increased transparency under the proposed amendments, some funds decide to recall their loaned shares, we expect the impact of this change on other related market activities such as short selling and arbitrage trading to be limited for the following reasons: • As discussed earlier, we would expect the recall to be short-term and funds to return to their normal securities lending practices immediately after the vote record date. Therefore, we anticipate that other market activities that rely on securities lending would also return to normal levels after the vote record date. • Additionally, we expect that the market for securities lending has sufficient depth to withstand these short-term recalls by some funds ahead the voting record date without experiencing significant changes. One academic study shows that the equity lending market has a slack in supply with approximately a quarter of a corporate issuer’s market capitalization typically available for lending and less than one-fifth of these shares being on loan.241 Therefore, we expect that if some funds decided to recall their securities to participate in proxy voting, other lenders would step in to supply shares for loan on similar terms. This is consistent with findings in academic research showing that changes in borrowing fees during the recall period tend to be economically small or insignificant.242 • The impact on borrowing fees could be more pronounced for hard-to-borrow stocks such as stocks with low lendable supply and/or high borrowing demand, also known as ‘‘special.’’ 243 If funds recalled a significant number of shares of such stocks ahead of the vote record date, it may potentially have an impact on the stock price.244 However, 241 See id at page 2315. 242 See id at page 2327. See also Susan Christoffersen, Cristopher Geczy, David Musto, and Adam Reed, ‘‘Vote Trading and Information Aggregation.’’ Journal of Finance, Volume 62 Issue 6 (2007) at page 2912. 243 The Aggarwal et al. (2015) study estimated that such special stocks represented about 9% of their considered equity lending sample, which covers more than 85% of the securities lending market. The study finds that ‘‘special’’ stocks have a higher average annualized borrowing fee of 429 basis points, compared with a fee of 9.3 basis points for the non-special stocks. 244 See, e.g. Jesse Blocher, Adam Reed, and Edward Van Wesep, ‘‘Connecting Two Markets: An PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 57505 ‘‘special’’ stocks are typically associated with higher borrowing fees 245 and, therefore, funds may be more reluctant to recall these shares from loans if the income from lending them exceeds the benefits of participating in proxy voting. For example, one academic study shows that lendable supply of ‘‘special’’ stocks changes by less than that of the nonspecial stocks prior to the vote record date.246 Therefore, we expect that the proposed amendments are unlikely to have an impact on securities lending and other related market activities for these stocks. 2. Amendments To Require Manager Reporting of Say-on-Pay Votes a. Benefits Under the proposal, managers would publicly disclose annually on Form N– PX information about their proxy votes relating to say-on-pay matters. The information would include a description of say-on-pay matters that is consistent with the description on an issuer’s form of proxy, their standardized classification, the number of shares voted and number of shares loaned and not recalled, and how the shares were voted by the manager. We believe the proposed rule may benefit the securities markets by providing access to information about how managers vote on issuers’ say-onpay recommendations. As of March 31, 2021, managers that file reports on Form 13F exercised investment discretion over approximately $39.79 trillion in section 13(f) equity securities. In many cases, fund managers also exercise voting power for proxies relating to these equity securities. This voting power gives fund managers significant ability to affect the outcomes of shareholder votes and influence the governance of corporations. Recent academic literature shows that the requirement of holding say-on-pay votes could have an impact on executive compensation and other corporate governance practices for corporate issuers.247 The proposed rule would Equilibrium Framework for Shorts, Longs, and Stock Loans.’’ Journal of Financial Economics, Volume 108 Issue 2 (2013) (finding that when share loan supply is ‘‘reduced around dividend record dates, prices of hard-to-borrow stocks increase 1.1% while prices of easy-to-borrow stocks are unaffected’’). While the study looks at the effect around the dividend record date, it is possible that similar results could hold around vote record dates. 245 Supra footnote 243. 246 See Aggarwal et al. (2015) at page 2323. 247 See Peter Iliev and Svetla Vitanova, ‘‘The Effect of the Say-on-Pay Vote in the United States.’’ Management Science, Volume 65 (2019); James Cotter, Alan Palmiter and Randall Thomas, ‘‘The First Year of Say-on-Pay under Dodd-Frank: An E:\FR\FM\15OCP2.SGM Continued 15OCP2 57506 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules enable investors to observe how managers exercised their proxy votes regarding such matters. To the extent the information contained in say-on-pay votes is understood and valued by investors,248 investors can benefit from using this additional information in selecting managers, and in determining whether managers are adequately maximizing the value of their assets. This information may also help deter votes motivated by conflicts of interest and promote accountability of executives who often are in a position to shape their own pay arrangements. To the extent that executives are sensitive to approval from their institutional shareholder base, the adoption of the proposed rule should help align the incentives of executives and investors, which would result in better corporate governance practices at corporate issuers. Public companies currently subject to the Dodd-Frank Act’s say-on-pay vote requirements may also benefit from the transparency provided by this rule. Knowing how managers have voted on executive compensation matters in the past, and knowing how they voted on say-on-pay matters at similar firms or other firms in the same industry, could be useful for the companies as they consider their own executive compensation practices and policies. b. Costs The proposed rule would lead to some additional direct and indirect costs for managers associated with disclosing required information about their say-on-pay votes annually on Form N–PX. If a manager exercises voting power for a client’s securities, the costs to report the vote may be passed on to the client. Some of these costs are a direct result of section 14A(d)’s statutory mandate for managers to report annually how they have voted.249 Direct costs to each manager would include both internal costs (for compliance attorneys and other nonlegal staff, such as computer programmers, to prepare and review the required disclosure) and external costs (such as any costs associated with thirdEmpirical Analysis and Look Forward.’’ George Washington Law Review, Volume 81 Issue 3 (2013). 248 See, e.g., David Larcker, Ronald Schneider, Brian Tayan, and Aaron Boyd, ‘‘2015 Investor Survey Deconstructing Proxy Statements—What Matters to Investors.’’ Stanford University, RR Donnelley, and Equilar Report (February 2015) (finding that 58 percent of shareholders believes that say-on-pay is effective in influencing or modifying pay practices). 249 In the 2010 Proposing Release, no commenter provided specific empirical data quantifying costs that may be incurred by a reporting person in complying with those proposed amendments. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 party service providers to collect and report the information disclosed in Form N–PX).250 We anticipate that costs for managers associated with obtaining the information required to be reported by the proposed rule would be limited because we believe that many managers are already tracking some of these data. Indirect costs to managers associated with the proposed amendments would be similar to the indirect costs to funds discussed in the prior section. More specifically, to the extent that the proposed amendments may provide an incentive for managers to devote additional time and resources to proxy voting, this may result in additional expenses for managers, some of which may be passed on to their clients. Also, an increase in scrutiny by investors as a result of increased transparency under the proposed amendments may incentivize managers to vote against the management of an issuer with which the manager may have a business relationship, which could weaken the manager’s relationship with the issuer firm and result in lost revenue. Further, the proposed disclosure requirements for managers could create incentives for them to recall their loaned securities to cast proxy votes on say-on-pay matters for these securities. This could reduce these managers’ and their clients’ revenues and may have a short-term impact on the securities lending and underlying stock markets.251 However, similar to the impact on funds discussed in the prior section, we expect that the scope of the possible impact of the proposed amendments on managers’ securities lending practices and revenues would be limited. We believe that the costs arising from the proposal to use Form N–PX to implement section 14A’s say-on-pay vote reporting requirements for managers would be mitigated by the experience that managers that are advisers to funds already have with filing Form N–PX reports on behalf of funds. In addition, the proposed move to a custom XML data language for Form N–PX is not expected to impose 250 Based on the results of the PRA analysis provided in Table 2, it is estimated that the annual direct costs attributable to information collection requirements in the proposed amendments for managers would be approximately $5,925 per manager, consisting of $4,925 in internal costs and $1,000 in external costs. These annual direct costs include ongoing as well as initial costs, with the latter being amortized over three years. 251 See supra footnotes 238–240 and accompanying text for the discussion related to the effect on securities lending for funds. See supra footnotes 241–246 and accompanying text for a discussion of the potential effects on underlying markets, which would also apply to changes in managers’ securities lending activities. PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 significant costs on managers subject to say-on-pay voting requirements, as managers have experience filing other EDGAR forms that use similar custom XML data languages, such as Form 13F. The costs associated with the proposed rule may vary depending on existing levels of voluntary disclosure, organizational structure, and investment objectives of each manager. For example, the cost of compliance with the proposed rule is likely to be lower for managers that exercise voting power on behalf of funds because such votes are already reported on Form N–PX, and the proposal would not require managers to separately report say-onpay votes cast on behalf of funds in compliance with the joint reporting provisions. Also, the costs are likely to be lower for managers who already voluntarily track and disclose some of the data the proposed rule would require. D. Effects on Efficiency, Competition, and Capital Formation In this section we consider whether the proposed rule and form amendments would promote efficiency, competition, and capital formation. 1. Amendments to Funds’ Reporting of Proxy Votes The proposed amendments to Form N–PX would provide investors with greater access to information regarding the proxy voting decisions of the funds they invest in. This could help investors make better informed investment decisions when they want to take into account funds’ voting records, which could promote more efficient allocation of capital by investors to funds. The amendments would also make it easier for investors and other proxy voting data users to compare and evaluate proxy voting records across a wide variety of funds. This may improve competition among funds, as funds may seek to differentiate themselves based on their voting records. This could further promote a more efficient allocation of capital by investors among competing funds. Further, as proxy voting information becomes easier to gather and analyze, data-collecting service providers could face an increased competitive pressure to improve and develop new tools and methodologies and/or reduce their service fees. Finally, we do not anticipate any significant effects of the proposed amendments on capital formation. E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules 2. Amendments To Require Manager Reporting of Say-on-Pay Votes Because the proposed rule applies equally to all managers that are required to file reports under section 13(f) of the Exchange Act, we do not anticipate that any competitive disadvantages would be created. To the contrary, we anticipate that the proposed rule may encourage competition by raising awareness about manager voting on say-on-pay matters and may facilitate differentiation among managers. The proposed amendments to require manager reporting of say-on-pay votes could promote more efficient allocation of capital to managers. The proposed amendments could enable investors to obtain managers’ proxy voting information which could help investors allocate assets to managers who cast proxy votes that are more consistent with investors’ preference for voting on executive compensation matters. Finally, we do not anticipate any significant effects of the amendments on capital formation. E. Reasonable Alternatives 1. Scope of Managers’ Say-on-Pay Reporting Obligations We considered as an alternative whether to more closely align managers’ reporting requirements on Form N–PX with their reporting requirements on Form 13F by adding a de minimis exception. Filers on Form 13F are permitted to exclude positions when the positions have a dollar value of less than $200,000 and consist of fewer than 10,000 shares. Several commenters on the 2010 proposal suggested that we include a de minimis exception, with one suggesting that not doing so would reduce the value of the exception to Form 13F reporting and a different commenter suggesting that this could permit their positions to be front-run.252 The benefits of say-on-pay vote reporting to managers’ clients and to other investors, as discussed above, do not appear to be limited to votes of a certain size. We also believe that the cost savings of a de minimis exception would be minimal. To the extent that a filing could reveal information about a filer’s trading strategy that would permit it to be front-run, we believe that the instructions for requesting confidential treatment address this concern. We also considered as an alternative whether to reduce the burden on managers who have a stated practice of 252 Intel Letter (suggesting that this would reduce the value of the Form 13F exception); Seward Letter (front-running). See also ABA Letter (general support for de minimis exception); Barnard Letter (same). VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 not voting shares, for instance by reducing their reporting obligations or not requiring them to make a filing at all. While this approach would reduce costs for relevant managers, it may limit the ability of investors to understand fully how managers exercise their voting power, including by determining not to vote shares. Another alternative we considered was allowing managers to not file on Form N–PX when they did not exercise voting power over securities that held say-on-pay votes during the reporting period. We do not believe this alternative would substantially reduce costs for relevant managers relative to the proposal because the proposal only requires these managers to state in a Form N–PX filing that they have no votes to report. Moreover, we believe that requiring all managers to make a filing would permit both Commission staff and investors to identify more easily managers who may have missed a filing obligation. Not requiring all managers to make a filing could reduce the usefulness of Form N–PX filings because investors would not necessarily understand whether a manager did not make a filing because it did not exercise voting power or because it simply neglected to file the form. 2. Amendments to Proxy Voting Information Reported on Form N–PX We are proposing changes to Form N– PX that would require disclosure of information about the number of shares that were voted (or, if not known, the number of shares that were instructed to be cast), as well as disclosure of the number of shares the reporting person loaned and did not recall. We considered proposing a requirement to disclose the number of shares voted (or instructed to be cast) and not proposing the requirement to disclose the number of shares the reporting person loaned and did not recall for these votes. This approach would provide information to understand split votes, but may have limited utility otherwise. Specifically, this approach would not provide information to help investors understand the full extent to which a reporting person is voting shares. While the alternative approach would reduce reporting burdens for some funds and managers, it would also have fewer benefits for investors such as transparency into how a reporting person’s securities lending affects its proxy voting.253 253 See supra Section II.C.3.b. for detailed discussion. PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 57507 3. Amendments to the Time of Reporting on Form N–PX or Placement of Funds’ Voting Records As an alternative to maintaining the current timeline for filing reports on Form N–PX, we considered requiring funds or managers to report relevant proxy votes more frequently, such as on a semiannual, quarterly, or monthly basis, or shortly after a given vote is held. We also considered maintaining the current annual reporting requirement, but requiring reporting persons to file their reports more quickly (e.g., by the end of July, rather than by the end of August). In general, these alternatives would provide investors and other data users with more timely information about how a fund or manager votes. A semiannual reporting requirement could be incorporated into funds’ current reporting of annual and semiannual shareholder reports on Form N–CSR. The Commission proposed a similar approach to requiring disclosure of funds’ proxy voting records in 2002.254 At that time, some commenters raised concern about the burdens of such an approach for fund complexes with staggered fiscal year ends, as these fund complexes could be required to file reports on Form N–CSR with complete proxy voting records as many as twelve times per year.255 An approach to requiring more frequent reporting of proxy voting records that is tied to funds’ fiscal year ends would likely create administrative complexity for many fund complexes and would increase costs associated with filing proxy voting information more frequently. As for a semiannual or quarterly reporting requirement on Form N–PX that is based on the calendar year, either of these approaches may not significantly enhance the timeliness of voting information in many cases because most corporate issuers hold proxy votes within the few months leading up to June 30, which is the end of the current Form N–PX annual reporting period. As a result, if we required semiannual or quarterly reporting of Form N–PX, most votes would likely be in the reporting person’s report for the first half of the year (for semiannual reports) or for the second calendar quarter (for quarterly reports). A semiannual or quarterly reporting requirement would also 254 See Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies, Investment Company Act File No. 25739 (Sept. 20, 2002). 255 See Form N–PX Adopting Release, supra footnote 7, at paragraph accompanying n.39. E:\FR\FM\15OCP2.SGM 15OCP2 57508 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules increase reporting costs, as reporting persons would be required to file either two or four Form N–PX reports per year rather than one report per year. A requirement to report monthly or shortly after each proxy vote is held would provide voting information much more quickly to investors and this could provide certain benefits. For example, timelier public reporting of funds’ proxy votes has the potential to facilitate fund shareholders’ ability to monitor their funds’ involvement in the governance activities of portfolio companies, including within a single proxy season.256 We currently are not proposing these alternative approaches, however, because we do not have evidence that most fund shareholders generally are interested in analyzing votes on a monthly basis or shortly after they are held rather than focusing on a reporting person’s voting record more holistically. Also, these alternative approaches would require reporting persons to disclose a position in a security before disclosure of the position is required on Form 13F or Form N–PORT, increasing the potential for disclosure of sensitive information that competitors could use to front-run or reverse engineer investing strategies. In addition, we would expect both alternative approaches to increase costs associated with reporting proxy voting information more frequently. Shortening the timeline for filing annual Form N–PX reports, which is currently about two months after the end of the reporting period, would marginally improve the timeliness of the reported information. However, shortening the filing timeline by more than a few weeks would increase the possibility of a reporting person being required to disclose a vote on a security before otherwise being required to disclose a position in that security on Form 13F or Form N–PORT. As a result, this approach could to some extent increase the potential for disclosure of sensitive information that competitors could use to front-run or reverse engineer investing strategies. F. Request for Comment We request comment on all aspects of our economic analysis, including the potential costs and benefits of the proposed amendments and alternatives thereto, and whether the amendments, if we were to adopt them, would promote efficiency, competition, and capital formation. In addition, we request comments on our selection of data sources, empirical methodology, and the 256 See supra footnote 191 and accompanying text. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 assumptions we have made throughout the analysis. Commenters are requested to provide empirical data, estimation methodologies, and other factual support for their views, in particular, on costs and benefits estimates. In addition, we request comment on: 93. To what extent would the proposed amendments affect funds’ or managers’ securities lending and have an impact on short-selling and arbitrage trading activities? What additional materials and data should we consider for estimating these effects? 94. Are we correct to assume that the costs associated with the use of a custom XML language for preparing Form N–PX would be minimal for funds and managers? What would the impact of these costs be for small reporting persons? 95. We considered requiring funds to report proxy votes semiannually, quarterly, or shortly after the vote is held. What are the costs and benefits of requiring funds to report proxy votes semiannually, quarterly, monthly, or shortly after the vote is held? Are we correct to assume that investors and other users of Form N–PX data generally are interested in analyzing a reporting person’s voting record more holistically rather than focusing on individual votes held during time horizons shorter than one year and therefore likely would derive little additional benefit from this increased reporting frequency? V. Paperwork Reduction Act Certain provisions of the proposed rules and form amendments contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act of 1995 (‘‘PRA’’).257 We are submitting the proposed collections of information to the Office of Management and Budget (‘‘OMB’’) for review in accordance with the PRA.258 The title for the collection of information is: ‘‘Form N–PX—Annual Report of Proxy Voting Record’’ (OMB Control No. 3235–0582).259 An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Section 14A(d) of the Exchange Act requires that every manager subject to section 13(f) of the Exchange Act report at least annually how it voted on say-onpay votes, unless such vote is otherwise 257 44 U.S.C. 3501 et seq. U.S.C. 3507(d); 5 CFR 1320.11. 259 The title for the collection of information relating to Form N–PX would be renamed from ‘‘Form N–PX—Annual Report of Proxy Voting Record of Registered Management Investment Companies.’’ 258 44 PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 required to be reported publicly by rule or regulation of the Commission. To implement section 14A(d), we are proposing new rule 14Ad–1 under the Exchange Act, which would require managers to file their record of say-onpay votes with the Commission annually on Form N–PX.260 We are also proposing to amend Form N–PX, which was adopted pursuant to section 30 of the Investment Company Act and is currently used by funds to file their complete proxy voting records with the Commission, to accommodate the new filings by managers and to enhance the information funds provide on their proxy votes.261 In addition, we propose to amend Forms N–1A, N–2, and N–3 to disclose that their proxy voting records are available on (or through) their websites. Although the website availability requirement would be located in the relevant registration form, the Commission is reflecting the burden for these requirements in the burden estimate for Form N–PX—Annual Report of Proxy Voting Record, and not in the burden for Forms N–1A, N–2, or N–3. Form N–PX, including the amendments, contains collection of information requirements. Compliance with the disclosure requirements of the form is mandatory. Responses to the disclosure requirements will not be kept confidential unless granted confidential treatment.262 The Commission estimates that there are approximately 2,087 funds registered with the Commission.263 These registrants represent approximately 11,619 fund portfolios that are required to file Form N–PX reports. The 11,619 portfolios are composed of approximately 7,064 portfolios that do or may hold equity securities, 3,188 portfolios holding no equity securities, and 1,367 portfolios holding fund securities (i.e., fund of funds).264 In addition, the Commission estimates that there are approximately 260 For purposes of the PRA analysis, the burden associated with the requirements of proposed rule 14Ad–1 is included in the collection of information requirements of Form N–PX. 261 15 U.S.C. 80a–29. 262 See Section II.F supra. 263 The estimate of 2,087 funds is based on staff review of Form N–CEN filings of management investment companies registered with the Commission as of December 2020. 264 The Commission staff estimates that there are approximately 6,301 portfolios that invest primarily in equity securities, 763 ‘‘hybrid’’ portfolios that may hold some equity securities (6,301 + 763 = 7,064), 2,848 bond portfolios that hold no equity securities and 340 money market fund portfolios (2,848 + 340 = 3,188), and 1,367 funds of funds, for a total of 11,619 portfolios required to file Form N– PX reports. See ICI 2021 Fact Book, supra footnote 5, at 214–221. E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules the proposed amendments, including proposed requirements to identify proxy matters using the language of the issuer’s form of proxy, categorize proxy votes, provide quantitative information related to shares voted (or instructed to be voted) and shares the fund loaned 7,550 managers required to file Form 13F reports with the Commission, which would be required to file Form N–PX reports under the proposal.265 The tables below summarize the currently approved Form N–PX burden estimates and our initial and ongoing annual burden estimates associated with 57509 and did not recall, follow specific formatting and presentation instructions, file Form N–PX using a custom XML language, and make proxy voting records available on (or through) fund websites.266 BILLING CODE 8011–01–P TABLE 1: CURRENTLY APPROVED FORM N-PX PRA ESTIMATES 1 Internal burden Estimated annual burden of current Form N-PX per response 7.2 Estimated number of annual responses 2 X X 46,022 Estimated annual burden of current Form N-PX per response 0.17 X 486 Estimated annual burden of current Form N-PX per response 1 X Annual External Cost Burden $368 $2,650 $1,000 X 6 392 X $16,936,243 $368 X 6 392 $6,392,000 $63 2 857 Total annual burden Estimated number of annual responses 2 Cost of Internal Burden 6 392 Total annual burden Estimated number of annual responses 2 Wage rate X 2 857 $178,734 $368 X $368 1476 X $100 1476 X 1476 Total annual burden 1,476 $543,168 $147,600 Total annual burden 47,984 $17,658,112 $6,539,600 265 The estimate of 7,550 filers is based on the number of managers who made Form 13F–HR or Form 13F–NT filings covering the first quarter of 2021. Form 13F–NT filers report their holdings on the Form 13F–HR of a different filer; while certain of those filers may be eligible to use the joint VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 reporting provisions of Form N–PX, we have assumed for the purpose of this analysis that they will file their own reports on Form N–PX. 266 The estimates differ from the estimates in the 2010 Proposing Release for a variety of reasons, including that our current proposal differs from the PO 00000 Frm 00033 Fmt 4701 Sfmt 4725 2010 proposal in several ways and the burden estimates of current Form N–PX have changed to some extent since 2010. We are further updating our PRA estimates based on our current estimates of the number of funds required to file Form N–PX. E:\FR\FM\15OCP2.SGM 15OCP2 EP15OC21.000</GPH> Certain products and sums do not tie due to rounding. 1. These estimates were previously submitted to 0MB in connection with a revision of the then-currently approved collection in 2020. 2. These estimates are conducted for each fund portfolio, not for each filing. In certain cases, a single Form N-PX filing will report the proxy voting records of multiple fund portfolios. In those circumstances, the filer would bear the burden associated with each fund portfolio it reported. 57510 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules TABLE 2: FORM N-PX PRA ESTIMATES Internal initial burden hours Internal annual burden hours1 Estimated annual burden of current Form N-PX per response Wage rate 2 Internal time costs Annual external cost burden $1,000 7.2 X $373 3 $2,686 8 X $325 4 $2,600 Additional estimated annual burden associated with amendments to Form N-PX 10 X $335 5 $3,350 Proposed website availability requirement:6 0.5 X $254 6 $127 Estimated initial burden to accommodate new reporting requirements 24 Estimated number of annual responses• X 7 064 X Total annual burden 181,545 Estimated annual burden of current Form N-PX per response 0.17 7 064 $61,901,832 $373 3 X $500 X 7 064 $10,596,000 $63 Additional estimated annual burden associated with amendments to Form N-PX X X 3188 3188 $200,844 Total annual burden 542 Estimated annual burden of current Form N-PX per response 1 X $373 3 $373 $100 Additional estimated annual burden associated with amendments to Form N-PX 0.5 X $373 3 $187 $100 Proposed website availability requirement:6 0.5 X $254 6 $127 Estimated number of annual responses• ~ Total annual burden 2,734 Changes to systems to accommodate new reporting requirements 30 Estimated annual burden associated with Form N-PX filing requirement VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 PO 00000 X 1367 $939,129 10 X $325 9 $3,250 5 X $33510 $1,675 Frm 00034 Fmt 4701 Sfmt 4725 E:\FR\FM\15OCP2.SGM 15OCP2 X 1367 $273,400 $1,000 EP15OC21.001</GPH> Estimated number of annual responses• 57511 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules Estimated number of annual responses11 X 7 744 X 7 744 Total annual burden 116,160 $38,139,200 $7,744,000 Current burden estimate 52,770 $18,973,904 $7,200,700 Additional burden estimate 248,211 $82,207,101 $11,412,700 Total annual burden 300,981 $101,181,005 $18,613,400 BILLING CODE 8011–01–C Some commenters suggested that the burdens of the 2010 proposal on funds and managers would be greater than the Commission’s estimates at that time, although none submitted quantitative estimates of a higher burden.267 We also received a comment letter in connection with the Proxy Mechanics Concept Release regarding the estimated average burden hours per response on current Form N–PX, in which the commenter indicated that it believed the thencurrent PRA burden estimate understated the burden of an investment company’s Form N–PX reporting 267 Brown Letter; Fidelity Letter; Glass Lewis Letter I (suggesting that the time and expense to provide disclosure regarding shared voting authority would be greater than estimated); ICI Letter (suggesting that the preparation, filing, and recordkeeping activities associated with the proposed Form N–PX amendments in 2010 would involve more than 1.5 hours of review by a compliance attorney); ISS Letter; Reiland Letter. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 obligations.268 We are updating our estimates of the PRA burden associated with Form N–PX to reflect our proposed amendments and have taken commenters’ feedback into account when developing these estimates. We estimate that the proposed amendments would result in initial and ongoing burdens for funds. For example, we recognize that funds may need to make systems and other changes to comply with the proposed requirement 268 See BlackRock Letter on Concept Release (stating that the then-estimated PRA burden of 9.6 hours ‘‘grossly understates’’ the time and expense required for an investment company to complete Form N–PX); Memorandum from the Division of Investment Management regarding November 29, 2010 telephone call with BlackRock, Inc., representatives (November 30, 2010), available at http://www.sec.gov/comments/s7-30-10/s7301033.pdf. Based on the staff’s subsequent conversation with the commenter, we believe that the burden estimates of the current form requirements in this release are appropriate, recognizing that the burden estimates are on a per portfolio basis, rather than a per filing basis, and that Form N–PX filings often contain multiple portfolios. PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 to file Form N–PX reports in an XML structured data language and to categorize proxy voting matters. In addition, we understand that the proposed requirement to categorize votes may require some manual categorization or review on an ongoing basis. Further, while funds should already have information about the number of shares they voted (or instructed to be voted), the number of shares loaned and not recalled, and the description of the voting matter from the issuer’s form of proxy, some changes may be needed to report the currently available information on Form N–PX. In the 2010 proposal, we estimated that each manager required to file its record of say-on-pay votes on Form N– PX would have the same total internal hours burden and external cost burden as a fund. Our revised estimates take into account differences between the 2010 proposal and our current proposal, as well as that managers will only be required to report say-on-pay votes E:\FR\FM\15OCP2.SGM 15OCP2 EP15OC21.002</GPH> Certain products and sums do not tie due to rounding. 1. Includes initial burden estimates amortized over a three-year period. 2. The Commission's estimates of the relevant wage rates are based on salary information for the securities industry compiled by the Securities Industry and Financial Markets Association's Office Salaries in the Securities Industry 2013. The estimated figures are modified by firm size, employee benefits, overhead, and adjusted to account for the effects of inflation. See Securities Industry and Financial Markets Association, Report on Management & Professional Earnings in the Securities Industry 2013. 3. Represents the estimated hourly wage rate of a compliance attorney. 4. Represents the blended estimated hourly wage rates of a programmer (4 hours at $277/hour) and a compliance attorney (4 hours at $373/hour). 5. Represents the blended estimated hourly wage rates of a programmer (4 hours at $277/hour) and a compliance attorney (6 hours at $373/hour). 6. While the proposed amendments would require funds to disclose that their proxy voting records both are available on fund websites and will be delivered to investors upon request, the Form N-PX PRA estimates includes only the burdens associated with website posting. Funds' registration forms currently require them to disclose that they either make their proxy voting records available on their websites or deliver them upon request. We understand most funds deliver proxy voting records upon request and, therefore, the burdens of delivery upon request are already included in the information collection burdens of each relevant registration form. 7. Represents the estimated hourly wage rate of a webmaster. 8. These estimates are conducted for each fund portfolio, not for each filing, and are an average estimate across all Form N-PX filers. In certain cases, a single Form N-PX filing will report the proxy voting records of multiple fund portfolios. In those circumstances, the filer would bear the burden associated with each fund portfolio it reported. This average estimate takes into account higher costs for funds filing reports for multiple portfolios without assuming any economies of scale that multiple-portfolio fund complexes may be able to achieve. 9. Represents the blended estimated hourly wage rates of a programmer (5 hours at $277/hour) and a compliance attorney (5 hours at $373/hour). 10. Represents the blended estimated hourly wage rates of a programmer (2 hours at $277/hour) and a compliance attorney (3 hours at $373/hour). 11. Includes 7,550 initial filings and assumes an additional 194 filings as a result of the final adverse disposition of a request for confidential treatment or upon expiration of confidential treatment. 57512 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules whereas funds are required to file their complete voting record. For example, we anticipate the proposed categorization requirement would be more burdensome for funds, which would be required to categorize each proxy vote, than for managers, which would be required to categorize only say-on-pay votes. We accordingly estimate that managers would bear approximately one-half of the ongoing annual burden borne by funds. We also estimate that managers would have larger initial burdens than funds because managers do not currently report on Form N–PX. While some managers advise funds and have experience with Form N–PX reporting, and some managers may otherwise be required to maintain records of their proxy voting decisions, we understand some systems or other changes may be needed to report information about sayon-pay votes on Form N–PX or to rely on the joint reporting provisions.269 We also estimate that managers would file approximately 194 amendments to Form N–PX reports as a result of the final adverse disposition of a request for confidential treatment or upon expiration of confidential treatment.270 For purposes of this estimate, we are assuming that every manager will file its full record of say-on-pay votes on ‘‘voting’’ report, and not file a ‘‘notice’’ report. In practice, because certain 269 See DOL Interpretive Bulletin 2016–01 [29 CFR 2509.2016–01] (noting the Department of Labor’s view that an investment manager or other ERISA plan fiduciary would be required to maintain accurate records as to proxy voting decisions). Some commenters on the 2010 proposal indicated that some changes to recordkeeping and reporting systems may be necessary if the Commission were to adopt those proposed amendments. See Glass Lewis Letter I; IAA Letter; ISS Letter; ABA Letter. 270 See Confidential Treatment Instructions 6 and 7 to Form N–PX. In the 2010 proposal, we estimated that approximately 200 amendments to Form N–PX reports would be filed annually by managers as a result of the final adverse disposition of a request for confidential treatment or upon expiration of confidential treatment. Our current estimate is based on the number of Form 13F amendments received by the Commission during each of the four quarters in 2020, divided by four. For purposes of this estimate, we are conservatively assuming that all 194 amendments filed are related to the adverse disposition of a request for confidential treatment or the expiration of confidential treatment, and that this results in the full burden of a new Form N– PX filing being borne by the manager. We do so even though we recognize that Form 13F amendments also are filed to correct errors or omissions in a filing that does not relate to a request for confidential treatment. Like the existing PRA estimate for Form N–PX, our estimate does not allocate a separate burden to amendments that merely correct errors or omissions in a separate filing. For that reason, and because we assume funds would not file confidential treatment-related amendments, we are not including a burden estimate for amendments filed by funds. See supra Section II.G. VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 managers exercise voting power over the same securities as other managers, or exercise voting power over say-on-pay votes that funds already report, the number of parties who need to separately maintain records and prepare filings may be lower. We request comment on whether our estimates are reasonable. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility; (2) evaluate the accuracy of the Commission’s estimate of the burden of the proposed collection of information; (3) determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and (4) determine whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology. Persons wishing to submit comments on the collection of information requirements of the proposed amendments should direct them to the OMB Desk Officer for the Securities and Exchange Commission, MBX.OMB.OIRA.SEC_desk_officer@ omb.eop.gov, and should send a copy to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090, with reference to File No. S7–11–21. OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication of this release; therefore a comment to OMB is best assured of having its full effect if OMB receives it within 30 days after publication of this release. Requests for materials submitted to OMB by the Commission with regard to these collections of information should be in writing, refer to File No. S7–11–21, and be submitted to the Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736. VI. Regulatory Flexibility Act Certification for Managers and Initial Regulatory Flexibility Analysis for Funds A. Regulatory Flexibility Act Certification for Managers Pursuant to section 605(b) of the Regulatory Flexibility Act (‘‘RFA’’), the Commission hereby certifies that proposed rule 14Ad–1 and the proposed amendments to Form N–PX relating to PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 managers would not, if adopted, have a significant economic impact on a substantial number of small entities.271 The Commission’s rule under the Exchange Act that defines a ‘‘small business’’ and ‘‘small organization’’ does not explicitly reference managers.272 However, rule 0–10 provides that the Commission may ‘‘otherwise define’’ small entities for purposes of a particular rulemaking proceeding. For purposes of the proposed amendments relating to Form N–PX reporting requirements for managers, the Commission has determined to use the definition of small entity under 17 CFR 275.0–7(a) as more appropriate to the functions of managers. The Commission believes that the proposed definition would help ensure that all persons or entities that might be managers under section 13(f) of the Exchange Act will be included within a category addressed by the definition. Therefore, for purposes of this rulemaking and the RFA, a manager is a small entity if it: (i) Has assets under management having a total value of less than $25 million; (ii) did not have total assets of $5 million or more on the last day of its most recent fiscal year; and (iii) does not control, is not controlled by, and is not under common control with another investment adviser that has assets under management of $25 million or more, or any person (other than a natural person) that had total assets of $5 million or more on the last day of its most recent fiscal year.273 The Commission requests comments on the use of this definition. We are proposing that rule 14Ad–1 and associated Form N–PX reporting obligations for say-on-pay votes would extend to each person that (i) is an ‘‘institutional investment manager’’ as defined in the Exchange Act; and (ii) is required to file reports under section 13(f) of the Exchange Act. Managers are not required to submit reports on Form 13F unless they exercise investment discretion with respect to accounts holding section 13(f) securities having an aggregate fair market value on the last trading day of any month of any calendar year of at least $100 million.274 Therefore, no small entities for purposes of rule 0–10 under the Exchange Act are affected by proposed rule 14Ad–1 and the amendments to Form N–PX relating to managers. Thus, there would be no significant economic impact on a substantial number of small entities associated with these aspects of the 271 5 U.S.C. 605(b). CFR 240.0–10 (‘‘rule 0–10’’). 273 17 CFR 275.0–7(a) (‘‘rule 0–7(a)’’). 274 See supra footnote 32. 272 17 E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules proposal. The Commission requests comment regarding this certification. The Commission requests that commenters describe the nature of any impact on small businesses and provide empirical data to support the extent of the impact. B. Initial Regulatory Flexibility Act Analysis for Funds This Initial Regulatory Flexibility Analysis (‘‘IRFA’’) has been prepared in accordance with section 3 of the RFA.275 It relates to the Commission’s proposed amendments to Form N–PX relating to funds, as well as proposed amendments to Forms N–1A, N–2, and N–3. 1. Reasons for and Objectives of the Proposed Actions The Commission is proposing to amend Form N–PX under Investment Company Act to enhance the information mutual funds, ETFs, and certain other funds currently report annually about their proxy votes and to make that information easier to analyze. In addition, we are proposing amendments to Forms N–1A, N–2, and N–3 to require these funds to disclose that their proxy voting records are publicly available on (or through) their websites and available upon request, free of charge in both cases. 2. Legal Basis The Commission is proposing the rule and form amendments that affect funds contained in this document under the authority set forth in the Securities Act [15 U.S.C. 77a et seq.], particularly sections 6, 7, 10, and 19(a) thereof, the Exchange Act, particularly sections 10(b), 13, 15(d), 23(a), 24, and 36 thereof [15 U.S.C. 78a et seq.], the Investment Company Act [15 U.S.C. 80a et seq.], particularly sections 8, 30, 31, 38, and 45 thereof. 3. Small Entities Subject to the Rule For purposes of Commission rulemaking in connection with the RFA, an investment company is a small entity if, together with other investment companies in the same group of related investment companies, it has net assets of $50 million or less as of the end of its most recent fiscal year.276 Commission staff estimates that, as of December 2020, approximately 31 registered open-end mutual funds, 9 registered open-end ETFs, and 27 registered closed-end funds U.S.C. 603. 17 CFR 270.0–10(a) [rule 0–10(a) under the Investment Company Act] (‘‘rule 0–10’’). (collectively, 67 funds) are small entities. 4. Projected Reporting, Recordkeeping, and Other Compliance Requirements We are proposing to amend Form N– PX, which funds currently use to file their complete proxy voting records with the Commission, to require reporting in a custom XML language, to require other formatting and presentation changes, and to add certain new or modified disclosure items. We are proposing amendments to Form N–PX that would affect funds that are currently required to report on the form, including those that are small entities. For instance, we propose to require funds to tie the description of the voting matter to the issuer’s form of proxy and to categorize voting matters by type. In addition, we are proposing to require information about the number of shares that were voted (or, if not known, the number of shares that were instructed to be cast), as well as the number of shares the fund loaned and did not recall. We are also proposing to require reporting of information on Form N–PX in a structured data language either via a Commissionsupplied web-based form or as an XML file. We are proposing a new section on the cover page of Form N–PX where the reporting person would provide information in cases where the form is filed as an amendment to a previously filed Form N–PX report. We are also requiring that the cover page include information to help users identify whether the reporting person is a fund or a manager. We are adding a new summary page to Form N–PX, on which a fund would be required to provide information about series whose votes are included in the report, if applicable. For purposes of the PRA analysis, we have estimated that the aggregate annual reporting, administrative, and paperwork costs imposed by the form amendments on funds will be approximately $29 million.277 We also estimate aggregate one-time reporting, administrative, and paperwork costs of approximately $55 million for funds that hold equity securities.278 5. Duplicative, Overlapping, or Conflicting Federal Rules Except as otherwise discussed below, the Commission has not identified any Federal rules that duplicate, overlap, or conflict with the proposed rule. Currently, funds must file their proxy voting records on EDGAR and either 275 5 276 See VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 277 See PO 00000 disclose that they make those records available on their websites or deliver them to investors upon request. Under the proposal, funds would disclose that their proxy voting records are available on their websites and delivered upon request to investors. We acknowledge that filing proxy voting records with the Commission, posting them online, and delivering them upon request could result in some investors being able to access the same information in multiple ways or at multiple times, which could be duplicative. However, each of these different requirements would serve a unique purpose. We believe it is important for regulatory disclosures to be filed with the Commission for oversight and compliance purposes. Website posting would provide investors with broad access to this information and conforms with evolving investor preferences regarding the availability of fund disclosures.279 Finally, delivery-upon-request could be especially important for investors who might not have reliable access to the internet or who might prefer paper disclosures. 6. Significant Alternatives The RFA directs us to consider significant alternatives that would accomplish our stated objective, while minimizing any significant adverse impact on small entities. In connection with the amendments, the Commission considered the following alternatives: (i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (ii) the clarification, consolidation, or simplification of compliance and reporting requirements under the amendments for small entities; (iii) the use of performance rather than design standards; and (iv) an exemption from coverage of the amendments, or any part thereof, for small entities. The Commission believes that, at the present time, special compliance or reporting requirements for small entities, or an exemption from coverage for small entities, would not be appropriate. The proposed amendments are designed to increase transparency about how funds vote. Different disclosure requirements for small entities, such as reducing the level of proxy voting disclosure for small entities, could raise investor protection concerns for investors in small funds to the extent they would not have access to the same disclosures as investors in large funds. Small funds currently must follow the same proxy voting reporting supra Section V, Table 2. 278 Id. Frm 00037 279 See Fmt 4701 Sfmt 4702 57513 E:\FR\FM\15OCP2.SGM supra footnote 205. 15OCP2 57514 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules requirements as large funds in light of these concerns. We have endeavored through the proposed amendments to Form N–PX to minimize the regulatory burden, including on small entities, while meeting our regulatory objectives. In response to comments on the 2010 proposal, we have modified the proposed quantitative disclosures in Form N–PX to: (1) Clarify the proposed disclosure of the number of shares voted; and (2) no longer propose to require disclosure of the number of shares the fund was entitled to vote. Reporting persons would be able to use a web-based reporting application developed by the Commission to generate the reports. We believe that these modifications to the approach in the 2010 proposal result in retention of key disclosures to help investors understand how a fund votes, while reducing the burdens on funds. We have endeavored to clarify, consolidate, and simplify the proposed requirements applicable to funds, including those that are small entities. Finally, we do not consider the use of performance rather than design standards to be consistent with our statutory mandate of investor protection with respect to reporting of proxy voting records. 7. General Request for Comment The Commission requests comments regarding this IRFA. We request comments on the number of small entities that may be affected by our proposed rules and guidelines, and whether the proposed rules and guidelines would have any effects not considered in this analysis. We request that commenters describe the nature of any effects on small entities subject to the rules and forms and provide empirical data to support the nature and extent of such effects. We also request comment on the proposed compliance burdens and the effect these burdens would have on smaller entities. VII. Consideration of Impact on the Economy For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 (‘‘SBREFA’’),280 the Commission must advise OMB whether a proposed regulation constitutes a ‘‘major’’ rule. Under SBREFA, a rule is considered ‘‘major’’ where, if adopted, it results in or is likely to result in: • An annual effect on the economy of $100 million or more; 280 Public Law 104–121, Title II, 110 Stat. 857 (1996) (codified in various sections of 5 U.S.C., 15 U.S.C., and as a note to 5 U.S.C. 601). VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 • A major increase in costs or prices for consumers or individual industries; or • Significant adverse effects on competition, investment, or innovation. We request comment on whether our proposal would be a ‘‘major rule’’ for purposes of SBREFA. We solicit comment and empirical data on: • The potential effect on the U.S. economy on an annual basis; • Any potential increase in costs or prices for consumers or individual industries; and • Any potential effect on competition, investment, or innovation. Commenters are requested to provide empirical data and other factual support for their views to the extent possible. VIII. Statutory Authority The Commission is proposing new rule 14Ad–1 pursuant to the authority set forth in sections 13, 14A, 23(a), 24, and 36 of the Exchange Act [15 U.S.C. 78m, 78n–1, 78w(a), 78x, and 78mm]. The Commission is proposing amendments to rule 30b1–4 pursuant to the authority set forth in sections 8, 30, 31, 38, and 45 of the Investment Company Act [15 U.S.C. 80a–8, 80a–29, 80a–30, 80a–37, and 80a–44]. The Commission is proposing amendments to Form N–PX pursuant to the authority set forth in sections 13, 14A, 23(a), 24, and 36 of the Exchange Act [15 U.S.C. 78m, 78n–1, 78w(a), 78x, and 78mm]; and sections 8, 30, 31, 38, and 45 of the Investment Company Act [15 U.S.C. 80a–8, 80a–29, 80a–30, 80a–37, and 80a–44]. The Commission is proposing amendments to Forms N–1A, N–2, and N–3 pursuant to the authority set forth in sections 5, 6, 7, 10, 19(a), and 28 of the Securities Act [15 U.S.C. 77e, 77f, 77g, 77j, 77s(a), and 77z–3], sections 10(b), 13, 15(d), 23(a), and 36 of the Exchange Act [15 U.S.C. 78j(b), 78m, 78o(d), 78w(a), and 78mm], and sections 6(c), 8, 24(a), 30, and 38 of the Investment Company Act [15 U.S.C. 80a–6(c), 80a–8, 80a–24(a), 80a–29, and 80a–37]. The Commission is proposing amendments to rule 101 of Regulation S–T pursuant to the authority set forth in sections 14A(d), 23(a), and 35A of the Exchange Act [15 U.S.C. 78n–1, 78w(a), and 78ll]. The Commission is proposing to amend the heading of Subpart D of Part 249 pursuant to the authority set forth in sections 13 and 14A(d) of the Exchange Act [15 U.S.C. 78m and 78n– 1]. List of Subjects 17 CFR Part 232 Administrative practice and procedure, Reporting and recordkeeping requirements, Securities. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 17 CFR Parts 240 and 249 Reporting and recordkeeping requirements, Securities. 17 CFR Parts 270 and 274 Investment companies, Reporting and recordkeeping requirements, Securities. Text of Rule and Form Amendments For the reasons set out in the preamble, the Commission proposes to amend title 17, chapter II, of the Code of Federal Regulations as follows: PART 232—REGULATION S–T— GENERAL RULES AND REGULATIONS FOR ELECTRONIC FILINGS 1. The general authority citation for part 232 is amended to read as follows: ■ Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 78n–1, 78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 80a–30, 80a–37, 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. * * * * * 2. Amend section 232.101 by revising paragraph (a)(1)(iii) to read as follows: ■ § 232.101 Mandated electronic submissions and exceptions. (a) * * * (1) * * * (iii) Statements, reports, and schedules filed with the Commission pursuant to sections 13, 14, 14A(d), 15(d), or 16(a) of the Exchange Act (15 U.S.C. 78m, 78n, 78n–1(d), 78o(d), and 78p(a)), and proxy materials required to be furnished for the information of the Commission in connection with annual reports on Form 10–K (§ 249.310 of this chapter), or Form 10–KSB (§ 249.310b of this chapter) filed pursuant to section 15(d) of the Exchange Act; Note 1 to paragraph (a)(1)(iii). Electronic filers filing Schedules 13D and 13G with respect to foreign private issuers should include in the submission header all zeroes (i.e., 00–0000000) for the IRS tax identification number because the EDGAR system requires an IRS number tag to be inserted for the subject company as a prerequisite to acceptance of the filing. Note 2 to paragraph (a)(1)(iii). Foreign private issuers must file or submit their Form 6–K reports (§ 249.306 of this chapter) in electronic format, except as otherwise permitted by paragraphs (b)(1) and (b)(7) of this section. * * * * * PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 3. The general authority citation for part 240 continues to read as follows: ■ Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, E:\FR\FM\15OCP2.SGM 15OCP2 57515 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules 77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b– 4, 80b–11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 111–203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112–106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted. * * * * * 4. Add section 240.14Ad–1 to read as follows: ■ § 240.14Ad–1 record. Report of proxy voting (a) Subject to paragraphs (b) and (c) of this section, every institutional investment manager (as that term is defined in Section 13(f)(6)(A) of the Act (15 U.S.C. 78m(f)(6)(A))) that is required to file reports under Section 13(f) of the Act (15 U.S.C. 78m(f)) must file an annual report on Form N–PX (§§ 249.326 and 274.129 of this chapter) not later than August 31 of each year, for the most recent 12-month period ended June 30, containing the institutional investment manager’s proxy voting record for each shareholder vote pursuant to Sections 14A(a) and (b) of the Act (15 U.S.C. 78n–1(a) and (b)) with respect to each security over which the manager exercised voting power (as defined in paragraph (d) of this section). (b) An institutional investment manager is not required to file a report on Form N–PX (§§ 249.326 and 274.129 of this chapter) for the 12-month period ending June 30 of the calendar year in which the manager’s initial filing on Form 13F (§ 249.325 of this chapter) is due pursuant to § 240.13f–1 of this part. For purposes of this paragraph, ‘‘initial filing’’ on Form 13F means any quarterly filing on Form 13F if no filing on Form 13F was required for the immediately preceding calendar quarter. (c) An institutional investment manager is not required to file a report on Form N–PX (§§ 249.326 and 274.129 of this chapter) with respect to any shareholder vote at a meeting that occurs after September 30 of the calendar year in which the manager’s final filing on Form 13F (§ 249.325 of this chapter) is due pursuant to § 240.13f–1 of this chapter. An institutional investment manager is required to file a Form N–PX for the period July 1 through September 30 of the calendar year in which the manager’s final filing on Form 13F is due pursuant to § 240.13f–1 of this chapter; this filing is required to be made not later than March 1 of the immediately following calendar year. For purposes of this paragraph, ‘‘final VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 filing’’ on Form 13F means any quarterly filing on Form 13F if no filing on Form 13F is required for the immediately subsequent calendar quarter. (d) For purposes of this section: (1) Voting power means the ability, through any contract, arrangement, understanding, or relationship, to vote the security or direct the voting of a security, including the ability to determine whether to vote the security or to recall a loaned security. (2) Exercise of voting power means using voting power to influence a voting decision with respect to a security. PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 5. The general authority citation for part 249 continues to read as follows: ■ Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; and 18 U.S.C. 1350; Sec. 953(b) Pub. L. 111–203, 124 Stat. 1904; Sec 102(a)(3) Pub. L. 112–106, 126 Stat. 309 (2012), Sec. 107 Pub. L. 112–106, 126 Stat. 313 (2012), Sec. 72001 Pub. L. 114–94, 129 Stat. 1312 (2015, and secs. 2 and 3 Pub. L. 116–222, 134 Stat. 1063 (2020), unless otherwise noted. * * * * * Subpart D—Forms for Annual and Other Reports of Issuers and Other Persons Required Under Sections 13, 14A, and 15(d) of the Securities Exchange Act of 1934 6. Revise the heading for Subpart D to read as set forth above: ■ 7. Add § 249.326 to read as follows: ■ § 249.326 Form N–PX, annual report of proxy voting record. This form shall be used by institutional investment managers to file an annual report pursuant to § 240.14Ad–1 of this chapter containing the manager’s proxy voting record. PART 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940 8. The general authority citation for part 270 continues to read as follows: ■ Authority: 15 U.S.C. 80a–1 et seq., 80a– 34(d), 80a–37, 80a–39, and Pub. L. 111–203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted. * * * § 270.30b1–4 * * [Amended] 9. Amend § 270.30b1–4 by removing the phrase ‘‘Form N–PX (§ 274.129 of this chapter)’’ and adding in its place ‘‘Form N–PX (§§ 249.326 and 274.129 of this chapter)’’. ■ PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 PART 274—FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940 10. The authority citation for part 274 is revised to read as follows: ■ Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 78n, 78n–1, 78o(d), 80a–8, 80a–24, 80a–26, 80a–29, and Pub L. 111–203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted. 11. Amend Form N–1A (referenced in §§ 239.15A and 274.11A) by revising Item 17(f) and Item 27(d)(5). The revisions read as follows: ■ Note: The text of Form N–1A does not, and these amendments will not, appear in the Code of Federal Regulations. FORM N–1A * * * * * Item 17. Management of the Fund * * * * * (f) Proxy Voting Policies. Unless the Fund invests exclusively in non-voting securities, describe the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, including the procedures that the Fund uses when a vote presents a conflict between the interests of Fund shareholders, on the one hand, and those of the Fund’s investment adviser; principal underwriter; or any affiliated person of the Fund, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the Fund’s investment adviser, or any other third party, that the Fund uses, or that are used on the Fund’s behalf, to determine how to vote proxies relating to portfolio securities. Also, state that information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12month period ended June 30 is available (1) without charge, upon request, by calling a specified toll-free telephone number and, if any, contacting a specified email address; (2) on or through the Fund’s website at a specified internet address; and (3) on the Commission’s website at http:// www.sec.gov. Instructions 1. A Fund may satisfy the requirement to provide a description of the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities by including a copy of the policies and procedures themselves. 2. If a Fund (or financial intermediary through which shares of the Fund may be purchased or sold) receives a request for the Fund’s proxy voting record by E:\FR\FM\15OCP2.SGM 15OCP2 57516 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules phone or email, the Fund (or financial intermediary) must send the information disclosed in the Fund’s most recently filed report on Form N–PX in a human-readable format, within three business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery. 3. A Fund must make publicly available free of charge the information disclosed in the Fund’s most recently filed report on Form N–PX on or through its website as soon as reasonably practicable after filing the report with the Commission. The information disclosed in the Fund’s most recently filed report on Form N–PX must be in a human-readable format and remain available on or through the Fund’s website for as long as the Fund remains subject to the requirements of Rule 30b1–4 (17 CFR 270.30b1–4). * * * * * Item 27. Financial Statements * * * * * (d) Annual and Semiannual Reports. Every annual and semiannual report to shareholders required by rule 30e–1 must contain the following: * * * * * (5) Statement Regarding Availability of Proxy Voting Record. A statement that information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12month period ended June 30 is available (i) without charge, upon request, by calling a specified toll-free telephone number and, if any, contacting a specified email address; (ii) on or through the Fund’s website at a specified internet address; and (iii) on the Commission’s website at http:// www.sec.gov. Instructions 1. If a Fund (or financial intermediary through which shares of the Fund may be purchased or sold) receives a request for the Fund’s proxy voting record by phone or email, the Fund (or financial intermediary) must send the information disclosed in the Fund’s most recently filed report on Form N–PX in a human-readable format, within three business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery. 2. A Fund must make publicly available free of charge the information disclosed in the Fund’s most recently filed report on Form N–PX on or through its website as soon as reasonably practicable after filing the VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 report with the Commission. The information disclosed in the Fund’s most recently filed report on Form N–PX must be in a human-readable format and remain available on or through the Fund’s website for as long as the Fund remains subject to the requirements of rule 30b1–4 (17 CFR 270.30b1–4). * * * * * ■ 12. Amend Form N–2 (referenced in §§ 239.14 and 274.11a–1) by revising Item 18.16, Item 24.6.d, and Item 24.8. The revisions read as follows: Note: The text of Form N–2 does not, and these amendments will not, appear in the Code of Federal Regulations. FORM N–2 * * * * * Item 18. Management * * * * * 16. Unless the Registrant invests exclusively in non-voting securities, describe the policies and procedures that the Registrant uses to determine how to vote proxies relating to portfolio securities, including the procedures that the Registrant uses when a vote presents a conflict between the interests of the Registrant’s shareholders, on the one hand, and those of the Registrant’s investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act and the rules thereunder) of the Registrant, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the Registrant’s investment adviser, or any other third party, that the Registrant uses, or that are used on the Registrant’s behalf, to determine how to vote proxies relating to portfolio securities. Also, state that information regarding how the Registrant voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling a specified toll-free telephone number and, if any, contacting a specified email address; (ii) on or through the Registrant’s website at a specified internet address; and (iii) on the Commission’s website at http:// www.sec.gov. Instructions 1. A Registrant may satisfy the requirement to provide a description of the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities by including a copy of the policies and procedures themselves. PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 2. If a Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for the Registrant’s proxy voting record by phone or email, the Registrant (or financial intermediary) must send the information disclosed in the Registrant’s most recently filed report on Form N–PX [17 CFR 274.129] in a humanreadable format, within 3 business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery. 3. A Registrant must make publicly available free of charge the information disclosed in the Registrant’s most recently filed report on Form N–PX on or through its website as soon as reasonably practicable after filing the report with the Commission. The information disclosed in the Registrant’s most recently filed report on Form N–PX must be in a human-readable format and remain available on or through the Registrant’s website for as long as the Registrant remains subject to the requirements of Rule 30b1–4 under the Investment Company Act [17 CFR 270.30b1–4]. * * * * * Item 24. Financial Statements * * * * * 6. Every annual and semiannual report to shareholders required by Section 30(e) of the Investment Company Act and Rule 30e–1 thereunder shall contain the following information: * * * * * d. A statement that information regarding how the Registrant voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling a specified toll-free telephone number and, if any, contacting a specified email address; (2) on or through the Registrant’s website at a specified internet address; and (3) on the Commission’s website at http:// www.sec.gov. * * * * * 8. a. When a Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for a description of the policies and procedures that the Registrant uses to determine how to vote proxies, the Registrant (or financial intermediary) must send the information most recently disclosed in response to Item 18.16 of this Form or Item 7 of Form N–CSR within 3 business days of receipt of the request, by first-class mail or other means E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules designed to ensure equally prompt delivery. b. If a Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for the Registrant’s proxy voting record by phone or email, the Registrant (or financial intermediary) must send the information disclosed in the Registrant’s most recently filed report on Form N–PX in a human-readable format, within 3 business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery. c. A Registrant must make publicly available free of charge the information disclosed in the Registrant’s most recently filed report on Form N–PX on or through its website as soon as reasonably practicable after filing the report with the Commission. The information disclosed in the Registrant’s most recently filed report on Form N–PX must be in a human-readable format and remain available on or through the Registrant’s website for as long as the Registrant remains subject to the requirements of Rule 30b1–4 under the Investment Company Act. * * * * * ■ 13. Amend Form N–3 (referenced in §§ 239.17a and 274.11b) by revising Item 23(f), Item 31.4(d), and Item 31.6. The revisions read as follows: Note: The text of Form N–3 does not, and these amendments will not, appear in the Code of Federal Regulations. FORM N–3 * * * * * Item 23. Management of the Registrant * * * * * (f) Proxy Voting Policies. Unless the Registrant invests exclusively in nonvoting securities, describe the policies and procedures that the Registrant uses to determine how to vote proxies relating to portfolio securities, including the procedures that the Registrant uses when a vote presents a conflict between the interests of investors, on the one hand, and those of the Registrant’s investment adviser; principal underwriter; or any affiliated person of the Registrant, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the Registrant’s investment adviser, or any other third party, that the Registrant uses, or that are used on the Registrant’s behalf, to determine how to vote proxies relating to portfolio securities. Also, state that information regarding how the Registrant voted proxies relating to portfolio securities during the most VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 recent 12-month period ended June 30 is available (1) without charge, upon request, by calling a specified toll-free telephone number and, if any, contacting a specified email address; (2) on or through the Registrant’s website at a specified internet address; and (3) on the Commission’s website at http:// www.sec.gov. Instructions 1. A Registrant may satisfy the requirement to provide a description of the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities by including a copy of the policies and procedures themselves. 2. If a Registrant (or financial intermediary through which shares of the Registrant may be purchased or sold) receives a request for the Registrant’s proxy voting record by phone or email, the Registrant (or financial intermediary) must send the information disclosed in the Registrant’s most recently filed report on Form N–PX [17 CFR 274.129] in a humanreadable format, within three business days of receipt of the request, by firstclass mail or other means designed to ensure equally prompt delivery. 3. A Registrant must make publicly available free of charge the information disclosed in the Registrant’s most recently filed report on Form N–PX on or through its website as soon as reasonably practicable after filing the report with the Commission. The information disclosed in the Registrant’s most recently filed report on Form N–PX must be in a human-readable format and remain available on or through the Registrant’s website for as long as the Registrant remains subject to the requirements of rule 30b1–4 [17 CFR 270.30b1–4]. * * * * * Item 31. Financial Statements * * * * * 4. Every report required by section 30(e) of the 1940 Act and rule 30e–1 under it [17 CFR 270.30e–1] shall contain the following information: * * * * * (d) a statement that information regarding how the Registrant voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling a specified toll-free telephone number and, if any, contacting a specified email address; (ii) on or through the Registrant’s website at a specified internet address; and (iii) on the PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 57517 Commission’s website at http:// www.sec.gov; * * * * * 6. (a) When a Registrant (or financial intermediary through which units of the Registrant may be purchased or sold) receives a request for a description of the policies and procedures that the Registrant uses to determine how to vote proxies, the Registrant (or financial intermediary) must send the information disclosed in response to Item 23(f) of this Form, within three business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery. (b) If a Registrant (or financial intermediary through which units of the Registrant may be purchased or sold) receives a request for the Registrant’s proxy voting record by phone or email, the Registrant (or financial intermediary) must send the information disclosed in the Registrant’s most recently filed report on Form N–PX [17 CFR 274.129] in a human readable format, within three business days of receipt of the request, by firstclass mail or other means designed to ensure equally prompt delivery. (c) A Registrant must make publicly available free of charge the information disclosed in the Registrant’s most recently filed report on Form N–PX on or through its website as soon as reasonably practicable after filing the report with the Commission. The information disclosed in the Registrant’s most recently filed report on Form N–PX must be in a human-readable format and remain available on or through the Registrant’s website for as long as the Registrant remains subject to the requirements of rule 30b1–4 under the Investment Company Act [17 CFR 270.30b1–4]. * * * * * ■ 14. The heading of § 274.129 is revised to read as follows: § 274.129 Form N–PX, annual report of proxy voting record. * * * * * ■ 15. Form N–PX (referenced in §§ 249.326 and 274.129) is revised to read as follows: Note: The text of Form N–PX does not, and these amendments will not, appear in the Code of Federal Regulations. E:\FR\FM\15OCP2.SGM 15OCP2 57518 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Washington, DC 20549 FORM N–PX Annual Report of Proxy Voting Record General Instructions A. Rule as to Use of Form N–PX Form N–PX is to be used by a registered management investment company, other than small business investment company registered on Form N–5 (17 CFR 239.24 and 274.5), to file the registered management investment company’s complete proxy voting record pursuant to Section 30 of the Investment Company Act of 1940 (‘‘Investment Company Act’’) and Rule 30b1–4 thereunder (17 CFR 270.30b1– 4). Form N–PX also is to be used by a person that is required to file reports under Rule 13f–1 (‘‘Institutional Manager’’), to file the Institutional Manager’s proxy voting record regarding votes pursuant to Sections 14A(a) and (b) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) on certain executive compensation matters, pursuant to Section 14A(d) of the Exchange Act and Rule 14Ad–1 thereunder (17 CFR 240.14Ad–1). Form N–PX is to be filed not later than August 31 of each year for the most recent 12month period ended June 30, except in the case of Institutional Managers that make initial or final filings on Form 13F during the relevant 12-month period as described in General Instruction F. B. Application of General Rules and Regulations The General Rules and Regulations under the Investment Company Act and the Exchange Act contain certain general requirements that are applicable to reporting on any form under those Acts. These general requirements should be read and observed carefully in the preparation and filing of reports on this form, except that any provision in the form or in these instructions is controlling. C. Joint Reporting Rules 1. If two or more Institutional Managers, each of which is required by Rule 14Ad–1 to file a report on Form N–PX for the reporting period, exercised voting power over the same securities on a vote pursuant to Section 14A(a) or (b) of the Exchange Act, only one such Institutional Manager must include the information regarding that vote in its report on Form N–PX. 2. Two or more Institutional Managers that are affiliated persons, as defined in Section 2(a)(3) of the Investment Company Act, may file a joint report on VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 a single Form N–PX notwithstanding that such Institutional Managers do not exercise voting power over the same securities. 3. An Institutional Manager is not required to report proxy votes that are reported on a Form N–PX report that is filed by a Fund. 4. An Institutional Manager that exercised voting power over any security with respect to proxy votes that are reported by another Institutional Manager or Managers pursuant to General Instruction C.1 or C.2, or are reported on a Form N–PX report filed by a Fund, must identify each Institutional Manager and Fund reporting on its behalf in the manner described in Special Instruction B.2.c. and d. 5. An Institutional Manager reporting proxy votes on behalf of another Institutional Manager pursuant to General Instruction C.1 or C.2 must identify any other Institutional Managers on whose behalf the filing is made in the manner described in Special Instruction C.2. 6. A Fund reporting proxy votes that would otherwise be required to be reported by an Institutional Manager must identify any Institutional Managers on whose behalf the filing is made in the manner described in Special Instruction C.2. D. Signature and Filing of Report 1. a. For reports filed by a Fund, the report must be signed on behalf of the Fund by its principal executive officer or officers. For reports filed by Institutional Managers, the report must be signed on behalf of the Institutional Manager by an authorized person. Attention is directed to Rule 12b–11 under the Exchange Act and Rule 8b–11 under the Investment Company Act concerning signatures. b. The name and title of each person who signs the report shall be typed or printed beneath his or her signature. 2. A reporting person must file reports on Form N–PX electronically using the Commission’s Electronic Data Gathering, Analysis, and Retrieval (‘‘EDGAR’’) system in accordance with Regulation S–T, except as provided by the Confidential Treatment Instructions. Consult the EDGAR Filer Manual and Appendices for EDGAR filing instructions. E. Definitions As used in this Form N–PX, the terms set out below have the following meanings: ‘‘Fund’’ means a registered management investment company (other than a small business investment company registered on Form N–5 (17 PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 CFR 239.24 and 274.5)) or a separate Series of the registered management investment company. ‘‘Institutional Manager’’ means a person that is required to file reports under Rule 13f–1 under the Exchange Act. ‘‘Reporting Person’’ means the Institutional Manager or Fund filing this report or on whose behalf the report is filed. ‘‘Series’’ means shares offered by a registered management investment company that represent undivided interests in a portfolio of investments and that are preferred over all other series of shares for assets specifically allocated to that series in accordance with Rule 18f–2(a) under the Investment Company Act [17 CFR 270.18f–2(a)]. F. Transition Rules for Institutional Managers 1. An Institutional Manager is not required to file a report on Form N–PX for the 12-month period ending June 30 of the calendar year in which the manager’s initial filing on Form 13F is due pursuant to Rule 13f–1 under the Exchange Act. For purposes of this paragraph, an ‘‘initial filing’’ on Form 13F means any quarterly filing on Form 13F if no filing on Form 13F was required for the immediately preceding calendar quarter. 2. An Institutional Manager is not required to file a report on Form N–PX with respect to any shareholder vote at a meeting that occurs after September 30 of the calendar year in which the manager’s final filing on Form 13F is due pursuant to Rule 13f–1 under the Exchange Act. An Institutional Manager is required to file a Form N–PX for the period July 1 through September 30 of the calendar year in which the manager’s final filing on Form 13F is due pursuant to Rule 13f–1 under the Exchange Act; this filing is required to be made not later than March 1 of the immediately following calendar year. For purposes of this paragraph, a ‘‘final filing’’ on Form 13F means any quarterly filing on Form 13F if no filing on Form 13F is required for the immediately subsequent calendar quarter. Special Instructions A. Organization of Form N–PX 1. This form consists of three parts: the Form N–PX Cover Page (‘‘Cover Page’’), the Form N–PX Summary Page (‘‘Summary Page’’), and the proxy voting information required by the form (‘‘Proxy Voting Information’’). 2. Present the Cover Page and the Summary Page information in the E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules format and order provided in the form. Do not include any additional information on the Summary Page. B. Cover Page 1. Amendments to a Form N–PX report must either restate the Form N–PX report in its entirety or include only proxy voting information that is being reported in addition to the information already reported in a current public Form N–PX report for the same period. If the Form N–PX report is filed as an amendment, then the reporting person must check the amendment box on the Cover Page, enter the amendment number, and check the appropriate box to indicate whether the amendment (a) is a restatement or (b) adds new Proxy Voting Information. Each amendment must include a complete Cover Page and, if applicable, a Summary Page. 2. Designate the Report Type for the Form N–PX report by checking the appropriate box in the Report Type section of the Cover Page, and include, where applicable, the List of Other Persons Reporting for this Manager (on the Cover Page), the Summary Page, and the Proxy Voting Information, as follows: a. For a report by a Fund, check the box for Report Type ‘‘Registered Management Investment Company Report,’’ omit from the Cover Page the List of Other Persons Reporting for this Manager, and include both the Summary Page and the Proxy Voting Information. b. For a report by an Institutional Manager that includes all proxy votes required to be reported by the Institutional Manager, check the box for Report Type ‘‘Institutional Manager Voting Report,’’ omit from the Cover Page the List of Other Persons Reporting for this Manager, and include both the Summary Page and the Proxy Voting Information. c. For a report by an Institutional Manager, when all proxy votes required to be reported by the Institutional Manager are reported by another Institutional Manager or Managers or by one or more Funds, check the box for Report Type ‘‘Institutional Manager Notice,’’ include (on the Cover Page) the List of Other Persons Reporting for this Manager, and file the Cover Page and required signature only. d. For a report by an Institutional Manager, if only part of the proxy votes required to be reported by the Institutional Manager are reported by another Institutional Manager or Managers or one or more Funds, check the box for Report Type ‘‘Institutional Manager Combination Report,’’ include VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 (on the Cover Page) the List of Other Persons Reporting for this Manager, and include both the Summary Page and the Proxy Voting Information. 3. If the Institutional Manager has a number assigned by the Financial Industry Regulatory Authority’s Central Registration Depository system or by the Investment Adviser Registration Depository system (‘‘CRD number’’), provide the Manager’s CRD number. If the Institutional Manager has a file number (e.g., 801–, 8–, 866–, 802-) assigned by the Commission (‘‘SEC file number’’), provide the Manager’s SEC file number. 4. The Cover Page may include information in addition to the required information, so long as the additional information does not, either by its nature, quantity, or manner of presentation, impede the understanding or presentation of the required information. Place all additional information at the end of the Cover Page, except as permitted by paragraph (m) of Item 1. C. Summary Page 1. Include on the Summary Page the number of included Institutional Managers with votes reported in this Form N–PX report pursuant to General Instruction C. Enter as the number of included Institutional Managers the total number of Institutional Managers in the list of included Institutional Managers on the Summary Page, and do not count the reporting person filing this report. See Special Instruction C.2. If none, enter the number zero (‘‘0’’). 2. Include on the Summary Page the list of included Institutional Managers with votes reported in this Form N–PX report pursuant to General Instruction C. Use the title, column headings, and format provided. a. If this Form N–PX report does not report the proxy votes of any Institutional Manager other than the reporting person, enter the word ‘‘NONE’’ under the title and omit the column headings and list entries. b. If this Form N–PX report reports the proxy votes of one or more Institutional Managers other than the reporting person, enter in the list of included Institutional Managers all such Institutional Managers together with their respective Form 13F file numbers, if known and their respective CRD Numbers and SEC File Numbers, if applicable and if known. (The Form 13F file numbers are assigned to Institutional Managers when they file their first Form 13F). Assign a number to each Institutional Manager in the list of included Institutional Managers, and present the list in sequential order. The PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 57519 numbers need not be consecutive. Do not include the reporting person filing this report. 3. For reports filed by a Fund, include on the Summary Page the total number of Series of the Fund reported in this Form N–PX, if any, the name of each Series included, and each Series identification number. If this Form N–PX report does not report the proxy votes of any Series, enter the word ‘‘NONE’’ under the title and omit the column headings and list entries. D. Proxy Voting Information 1. Disclose the information required or permitted by Item 1 in the order presented in paragraphs (a) through (m) of Item 1. 2. The CUSIP number or ISIN required by paragraph (b) or (c) of Item 1 may be omitted if it is not available through reasonably practicable means, e.g., in the case of certain securities of foreign issuers. The ISIN may also be omitted if the CUSIP number is reported. 3. Item 1(e) requires an identification of the matter for all matters. In responding to Item 1(e), identify all matters in the same order as on the form of proxy and identify each matter using the same language as on the form of proxy. For election of directors, identify each director separately in the same order as on the form of proxy, even if the election of directors is presented as a single matter on the form of proxy. 4. Item 1(f) requires the reporting person to categorize each matter from a list of categories and subcategories that may apply to such matter. In responding to Item 1(f), a reporting person must choose all categories or subcategories applicable to such matter. 5. In responding to paragraph (h) of Item 1, a reporting person may use the number of shares voted as reflected in its records at the time of filing a report on Form N–PX. If the reporting person has not received confirmation of the actual number of votes cast prior to filing a report on Form N–PX, the numbers reported may reflect the number of shares instructed to be cast. A reporting person is not required to amend a previously filed Form N–PX report if the reporting person subsequently receives confirmation of the actual number of votes cast. 6. In responding to paragraphs (h) and (i) of Item 1: a. An Institutional Manager must report the number of shares that the Institutional Manager is reporting on behalf of another Institutional Manager pursuant to General Instruction C.1 or C.2 separately from the number of shares that the Institutional Manager is E:\FR\FM\15OCP2.SGM 15OCP2 57520 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules reporting only on its own behalf. An Institutional Manager also must separately report shares when the groups of Institutional Managers on whose behalf the shares are reported are different. For example, if the reporting Institutional Manager is reporting on behalf of Manager A with respect to 10,000 shares and on behalf of Managers A and B with respect to 50,000 shares, then the groups of 10,000 and 50,000 shares must be separately reported. b. A Fund must separately report shares that are reported on behalf of different Institutional Managers or groups of Institutional Managers pursuant to General Instruction C.3. 7. For purposes of paragraph (i) of Item 1, a reporting person is considered to have loaned securities if it loaned the securities directly or loaned the securities indirectly through a lending agent. 8. If management did not make a recommendation on how to vote on a particular matter, a reporting person should respond ‘‘none’’ to paragraph (k) of Item 1 for that matter. 9. In the case of a reporting person that is a Fund that offers multiple series of shares, provide the information required by Item 1 separately by Series (for example, provide Series A’s full proxy voting record, followed by Series B’s full proxy voting record). 10. In response to paragraph (m), a reporting person may provide additional information about the matter or how it voted, provided the information does not, either by its nature, quantity, or manner of presentation, impede the understanding or presentation of the required information. The disclosure permitted by paragraph (m) is optional. A reporting person is not required to respond to paragraph (m) for any vote, and if a reporting person does provide additional information for one or more votes, it is not required to provide this information for all votes. Confidential Treatment Instructions 1. A reporting person should make requests for confidential treatment of information reported on this form in accordance with Rule 24b–2 under the Exchange Act (17 CFR 240.24b–2). 2. Rule 24b–2 requires a person filing confidential information with the Commission to indicate at the appropriate place in the public filing that the confidential portion has been so omitted and filed separately with the Commission. A reporting person should comply with this provision by including on the Summary Page, after the number of included Institutional Managers and prior to the list of included Institutional Managers, a statement that confidential VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 information has been omitted from the public Form N–PX report and filed separately with the Commission. 3. A reporting person must file all requests for and information subject to the request for confidential treatment in accordance with the instructions for filing confidential treatment requests for information filed on Form 13F. 4. A reporting person requesting confidential treatment must provide enough factual support for its request to enable the Commission to make an informed judgment as to the merits of the request, including a demonstration that the information is both customarily and actually kept private by the reporting person, and that release of this information could cause harm to the reporting person. If a request for confidential treatment of information filed on Form N–PX relates to a request for confidential treatment of information included in an Institutional Manager’s filing on Form 13F, the Institutional Manager should so state and identify the related request. In such cases, the Institutional Manager need not repeat the analysis set forth in the request for confidential treatment in connection with the Form 13F filing. The Institutional Manager’s request, however, must explain whether and, if so, how the Form N–PX and Form 13F confidential treatment requests are related and should identify if any of the analysis in its request for confidential treatment on Form 13F does not apply, or applies differently, to its report on Form N–PX. 5. State the period of time for which confidential treatment of the proxy voting information is requested. The time period specified may not exceed one (1) year from the date that the Form N–PX report is required to be filed with the Commission. The request must include a justification of the time period for which confidential treatment is requested, as required by Rule 24b– 2(b)(2)(ii). 6. At the expiration of the period for which confidential treatment has been granted (the ‘‘Expiration Date’’), the Commission, without additional notice to the reporting person, will make the proxy voting information public unless a de novo request for confidential treatment of the information that meets the requirements of Rule 24b–2 and these Confidential Treatment Instructions is filed with the Commission at least fourteen (14) days in advance of the Expiration Date. 7. Upon the final adverse disposition of a request for confidential treatment, or upon the expiration of the confidential treatment previously granted for a filing, unless a hardship PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 exemption is available, the reporting person must submit electronically, within six (6) business days of the expiration or notification of the final disposition, as applicable, an amendment to its publicly filed Form N–PX report that includes the proxy voting information as to which the Commission denied confidential treatment or for which confidential treatment has expired. An amendment filed under such circumstances must not be a restatement; the reporting person must designate it as an amendment which adds new proxy voting information. The reporting person must include at the top of the Form N–PX Cover Page the following legend to correctly designate the type of filing being made: This filing lists proxy vote information reported on the Form N–PX filed on (date) pursuant to a request for confidential treatment and for which (that request was denied/confidential treatment expired) on (date). Paperwork Reduction Act Information Form N–PX is to be used by a Fund to file reports with the Commission pursuant to Section 30 of the Investment Company Act and Rule 30b1–4 thereunder. Form N–PX also is to be used by an Institutional Manager to file reports with the Commission as required by Section 14A(d) of the Exchange Act and Rule 14Ad–1 thereunder. Form N–PX is to be filed not later than August 31 of each year, containing the reporting person’s proxy voting record for the most recent 12-month period ended June 30. The Commission may use the information provided on Form N–PX in its regulatory, disclosure review, inspection, and policymaking roles. Funds and Institutional Managers are required to disclose the information specified by Form N–PX, and the Commission will make this information public. Funds and Institutional Managers are not required to respond to the collection of information contained in Form N–PX unless the Form displays a currently valid Office of Management and Budget (‘‘OMB’’) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 3507. BILLING CODE 8011–01–P E:\FR\FM\15OCP2.SGM 15OCP2 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules 57521 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORMN-PX ANNUAL REPORT OF PROXY VOTING RECORD FORM N-PX COVER PAGE (Name of reporting person) (For registered management investment companies, provide exact name of registrant as specified in charter) (Address of principal executive offices) (Zip code) (Name and address of agent for service) Telephone number of reporting person, including area code: _ _ _ _ _ _ _ _ __ Report for the [year ended June 30, _ ] [period July 1, _ _ to September 30, _ _] SEC Investment Company Act or Form 13F File Number: [811- ] [028- .... ] _ __ CRD Number (if applicable): _ _ _ _ __ Other SEC File Number (if applicable): _ _ _ __ This Amendment (check only one): Report Type (check only one): VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 PO 00000 Frm 00045 Fmt 4701 D is a restatement. D adds new proxy voting entries. D Registered Management Investment Company Report. D Institutional Manager Voting Report (Check here if all proxy votes of this reporting manager are reported in this report.) D Institutional Manager Notice (Check here if no proxy votes reported are in this report, and all proxy votes are reported by other reporting person(s).) D Institutional Manager Combination Report (Check here if a portion of the proxy votes for this reporting manager are reported in this report and a portion Sfmt 4725 E:\FR\FM\15OCP2.SGM 15OCP2 EP15OC21.003</GPH> Check here if amendment 0; Amendment number: _ _ _ __ 57522 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules are reported by other reporting person(s).) List of Other Persons Reporting for this Manager: [If there are no entries in this list, omit this section.] Investment Company Act or Form 13F File Number CRDNumber (if applicable) Other SEC File Number (if applicable) Name [811-] [028- ]_ _ VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 PO 00000 Frm 00046 Fmt 4701 Sfmt 4725 E:\FR\FM\15OCP2.SGM 15OCP2 EP15OC21.004</GPH> [Repeat as necessary.] Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules 57523 FORM N-PX SUMMARY PAGE Information about Institutional Managers. Number of Included Institutional Managers: _ __ List oflncluded Institutional Managers: Provide a numbered list of the name(s), 13F file number(s), CRD Numbers (if applicable), and SEC File Number(s) (if applicable) of all Institutional Managers with respect to which this report is filed, other than the reporting person filing this report. [If there are no entries in this list, state "NONE" and omit the column headings and list entries.] Form 13F File Number No. CRD Number (if applicable) SEC File Number(if applicable) Name 28- [Repeat as necessary.] Information about the Series. Number of Series: - - - Provide a list of the name(s) and identification number(s) of all Series with respect to which this report is filed. [If there are no entries in this list, state "NONE" and omit the column headings and list entries.] Series Identification Number Series Name FORM N–PX Item 1. Proxy Voting Record If the reporting person is a Fund, disclose the following information for each matter relating to a portfolio security considered at any shareholder meeting held during the period covered by the report and with respect to which the reporting person was entitled to vote, including securities on loan for purposes of this form. If the reporting VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 person is an Institutional Manager, disclose the following information for each shareholder vote pursuant to Sections 14A(a) and (b) of the Exchange Act over which the manager exercised voting power, as defined in Rule 14Ad– 1(d) under the Exchange Act [17 CFR 240.14Ad–1]. If a reporting person does not have any proxy votes to report for the reporting period, the reporting person must file a report with the Commission stating that the reporting PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 person does not have proxy votes to report. (a) The name of the issuer of the security; (b) The Council on Uniform Securities Identification Procedures (‘‘CUSIP’’) number for the security; (c) The International Securities Identification Number (‘‘ISIN’’) for the security; (d) The shareholder meeting date; E:\FR\FM\15OCP2.SGM 15OCP2 EP15OC21.005</GPH> [Repeat as necessary.] 57524 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Proposed Rules (e) An identification of the matter voted on; (f) All categories and subcategories applicable to the matter voted on from the following list of categories and subcategories: (A) Board of directors (subcategories: director election, term limits, committees, size of board, or other board of directors matters (along with a brief description)); (B) Section 14A say-on-pay votes (subcategories: 14A executive compensation, 14A executive compensation vote frequency, or 14A extraordinary transaction executive compensation); (C) Audit-related (subcategories: Auditor ratification, auditor rotation, or other audit-related matters (along with a brief description)); (D) Investment company matters (subcategories: Change to investment management agreement, new investment management agreement, assignment of investment management agreement, business development company approval of restricted securities, closed-end investment company issuance of shares below net asset value, business development company asset coverage ratio change, or other investment company matters (along with a brief description)); (E) Shareholder rights and defenses (subcategories: Adoption or modification of a shareholder rights plan, control share acquisition provisions, fair price provisions, board classification, cumulative voting, or other shareholder rights and defenses matters (along with a brief description)); (F) Extraordinary transactions (subcategories: Merger, asset sale, liquidation, buyout, joint venture, going private, spinoff, delisting, or other extraordinary transaction matters (along with a brief description)); (G) Security issuance (subcategories: Equity, debt, convertible, warrants, units, rights, or other security issuance matters (along with a brief description)); (H) Capital structure (subcategories: Stock split, reverse stock split, dividend, buyback, tracking stock, adjustment to par value, authorization of additional stock, or other capital VerDate Sep<11>2014 17:11 Oct 14, 2021 Jkt 256001 structure matters (along with a brief description)); (I) Compensation (subcategories: Board compensation, executive compensation (other than Section 14A say-on-pay), board or executive antihedging, board or executive antipledging, compensation clawback, 10b5–1 plans, or other compensation matters (along with a brief description)); (J) Corporate governance (subcategories: Articles of incorporation or bylaws, board committees, codes of ethics, or other corporate governance matters (along with a brief description)); (K) Meeting governance (subcategories: Approval to adjourn, acceptance of minutes, or other meeting governance matters (along with a brief description)); (L) Environment or climate (subcategories: Greenhouse gas (GHG) emissions, transition planning or reporting, biodiversity or ecosystem risk, chemical footprint, renewable energy or energy efficiency, water issues, waste or pollution, deforestation or land use, say-on-climate, environmental justice, or other environment or climate matters (along with a brief description)); (M) Human rights or human capital/ workforce (subcategories: Workforcerelated mandatory arbitration, supply chain exposure to human rights risks, outsourcing or offshoring, workplace sexual harassment, or other human rights or human capital/workforce matters (along with a brief description)); (N) Diversity, equity, and inclusion (subcategories: Board diversity, pay gap, or other diversity, equity, and inclusion matters (along with a brief description)); (O) Political activities (subcategories: Lobbying, political contributions, or other political activity matters (along with a brief description)); (P) Other social (subcategories: Data privacy, responsible tax policies, charitable contributions, consumer protection, or other social matters (along with a brief description)); or (Q) Other (along with a brief description). (g) For reports filed by Funds, disclose whether the matter was proposed by the issuer or by a security PO 00000 Frm 00048 Fmt 4701 Sfmt 9990 holder and, if by a security holder, whether the matter was a proposal or counterproposal; (h) The number of shares that were voted, with the number zero (‘‘0’’) entered if no shares were voted; (i) The number of shares that the reporting person loaned and did not recall; (j) How the shares in paragraph (h) were voted (e.g., for or against proposal, or abstain; for or withhold regarding election of directors) and, if the votes were cast in multiple manners (e.g., for and against), the number of shares voted in each manner; (k) Whether the votes disclosed in paragraph (j) represented votes for or against management’s recommendation; (l) Identify each Institutional Manager on whose behalf this Form N–PX report is being filed (other than the reporting person filing the report) and that exercised voting power over the securities voted by entering the number assigned to the Institutional Manager in the List of Included Institutional Managers; and (m) Any other information the reporting person would like to provide about the matter or how it voted. SIGNATURE [See General Instruction D] Pursuant to the requirements of the [Securities Exchange Act of 1934 (for Institutional Managers)] [Investment Company Act of 1940 (for Funds)], the reporting person has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Reporting Person) lllllllll By (Signature and Title) * llllll Date llllllllllllllll * Print the name and title of each signing officer under his or her signature. By the Commission. Dated: September 29, 2021. Vanessa A. Countryman, Secretary. [FR Doc. 2021–21549 Filed 10–14–21; 8:45 am] BILLING CODE 8011–01–C E:\FR\FM\15OCP2.SGM 15OCP2

Agencies

[Federal Register Volume 86, Number 197 (Friday, October 15, 2021)]
[Proposed Rules]
[Pages 57478-57524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21549]



[[Page 57477]]

Vol. 86

Friday,

No. 197

October 15, 2021

Part II





 Securities and Exchange Commission





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17 CFR Parts 232, 240, 249, et al.





Enhanced Reporting of Proxy Votes by Registered Management Investment 
Companies; Reporting of Executive Compensation Votes by Institutional 
Investment Managers; Proposed Rule

Federal Register / Vol. 86 , No. 197 / Friday, October 15, 2021 / 
Proposed Rules

[[Page 57478]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 232, 240, 249, 270, and 274

[Release Nos. 34-93169; IC-34389; File No. S7-11-21]
RIN 3235-AK67


Enhanced Reporting of Proxy Votes by Registered Management 
Investment Companies; Reporting of Executive Compensation Votes by 
Institutional Investment Managers

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
proposing to amend Form N-PX under the Investment Company Act of 1940 
(``Investment Company Act'') to enhance the information mutual funds, 
exchange-traded funds (``ETFs''), and certain other funds currently 
report annually about their proxy votes and to make that information 
easier to analyze. The Commission also is proposing rule and form 
amendments under the Securities Exchange Act of 1934 (``Exchange Act'') 
that would require an institutional investment manager subject to the 
Exchange Act to report annually on Form N-PX how it voted proxies 
relating to executive compensation matters, as required by the Exchange 
Act. The proposed reporting requirements for institutional investment 
managers, if adopted, would complete implementation of those 
requirements under the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (``Dodd-Frank Act'').

DATES: Comments should be received on or before December 14, 2021.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/submitcomments.htm); or
     Send an email to [email protected]. Please include 
File Number S7-11-21 on the subject line; or

Paper Comments

     Send paper comments to, Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-11-21. This file number 
should be included on the subject line if email is used. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's 
website (http://www.sec.gov/rules/proposed.shtml). Comments are also 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Room 1580, Washington, DC 20549, on 
official business days between the hours of 10 a.m. and 3 p.m. 
Operating conditions may limit access to the Commission's public 
reference room. All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the Commission's website. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Nathan R. Schuur, Senior Counsel; 
Angela Mokodean, Branch Chief; or Brian M. Johnson, Assistant Director, 
at (202) 551-6792, Investment Company Regulation Office; Terri G. 
Jordan, Branch Chief, at (202) 551-6825 or [email protected], Chief 
Counsel's Office, Division of Investment Management, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing new 17 CFR 
240.14Ad-1 [new rule 14Ad-1] under the Exchange Act.\1\ We are also 
proposing amendments to the following rules and forms:
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    \1\ 15 U.S.C. 78a et seq.
    \2\ Form N-PX was adopted under the Investment Company Act only. 
In this release, we are proposing to amend Form N-PX under both the 
Exchange Act and the Investment Company Act. 15 U.S.C. 80a-1 et seq.
    \3\ 15 U.S.C. 77a et seq.

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                   Commission reference                                     CFR citation [17 CFR]
----------------------------------------------------------------------------------------------------------------
Investment Company Act:
    Rule 30b1-4...........................................  Sec.   270.30b1-4.
Exchange Act and Investment Company Act:
    Form N-PX \2\.........................................  Sec.  Sec.   274.129 and 249.326.
Securities Act of 1933 (``Securities Act'') \3\ and
 Investment Company Act:
    Form N-1A.............................................  Sec.  Sec.   239.15A and 274.11A.
    Form N-2..............................................  Sec.  Sec.   239.14 and 274.11a-1.
    Form N-3..............................................  Sec.  Sec.   239.17a and 274.11b.
Securities Act:
    Rule 101 of Regulation S-T............................  Sec.   232.101.
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Table of Contents

I. Introduction and Background
II. Discussion
    A. Scope of Funds' Form N-PX Reporting Obligations
    B. Scope of Managers' Form N-PX Reporting Obligations
     1. Managers Subject to Form N-PX and Categories of Votes They 
Must Report
     2. Managers' Exercise of Voting Power
     3. Additional Scoping Matters for Manager Reporting of Say-on-
Pay Votes
    C. Proxy Voting Information Reported on Form N-PX
     1. Identification of Proxy Voting Matters
     2. Identification of Proxy Voting Categories
     3. Quantitative Disclosures
     4. Additional Proposed Amendments to Form N-PX
    D. Joint Reporting and Related Form N-PX Amendments To 
Accommodate Manager Reporting
     1. Joint Reporting Provisions
     2. The Cover Page
     3. The Summary Page
     4. Other Proposed Amendments to Form N-PX To Accommodate 
Manager Reporting
    E. Form N-PX Reporting Data Language
    F. Time of Reporting

[[Page 57479]]

    G. Requests for Confidential Treatment
    H. Proposed Website Availability of Fund Proxy Voting Records
    I. Compliance Dates
    J. Transition Rules for Managers
    K. Technical and Conforming Amendments
III. General Request for Comments
IV. Economic Analysis
    A. Introduction
    B. Economic Baseline and Affected Parties
     1. Funds' Reporting of Proxy Voting Records
     2. Managers' Reporting of Say-on-Pay Votes
    C. Costs and Benefits
     1. Amendments to Funds' Reporting of Proxy Votes
     2. Amendments To Require Manager Reporting of Say-on-Pay Votes
    D. Effects on Efficiency, Competition, and Capital Formation
     1. Amendments to Funds' Reporting of Proxy Votes
     2. Amendments To Require Manager Reporting of Say-on-Pay Votes
    E. Reasonable Alternatives
     1. Scope of Managers' Say-on-Pay Reporting Obligations
     2. Amendments to Proxy Voting Information Reported on Form N-PX
     3. Amendments to the Time of Reporting on Form N-PX or 
Placement of Funds' Voting Records
    F. Request for Comment
V. Paperwork Reduction Act
VI. Regulatory Flexibility Act Certification for Managers and 
Initial Regulatory Flexibility Analysis for Funds
    A. Regulatory Flexibility Act Certification for Managers
    B. Initial Regulatory Flexibility Act Analysis for Funds
     1. Reasons for and Objectives of the Proposed Actions
     2. Legal Basis
     3. Small Entities Subject to the Rule
     4. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
     5. Duplicative, Overlapping, or Conflicting Federal Rules
     6. Significant Alternatives
     7. General Request for Comment
VII. Consideration of Impact on the Economy
VIII. Statutory Authority

I. Introduction and Background

    Mutual funds, ETFs, and other registered management investment 
companies (collectively, ``funds'') hold substantial institutional 
voting power that they exercise on behalf of millions of fund 
investors.\4\ Funds own around 30 percent of U.S. corporate equities 
and in some cases funds hold a larger percent of a single company's 
stock.\5\ As a result, funds can influence the outcome of a wide 
variety of matters that companies submit to a shareholder vote, 
including matters related to governance, corporate actions, and 
shareholder proposals. Funds' proxy voting decisions can play an 
important role in maximizing the value of their investments, affecting 
the more than 45 percent of U.S. households that own funds, as well as 
other investors in U.S. equity markets.\6\
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    \4\ Mutual funds and most ETFs are open-end management 
investment companies registered on Form N-1A. An open-end management 
investment company is an investment company, other than a unit 
investment trust or face-amount certificate company, that offers for 
sale or has outstanding any redeemable security of which it is the 
issuer. See sections 4 and 5(a)(1) of the Investment Company Act [15 
U.S.C. 80a-4 and 80a-5(a)(1)]. The amendments proposed in this 
release would also apply to registered closed-end management 
investment companies (which register on Form N-2) and insurance 
company separate accounts organized as management investment 
companies that offer variable annuity contracts (which register on 
Form N-3).
    \5\ ICI 2021 Fact Book, available at https://www.ici.org/system/files/2021-05/2021_factbook.pdf, at figure 2.7 (stating that mutual 
funds and other registered investment companies held 30 percent of 
U.S. corporate equities as of year-end 2020).
    \6\ Id., at figure 7.1 (stating that 45.7 percent of U.S. 
households owned funds in 2020).
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    For certain types of funds and their investors, proxy voting can 
have particularly heightened importance. For example, because index 
funds' investment policies typically do not permit them to sell 
investments in the relevant index, these funds cannot sell a stock if 
they are dissatisfied with management. Instead, index funds may use 
their voting power to become active in corporate governance in order to 
increase the value of their investments.\7\ Index funds have grown 
significantly in recent years. Index funds make up nearly half of the 
assets in equity funds.\8\ More generally, the net assets of index 
funds as a share of mutual funds and ETFs have more than doubled since 
2010.\9\
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    \7\ See Disclosure of Proxy Voting Policies and Proxy Voting 
Records by Registered Management Investment Companies, Investment 
Company Act Release No. 25922 (Jan. 31, 2003) [68 FR 6563 (Feb. 7, 
2003)] (``Form N-PX Adopting Release'') at nn.17-18 and accompanying 
text (noting that, because passive funds have investment policies 
that do not permit them to sell their shares, they may become more 
active in corporate governance as a way to maximize value for their 
shareholders).
    \8\ See Kenechukwu Anadu, Mathias Kruttli, Patrick McCabe, and 
Emilio Osambela, ``The Shift from Active to Passive Investing: 
Potential Risks to Financial Stability?'', Finance and Economics 
Discussion Series 2018-060r1, Washington: Board of Governors of the 
Federal Reserve System (2020), available at https://doi.org/10.17016/FEDS.2018.060r1 (citing statistics as of March 2020); see 
also ICI 2021 Fact Book, supra footnote 6, at figure 2.8 (stating 
that index funds represented 40% of the mutual fund and ETF market, 
excluding money market funds, in 2020).
    \9\ See ICI 2021 Fact Book, supra footnote 5, at figure 2.8 
(noting index fund growth as a share of the mutual fund and ETF 
market between 2010 and 2020, excluding money market funds).
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    Due to funds' significant voting power and the effects of funds' 
proxy voting practices on the actions of corporate issuers and the 
value of these issuers' securities, investors have an interest in how 
funds vote.\10\ In addition, in recent years, investors have increased 
their focus on how funds vote on environmental, social, and governance-
oriented matters (i.e., ESG matters). Many funds now incorporate 
sustainability or other ESG factors or put these factors at the center 
of their investment approach.
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    \10\ Some investors review funds' voting practices by accessing 
Form N-PX reports directly on EDGAR, while others may obtain 
information about funds' voting practices through analysis or 
synthesis of Form N-PX reports by data aggregators or others. A 
variety of market participants and other stakeholders also use data 
reported on Form N-PX. See infra Section IV.C.1.a.
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    In most cases, a fund's adviser votes proxies relating to the 
fund's portfolio securities on the fund's behalf.\11\ Investment 
advisers are fiduciaries that owe duties of care and loyalty to each 
client.\12\ To satisfy its fiduciary duty in making any voting 
determination on behalf of a fund, an investment adviser must make 
determinations in the best interest of its client. Further, an 
investment adviser cannot place its own interests ahead of the 
interests of its client.\13\ An investment adviser that assumes proxy 
voting authority must adopt and implement policies and procedures 
reasonably designed to ensure it votes client securities in the best 
interest of clients.\14\
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    \11\ See Form N-PX Adopting Release, supra footnote 7, at nn.11-
13 and accompanying text (recognizing that while the fund's board of 
directors, acting on the fund's behalf, has the right and the 
obligation to vote proxies relating to the fund's portfolio 
securities, this function is typically delegated to the fund's 
investment adviser).
    \12\ Commission Interpretation Regarding Standard of Conduct for 
Investment Advisers, Investment Advisers Act Release No. 5248 (June 
5, 2019) [84 FR 33669 (July 12, 2019)] (``2019 Fiduciary 
Interpretation'').
    \13\ Commission Guidance Regarding Proxy Voting Responsibilities 
of Investment Advisers, Investment Advisers Act Release No. 5325 
(Aug. 21, 2019) [85 FR 55155 (Sept. 3, 2019)] (``Proxy Voting 
Interpretation'').
    \14\ See 17 CFR 275.206(4)-6.
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    In 2003, the Commission adopted Form N-PX, which requires funds to 
report publicly their proxy voting records annually. Form N-PX is 
designed to improve transparency and enable fund shareholders to 
monitor their funds' involvement in the governance activities of 
portfolio companies.\15\ Since its adoption, Form

[[Page 57480]]

N-PX has advanced transparency into fund voting. However, these reports 
can be difficult for investors to use and can provide an incomplete 
picture of a fund's voting practices.
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    \15\ See Form N-PX Adopting Release, supra footnote 7, at 
paragraph accompanying n.34. Although the Commission proposed to 
require funds to disclose their proxy voting records in their annual 
and semiannual shareholders reports, after considering comments, the 
Commission adopted a separate form--Form N-PX--for funds to use in 
filing this information with the Commission. See id. at Section 
II.B. In the same release, the Commission also adopted amendments to 
require funds to disclose the policies and procedures they use to 
determine how to vote proxies. In that release, the Commission 
discussed several benefits of providing transparency on how funds 
vote, including illuminating potential conflicts of interest, 
discouraging voting that is inconsistent with fund shareholders' 
best interests, and encouraging funds to become more engaged in 
corporate governance of issuers held in their portfolios. Id. at 
Section I.
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    Investors may face difficulties using Form N-PX reports to find a 
particular fund's voting record, find a specific vote or type of vote 
that is of interest, or compare funds' voting records for several 
reasons. First, the organization and presentation of funds' proxy 
voting records in Form N-PX reports can vary significantly. For 
example, funds may provide unclear and inconsistent descriptions of 
voting matters (e.g., by using abbreviations or other shorthand). As 
another example, although the instructions to the form require separate 
presentations for each fund, some funds interpret this requirement as 
providing flexibility to organize voting information first by security, 
with each fund holding that security listed separately.\16\ As a 
result, a given fund's voting record can be spread throughout the 
report instead of presented together in one place. Second, Form N-PX 
reports can be overwhelmingly long due to the number of voting matters 
and funds the reports often cover.\17\ A single fund may own hundreds 
of securities, each of which may have ten or more proposals each year, 
and a single Form N-PX report often includes information about several 
different funds' voting records.\18\ Third, reports on Form N-PX are 
not currently filed in a machine readable, or ``structured,'' data 
language. This can make it more difficult for investors to analyze 
efficiently the reported data, particularly in light of the 
inconsistencies and length of Form N-PX reports.\19\
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    \16\ Many fund complexes include information about several 
different funds in a single Form N-PX report, given the structure of 
many funds as series of a trust. See Instruction 1 to current Form 
N-PX (``In the case of a registrant that offers multiple series of 
shares, provide the information required by this Item separately for 
each series. The term `series' means shares offered by a registrant 
that represent undivided interests in a portfolio of investments and 
that are preferred over all other series of shares for assets 
specifically allocated to that series in accordance with Rule 18f-
2(a) under the Act (17 CFR 270.18f-2(a)).'').
    \17\ Based on staff analysis of reports on Form N-PX, larger 
funds can have filings in excess of 1,000 pages.
    \18\ For example, during the 2017 proxy season, funds cast more 
than 7.6 million votes for proxy proposals, and the average fund 
voted on 1,504 separate proxy proposals for U.S. listed portfolio 
companies. Letter dated Mar. 15, 2019, from Paul Schott Stevens, 
President and CEO, Investment Company Institute, submitted in 
response to the Statement Announcing SEC Staff Roundtable on the 
Proxy Process, available at https://www.sec.gov/comments/4-725/4-725.htm.
    \19\ While some structured data is available commercially, 
investors seeking to use this information may incur costs, as well 
as potential limits on the comprehensiveness and timeliness of 
available information.
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    In addition to difficulties in accessing and analyzing the data 
provided on Form N-PX, certain gaps in the required disclosure may 
result in an incomplete picture of a fund's proxy voting practices. 
Funds commonly engage in securities lending activities to generate 
additional revenue for the fund.\20\ When a fund lends its portfolio 
securities, it transfers incidents of ownership relating to the loaned 
securities, including proxy voting rights, for the duration of the 
loan. As a result, while the securities are on loan, the fund is not 
able to vote the proxies of such securities. If a fund determines that 
it wants to vote loaned securities, it must recall the securities and 
receive them prior to the record date for the vote. Recalling loaned 
securities may decrease the revenue a fund generates from securities 
lending activity. The decision of whether to recall a security on loan 
to vote it is not currently disclosed on Form N-PX, although some 
investors have expressed interest in information about the relationship 
between a fund's securities lending and proxy voting.\21\
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    \20\ According to Form N-CEN filings, 67.2% of funds were 
authorized to engage in securities lending in their most recent 
fiscal year, and 40.2% of funds reported lending securities over 
that same period. These funds reported, in the aggregate, net income 
from securities lending of $2.663 billion. See also Reena Aggarwal 
et al., The Role of Institutional Investors in Voting, J. of 
Finance, at 2310 (2015) (noting that ``[m]ost large pension funds, 
mutual funds, and other institutional investors have a lending 
program and consider it an important source of revenue, with 
estimates of $800 million in annual revenue for pension funds.'').
    \21\ See, e.g., Letter of the Shareowner Education Network (Oct. 
20, 2010) (File No. S7-14-10) (``Shareowner Education Letter on 
Concept Release'') (``Funds should disclose all aspects of 
securities lending that affect their investors, such as the number 
of shares on loan over the record date and lending fees, as well as 
the number of shares from any other missed voting opportunities and 
the actual number of shares that were voted for each meeting. This 
information is important to investors who are monitoring the 
stewardship responsibilities of funds.''). See also infra footnote 
99.
---------------------------------------------------------------------------

    To improve the utility of Form N-PX information for investors, we 
are proposing amendments to enhance the information funds currently 
report about their proxy votes on Form N-PX and to make that 
information easier to analyze. For example, we are proposing to require 
funds to tie the description of the voting matter to the issuer's form 
of proxy and to categorize voting matters by type. We are also 
proposing to require reporting of information on Form N-PX in a 
structured data language either via a Commission-supplied web-based 
form or as an Extensible Markup Language (``XML'') file.\22\ In 
addition, we are proposing to require disclosure of the number of 
shares that were voted (or, if not known, the number of shares that 
were instructed to be cast) and the number of shares that were loaned 
and not recalled. To enhance investors' access to funds' proxy voting 
records, we also are proposing to require a fund to provide its voting 
record on (or through) its website.
---------------------------------------------------------------------------

    \22\ Cf. Recommendations of the Investor Advisory Committee 
Regarding the SEC and the Need for the Cost Effective Retrieval of 
Information by Investors (adopted July 25, 2013), available at 
https://www.sec.gov/spotlight/investor-advisory-committee-2012/data-tagging-resolution-72513.pdf, at 5 (recommending amendments to Form 
N-PX to provide for the tagging of data).
---------------------------------------------------------------------------

    In addition to proposing to amend Form N-PX to enhance disclosure 
of funds' proxy voting records, we are proposing rule and form changes 
to require an institutional investment manager subject to section 13(f) 
reporting requirements (``manager'') to report annually on Form N-PX 
how it voted proxies relating to shareholder advisory votes on 
executive compensation (or ``say-on-pay'') matters.\23\ Similar to 
funds, managers have substantial voting power. As of March 31, 2021, 
managers exercised investment discretion over approximately $39.79 
trillion in section 13(f) securities.\24\ This aspect of the

[[Page 57481]]

proposal is aimed at completing implementation of section 951 of the 
Dodd-Frank Act. The Commission first proposed rule and form changes in 
October 2010 to implement the Dodd-Frank Act's manager reporting 
requirements.\25\ This proposal takes into account the comments we 
received in response to that proposal.
---------------------------------------------------------------------------

    \23\ The term ``institutional investment manager'' includes any 
person, other than a natural person, investing in or buying and 
selling securities for its own account, and any person exercising 
investment discretion with respect to the account of any other 
person. See section 13(f)(6)(A) of the Exchange Act [15 U.S.C. 
78m(f)(6)]. The term ``person'' includes any natural person, 
company, government, or political subdivision, agency, or 
instrumentality of a government. See section 3(a)(9) of the Exchange 
Act [15 U.S.C. 78c(a)(9)]. Entities serving as managers could 
include, for example: Banks, insurance companies, and broker-dealers 
that invest in, or buy and sell, securities for their own accounts; 
corporations and pension funds that manage their own investment 
portfolios; or investment advisers that manage private accounts, 
mutual fund assets, or pension plan assets. In addition to 
amendments to Form N-PX, we are proposing new rule 14Ad-1 under the 
Exchange Act to require managers to annually report their say-on-pay 
votes on Form N-PX.
    \24\ This number does not include put or call options and is 
based on staff review of managers' reports on Form 13F covering the 
first quarter of 2021. Section 13(f) of the Exchange Act requires a 
manager to file a report with the Commission if it exercises 
investment discretion with respect to accounts holding certain 
equity securities (``section 13(f) securities'') having an aggregate 
fair market value on the last trading day of any month of any 
calendar year of at least $100 million. Rule 13f-1 requires that 
managers file quarterly reports on Form 13F if the accounts over 
which they exercise investment discretion hold an aggregate of more 
than $100 million in section 13(f) securities. See 17 CFR 240.13f-1. 
Section 14A(d) of the Exchange Act requires that ``every 
institutional investment manager subject to section 13(f)'' of the 
Exchange Act report its say-on-pay votes.
    \25\ See Exchange Act Release No. 63123 (Oct. 18, 2010) [75 FR 
66622 (Oct. 28, 2010)] (``2010 Proposing Release'').
---------------------------------------------------------------------------

    Section 951 of the Dodd-Frank Act added new section 14A to the 
Exchange Act. This section generally requires public companies to hold 
non-binding shareholder advisory votes to: (1) Approve the compensation 
of its named executive officers; (2) determine the frequency of such 
votes, with the option of every 1, 2, or 3 years; and (3) approve 
``golden parachute'' compensation in connection with a merger or 
acquisition (collectively, ``say-on-pay votes'').\26\ Section 14A(d) of 
the Exchange Act requires that every manager report at least annually 
how it voted on say-on-pay votes, unless such vote is otherwise 
required to be reported publicly. The Commission's 2010 proposal to 
implement this provision would have required managers to file their 
record of say-on-pay votes with the Commission annually on Form N-PX, 
and would have amended Form N-PX to accommodate the new manager 
filings.\27\
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    \26\ See section 14A(a) and (b) of the Exchange Act; 17 CFR 
240.14a-21; see also Item 402(a)(3) of Regulation S-K (defining the 
term ``named executive officers'').
    \27\ See 2010 Proposing Release, supra footnote 25. Unless 
otherwise indicated, comments cited in this release are the public 
comments the Commission received in response to the 2010 Proposing 
Release, which are available at http://www.sec.gov/comments/s7-30-10/s73010.shtml. In addition, to facilitate public input on the 
Dodd-Frank Act, the Commission provided a series of email links, 
organized by topic, on its website. The public comments received on 
section 951 of the Dodd-Frank Act are available at http://www.sec.gov/comments/df-title-ix/executive-compensation/executive-compensation.shtml.
---------------------------------------------------------------------------

    Most commenters on the 2010 proposal expressed overall support for 
the Commission's proposal to implement this requirement through 
reporting on modified Form N-PX.\28\ As discussed further below, some 
commenters expressed concerns with particular aspects of the proposal. 
The rule and form amendments we are proposing include certain 
modifications from the 2010 proposal, including modifications that take 
into consideration commenters' suggestions. In response to comments, we 
propose to require managers to report say-on-pay votes for securities 
over which the manager exercised voting power. The proposed definition 
of exercise of voting power focuses on instances when the manager uses 
voting power to influence a voting decision. To reduce the potential 
for duplicative reporting when more than one manager exercises voting 
power or when a manager exercises voting power on behalf of a fund, we 
propose to allow managers to rely on joint reporting provisions under 
these circumstances. We also propose that the amendments to Form N-PX 
for funds would apply to managers reporting say-on-pay votes on Form N-
PX.
---------------------------------------------------------------------------

    \28\ See, e.g., Letter of California Public Employees' 
Retirement System (Nov. 18, 2010) (``CalPERS Letter''); Letter of 
Council of Institutional Investors (Nov. 12, 2010) (``CII Letter''); 
Letter of Glass Lewis & Co. (Nov. 18, 2010) (``Glass Lewis Letter 
I''); Letter of Investment Company Institute (Nov. 18, 2010) (``ICI 
Letter''); Letter of Senator Carl Levin (Nov. 18, 2010) (``Levin 
Letter''); Letter of Heidi Preston (Oct. 26, 2010). Two commenters 
acknowledged that the Commission's proposal was required under the 
Dodd-Frank Act. Letter of Investment Adviser Association (Nov. 16, 
2010) (``IAA Letter''); Letter of Oli Stone (Nov. 17, 2010) (``Stone 
Letter''). One commenter generally opposed the proposal. Letter of 
Dennis Reiland (Nov. 8, 2010) (``Reiland Letter'').
---------------------------------------------------------------------------

II. Discussion

A. Scope of Funds' Form N-PX Reporting Obligations

    Currently, every registered management investment company, other 
than a small business investment company registered on Form N-5, must 
file its proxy voting record annually on Form N-PX.\29\ We are not 
proposing to modify the scope of registered investment companies 
subject to Form N-PX reporting requirements.
---------------------------------------------------------------------------

    \29\ See rule 30b1-4 under the Investment Company Act [17 CFR 
270.30b1-4].
---------------------------------------------------------------------------

    We are, however, proposing to amend the scope of voting decisions 
these funds must report. Currently, funds are required to report 
information for each matter relating to a portfolio security considered 
at any shareholder meeting held during the reporting period and with 
respect to which the fund was entitled to vote.\30\ We are proposing to 
amend this standard to provide that, for purposes of Form N-PX, a fund 
would be entitled to vote on a matter if its portfolio securities are 
on loan as of the record date for the meeting because the fund could 
recall them and vote them.\31\ This proposed amendment is designed to 
ensure that a fund's filings on Form N-PX reflect the effect of its 
securities lending activities on its proxy voting, providing context to 
the information funds already provide about revenue from securities 
lending.
---------------------------------------------------------------------------

    \30\ See Item 1 of current Form N-PX.
    \31\ See Item 1 of proposed Form N-PX.
---------------------------------------------------------------------------

    We request comment on the proposed amendments to the scope of 
funds' reporting obligations on Form N-PX, including the following:
    1. Should we continue to require all registered management 
investment companies, other than small business investment companies 
registered on Form N-5, to report on Form N-PX? Are there other types 
of registered investment companies, such as unit investment trusts, 
that we should require to report their proxy votes on Form N-PX? If we 
do so, would these other types of investment companies face unique 
challenges in reporting their proxy votes? If we extended Form N-PX 
reporting requirements to unit investment trusts, should we exclude 
unit investment trusts that invest exclusively in mutual funds, such as 
those that offer variable annuities and variable life insurance, since 
the underlying mutual funds would be covered?
    2. As proposed, should we amend Form N-PX to provide that a fund 
will be entitled to vote on a matter if its portfolio securities are on 
loan as of the record date? If not, why should the form not consider a 
fund to be entitled to vote loaned securities where the fund could 
recall the securities in order to vote them?

B. Scope of Managers' Form N-PX Reporting Obligations

1. Managers Subject to Form N-PX and Categories of Votes They Must 
Report
    We are proposing that Form N-PX reporting obligations for say-on-
pay votes would extend to each person that (i) is an ``institutional 
investment manager'' as defined in the Exchange Act; and (ii) is 
required to file reports under section 13(f) of the Exchange Act.\32\ 
This is consistent with the scope of the reporting obligation in 
section 14A(d) of the Exchange Act. Thus, a manager that is otherwise 
required to report on Form 13F would be required to disclose its say-
on-pay votes on Form N-PX.\33\
---------------------------------------------------------------------------

    \32\ See proposed rule 14Ad-1(a); 15 U.S.C. 78m(f).
    \33\ Proposed rule 14Ad-1(a).
---------------------------------------------------------------------------

    We are proposing, consistent with the 2010 proposal, to require a 
manager's report on Form N-PX to include the manager's voting record 
for say-on-pay votes.\34\ The types of votes that the

[[Page 57482]]

proposal would require managers to report are the same as the types 
provided by section 14A(d) of the Exchange Act. The manager, therefore, 
would be required to report votes required by section 14A(a) on the 
approval of executive compensation and on the frequency of such 
executive compensation approval votes, as well as votes required by 
section 14A(b) on the approval of executive compensation that relates 
to an acquisition, merger, consolidation, or proposed sale or other 
disposition of all or substantially all the issuer's assets.
---------------------------------------------------------------------------

    \34\ Proposed rule 14Ad-1(a); Item 1 of proposed Form N-PX. 
Shareholder votes on executive compensation that are not required by 
sections 14A(a) and (b), such as in the case of foreign private 
issuers (as defined in rule 3b-4(c) under the Exchange Act [17 CFR 
240.3b-4(c)]) that are exempt from the proxy solicitation rules, 
would not be required to be reported on proposed Form N-PX.
---------------------------------------------------------------------------

    A few commenters expressed support for broader disclosure of 
managers' proxy votes, beyond say-on-pay votes.\35\ In the 2010 
proposal, the Commission did not propose to require reporting of votes 
other than say-on-pay votes by managers because the purpose of that 
rulemaking was primarily to implement a statutory mandate.\36\ We 
continue to believe that it is appropriate to focus on managers' say-
on-pay votes, consistent with the statutory mandate.
---------------------------------------------------------------------------

    \35\ See ICI Letter (expressing the belief that all 
institutional investors should be required to disclose every proxy 
vote they cast, as funds currently do); Stone Letter (suggesting 
that manager reporting requirements should cover all proxy items 
over which the manager has voting authority, rather than just say-
on-pay votes).
    \36\ See, e.g., 2010 Proposing Release, supra footnote 25, at 
Section II.B.1 (``The scope of votes that would be required to be 
reported under the proposal is the same as the scope provided by new 
Section 14A(d) of the Exchange Act.'').
---------------------------------------------------------------------------

    We request comment on the class of managers who would be required 
to file reports on Form N-PX and the types of votes they would be 
required to report under the proposal:
    3. Is the proposed scope of managers that would be required to 
report say-on-pay votes on Form N-PX appropriate? Does it sufficiently 
capture all managers? Does it capture managers that should not be 
covered? Why or why not?
    4. Is there a more appropriate standard for proposed rule 14Ad-1's 
manager reporting requirements? If so, please explain.
    5. Should we, as we are proposing, require managers to report all 
of their say-on-pay votes? Are any exclusions warranted? If so, please 
explain.
    6. Should we require managers to report say-on-pay votes on Form N-
PX, as proposed? Should managers use a different form for reporting 
these votes? For example, would there be advantages to requiring 
managers to report say-on-pay votes on Form 13F instead?
    7. In addition to requiring managers to report their say-on-pay 
votes, should we require managers to report any votes other than say-
on-pay votes? If so, please identify any other votes that managers 
should be required to report and the basis for the Commission to 
introduce such a reporting requirement.
    8. Are there circumstances in which managers may want to 
voluntarily disclose other types of votes, beyond say-on-pay votes, on 
Form N-PX? If so, are there any impediments in the proposal that would 
prevent or discourage managers from voluntarily disclosing information 
about other types of votes?
2. Managers' Exercise of Voting Power
    We are proposing to require that a manager report a say-on-pay vote 
for a security only if the manager ``exercised voting power'' over the 
security--that is, if the manager both has voting power and exercises 
that power.\37\ Under the proposal, voting power would exist when a 
manager has the ability to vote the security or direct the voting of 
the security, including the ability to determine whether to vote the 
security at all, or to recall a loaned security before a vote.\38\ The 
proposal would define exercise of voting power to mean the actual use 
of voting power to influence a voting decision.\39\ Voting power could 
exist or be exercised directly or through a contract, arrangement, 
understanding, or relationship, and multiple parties could have voting 
power over the same securities. For example, a party could exercise 
voting power if it influences the way a third party votes the security, 
even where the manager is not the sole decision-maker.\40\ The proposed 
rule thus adopts a two-part test for determining whether a vote must be 
reported, requiring both power to vote a security (or to cause another 
party to vote such security) and the actual use of such power to 
influence the voting decision in the case of the specific vote.\41\
---------------------------------------------------------------------------

    \37\ See proposed rule 14Ad-1(a).
    \38\ See proposed rule 14Ad-1(d)(1) (defining voting power).
    \39\ See proposed rule 14Ad-1(d)(2) (defining exercise of voting 
power).
    \40\ If two managers exercise voting power over the same 
security, they could rely on the joint reporting provisions in the 
proposal to reduce reporting burdens and address duplicative 
reporting. See infra Section II.D.1.
    \41\ Proposed rule 14Ad-1(a); Item 1 of proposed Form N-PX.
---------------------------------------------------------------------------

    The proposed voting power standard differs from the approach the 
Commission proposed in 2010 and from how the Commission has identified 
voting power in certain other contexts. In 2010, the Commission 
proposed to require that a manager report a say-on-pay vote for a 
security only if the manager ``had or shared the power to vote, or to 
direct the voting of'' the security, using language similar to 17 CFR 
240.13d-3(a) (rule 13d-3(a)) under the Exchange Act.\42\ Some 
commenters on the 2010 Proposing Release supported the proposed focus 
on voting power as the standard for determining whether a manager must 
report say-on-pay votes, with one noting that in practice, shared 
voting arrangements are rare.\43\ Other commenters suggested that it 
would be more appropriate to focus on who actually voted the security, 
rather than who had the power to vote the security.\44\ Another 
commenter noted that in certain cases, managers cast votes based on 
client instructions, and that in such cases the manager's voting power 
is ministerial in nature.\45\
---------------------------------------------------------------------------

    \42\ See 2010 Proposing Release, supra footnote 25, at n.18 and 
accompanying text.
    \43\ See, e.g., Letter of Chris Barnard (Nov. 13, 2010) 
(``Barnard Letter''); CalPERS Letter; CII Letter.
    \44\ See, e.g., Stone Letter; Letter of Managed Funds 
Association (Dec. 22, 2010) (``MFA Letter''); ABA Letter; Glass 
Lewis Letter I.
    \45\ See, e.g., Mayer Brown Letter.
---------------------------------------------------------------------------

    The revised standard we are proposing is intended to clarify the 
scope of the say-on-pay vote reporting obligation by focusing more 
specifically on the exercise, rather than mere possession, of voting 
power. Our proposed standard is intended to align responsibility for 
deciding how to vote securities with responsibility for reporting such 
votes.\46\ The proposed approach is tailored to considerations 
associated with section 14A(d) of the Exchange Act and the scope of 
say-on-pay vote reporting obligations. As a result, our proposed 
definition of ``voting power'' and the ``exercise'' of voting power do 
not affect the meaning of these or similar terms used in other 
Commission rules.
---------------------------------------------------------------------------

    \46\ Glass Lewis Letter I (supporting this approach).
---------------------------------------------------------------------------

    The proposed test focuses on exercise, rather than mere possession, 
of voting power to address shared voting power situations and to make 
managers' reports of say-on-pay votes more useful for clients and other 
investors. As an example of the proposed approach, if a manager votes a 
client's separate account's shares based on its own judgment or in 
accordance with its own guidelines, the manager exercised voting power 
over the security and would be required to report those votes. 
Conversely, if the manager's voting decision on a say-on-pay vote is 
entirely determined by its client, either because the client 
communicates its wishes directly to the manager or because the client 
has a written policy regarding the voting decision that does not call 
for

[[Page 57483]]

any independent judgment by the manager, the manager is not exercising 
voting power over the security because the manager is not influencing 
the voting decision. The proposal would not require a manager to report 
these votes. This is the case even if the manager is the party that 
carries out the actual vote in accordance with its client's wishes. 
However, if the manager influences the voting decision in this context 
by, for example, exercising its own judgment in determining how the 
client's policies should apply to the say-on-pay vote, then the manager 
would exercise voting power when it carries out the policy and report 
the vote accordingly. This may be the case, for instance, if a client 
has a policy of opposing pay packages that are unreasonable but 
determining if a package is ``unreasonable'' involves exercise of the 
manager's judgment. When determining whether the manager exercised 
voting power, the manager should assess whether it was using its voting 
power to influence the voting decision--such as by exercising 
independent judgment or expertise in a way that affects how the 
security was voted--or whether it was instead simply applying a policy 
on a formulaic or mechanical basis. As another example, a manager would 
exercise voting power where the manager casts a vote in accordance with 
voting policies developed by the manager and adopted by the client. A 
manager with voting power may also exercise that voting power through 
other influence over the voting decision, separate from any discretion 
the manager may have in determining or applying a client's voting 
policies. The fact patterns in this discussion are meant to be 
illustrative examples and are not meant to cover all scenarios in which 
a manager would be required to report say-on-pay votes because it has 
voting power and uses that power to influence a voting decision.
    The proposed test also provides that a manager exercises voting 
power when it influences the decision of whether to vote a security. 
For example, a manager that determines not to vote on a say-on-pay 
matter would exercise voting power under the proposal. A manager also 
would exercise voting power when it decides whether to recall loaned 
securities in advance of a vote in order to vote the shares.\47\
---------------------------------------------------------------------------

    \47\ See also infra Section C.3.b (discussing proposed 
disclosure about the number of shares a reporting person has loaned 
and not recalled, and the benefits of that disclosure).
---------------------------------------------------------------------------

    A manager would not exercise voting power if a third party makes 
all decisions of whether to vote the security. For example, certain 
clients may have relationships with securities lending agents, and the 
client or the securities lending agent would determine whether to 
recall loaned securities, without any involvement by the manager.\48\ 
In this case, the manager would not exercise voting power with respect 
to the loaned securities because it would not influence the decision of 
whether to recall the loaned shares.
---------------------------------------------------------------------------

    \48\ See ABA Letter.
---------------------------------------------------------------------------

    The framework we are proposing is intended to provide additional 
insight into how managers are exercising the voting discretion they 
have been granted by their clients without attributing to managers 
votes that are dictated fully by their clients or by other managers. 
The framework is intended to avoid potential confusion that could 
result from a manager reporting votes where the manager did not 
influence the voting decision. We believe requiring a manager who does 
not exercise voting power, for instance because its votes are entirely 
dictated by a client's policy, to report those votes on Form N-PX would 
be of limited benefit to the manager's clients and potential clients, 
as well as other investors. It would not provide insight into--and in 
fact may obscure--how a manager exercises its discretion.\49\
---------------------------------------------------------------------------

    \49\ See, e.g., ISS Letter; Mayer Brown Letter (commenting that 
managers sometimes effectuate client voting decisions by completing 
the proxy card, but do not have control over or decide how shares 
will be voted).
---------------------------------------------------------------------------

    In certain cases, we expect our proposed framework will result in 
multiple parties determining they exercise voting power (e.g., because 
more than one manager provides input on applying a client's voting 
policies). In these circumstances, all such managers would come within 
the scope of the reporting requirements under the proposal, although 
they could rely on the joint reporting provisions discussed below to 
reduce reporting burdens.
    The focus on a manager's exercise of voting power could result in 
the manager's reports on Form N-PX differing from its reports on Form 
13F. For example, if a manager exercises investment discretion over a 
particular section 13(f) security held in a client's account, but the 
client retains all rights to vote proxies for that security, the 
manager generally would report that security on its holdings report on 
Form 13F. However, it would not be required to report any say-on-pay 
votes with respect to that security. Conversely, a manager that 
exercises voting power over a security, but is not required to report 
the security on Form 13F because it does not have investment discretion 
over the security or because it did not hold the security at the end of 
a calendar quarter, would nonetheless be required to report say-on-pay 
votes on Form N-PX for that security.\50\
---------------------------------------------------------------------------

    \50\ See also discussion infra Section II.B.3 (discussing 
differences in reporting between Form 13F and Form N-PX).
---------------------------------------------------------------------------

    The 2010 proposal asked whether it would be appropriate to use a 
different standard, such as investment discretion, as the test for 
reporting say-on-pay votes.\51\ We believe that using investment 
discretion as the test would result in managers having to report votes 
cast by clients in cases where the manager retains investment 
discretion but not voting power. We believe this would be confusing to 
investors and could inaccurately imply that the manager filing the 
report actually made or influenced the decision it was reporting.\52\ 
We also are not proposing to base the reporting requirement upon 
whether a manager, in fact, votes rather than on whether the manager 
exercises voting power.\53\ A test based on who physically marks the 
proxy card (or its electronic equivalent) would omit from its scope 
managers that participated in determining how to cast the vote, but 
would simplify the reporting obligation.\54\
---------------------------------------------------------------------------

    \51\ See 2010 Proposing Release, supra footnote 25, at Section 
II.B.2.
    \52\ CII Letter.
    \53\ Glass Lewis Letter I (only the ``voting entity'' should 
report); MFA Letter (require reporting only when the manager has 
instructed an intermediary to vote its shares); Letter of Seward & 
Kissel LLP (Nov. 18, 2010) (``Seward Letter'') (require reporting by 
manager that ``actually voted'' the proxy); Stone Letter (party who 
votes should bear the burden of disclosure and the Commission should 
not require reporting on the basis of shared voting authority).
    \54\ ISS Letter (suggesting that the manager who receives the 
ballot should be the primary filer with respect to the votes covered 
by that ballot).
---------------------------------------------------------------------------

    We request comment on the proposed approach of requiring managers 
to report say-on-pay votes when they exercise voting power over the 
security, and in particular, on the following issues:
    9. Should the reporting requirement be based on exercising the 
power to vote with respect to say-on-pay votes as proposed, or should 
we use some other basis? For example, should we base the reporting 
requirement on the possession of investment discretion, the identity of 
who in fact votes, or the identity of who receives the ballot? As 
another example, should a vote that was dictated entirely by a client's 
mandate be treated as an exercise of voting power by the manager, even 
if the manager did not influence the vote? What are the advantages and 
disadvantages of the different potential approaches?

[[Page 57484]]

    10. Should we modify the proposed definitions of voting power or 
exercise of voting power? For example, instead of considering a manager 
to exercise voting power when it uses voting power to influence a 
voting decision, should we use a different standard, such as using 
voting power to ``significantly'' influence a voting decision or to 
``primarily'' make a voting decision? If so, what factors would be 
relevant for determining if a manager's role in a voting decision meets 
the revised standard?
    11. Should we, as proposed, consider a manager to exercise voting 
power when it has the ability to determine not to vote or to recall 
loaned securities? Would this provision present challenges to managers? 
If so, what are those challenges, and are there changes to the 
reporting requirement that would address such challenges?
    12. Should we provide additional guidance concerning the 
circumstances under which a manager exercises voting power? If so, 
please specify the type of guidance that managers would find helpful.
    13. Does our proposed exercise of voting power standard cover 
circumstances that should be covered or should not be covered? If so, 
what are the circumstances that should or should not be covered?
3. Additional Scoping Matters for Manager Reporting of Say-on-Pay Votes
    We are proposing to require that a manager report say-on-pay votes 
with respect to any security over which it meets the voting power test 
described above.\55\ As was the case in the 2010 Proposing Release, we 
are not proposing to modify the scope of securities to align with those 
reported on Form 13F or to provide exceptions where the manager does 
not vote.
---------------------------------------------------------------------------

    \55\ Proposed rule 14Ad-1(a).
---------------------------------------------------------------------------

    Some commenters supported the requirement that managers report any 
security.\56\ Other commenters requested that the Commission limit the 
reporting obligation to securities that had previously been reported 
publicly on Form 13F or adopt a de minimis threshold below which 
reporting of say-on-pay votes would not be required.\57\ A commenter 
requesting a de minimis threshold argued that not providing an 
equivalent exemption from Form N-PX reporting as is available from Form 
13F reporting would reduce the value of the 13F exemption and raise 
costs for managers.\58\
---------------------------------------------------------------------------

    \56\ CII Letter; Levin Letter.
    \57\ See, e.g., ABA Letter (recommending non-disclosure of say-
on-pay votes for securities not previously reported because they 
were below the de minimis threshold for Form 13F); Seward Letter 
(suggesting limiting the securities to which the reporting 
requirements apply to those securities previously reported publicly, 
or, in the alternative, adopting a threshold position size below 
which a reporting person need not report proxy votes); Barnard 
Letter (excluding securities where the manager holds less than 
10,000 shares); Reiland Letter (suggesting to limit to holdings on 
which persons are required to file statements on Schedule 13D or 
Schedule 13G under the Exchange Act).
    \58\ See Letter of Intel Corporation (Nov. 19, 2010) (``Intel 
Letter''). On Form 13F, a manager is permitted to omit holdings of 
fewer than 10,000 shares (or less than $200,000 principal amount in 
case of convertible debt securities) and less than $200,000 
aggregate fair market value. See Special Instruction 10 to Form 13F.
---------------------------------------------------------------------------

    While we acknowledge commenters' suggestion that a de minimis 
threshold could reduce record keeping and reporting burdens on managers 
for smaller position sizes that currently do not require reporting on 
Form 13F, a de minimis threshold could reduce the value of the say-on-
pay disclosure because a fund or manager's full voting record would not 
be available when the threshold applied. We therefore are not proposing 
to provide a de minimis threshold for institutional managers reporting 
their say-on-pay votes on Form N-PX.
    Because Form 13F reports only disclose holdings as of the close of 
a calendar quarter, these reports are not required to include 
securities held during the quarter but subsequently disposed of prior 
to the end of the quarter. Form 13F reports also do not reflect when a 
manager increased or decreased its position during a quarter but 
returned to the ``baseline'' level reported on its previous Form 13F 
report by the end of the quarter. As a result, although some commenters 
requested that the Commission limit say-on-pay reporting to securities 
that had previously been reported publicly on Form 13F, this approach 
could exclude a significant number of say-on-pay votes, which we 
believe would be inconsistent with the purpose of section 14A. The 
proposed rule therefore would require a manager to report say-on-pay 
votes without regard to whether the manager had previously reported or 
been required to report the security as a holding on Form 13F.
    In addition to comments suggesting that Form N-PX reporting 
obligations should more closely align with Form 13F, some commenters 
suggested other exceptions from Form N-PX reporting for managers who do 
not vote. For example, two commenters recommended that we not require a 
manager to report on Form N-PX if, under certain or all circumstances, 
the manager does not vote.\59\ These commenters stated that some 
investment strategies (such as algorithmic strategies with short 
holding periods) are unrelated to the economic interests served by 
voting proxies. One of these commenters stated that, with respect to 
certain strategies, voting proxies could be characterized as ``empty 
voting.'' \60\ One of these commenters suggested that, in some cases, 
securities are held for insufficient periods (such as less than one 
day) to perform the requisite analysis for proxy voting, and where the 
manager disclosed a policy not to vote proxies to its clients, the 
manager's Form N-PX report would contain little information and would 
not further the policy objectives of the proposed rule.\61\ The other 
commenter expressed concern about the burdens of developing and 
implementing technology to track record date holdings in cases where 
the manager does not vote.\62\
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    \59\ See Seward Letter (requesting an exception from the 
reporting requirement where the manager maintains a policy not to 
vote proxies and discloses that policy to clients); ABA Letter 
(requesting a blanket exception for holdings that were not voted).
    \60\ See ABA Letter; see also Exchange Act Release No. 62495 
(July 14, 2010) [75 FR 42982, 43017-20 (July 22, 2010)] (``Proxy 
Mechanics Concept Release'') (discussing the concept of ``empty 
voting''). This release cites some comment letters on the Proxy 
Mechanics Concept Release. These comment letters are available at 
https://www.sec.gov/comments/s7-14-10/s71410.shtml.
    \61\ Seward Letter.
    \62\ ABA Letter.
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    We believe that an exception from Form N-PX reporting requirements 
when a manager does not cast a vote on say-on-pay matters may limit the 
ability of investors to understand fully how a manager votes its 
shares. In addition, we believe the burden of reporting when the 
manager does not vote its shares would be lower under our current 
proposal, as compared to the burden of the equivalent aspect in the 
2010 proposal, because the current proposal would not require the 
manager to track record date holdings to disclose the number of shares 
the manager was authorized to vote.\63\
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    \63\ See supra Section II.C.3 (discussing how the quantitative 
information contained in this proposal differs from the 2010 
proposal, including no longer proposing to require the number of 
shares the manager was authorized to vote).
---------------------------------------------------------------------------

    A few commenters requested exceptions from Form N-PX reporting 
requirements in situations where a manager discloses certain 
information about how it votes to its clients, such as formulaic voting 
criteria developed by the manager which have been disclosed to clients 
or where the manager distributes its voting record to a client who had 
provided the manager its own

[[Page 57485]]

proxy policies or guidelines to follow.\64\ We do not believe that an 
exception would be warranted in these circumstances because, in 
addition to benefiting the direct clients of managers, public 
disclosure of say-on-pay votes could benefit other investors, such as 
plan participants of employee benefit plans that hire managers.
---------------------------------------------------------------------------

    \64\ ABA Letter (formulaic voting criteria); Mayer Brown Letter 
(distribution to clients).
---------------------------------------------------------------------------

    Finally, to the extent a manager did not exercise voting power over 
any securities that held say-on-pay votes during a given reporting 
period, we are proposing to require the manager to file a Form N-PX 
report affirmatively stating this fact. The Commission also proposed 
this requirement in 2010.\65\ One commenter opposed this requirement, 
stating that it would not contribute to the objective of increased 
transparency regarding any possible influence over shareholder votes 
and corporate governance.\66\ However, we believe this disclosure would 
help investors and the Commission differentiate managers with no 
reportable say-on-pay votes from those that failed to file a Form N-PX 
report to disclose say-on-pay votes.
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    \65\ Item 1 of proposed Form N-PX.
    \66\ Seward Letter.
---------------------------------------------------------------------------

    We request comment on the circumstances in which the proposal would 
require a manager to file a Form N-PX report, and, in particular, on 
the following issues:
    14. Should we permit managers to omit votes otherwise reportable 
where the manager's ownership is below a specific threshold? What are 
the potential advantages or disadvantages if we permit a manager that 
holds, on the record date, fewer than 10,000 shares and less than 
$200,000 aggregate fair market value to omit say-on-pay votes on such 
securities? Would such an exception impede investors from understanding 
how shares were voted? Why or why not?
    15. Should we permit managers to omit votes on a particular type of 
security? Do managers have substantial holdings of securities that are 
not ``section 13(f) securities'' as defined by 17 CFR 240.13f-1(c), but 
are registered pursuant to section 12 of the Exchange Act and thus 
would have say-on-pay votes? Would there be potential advantages or 
disadvantages if we required managers to report only their say-on-pay 
votes on section 13(f) securities? Would such an approach be consistent 
with the public interest, and how would it impact investor protection?
    16. Should we permit managers to omit votes on securities that were 
not held as of the end of a calendar quarter (and thus would not be 
reported on Form 13F)? Should we permit or require any disclosure on 
Form N-PX or elsewhere to explain differences between information 
reported on Form N-PX and information reported on Form 13F or related 
circumstances (e.g., where a manager has significantly more or less 
voting power on the record date of a say-on-pay vote than its Form 13F 
report would otherwise suggest)? If so, under what circumstances would 
this disclosure be helpful? What would the disclosure entail, and 
should it be permissive or required? \67\
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    \67\ Under the proposal, a manager would be permitted to 
disclose additional information on the cover page of its Form N-PX 
report, so long as it does not, either by its nature, quantity, or 
manner of presentation, impede the understanding or presentation of 
the required information. See General Instruction C.3 of proposed 
Form N-PX.
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    17. Should we expand or limit in any other way the securities with 
respect to which managers would be required to report say-on-pay votes?
    18. Should we modify the proposed approach for managers that do not 
vote their shares? For example, should we permit these managers to not 
file Form N-PX reports? Should we exempt non-voting managers from 
certain disclosure requirements on Form N-PX concerning the various 
securities they did not vote on say-on-pay matters during the reporting 
period? What conditions or limitations, if any, should apply? For 
instance, to rely on a modified approach, should a manager be required 
to disclose to its clients that it does not vote? Would a modified 
approach be particularly applicable to certain categories of managers, 
such as those whose trading strategies involve relatively short-term 
ownership?
    19. As proposed, should we require a manager without any say-on-pay 
votes to disclose to file a report on Form N-PX stating that fact? 
Would such filings effectively distinguish managers that missed a 
required filing from managers without say-on-pay votes to report?

C. Proxy Voting Information Reported on Form N-PX

    We are proposing to enhance funds' current Form N-PX disclosures so 
investors can more easily understand and analyze proxy voting 
information. These proposed changes include, for example, more clearly 
tying the description of the voting matter to the issuer's form of 
proxy and categorizing voting matters by type. In addition, we are 
proposing to extend many of these proposed enhancements to the Form N-
PX reports that managers would file under this proposal.
1. Identification of Proxy Voting Matters
    We are proposing to require reports on Form N-PX to identify proxy 
voting matters using the same language as disclosed in the issuer's 
form of proxy. In 2010, the Commission proposed to require standardized 
descriptions for say-on-pay votes and brief identifications of other 
votes.\68\ At that time, the Commission requested comment on 
alternative methods of standardizing descriptions of these voting 
matters. As part of the Proxy Mechanics Concept Release, the Commission 
also solicited comment regarding methods for uniform identification of 
proxy voting matters in Form N-PX reports.\69\ In particular, the 
Commission asked about ways to standardize identifications if issuers 
do not themselves create and assign unique interactive data ``tags'' 
for each matter on their proxy statements.\70\ Several commenters on 
the Commission's 2010 proposal supported requiring standardized 
descriptions for say-on-pay votes, and one commenter on the Proxy 
Mechanics Concept Release expressed support for standardizing 
descriptions more broadly.\71\ Two commenters expressed concern with 
standardized descriptions for matters other than say-on-pay votes. 
These commenters cited the practical challenges posed in uniformly 
identifying different matters, given both the variety of voting matters 
before shareholders and the absence of standardized data tags in issuer 
proxy materials.\72\
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    \68\ See 2010 Proposing Release, supra footnote 25, at paragraph 
accompanying n.89.
    \69\ Proxy Mechanics Concept Release, supra footnote 60, at 
Section III.C.3.
    \70\ Id., at requests for comment subsequent to n.237 (``Whether 
or not we permit or require interactive data tagging, should Form N-
PX require standardized reporting formats so that comparisons 
between funds are easier?'').
    \71\ See CalPERS Letter; Fidelity Letter; Letter of Michael 
Ostrovsky (Sept. 5, 2013) (File No. S7-14-10) (``Ostrovsky Letter on 
Concept Release'') (supporting a standardized classification system 
for voting matters).
    \72\ See Fidelity Letter (citing difficulty ``given the wide 
variety of votes placed before shareholders'' and stating that ``as 
a general matter, the variable nature of proxy-related disclosures 
do not lend themselves to uniform standardization''); Letter of 
Fidelity Investments (Oct. 20, 2010) (File No. S7-14-10) (``Fidelity 
Letter on Concept Release'') (questioning feasibility of providing 
for a uniform identification of each matter voted in reports on Form 
N-PX); Letter of Investment Company Institute (Oct. 20, 2010) (File 
No. S7-14-10) (``ICI Letter on Concept Release'') (citing a 
``significant practical issue'' of ``how to provide for uniform 
identification of each matter voted across different funds'').

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[[Page 57486]]

    We are proposing to require reporting persons to use the same 
language from the issuer's form of proxy to identify proxy voting 
matters on Form N-PX.\73\ In addition, each voting matter (including 
say-on-pay votes and other voting matters) would be required to be 
reported in the same order as presented on the issuer's form of 
proxy.\74\ We believe these proposed requirements would facilitate 
identification of identical matters included on different Form N-PX 
filings by different reporting persons even though there is no 
interactive data tagging in issuer proxy materials.\75\ We are 
proposing to apply the identification requirement to all voting matters 
in order to facilitate the ability of investors to better understand 
fund and manager proxy disclosure and compare voting records. We 
believe that reflecting the descriptions and ordering used on an 
issuer's form of proxy, which is publicly available and must identify 
clearly and impartially each separate matter intended to be acted upon, 
would address the previously identified practical issues associated 
with standardized descriptions.\76\
---------------------------------------------------------------------------

    \73\ Special Instruction D.3 to proposed Form N-PX.
    \74\ Id. For matters involving the election of more than one 
director, reporting persons would be required to identify each 
director separately in the same order as on the form of proxy, even 
if the election of directors is presented as a single matter on the 
form of proxy. Id.
    \75\ See 2010 Proposing Release, supra footnote 25, at requests 
for comment subsequent to n.90 (requesting comment on alternatives 
that could result in uniform tags being assigned by all reporting 
persons).
    \76\ See Securities Exchange Act rule 14a-4(a)(3) (requiring 
that the form of proxy identify clearly and impartially each 
separate matter intended to be acted upon). See also Division of 
Corporation Finance, Compliance and Disclosure Interpretations, 
Section 301 (Mar. 22, 2016), available at https://www.sec.gov/divisions/corpfin/guidance/exchange-act-rule-14a-4a3-301.htm.
---------------------------------------------------------------------------

    We request comment on the proposed requirement to identify proxy 
voting matters, including the following:
    20. Should we require, as we are proposing, that Form N-PX use the 
descriptions and ordering used on an issuer's form of proxy? Are there 
practical considerations we should consider with respect to tying Form 
N-PX disclosure to forms of proxies?
    21. Does using the descriptions and ordering used on an issuer's 
form of proxy, which is publicly available, overcome the previously 
identified practical issues associated with standardized descriptions? 
Why or why not? Should we revert to the standardized language approach 
for say-on-pay votes, as was proposed in the 2010 proposal? If so, why?
    22. Would the proposed requirement to use the description and 
ordering from an issuer's form of proxy facilitate the comparison of 
Form N-PX data, or otherwise enhance the usefulness of information 
reported on Form N-PX for users? What obstacles, if any, might prevent 
reporting persons from being able to comply with the proposed 
requirement?
2. Identification of Proxy Voting Categories
    We are proposing that Form N-PX reporting persons select from 
standardized categories to identify the subject matter of each of the 
reported proxy voting items. This requirement would apply to managers 
and funds. The proposal would require a reporting person to categorize 
each proxy voting matter from a specified list of categories and 
subcategories. The proposed categories and subcategories are designed 
to cover matters on which funds frequently vote, based on our staff's 
experience and review of the matters on which funds voted in 2020, 
including say-on-pay votes:
     Board of directors (subcategories: Director election, term 
limits, committees, size of board, or other board of directors matters 
(along with a brief description));
     Section 14A say-on-pay votes (subcategories: 14A executive 
compensation, 14A executive compensation vote frequency, or 14A 
extraordinary transaction executive compensation); \77\
---------------------------------------------------------------------------

    \77\ The proposed Form N-PX categorizations include a separate 
category for say-on-pay votes to make it easier for investors to 
identify these votes, which require special disclosure under the 
Dodd-Frank Act. The Commission similarly proposed to require 
managers to use standardized descriptions to identify these votes in 
the 2010 proposal.
---------------------------------------------------------------------------

     Audit-related (subcategories: Auditor ratification, 
auditor rotation, or other audit-related matters (along with a brief 
description));
     Investment company matters (subcategories: Change to 
investment management agreement, new investment management agreement, 
assignment of investment management agreement, business development 
company approval of restricted securities, closed-end investment 
company issuance of shares below net asset value, business development 
company asset coverage ratio change, or other investment company 
matters (along with a brief description));
     Shareholder rights and defenses (subcategories: Adoption 
or modification of a shareholder rights plan, control share acquisition 
provisions, fair price provisions, board classification, cumulative 
voting, or other shareholder rights and defenses matters (along with a 
brief description));
     Extraordinary transactions (subcategories: Merger, asset 
sale, liquidation, buyout, joint venture, going private, spinoff, 
delisting, or other extraordinary transaction matters (along with a 
brief description));
     Security issuance (subcategories: Equity, debt, 
convertible, warrants, units, rights, or other security issuance 
matters (along with a brief description));
     Capital structure (subcategories: Stock split, reverse 
stock split, dividend, buyback, tracking stock, adjustment to par 
value, authorization of additional stock, or other capital structure 
matters (along with a brief description));
     Compensation (subcategories: Board compensation, executive 
compensation (other than Section 14A say-on-pay), board or executive 
anti-hedging, board or executive anti-pledging, compensation clawback, 
10b5-1 plans, or other compensation matters (along with a brief 
description));
     Corporate governance (subcategories: Articles of 
incorporation or bylaws, board committees, codes of ethics, or other 
corporate governance matters (along with a brief description));
     Meeting governance (subcategories: Approval to adjourn, 
acceptance of minutes, or other meeting governance matters (along with 
a brief description));
     Environment or climate (subcategories: Greenhouse gas 
(GHG) emissions, transition planning or reporting, biodiversity or 
ecosystem risk, chemical footprint, renewable energy or energy 
efficiency, water issues, waste or pollution, deforestation or land 
use, say-on-climate, environmental justice, or other environment or 
climate matters (along with a brief description));
     Human rights or human capital/workforce (subcategories: 
Workforce-related mandatory arbitration, supply chain exposure to human 
rights risks, outsourcing or offshoring, workplace sexual harassment, 
or other human rights or human capital/workforce matters (along with a 
brief description));
     Diversity, equity, and inclusion (subcategories: Board 
diversity, pay gap, or other diversity, equity, and inclusion matters 
(along with a brief description));
     Political activities (subcategories: Lobbying, political 
contributions, or other political activity matters (along with a brief 
description));
     Other social (subcategories: Data privacy, responsible tax 
policies, charitable contributions, consumer protection, or other 
social matters (along with a brief description)); or

[[Page 57487]]

     Other (along with a brief description).
    Some categories would contain specific subcategories which a 
reporting person must select when filing a report on Form N-PX. For 
example, a reporting person would need to distinguish section 14A 
executive compensation votes from section 14A executive compensation 
frequency votes. When categorizing a particular voting matter, a 
reporting person would be required to select multiple categories or 
subcategories for the matter if applicable. If a vote did not fall 
within a specified subcategory, the reporting person would select the 
``other'' subcategory and provide a brief description. The brief 
description need only identify the subject matter of the vote, 
consistent with the level of detail in the specified subcategories.
    We believe that requiring reporting persons to categorize their 
proxy votes would help investors understand how funds and managers are 
voting by helping them readily identify votes on matters that are 
important to them. It also would allow investors to compare how 
different managers or funds voted on specific types of matters.
    We request comment on the proposed requirement to categorize proxy 
votes reported on Form N-PX, and, in particular, on the following 
issues:
    23. Should we require reporting persons to categorize their votes, 
as proposed? What are the advantages and disadvantages of this 
approach?
    24. Do the proposed categories or subcategories adequately capture 
the range of proxy voting matters? Are there other categories or 
subcategories of votes that we should require reporting persons to 
identify? Will these categorizations enhance the usefulness of the 
information reported on Form N-PX for investors and facilitate the 
comparison of reporting persons' proxy voting records? Are there 
categories or subcategories we should eliminate?
    25. Should we require reporting persons to use high-level 
categories to identify different types of votes, or should we require 
reporting persons to use subcategories, as proposed? Are there 
particular areas where subcategories are more or less difficult for 
reporting persons to use for purposes of identifying different types of 
votes? Are there particular areas where subcategories are more or less 
useful for investors?
    26. Are there particular types of votes where the categorization 
would be unclear or where reporting persons may reasonably categorize 
the same vote differently? To what extent would the ability to select 
more than one category for a given vote address these types of issues? 
Would the use of subcategories help address or contribute to 
potentially differing approaches to categorizing a particular vote 
among reporting persons?
    27. Are the proposed categories and subcategories sufficiently 
clear? Are there any categories or subcategories where additional 
guidance or definition would be helpful for understanding the 
parameters of a category or subcategory?
3. Quantitative Disclosures
    We are proposing changes to Form N-PX that would require disclosure 
of information about the number of shares that were voted (or, if not 
known, the number of shares that were instructed to be cast). We are 
also proposing a requirement to disclose the number of shares the 
reporting person loaned and did not recall. These quantitative 
disclosure requirements would apply to a manager's say-on-pay votes and 
to all of a fund's votes.
    In 2010, the Commission proposed to require that both funds and 
managers report: (1) The number of shares that the reporting person was 
entitled to vote (for funds) or had or shared voting power over (for 
managers); (2) the number of shares voted; and (3) how the reporting 
person voted the shares and, if the votes were cast in multiple manners 
(e.g., for and against), the number of shares voted in each manner.\78\
---------------------------------------------------------------------------

    \78\ See 2010 Proposing Release, supra footnote 25, at Section 
II.E.3.
---------------------------------------------------------------------------

    Comments regarding these quantitative disclosure requirements were 
mixed. Some commenters supported the proposed quantitative disclosures 
or stated that they were acceptable.\79\ Some commenters stated that 
providing quantitative disclosures would be burdensome.\80\ One 
commenter opposed requiring funds to quantify votes in particular and 
stated that quantitative disclosures might cause confusion for 
investors or result in competitors gaining insight into fund 
strategies.\81\
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    \79\ See Levin Letter (stating that quantitative disclosure will 
allow investors to monitor, understand, and hold their proxies 
accountable for their votes); CalPERS Letter (finding disclosure of 
the number of shares voted acceptable).
    \80\ See ICI Letter; Fidelity Letter; Mayer Brown Letter. One 
commenter, however, while opposing quantitative disclosures for 
other reasons, noted that from a purely technological perspective, 
disclosing share positions voted would be straightforward. See ISS 
Letter.
    \81\ See ICI Letter (noting that complying with the quantitative 
disclosure requirements as proposed would be burdensome and 
difficult, and questioning the value to shareholders).
---------------------------------------------------------------------------

    Some commenters, while opposing any requirement that reporting 
persons report quantitative information, agreed that the use of the 
existing Form N-PX disclosure (e.g., for, against, or abstain) without 
quantification is not meaningful for ``split votes,'' i.e., if 
different votes are cast on the same matter by a reporting person.\82\ 
These commenters suggested, should the Commission determine to adopt 
quantitative reporting requirements, that it limit such reporting to 
instances of actual split votes, and allow reporting persons to report 
the number of shares instructed to be cast.\83\ Another commenter 
suggested that the Commission consider alternative indications of 
``magnitude'' in lieu of requiring disclosure of the number of votes 
cast.\84\
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    \82\ See Fidelity Letter (stating that ``a mere notation of 
`split' may not be rich disclosure''); ICI Letter (stating that 
``simply reporting `split' does not provide much meaningful 
information about the way the reporting entity voted, and additional 
information may be useful to put the split vote in context'').
    \83\ See ICI Letter; Fidelity Letter; MFA Letter.
    \84\ See Mayer Brown Letter.
---------------------------------------------------------------------------

    As discussed in greater detail below, as compared to the 2010 
proposal, there are three primary differences in the proposed 
quantitative disclosures requirements: (1) Clarifying that the 
reporting person's records could be used to determine the number of 
shares voted, even where those records do not reflect a confirmed 
number of actual votes cast and received by the issuer; (2) requiring 
disclosure of the number of shares the reporting person has loaned and 
not recalled; and (3) not proposing the previously proposed provisions 
requiring disclosure of the number of shares the reporting person was 
entitled to vote (for funds) or had or shared voting power over (for 
managers).
a. Disclosure of Number of Shares Voted
    We are proposing, substantially as proposed in the 2010 proposal, a 
requirement that both funds and managers disclose: (1) The number of 
shares voted (or instructed to be voted); and (2) how those shares were 
voted (e.g., for or against proposal, or abstain).\85\ If the votes 
were cast in multiple manners (e.g., both for and against), we propose 
requiring disclosure of the number of shares voted (or instructed to be 
voted) in each manner.\86\ We are proposing to require

[[Page 57488]]

disclosure of the number of shares voted or instructed to be voted 
because, where a manager votes in multiple ways on the same matter, 
disclosure of that fact alone is largely meaningless without providing 
a measure of the magnitude of the different votes.\87\ In addition, and 
in contrast to the 2010 proposal, we are also proposing to require 
disclosure of the number of shares the reporting person loaned and did 
not recall.\88\ We believe that the context given by disclosing the 
number of shares voted would allow investors to better understand how 
securities lending activities affect the voting practices of the 
reporting person. Without disclosing the amount voted, the amount of 
shares on loan for a given vote would not provide meaningful insight 
into how a fund or manager voted.
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    \85\ Items 1(h) and 1(j) of proposed Form N-PX.
    \86\ Item 1(j) of proposed Form N-PX. As proposed in the 2010 
release, in the case of a shareholder vote on the frequency of 
executive compensation votes, a reporting person would be required 
to disclose the number of shares, if any, voted in favor of each of 
1-year frequency, 2-year frequency, or 3-year frequency, and the 
number of shares, if any, that abstained. We are clarifying that the 
number zero (``0'') would be entered if no shares were voted, so 
that responses to this item would be uniformly numeric in nature. 
Item 1(h) of proposed Form N-PX.
    \87\ While we understand that funds do not split votes 
regularly, we believe investors would benefit from parity in 
disclosure between funds and managers in cases where funds do split 
votes.
    \88\ Item 1(i) of proposed Form N-PX. See also infra Section 
II.C.3.b for more information with respect to this proposed 
requirement.
---------------------------------------------------------------------------

    As suggested by some commenters, we are proposing to modify the 
2010 proposal with respect to the disclosure of the number of shares 
voted because reporting persons may not be able to determine with 
certainty how many of the votes they instructed to be cast were 
actually voted in a particular matter.\89\ This change would permit a 
reporting person to use the number of shares voted as reflected in its 
records at the time of filing a report on Form N-PX. If a reporting 
person has not received confirmation of the actual number of votes 
cast, we are proposing that Form N-PX instead may reflect the number of 
shares instructed to be cast on the date of the vote.\90\ The proposal 
would not require a reporting person to seek confirmation of the actual 
number of votes cast if this information is not otherwise readily 
available.\91\ However, should the reporting person learn prior to 
filing its Form N-PX that a different number of shares were voted, the 
reporting person would be required to report the actual number of votes 
cast.\92\ If confirmation of the actual number of votes cast occurs 
after the reporting person files the Form N-PX report, we are not 
proposing to require an amendment to the filing. We believe that this 
approach would reduce the compliance burden of providing information 
regarding the number of shares voted. At the same time, this disclosure 
would still achieve the goal of providing meaningful information to 
investors about how a reporting person voted its shares.
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    \89\ See ICI Letter; Fidelity Letter; MFA Letter. See also 
Memorandum from the Division of Investment Management regarding 
November 29, 2010 telephone call with BlackRock, Inc., 
representatives (November 30, 2010), available at http://www.sec.gov/comments/s7-30-10/s73010-33.pdf (in which BlackRock 
representatives indicated that the burden associated with providing 
quantitative disclosures may be significantly reduced to the extent 
that the proposed quantitative disclosure requirement was modified 
to only require disclosure of the number of votes instructed to be 
cast). In addition, we recognize that this may be an issue when a 
manager's client enters an arrangement with a securities lending 
agent to loan the client's securities without any involvement by the 
manager.
    \90\ Special Instruction D.5 to proposed Form N-PX. See Fidelity 
Letter (suggesting quantitative disclosure be limited to votes 
instructed to be cast); ICI Letter (same); MFA Letter (same); Stone 
Letter (same). See also Proxy Mechanics Concept Release, supra 
footnote 60, at Section II.B.1 (discussion of issues surrounding 
confirmation of proxy votes).
    \91\ Special Instruction D.5 to proposed Form N-PX.
    \92\ Id.
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    Although suggested by a commenter, we are not proposing disclosure 
of the number of shares voted only in split voting situations.\93\ We 
believe that requiring different disclosures for votes, depending on 
whether a reporting person split its vote on a particular matter, could 
result in potentially confusing inconsistencies within each report on 
Form N-PX. Providing information about the number of shares voted, in 
addition to shares on loan and not recalled, also would present a more 
complete picture of a reporting person's voting, including by allowing 
an investor to understand the extent to which a reporting person 
determines not to vote.
---------------------------------------------------------------------------

    \93\ See ICI Letter.
---------------------------------------------------------------------------

    We also disagree with commenters that disclosure of the number of 
votes cast could result in competitors gaining insight into reporting 
persons' holdings.\94\ Given the alignment of filing deadlines among 
forms, this disclosure likely will be publicly available via Form 13F 
(for managers) and Form N-PORT (for funds) before the reporting person 
is required to file on Form N-PX.\95\ Even for securities reported on 
Form N-PX that are not reported on Form 13F or Form N-PORT, proxy votes 
reported on Form N-PX generally occur up to several months (including 
as many as 14 months) before the August 31 Form N-PX reporting date. As 
a result, we do not believe the disclosure would materially affect 
competition.\96\ Reporting persons would also be permitted to request 
confidential treatment of filed information, as discussed further 
below.
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    \94\ See ISS Letter; ICI Letter (noting that quantitative 
disclosure information might be useful to competitors looking for 
information about fund holdings).
    \95\ To the extent securities reported on Form N-PX are included 
on Form 13F, reports from managers on Form 13F for the quarter 
ending June 30 would be required to be filed no later than August 
14. This means that public disclosure of such holdings on Form 13F 
generally would pre-date the August 31 deadline for filing Form N-
PX. Similarly, funds must publicly disclose their holdings on a 
quarterly basis on Form N-PORT. See 17 CFR 270.30b1-9 (requiring 
filing no later than 60 days after the end of the relevant fiscal 
quarter).
    \96\ See also infra Section IV.
---------------------------------------------------------------------------

    We are also not proposing the approach advocated by one commenter 
who suggested that the Commission consider alternative indications of 
``magnitude'' in lieu of requiring disclosure of the number of votes 
cast. This commenter suggested, for example, that a manager could 
report how a majority (or plurality) of the shares the manager was 
entitled to vote was actually voted or managers could report the 
percentage of total votes cast for each position.\97\ We are not 
proposing these approaches because we believe they do not sufficiently 
demonstrate how a manager exercised its voting power (including any 
shares on loan and not recalled). We believe this context is important 
to present a more complete picture of how the manager votes, and these 
alternatives do not provide additional information relative to our 
proposal. Further, these methods would not alleviate any burden in 
retaining and reporting quantitative data regarding the number of votes 
cast.
---------------------------------------------------------------------------

    \97\ Mayer Brown Letter.
---------------------------------------------------------------------------

    We request comment on the proposed disclosure of the number of 
shares voted, and, in particular, on the following issues:
    28. Should we, as proposed, require funds and managers to report 
the number of shares voted (or instructed to be cast)? Does disclosing 
the number of shares voted allow investors to understand better how 
securities lending activities impact the voting practices of the 
reporting person? Why or why not?
    29. As proposed, should we require a reporting person to report the 
actual number of votes cast if it learns prior to filing its Form N-PX 
that a different number of shares were voted than the reporting person 
instructed to be cast? Should we require this reporting only if the 
reporting person receives information about the actual number of shares 
voted within a specified period before its Form N-PX filing is due? If 
so, what should the specified period be (e.g., at least 5, 10, or 30 
days before the Form N-PX filing is due)?
    30. Are there other ways to promote investor understanding of 
reporting

[[Page 57489]]

persons' voting practices (e.g., the occurrence of split voting) that 
we should require instead of, or in addition to, disclosure of the 
number of shares voted (or instructed to be cast)? For example, would 
investor understanding be promoted if we required reporting of another 
metric, such as the percentage of total shares held that were voted (or 
instructed to be cast), to be disclosed? Why or why not?
    31. We are proposing that, if a reporting person has not received 
confirmation of the actual number of votes cast, the reporting person 
instead may reflect the number of shares instructed to be cast on the 
date of the vote. Does this alleviate concerns about the burden on 
reporting persons with respect to quantitative disclosures? Is the 
information disclosed still of utility to data users? Why or why not?
    32. Should the requirement to disclose the number of shares voted 
only apply to certain types of votes or to a subset of reporting 
persons? For example, should this disclosure be required only in the 
case of say-on-pay votes or split votes?
    33. Does the proposed requirement to disclose the number of shares 
voted complement the proposed requirement to disclose the number of 
shares the reporting person loaned and did not recall? Would investors 
need both figures to understand how securities lending activities 
affect a reporting person's proxy voting? Are there other figures or 
types of information one would need to understand the interaction 
between these two activities?
    34. Are there additional quantitative disclosures we should 
consider that would provide utility to investors?
b. Disclosure of Number of Shares the Reporting Person Loaned and Did 
Not Recall
    In addition to the number of shares a reporting person voted, we 
are proposing to require disclosure of the number of shares the 
reporting person loaned and did not recall.\98\ We understand from 
commenters that this information about securities lending is important 
to understand a reporting person's voting record because the reporting 
person cannot affirmatively cast a vote for or against a matter if the 
security is on loan over the record date. Several commenters on the 
2010 Proposing Release and Proxy Mechanics Concept Release stated that 
it was important to know how many shares were not voted because they 
were on loan.\99\ The proposed requirement is designed to provide 
transparency into how a reporting person's securities lending affects 
its proxy voting.
---------------------------------------------------------------------------

    \98\ Item 1(i) of proposed Form N-PX.
    \99\ Levin Letter; Letter of InterOrganization Network (Oct. 13, 
2010) (File No. S7-14-10); Shareowner Education Letter on Concept 
Release; Letter of Society of Corporate Secretaries & Governance 
Professionals (Nov. 22, 2010) (File No. S7-14-10) (``SCSGP Letter on 
Concept Release'').
---------------------------------------------------------------------------

    We also believe the proposed requirement to disclose the number of 
shares the reporting person loaned and did not recall would help 
address commenters' concerns with a requirement in the 2010 proposal to 
disclose the total number of shares a fund was entitled to vote or a 
manager had or shared voting power over. Some commenters opposed the 
requirement in the 2010 proposal because of the cost and effort that 
would be required to aggregate and reconcile the total number of shares 
a fund is entitled to vote or a manager has or shared voting power 
over.\100\ These commenters noted complexities in the current proxy 
system, including the intermediation between issuers and shareholders, 
and the multitude of entities involved (such as transfer agents, proxy 
vendors, and tabulators).\101\ Some commenters also raised concern that 
there could be potentially confusing or misleading discrepancies 
between the reported number of shares voted and the reported number of 
shares which the reporting person was entitled to vote or over which it 
had or shared voting power.\102\ For example, commenters discussed 
scenarios in which discrepancies between these figures could arise 
despite the reporting person's intent to vote all available shares 
(e.g., discrepancies resulting from differing proxy frameworks in 
certain jurisdictions or limitations on a manager's ability to vote 
shares that its client has loaned as part of an agreement solely 
between the client and its custodian).\103\
---------------------------------------------------------------------------

    \100\ See, e.g., ABA Letter; ICI Letter; Fidelity Letter; Stone 
Letter. See also Letter of Institutional Shareholder Services, Inc. 
(Oct. 20, 2010) (File No. S7-14-10) (``ISS Letter on Concept 
Release''); Letter of Sullivan & Cromwell LLP (Oct. 20, 2010) (File 
No. S7-14-10) (``Sullivan & Cromwell Letter on Concept Release''); 
Fidelity Letter on Concept Release; Letter of BlackRock (Oct. 29, 
2010) (File No. S7-14-10) (``BlackRock Letter on Concept Release''); 
Letter of CFA Institute (Nov. 22, 2010) (File No. S7-14-10); ICI 
Letter on Concept Release.
    \101\ See ICI Letter; Sullivan & Cromwell Letter on Concept 
Release.
    \102\ See Fidelity Letter; ICI Letter; Mayer Brown Letter.
    \103\ See Fidelity Letter; Mayer Brown Letter.
---------------------------------------------------------------------------

    We are proposing a requirement that focuses solely on shares a 
reporting person loaned and did not recall. Under federal law, an 
investment adviser is a fiduciary.\104\ With respect to securities 
lending, advisers have a fiduciary duty to consider the tradeoffs 
between continuing to keep securities on loan, or recalling loaned 
securities in order to vote.\105\ The disclosure we are proposing to 
add to Form N-PX would provide transparency regarding whether a 
reporting person has opted to recall a security and vote the 
accompanying proxy or to keep the security out on loan. Absent this 
disclosure, investors would not have information about a manager's 
decision not to recall a loaned security, which is similar to the 
decision not to vote on a matter, which currently is reported on Form 
N-PX.\106\ Our proposal also takes into account commenters' concerns on 
the prior proposal, and we believe the quantitative information we are 
proposing to require is easier for reporting persons to obtain than the 
information the 2010 proposal would have required. For instance, the 
proposal does not implicate the complexities in the current proxy 
system with determining the number of shares the reporting person was 
entitled to vote or over which it had or shared voting power that 
commenters described.
---------------------------------------------------------------------------

    \104\ 2019 Fiduciary Interpretation, supra footnote 12, at text 
accompanying n.2. See also SEC v. Capital Gains Research Bureau, 
Inc., 375 U.S. 180, 194 (1963); Investment Adviser Codes of Ethics, 
Investment Advisers Act Release No. 2256 (July 2, 2004); Compliance 
Programs of Investment Companies and Investment Advisers, Investment 
Advisers Act Release No. 2204 (Dec. 17, 2003); Electronic Filing by 
Investment Advisers; Proposed Amendments to Form ADV, Investment 
Advisers Act Release No. 1862 (Apr. 5, 2000).
    \105\ See Proxy Voting Interpretation, supra footnote 13, at 
response to question 1 and at n.34 (indicating that while the 
application of the investment adviser's fiduciary duty in the 
context of proxy voting will vary with the scope of the voting 
authority assumed by the investment adviser, the relationship in all 
cases remains that of a fiduciary to the client, and an investment 
adviser must make any determination regarding whether to retain a 
security and vote the accompanying proxy or lend out the security in 
the client's best interest).
    \106\ See Item 1(g) of current Form N-PX.
---------------------------------------------------------------------------

    The disclosure we are proposing would be required only where the 
reporting person has loaned the securities. This would include 
scenarios where the reporting person loans the securities directly or 
indirectly through a lending agent.\107\ However, it would not include 
scenarios where the manager is not involved in lending shares in a 
client's account because, for

[[Page 57490]]

example, the manager is not a party to the client's securities lending 
agreement and has not itself (rather than the client) loaned the 
securities. As recognized above, a manager would not exercise voting 
power over loaned securities when its client hires a securities lending 
agent to loan securities in the client's account and the manager has no 
involvement in the securities lending arrangement or in decisions to 
recall loaned securities.\108\ Thus, the manager would not have any 
say-on-pay reporting obligations with respect to those loaned 
securities.
---------------------------------------------------------------------------

    \107\ See Special Instruction D.7 of proposed Form N-PX. To the 
extent a reporting person allocates an amount of securities to the 
lending agent for lending purposes and treats that amount of 
securities as being on loan when determining how many shares it can 
vote in a matter, the reporting person should report all of the 
allocated shares as being on loan and not recalled (excluding any 
shares the reporting person recalled for the vote).
    \108\ See supra paragraph accompanying footnote 48.
---------------------------------------------------------------------------

    We request comment on the proposed requirement to disclose the 
number of shares loaned and not recalled, and, in particular, on the 
following issues:
    35. Should we require disclosure of the number of shares a 
reporting person loaned and did not recall, as proposed? Is this 
information valuable to investors? Does the value of the information 
differ between institutional and retail investors? Are there any 
changes we could make to enhance the utility of the information for 
investors?
    36. Are there limitations we should be aware of regarding the 
ability of reporting persons to disclose the number of shares loaned 
and not recalled? If so, are there ways would could address those 
limitations?
    37. We understand that proxy statements typically are not delivered 
until after the record date.\109\ Does this create challenges for 
reporting persons to determine whether they want to recall loaned 
securities before the record date? \110\ If so, how might these 
challenges affect disclosure of the number of shares loaned and not 
recalled, or other aspects of this proposal? Are there any changes we 
should make to the proposed rule to recognize these challenges?
---------------------------------------------------------------------------

    \109\ See Proxy Mechanics Concept Release, supra footnote 60, at 
Section III.C.2.
    \110\ Some commenters on the Proxy Mechanics Concept Release 
suggested that the lack of a meeting agenda prior to a record date 
generally does not affect their ability to anticipate many kinds of 
voting matters and to make arrangements to recall loaned securities 
in advance of a record date, if they determine to do so. See, e.g., 
ICI Letter on Concept Release; Letter of American Bar Association 
(Dec. 17, 2010) (File No. S7-14-10).
---------------------------------------------------------------------------

    38. Would the proposed requirement to disclose the number of shares 
a reporting person loaned and did not recall affect decisions a fund or 
manager currently makes on when to recall a loaned security for 
purposes of voting and when to keep a security on loan? If so, how 
might the proposal affect the revenues funds or managers (and, by 
extension, their investors or clients) receive from securities lending? 
Would disclosure of this effect be helpful to a fund's investors or a 
manager's clients? If so, what form should this disclosure take?
    39. Beyond information about how securities lending activities 
affect proxy voting, are there other types of information that would 
help investors understand a reporting person's approach to voting? If 
so, are there ways we could capture that information in Form N-PX 
reports or elsewhere? Similar to the 2010 proposal, should we require 
that the reporting person disclose the total number of shares a fund 
was entitled to vote or a manager exercised voting power over?
    40. Commenters raised concerns that the quantitative disclosure 
requirements in the 2010 proposal may lead to investor confusion.\111\ 
Does our proposed approach limit the potential for confusing 
discrepancies by focusing more directly on the number of shares voted 
and the number of shares on loan? If not, what areas of potential 
confusion remain under our current proposal, and are there changes we 
could make to reduce the potential for confusion?
---------------------------------------------------------------------------

    \111\ See supra footnote 103 and accompanying text.
---------------------------------------------------------------------------

4. Additional Proposed Amendments to Form N-PX
    In addition to proposing new categories of disclosure on Form N-PX, 
we are proposing certain other amendments to enhance the usability of 
Form N-PX reports and to modernize or clarify existing form 
requirements. For instance, we are proposing to require a standardized 
order to the Form N-PX disclosure requirements.\112\ We are also 
proposing an amendment to require a fund that offers multiple series of 
shares to provide Form N-PX disclosure separately by series (for 
example, provide Series A's full proxy voting record, followed by 
Series B's full proxy voting record).\113\ We believe these proposed 
changes will make Form N-PX disclosure easier to review and compare 
among reporting persons. Several commenters supported standardized 
order requirements, stating the importance of displaying data in a 
consistent manner to assist in analyzing multiple votes.\114\ One 
commenter, in contrast, stated that we should not adopt a standardized 
order requirement and that it was not aware of shareholders having any 
difficulty in deciphering or locating Form N-PX information.\115\ 
However, we are re-proposing the requirement because we continue to 
believe it would make the disclosure easier to review and compare among 
reporting persons, and believe it will aid our overall objective to 
increase transparency.
---------------------------------------------------------------------------

    \112\ See Special Instruction D.1 to proposed Form N-PX.
    \113\ See Special Instruction D.9 to proposed Form N-PX.
    \114\ See Levin Letter (supporting standardized order and 
stating that ``[r]equiring the data to be displayed in a consistent 
manner will assist analysis of multiple votes''); CalPERS Letter 
(finding standardized order to be acceptable); Letter of the State 
Board of Administration of Florida (Oct. 20, 2010) (File No. S7-14-
10) (``Florida Board Letter on Concept Release'') (supporting 
standardization of reporting for Form N-PX); Shareowner Education 
Letter on Concept Release (same); Letter of the United States Proxy 
Exchange (Oct. 20, 2010) (File No. S7-14-10) (``Proxy Exchange 
Letter on Concept Release'') (same).
    \115\ See Fidelity Letter.
---------------------------------------------------------------------------

    In the 2010 Proposing Release, the Commission proposed to retain 
the current form's requirement to report both the relevant security's 
CUSIP number and its ticker symbol. One commenter recommended that a 
ticker symbol be required only if a CUSIP number was unavailable since 
certain securities listed on more than one exchange have multiple 
ticker symbols.\116\ In response to this comment, we are proposing to 
require reporting of only one security identifier. Reporting persons 
would be required to report the security's CUSIP number unless it is 
not available through reasonably practicable means (e.g., in the case 
of certain foreign issuers).\117\ If the CUSIP number is not reported, 
then Form N-PX would require the security's ISIN, unless it also is not 
available through reasonably practicable means.\118\ Consistent with 
current Form N-PX, a filer may omit disclosure of both the CUSIP and 
ISIN identifier if neither is reasonably available through practicable 
means.\119\
---------------------------------------------------------------------------

    \116\ ABA Letter (noting the difficulties in determining which 
exchange is the principal exchange for the securities for purposes 
of the disclosure).
    \117\ See Item 1(b) of proposed Form N-PX; Special Instruction 
D.2 to proposed Form N-PX.
    \118\ See Item 1(c) of proposed Form N-PX; Special Instruction 
D.2 of proposed Form N-PX. If the security's CUSIP number is 
reported, then the ISIN would not be required to be reported.
    \119\ See Instruction 2 to Item 1 of current Form N-PX; Special 
Instruction D.2 of proposed Form N-PX.
---------------------------------------------------------------------------

    In addition, we are proposing two general amendments related to the 
cover page of Form N-PX.\120\ Consistent with the 2010 proposal, 
amended Form N-PX would contain a new section on the cover page to be 
used where the filing is an amendment to a previously filed Form N-PX 
report (e.g., to correct errors

[[Page 57491]]

in a previous filing or as part of the confidential treatment 
process).\121\ Amendments to a Form N-PX report would be required to 
either restate the original Form N-PX report in its entirety or include 
only the additional information that supplements the information 
already reported in a Form N-PX report for the same period.\122\ We 
also propose to amend the form to allow for additional information so 
long as it does not, either by its nature, quantity, or manner of 
presentation, impede the understanding or presentation of the required 
information.\123\ This optional disclosure would be placed at the end 
of the cover page or, if it relates to a particular vote, a reporting 
person could provide additional information about the matter or how it 
voted after disclosing the required information about that vote.\124\ 
Form 13F provides similar flexibility, where filers use it, among other 
things, to explain the reasons for an amendment to an earlier 
filing.\125\ We believe this flexibility would also be useful in Form 
N-PX and would facilitate a reporting person's ability to provide 
additional information about a particular vote, or about its voting 
practices in general.\126\
---------------------------------------------------------------------------

    \120\ We are also proposing a few other amendments to the cover 
page of Form N-PX to accommodate manager reporting on Form N-PX. See 
infra Section II.D.2 (discussing these proposed cover page 
amendments).
    \121\ See, e.g., Confidential Treatment Instruction 7 to 
proposed Form N-PX (regarding the filing of amendments upon the 
final adverse disposition of a confidential treatment request or the 
expiration of confidential treatment); see also Section II.G infra.
    \122\ See Special Instruction B.1 to proposed Form N-PX.
    \123\ Special Instruction B.4 to proposed Form N-PX.
    \124\ See Special Instructions B.4 and D.10 and Item 1(m) of 
proposed Form N-PX.
    \125\ See Special Instruction 5 to Form 13F.
    \126\ Cf. ABA Letter (observing that Form N-PX does not readily 
permit explanatory disclosure).
---------------------------------------------------------------------------

    Further, we propose to amend the current disclosure in Form N-PX 
requiring a fund to identify whether a matter was proposed by the 
issuer or by a security holder.\127\ To provide additional information 
about matters proposed by security holders, we propose to require funds 
to identify whether such matters are proposals or counterproposals. In 
addition, we propose to clarify that the disclosure requirement would 
apply to funds only, and not to managers. We are not proposing that 
managers make this disclosure because say-on-pay votes relate 
exclusively to matters proposed by issuers and not by security 
holders.\128\
---------------------------------------------------------------------------

    \127\ See Item 1(f) of current Form N-PX; Item 1(g) of proposed 
Form N-PX.
    \128\ See 2010 Proposing Release, supra footnote 25, at text 
accompanying n.77.
---------------------------------------------------------------------------

    We are also proposing a technical amendment to Form N-PX that would 
require reporting persons to disclose whether each reported vote was 
``for or against management's recommendation.'' Current Form N-PX 
requires funds to disclose whether a vote was ``for or against 
management.'' \129\ The proposed amendment is intended to clarify that 
Form N-PX should disclose how the vote was cast in relation to 
management's recommendation on a particular proxy voting matter, as 
opposed to how the vote may have affected management. In recognition 
that there are some circumstances in which management may not provide a 
voting recommendation on a given matter, we are also proposing an 
instruction that would direct reporting persons to disclose ``none'' 
for the applicable matter in response to this disclosure 
requirement.\130\
---------------------------------------------------------------------------

    \129\ See Item 1(i) of Form N-PX.
    \130\ See Special Instruction D.8 of proposed Form N-PX.
---------------------------------------------------------------------------

    The Commission similarly proposed to amend the current Form N-PX 
item to refer to whether a vote was ``for or against management's 
recommendation'' in the 2010 proposal.\131\ Commenters generally 
supported the proposed change.\132\ One commenter stated that we should 
replace this item instead with a narrative description of what 
management recommended for the vote, and allow readers to determine on 
their own if the reporting person voted with or against 
management.\133\ However, our intent in this proposal is to provide 
useful and easily comparable information to shareholders. As a result, 
we are proposing to update the required disclosure to clarify that the 
report is required to disclose how the vote was cast in relation to 
management's recommendation.\134\
---------------------------------------------------------------------------

    \131\ See 2010 Proposing Release, supra footnote 25, at text 
accompanying n.90.
    \132\ See CalPERS Letter; Levin Letter.
    \133\ See Stone Letter.
    \134\ Item 1(k) of proposed Form N-PX.
---------------------------------------------------------------------------

    Unlike the 2010 proposal, which would have removed the definitions 
section in the instructions to Form N-PX, we are proposing to amend 
Form N-PX to include a section containing definitions for purposes of 
identifying terms used in Form N-PX.\135\ The terms for which 
definitions are included are ``fund,'' ``institutional manager,'' 
``reporting person,'' and ``series.'' The current version of Form N-PX 
also has a definitions section, but it refers filers to the definitions 
in the Investment Company Act and the rules and regulations 
thereunder.\136\ The terms used in the definitions section are the same 
as those used in this release. We believe the proposed definitions 
would clarify the terms used on Form N-PX and, in doing so, make the 
application of the form's requirements to different categories of 
reporting persons clear. The proposed definitions are also intended to 
make the proposed form more concise and readable (e.g., by referring to 
funds, rather than registered management investment companies, 
throughout the form).
---------------------------------------------------------------------------

    \135\ See General Instruction E to proposed Form N-PX.
    \136\ General Instruction E to current Form N-PX.
---------------------------------------------------------------------------

    We request comment on the additional proposed amendments to Form N-
PX, and, in particular, on the following issues:
    41. Should we, as proposed, require the information in Form N-PX 
reports to be disclosed in a standardized order? Would this facilitate 
comparisons or be otherwise useful to users of this information? What 
costs, if any, would be associated with standardization? Should the 
requirement to standardize apply to managers, funds, or both? If we 
standardize the order of the information in Form N-PX reports, should 
we use the order set forth in our proposal, or would some other order 
of information be more appropriate?
    42. In proposing to require a standardized order to the information 
in Form N-PX, we are also proposing clarifying language with respect to 
the placement in a report for a fund containing multiple series. Would 
this requirement make it easier for investors to review reports more 
efficiently? Is there a different method of disclosing the votes of 
multiple series that would assist our goal of providing useful and 
comparative information?
    43. Are there other ways we could make the disclosure in Form N-PX 
easier to review and compare among reporting persons? If so, what are 
they?
    44. We are proposing to require reporting of only one security 
identifier (either the CUSIP or the ISIN) on Form N-PX. Should we 
require reporting persons to disclose both identifiers? If so, why? 
Should we also require the ticker symbol in order to identify a 
security? Why or why not? Is there a more appropriate identifier of 
securities?
    45. Should the cover page permit, as proposed, the inclusion of 
optional information in addition to the information required by Form N-
PX? Are the conditions proposed with respect to the optional 
information sufficient? Why or why not? In what instances might the 
inclusion of additional information on the cover page impede the 
comprehension of the required disclosure? For example, should we limit 
this additional information by length? Or by

[[Page 57492]]

presentation? Are there other limits we should consider?
    46. Should we allow reporting persons to provide additional 
information relating to a particular vote after disclosing the required 
information about that vote, as proposed? What types of information 
might reporting persons wish to provide about particular votes? Does 
the proposal provide sufficient flexibility for reporting persons to 
provide such information, while also limiting the potential for 
optional disclosure that would impede the understanding or presentation 
of the required information?
    47. To what extent do filers amend Form N-PX filings? What are the 
typical reasons for an amendment? Should all amended Form N-PX filings 
be required to restate all information in the prior filing? Should we 
require any additional clarifying language on amendment filings?
    48. As proposed, should we require funds to distinguish between 
proposals and counterproposals when identifying matters proposed by 
security holders? Is it sufficiently clear to a fund when a matter 
proposed by a security holder should be classified as a proposal or 
counterproposal?
    49. Should we, as proposed, clarify that managers are not required 
to disclose whether a matter was proposed by the issuer or by a 
security holder? Are there other requirements in Form N-PX that should 
only apply to funds? Are there requirements that should only apply to 
managers?
    50. Does the change of required disclosure on Form N-PX to ``for or 
against management's recommendation'' clarify the intended purpose of 
the disclosure? Why or why not? Is additional clarification necessary? 
Should we instead require a narrative disclosure, as suggested by a 
commenter?
    51. We are proposing to amend Form N-PX to add specific definitions 
to the instructions. Are the proposed definitions effective? Should we 
modify or remove any of the proposed definitions? Are there other 
definitions we should add to Form N-PX? Should we instead retain the 
current definitions section or remove this section, as proposed in the 
2010 proposal?
    52. Should we modify the proposed content requirements in any way 
for either managers or funds? Is there any information that we are 
proposing to require that should not be required? Is there additional 
information that should be required?
    53. Should we provide any additional guidance on the contents of 
the proposed Form N-PX requirements?

D. Joint Reporting and Related Form N-PX Amendments To Accommodate 
Manager Reporting

1. Joint Reporting Provisions
    Section 14A(d) of the Exchange Act requires a manager to report any 
say-on-pay vote unless such vote is otherwise required to be reported 
publicly by rule or regulation of the Commission. In order to implement 
this provision and prevent duplicative reporting, we are proposing 
three sets of amendments to Form N-PX to permit joint reporting, as 
well as associated disclosure requirements to identify all of a given 
manager's votes. The Commission proposed similar joint-reporting 
provisions in the 2010 proposal, and commenters supported this 
reporting framework.\137\ Based on our experience with Form 13F 
reports, we believe that allowing consolidated reporting in this manner 
would yield reported data that would be at least as useful as 
separately reported data while reducing burden for reporting persons 
who may prefer to report jointly. Furthermore, we expect that the 
instructions we are proposing that require reports on Form N-PX to be 
structured and machine-readable would allow tools to be developed so 
that investors can sort and filter the data to view votes by the 
relevant manager.
---------------------------------------------------------------------------

    \137\ See, e.g., ABA Letter; Letter of The Colorado Public 
Employees' Retirement Association (Nov. 18, 2010) (``COPERA 
Letter''); CII Letter; IAA Letter.
---------------------------------------------------------------------------

    The first amendment would permit a single manager to report say-on-
pay votes in cases where multiple managers exercise voting power.\138\ 
This method for preventing duplicative reporting is similar to that 
employed by Form 13F, which permits a single manager to include 
information regarding securities with respect to which multiple 
managers exercise investment discretion.\139\
---------------------------------------------------------------------------

    \138\ General Instruction C.1 to proposed Form N-PX.
    \139\ See 15 U.S.C. 78m(f)(6)(B) (directing the Commission to 
adopt such rules as it deems necessary or appropriate to prevent 
duplicative reporting by two or more managers exercising investment 
discretion with respect to the same amount); General Instruction 2 
to Form 13F.
---------------------------------------------------------------------------

    In response to a similar provision in the 2010 proposal, one 
commenter suggested that we require a manager who receives a ballot be 
the primary filer that all other managers may reference in their 
filings.\140\ We are not proposing this approach because we believe 
that the joint-reporting provisions should provide flexibility to 
address different types of voting arrangements. Moreover, under our 
current proposal, the manager who receives the ballot would not be 
required to report a say-on-pay vote on Form N-PX under all 
circumstances (e.g., if it does not exercise voting power). Another 
commenter requested guidance on whether an adviser or a sub-adviser 
should be the primary filer when both exercise voting power. We do not 
believe it is necessary to specify who should report under these 
circumstances, because the joint reporting provisions are designed to 
provide flexibility to reporting persons to divide that responsibility 
among themselves or to each report independently.\141\ This may in 
certain circumstances result in two managers reporting the same vote, 
for instance if two managers provide voting advice regarding the same 
securities and have not coordinated with each other regarding who will 
make a report on Form N-PX. Because both managers would exercise voting 
power (i.e., would influence the voting decision) under these 
circumstances, we do not believe it would be inappropriate or confusing 
for those managers to report the same vote separately. Like reports on 
Form N-PX that rely on the joint reporting provisions, reports that 
separately disclose the same votes would provide insight to clients and 
other investors into how a manager voted.
---------------------------------------------------------------------------

    \140\ See ISS Letter.
    \141\ See Brown Letter.
---------------------------------------------------------------------------

    The second proposed amendment would permit a fund to report its 
say-on-pay votes on behalf of a manager exercising voting power over 
some or all of the fund's securities.\142\ This provision avoids a fund 
and its adviser each having to file duplicative reports regarding the 
same votes. Under our proposed approach, if a manager's say-on-pay 
votes are reported by one or more funds over whose securities the 
manager exercises voting power or by one or more other managers, the 
non-reporting manager would be required to file a Form N-PX report that 
identifies each manager and fund reporting on its behalf.\143\
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    \142\ General Instruction C.3 to proposed Form N-PX.
    \143\ General Instruction C.4 to proposed Form N-PX. See infra 
Section II.D.2 (discussing this proposed requirement).
---------------------------------------------------------------------------

    The third proposed amendment would permit affiliates to file joint 
reports on Form N-PX notwithstanding that they do not exercise voting 
power over the same securities. The Commission did not propose a 
similar provision in 2010, but a few commenters suggested that we 
broaden the circumstances where affiliates may file joint reports.\144\ 
These commenters

[[Page 57493]]

suggested that, to further promote operational efficiencies and ease 
potential administrative burdens, the Commission should permit 
affiliated managers to file jointly even where they do not jointly 
exercise voting power, and allow managers to report at the holding 
company level if they so choose.\145\ After considering these comments, 
we are proposing to permit two or more persons who are affiliated 
persons to file a single report on Form N-PX for all affiliated persons 
in the group.\146\ This joint reporting provision is designed to 
provide operational efficiencies without negatively affecting the 
quality or accessibility of the information reported on Form N-PX.
---------------------------------------------------------------------------

    \144\ See Letter of Fidelity Investments (Nov. 18, 2010) 
(``Fidelity Letter'') (suggesting flexibility for affiliated 
managers to jointly file Form N-PX even where they do not share 
voting power); IAA Letter (suggesting flexibility for corporate 
groups to report at the holding company or subsidiary level 
regardless of whether they share voting authority).
    \145\ Id.
    \146\ See General Instruction C.2 to proposed Form N-PX; section 
2(a)(3) of the Investment Company Act (defining ``affiliated 
person'').
---------------------------------------------------------------------------

    In all three cases, where another reporting person reports say-on-
pay votes on a manager's behalf, the report on Form N-PX that includes 
the manager's votes would be required to identify the manager (and any 
other managers) on whose behalf the filing is made and separately 
identify the securities over which the non-reporting manager exercised 
voting power.\147\ The manager's report on Form N-PX also would have to 
identify the other managers or funds reporting on its behalf.\148\ This 
approach is designed to allow managers' clients and investors to easily 
search for all votes where the manager exercised voting power, whether 
or not those votes are reported on the manager's own Form N-PX.
---------------------------------------------------------------------------

    \147\ For example, in the case of a Form N-PX report that 
includes votes of multiple affiliated managers, the filing must 
identify each affiliate the report covers and separately identify 
the securities for which each affiliate exercised voting power.
    \148\ General Instructions C.5 and C.6 to proposed Form N-PX; 
Special Instructions C.2 and D.6 to proposed Form N-PX. See infra 
Sections II.D.3 and II.D.4 (discussing these proposed requirements 
in more detail).
---------------------------------------------------------------------------

    Use of the proposed joint reporting provisions would be optional. 
For example, where multiple managers exercise voting power over the 
same securities, the managers could choose to report the relevant say-
on-pay votes individually instead of relying on the joint reporting 
provisions. If a manager does not rely on the joint reporting 
provisions, it would not be subject to the disclosure requirements tied 
to joint reporting that facilitate identification of all of a manager's 
say-on-pay votes.\149\ In this case, the manager's report on Form N-PX 
would provide its complete proxy voting record for say-on-pay votes 
during the reporting period, without reference to any other reports on 
Form N-PX, and would not include any votes where the manager did not 
exercise voting power.
---------------------------------------------------------------------------

    \149\ In this case, the manager would report on its own behalf 
and would not have to analyze if any other manager also is required 
to report the vote.
---------------------------------------------------------------------------

    We request comment on the proposal to address duplicative reporting 
and, in particular, on the following issues:
    54. Should we, as proposed, permit a single manager to report say-
on-pay votes in cases where multiple managers exercise voting power? 
Should we, as proposed, permit a manager to satisfy its reporting 
obligations by reference to the Form N-PX report of a fund that 
includes the manager's say-on-pay votes? Is there any reason not to 
permit joint reporting? For example, would joint reporting confuse 
investors or make Form N-PX harder to use? Would the potential for 
confusion or for reduced usability decline if, as proposed, Form N-PX 
reports were reported in a structured data language? \150\ Are there 
other ways to address potentially duplicative reporting that are 
consistent with section 14A(d) of the Exchange Act that we should 
consider?
---------------------------------------------------------------------------

    \150\ Proposed rule 14Ad-1(a); Item 1 of proposed Form N-PX.
---------------------------------------------------------------------------

    55. Should the rule and form amendments provide, as we are 
proposing, that two or more managers that are affiliated persons may 
file a joint report on a single Form N-PX notwithstanding that the 
managers do not exercise voting power over the same securities? Does 
this standard permit a level of consolidated reporting by corporate 
groups that is sufficient to address common arrangements? Are there 
other frameworks for consolidated reporting that would be more 
appropriate? Rather than use the Investment Company Act definition of 
``affiliated person,'' is there a different standard we should use? For 
example, similar to Form 13F, should we deem a manager to exercise 
voting power over any securities over which any person under its 
control exercises voting power?
    56. Would the ability of a manager to report say-on-pay votes that 
another manager or a fund also reports lead to investor confusion or 
inappropriate double-counting? Should we prohibit a manager from 
reporting say-on-pay votes that another manager or a fund also reports? 
Should any such prohibition be qualified based on a manager's 
knowledge, belief, or some other standard? Should a manager be required 
to take any steps to determine whether another manager or fund is 
reporting say-on-pay votes for the same securities? Would it confuse 
investors if, as provided in our proposal, joint reporting of say-on-
pay votes is optional?
    57. Are the joint reporting provisions necessary in light of 
differences between our current proposal's standard for exercising 
voting power and the 2010 proposal's standard of directly or indirectly 
having or sharing the power to vote or to direct the voting of a 
security? If so, are there any changes we should make to the joint 
reporting provisions to better align with our proposed standard of 
exercising voting power over a security?
2. The Cover Page
    The Commission proposed changes to the cover page of Form N-PX in 
the 2010 proposal to address the addition of managers as a class of 
reporting persons and to help operationalize the joint reporting 
provisions. Commenters did not address these cover page changes, and we 
are proposing the same changes. Consistent with current Form N-PX cover 
page requirements, the proposed cover page of Form N-PX would require 
the name of the reporting person, the address of its principal 
executive offices, the name and address of the agent for service, the 
telephone number of the reporting person, identification of the 
reporting period, and the reporting person's file number.\151\ We also 
propose that a manager provide its CRD number and other SEC file 
number, if any, which we believe would facilitate identification of 
other regulatory filings of the manager and interrelationships between 
managers who rely on the proposed joint reporting provisions.\152\ We 
are proposing to require that the cover page include information to 
identify more readily whether the reporting person is a fund or a 
manager. If the reporting person is a manager, this information would 
also help investors identify reports filed by other managers and funds 
that contain say-on-pay votes of the reporting person under the joint 
reporting provisions. Specifically, the reporting person would be 
required to

[[Page 57494]]

check a box in order to identify the report as one of the following 
four types:
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    \151\ In the case of a fund, the file number would be an 
Investment Company Act number beginning with ``811-.'' In the case 
of a manager, the file number would be a Form 13F number beginning 
with ``028-.''
    \152\ A CRD number is a number assigned by the Financial 
Industry Regulatory Authority's Central Registration Depository 
system or by the Investment Adviser Registration Depository system. 
The SEC file number would be any file number (e.g., 801-, 8-, 866-, 
802-) assigned by the Commission to the manager other than the 
manager's 13F file number, which all managers would be required to 
provide on the cover page. See Special Instruction B.3 of proposed 
Form N-PX.
---------------------------------------------------------------------------

     Registered management investment company report;
     Manager ``voting'' report when the report contains all 
say-on-pay votes of the manager;
     Manager ``notice'' when the report contains no say-on-pay 
votes of the manager and all say-on-pay votes are reported by other 
managers or funds under the joint reporting provisions; and
     Manager ``combination'' report when the report contains 
some say-on-pay votes of the manager and some say-on-pay votes of the 
manager are reported by other managers or funds under the joint 
reporting provisions.
    In addition, the cover page of a ``notice'' or ``combination'' 
report would include a list of the file numbers and names, as well as 
CRD numbers (if any), of the other managers and funds whose Form N-PX 
reports include say-on-pay votes of the reporting manager.\153\ This 
cross-referencing, which is modeled after Form 13F requirements, will 
help investors locate the reports of say-on-pay votes by other such 
managers.\154\
---------------------------------------------------------------------------

    \153\ Special Instruction B.2 to proposed Form N-PX.
    \154\ See Special Instruction 6 to Form 13F.
---------------------------------------------------------------------------

    We request comment on the proposed cover page of Form N-PX and, in 
particular, on the following issues:
    58. Should we adopt the cover page of Form N-PX as proposed, or 
should we modify it in any way, e.g., by adding or removing 
information? For example, should we require managers to include their 
CRD numbers and SEC file numbers, if any, as proposed? Should we also 
require managers to include their legal entity identifiers (``LEIs''), 
if any? \155\ Would the proposed cover page adequately identify the 
reporting person and the reporting period? Would the proposed cover 
page sufficiently enable investors to identify a reporting person's 
Form N-PX report for a given period and any amendments to that report? 
Would the proposed cover page enable users to identify the type of 
reporting person?
---------------------------------------------------------------------------

    \155\ An LEI is a unique identifier generally associated with a 
single corporate entity and is intended to provide a uniform 
international standard for identifying counterparties to a 
transaction.
---------------------------------------------------------------------------

    59. In the case of a ``notice'' or ``combination'' report filed by 
a manager, would the proposed cover page adequately enable investors to 
identify reports filed by other persons that contain say-on-pay votes 
for which the manager exercised voting power? Should these reports be 
required to include a list of the file numbers and names, as well as 
CRD numbers (if any), of the other managers and funds whose Form N-PX 
reports include say-on-pay votes of the reporting manager, as proposed? 
Is there other information that would help investors find a given 
manager's votes?
    60. Should ``notice'' filings contain any additional required 
disclosure? As currently contemplated, does the proposed notice filing 
requirement provide useful information to investors?
    61. Is there additional information that would be helpful to 
include on the cover page of Form N-PX?
3. The Summary Page
    We are proposing to add a new summary page to Form N-PX to enable 
investors to readily identify any additional managers (besides the 
reporting person) with say-on-pay votes included on the Form N-PX 
report.\156\ The summary page would be required in any fund's Form N-PX 
report, as well as any manager's Form N-PX other than a ``notice'' 
filing.\157\ Commenters did not address the proposed summary page 
requirements, and we are proposing the summary page requirements 
largely without any changes from the 2010 proposal.
---------------------------------------------------------------------------

    \156\ For example, this disclosure might contain managers 
included under the joint reporting requirements. See Special 
Instruction B.2.b-d of proposed Form N-PX.
    \157\ Special Instructions B.2.a-d of proposed Form N-PX. The 
summary page would not be required in a ``notice'' report by 
managers because, since the notice report would not contain any say-
on-pay votes at all, it would not report any say-on-pay votes of 
other managers.
---------------------------------------------------------------------------

    The summary page of Form N-PX would require reporting persons to 
identify the names and total number of additional managers with say-on-
pay votes included in the report in list format.\158\ The proposed 
instructions to Form N-PX specify the contents of this information, 
including the title, column headings, and format.\159\
---------------------------------------------------------------------------

    \158\ Special Instruction C.1 to proposed Form N-PX.
    \159\ Special Instruction C.2 to proposed Form N-PX.
---------------------------------------------------------------------------

    If a Form N-PX report includes the say-on-pay votes of additional 
managers, the summary page list would be required to include all such 
managers together with their respective Form 13F file numbers and, if 
any, CRD numbers and other SEC file numbers.\160\ In addition, and 
similar to Form 13F, the proposal would require the reporting person to 
assign a number (which need not be consecutive) for each such manager, 
and present the list in sequential order.\161\ These numbers would help 
identify the particular manager(s) who exercised the power to vote the 
securities. While we are proposing the sequential numbering requirement 
to make the list easier to use, the proposal would permit non-
consecutive numbering to allow managers to retain the same number 
across filings of different reporting persons and different time 
periods.
---------------------------------------------------------------------------

    \160\ Special Instruction C.2.b to proposed Form N-PX.
    \161\ Id.; see also Special Instruction 8.b to Form 13F.
---------------------------------------------------------------------------

    If a Form N-PX filing does not disclose the proxy votes of a 
manager other than the reporting person, the reporting person would 
enter the word ``NONE'' under the title and would not include the 
column headings and list entries.\162\
---------------------------------------------------------------------------

    \162\ Special Instruction C.2.a to proposed Form N-PX.
---------------------------------------------------------------------------

    To the extent a fund's report on Form N-PX includes the votes of 
multiple series, the summary page would require the name and the series 
identifier (if any) of each series.\163\ We believe this would assist 
investors in discerning the funds covered by the Form N-PX report. 
While the Commission did not propose this requirement in 2010, the 
Commission has since adopted Form N-CEN and Form N-PORT, which contain 
similar series identification requirements for funds.\164\
---------------------------------------------------------------------------

    \163\ Special Instruction C.3 to proposed Form N-PX.
    \164\ Item B.6.a.ii of Form N-CEN; Item A.2 of Form N-PORT.
---------------------------------------------------------------------------

    We request comment on the proposed summary page of Form N-PX and, 
in particular, on the following issues:
    62. Should we adopt the summary page of Form N-PX, as proposed, or 
should we modify it in any way? For example, should we require the 
inclusion of additional information with respect to the additional 
managers in the list? What information would be helpful for investors 
to review in summary format? Would such information be practicable for 
the reporting person to acquire and report? Should we remove any of the 
proposed information requirements, such as the requirements for CRD 
numbers and other SEC file numbers for managers, if any?
    63. Would the proposed sequential and/or non-consecutive listing of 
other managers in the summary page help investors identify specific 
managers? Is the other identifying information we are proposing to 
require (including a manager's 13F file number and, if any, CRD number 
and other SEC file numbers) sufficient for purposes of identifying 
managers whose votes are included in a given report?

[[Page 57495]]

    64. Would the proposed summary page enable investors to readily 
identify any managers whose say-on-pay votes are included in a Form N-
PX report? Would additional formatting constraints be helpful?
    65. Should there be additional summary page requirement differences 
between funds and managers?
    66. Should we, as proposed, require fund Form N-PX reports that 
include the votes of multiple series to identify on the summary page 
the names and EDGAR identifier of each series that the report covers? 
Is there other information we should require of funds that would enable 
investors to more easily identify which funds the report covers? For 
example, should we also require disclosure of the series' LEI?
    67. Should we provide any exceptions to the summary page reporting 
requirement? If so, how should any such exception be defined?
    68. We request information on how clients of managers or other 
investors would utilize the information contained on the summary page. 
Would it provide useful data?
4. Other Proposed Amendments to Form N-PX To Accommodate Manager 
Reporting
    We are proposing other modifications to the format and content of 
the information currently required by Form N-PX to accommodate the 
proposed requirement for managers to report on Form N-PX. Specifically, 
we are proposing to require a manager to report the number of shares 
the manager is reporting on behalf of another manager pursuant to the 
joint reporting provisions separately from the number of shares the 
manager is reporting only on its own behalf.\165\ A manager would also 
be required to separately report shares when the groups of managers on 
whose behalf the shares are reported are different. For example, if the 
reporting manager is reporting on behalf of Manager A with respect to 
10,000 shares and on behalf of Managers A and B with respect to 50,000 
shares, then the groups of 10,000 and 50,000 shares must be separately 
reported. Similarly, a fund would be required to separately report 
shares that are reported on behalf of different managers or groups of 
managers.\166\ We believe this requirement would further our goal of 
providing meaningful information to investors by allowing investors to 
clearly see how a particular manager exercised voting power.
---------------------------------------------------------------------------

    \165\ See Special Instruction D.6 to proposed Form N-PX. See 
also supra Section II.D.1 (discussing the proposed joint reporting 
provisions).
    \166\ See id. We are also clarifying, as a commenter suggested, 
that reporting persons would not be required to report shares 
separately when they are not relying on the joint reporting 
provisions, even if another manager exercised voting power over some 
of the shares reported. See IAA Letter.
---------------------------------------------------------------------------

    One commenter suggested limiting disclosure regarding manager 
shared voting power to the summary page of Form N-PX.\167\ We are not 
proposing this approach because we believe it would make it difficult 
for investors to identify which entities are responsible for the 
particular say-on-pay votes reported, which would undermine the purpose 
of reporting say-on-pay votes. The summary page is intended to identify 
any additional managers (besides the reporting person) with say-on-pay 
votes included on the Form N-PX report. We believe disclosure with 
respect to shared voting power should be included in the body of Form 
N-PX containing proxy voting information, in order to assist 
identifying which of the votes reported on Form N-PX were those over 
which the manager exercised voting power.
---------------------------------------------------------------------------

    \167\ See ISS Letter.
---------------------------------------------------------------------------

    We request comment on the other proposed amendments to Form N-PX to 
accommodate new reporting requirements for managers, including the 
following:
    69. Should we, as proposed, require a reporting person relying on 
the joint reporting provisions to identify, for each applicable vote 
reported, each manager who exercised voting power as to the securities 
voted? Why or why not? Alternatively, would it be sufficient to require 
a reporting person to disclose on the summary page the managers for 
whom it is reporting, without identifying, for each vote reported, the 
managers that exercised voting power?
    70. Are there other changes we should make to Form N-PX to 
accommodate manager say-on-pay vote reporting requirements?

E. Form N-PX Reporting Data Language

    We are proposing to require reporting persons to file reports on 
Form N-PX in a structured data language.\168\ In particular, and as 
discussed in more detail below, we are proposing to require filing of 
Form N-PX reports in a custom eXtensible Markup Language (``XML'')-
based structured data language created specifically for reports on Form 
N-PX (``custom XML'').\169\ We believe use of a custom XML language 
would make it easier for reporting persons to prepare and submit the 
information required by Form N-PX accurately, and would make the 
submitted information more useful.
---------------------------------------------------------------------------

    \168\ See General Instruction D.2. of proposed Form N-PX 
(specifying that reporting persons must file reports on Form N-PX 
electronically on EDGAR, except as provided by the form's 
confidential treatment instructions, and consult the EDGAR Filer 
Manual for EDGAR filing instructions). See also 17 CFR 232.301 
(requiring filers to prepare electronic filings in the manner 
prescribed by the EDGAR Filer Manual). We are also proposing to 
amend rule 101(a)(1)(iii) of Regulation S-T to provide that reports 
filed pursuant to section 14A(d) of the Exchange Act must be 
submitted in electronic format. Reports filed pursuant to section 30 
of the Investment Company Act are already subject to electronic 
filing. See rule 101(a)(1)(iv) of Regulation S-T.
    \169\ This would be consistent with the approach used for other 
XML-based structured data languages created by the Commission for 
certain EDGAR Forms, including the data languages used for reports 
on each of Form N-CEN, Form N-PORT, and Form 13F.
---------------------------------------------------------------------------

    Reports on Form N-PX are currently required to be filed in HTML or 
ASCII.\170\ We understand that, in order to prepare reports in HTML and 
ASCII, reporting persons generally need to reformat required 
information from the way the information is stored for normal business 
uses. In this process, reporting persons typically strip out 
incompatible metadata (i.e., syntax that is not part of the HTML or 
ASCII specification) that their business systems use to ascribe meaning 
to the stored data items and to represent the relationships among 
different data items. The resulting code, when rendered in an end-
user's web browser, is comprehensible to a human reader, but it is not 
suitable for automated validation or aggregation.
---------------------------------------------------------------------------

    \170\ See Regulation S-T, 17 CFR 232.101(a)(1)(iv); 17 CFR 
232.301; EDGAR Filer Manual (Volume II) version 58 (June 2021), at 
5-1 (requiring EDGAR filers generally to use ASCII or HTML for their 
document submissions, subject to certain exceptions).
---------------------------------------------------------------------------

    The Commission requested comment in both the 2010 Proposing Release 
and the Proxy Mechanics Concept Release on whether to require reporting 
of the information required by Form N-PX in a structured data 
language.\171\ Among other things, we requested comment on the 
feasibility of identifying proxy voting matters in a uniform way and on 
the costs of providing data in a

[[Page 57496]]

structured data language.\172\ Commenters on these releases were mixed. 
Commenters that expressed support suggested that structured data would: 
Improve investor analysis or allow for more informed decision-making, 
improve third-party analyses of voting information or reduce the costs 
associated with preparing them, and generally benefit investors or 
improve the usefulness and accessibility of reported data.\173\ The 
Commission's Investor Advisory Committee also recommended that reports 
on Form N-PX be filed in a structured data language, stating that 
investors would be better able to assess the voting records of mutual 
funds.\174\ We believe that the modifications we are proposing 
regarding the identification of proxy voting matters would result in 
reported data that is sufficiently standardized to make structured data 
useful for interested parties.\175\
---------------------------------------------------------------------------

    \171\ 2010 Proposing Release, supra footnote 25, at text 
subsequent to footnote 91 (``Are there methods other than 
standardizing the order of information that would render the 
information reported on Form N-PX more useful? Should we require 
reporting persons to provide the information reported on Form N-PX 
in interactive data format?''); Proxy Mechanics Concept Release, 
supra footnote 60 at text accompanying n. 225. The 2010 Proposing 
Release and the Proxy Mechanics Concept Release referred to an 
``interactive data format.'' Some comments on these releases 
similarly referred to an ``interactive data format.'' For purposes 
of this release, we consider the terms ``interactive data format'' 
and ``structured data language'' to be synonymous and use the terms 
``structured data language'' or ``structured data'' throughout for 
consistency.
    \172\ 2010 Proposing Release, supra footnote 25, at requests for 
comment subsequent to n. 91; Proxy Mechanics Concept Release, supra 
footnote 60, at requests for comment at n. 225.
    \173\ Letter of Broadridge Financial Solutions (Oct. 19, 2010) 
(File No. S7-14-10) (``Broadridge Letter on Concept Release''); 
Florida Board Letter on Concept Release,; ISS Letter on Concept 
Release; Letter of Dominic Jones (Nov. 2, 2010) (``Jones Letter''); 
Ostrovsky Letter on Concept Release; Proxy Exchange Letter on 
Concept Release; Letter of Shareowners Education Network (Oct. 20, 
2010) (File No. S7-14-10) (``Shareholder Education Letter on Concept 
Release''); Towns Letter on Concept Release; Letter of 
VoterMedia.org (Sept. 29, 2010) (File No. S7-14-10) (``VoterMedia 
Letter on Concept Release'').
    \174\ See supra footnote 22.
    \175\ See supra Section II.C.1 (Identification of Proxy Voting 
Matters). Some commenters agreed with statements in the 2010 
Proposing Release and the Proxy Mechanics Concept Release suggesting 
that having uniform identification of proxy voting matters would 
make structured data more useful. See Fidelity Letter on Concept 
Release; ICI Letter on Concept Release; see also Ostrovsky Letter on 
Concept Release (indicating that uniform identification is 
essential, but feasible).
---------------------------------------------------------------------------

    Two commenters on the Proxy Mechanics Concept Release urged the 
Commission to evaluate its then-new structured data requirements before 
adopting similar requirements elsewhere.\176\ In the time since the 
Commission issued the 2010 Proposing Release and the Proxy Mechanics 
Concept Release, we have gained additional experience with different 
reporting data languages, including with reports in an XML-based 
structured data language. For example, we have used customized XML data 
languages for reports filed on Form N-CEN, Form N-PORT, and Form 
13F.\177\ We have found the XML-based structured data languages used 
for those reports allow investors to aggregate and analyze reported 
data in a much less labor-intensive manner than data filed in ASCII or 
HTML. Based on our consideration of comments and our understanding of 
how fund and managers currently disclose required information in a 
structured data language, we believe that requiring a custom XML 
language for Form N-PX would minimize reporting costs while yielding 
reported data that would be more useful to investors. Reporting persons 
would be able to, at their option, either submit XML reports directly 
or use a web-based reporting application developed by the Commission to 
generate the reports, as managers are able to do today when submitting 
holdings reports on Form 13F.
---------------------------------------------------------------------------

    \176\ Fidelity Letter on Concept Release; ICI Letter on Concept 
Release.
    \177\ See e.g., Investment Company Reporting Modernization, 
Investment Company Act Release No. 32314 (Oct. 13, 2016) [81 FR 
81870 (Nov. 18, 2016)] (adopting Form N-CEN and Form N-PORT); 
Adoption of Updated EDGAR Filer Manual, Securities Act Release 9403 
(May 14, 2013) [78 FR 29616 (May 21, 2013)] (requiring managers to 
report their holdings in an XML-based structured data language on 
Form 13F).
---------------------------------------------------------------------------

    Some commenters observed that interested data users can procure 
structured voting data from third-party service providers.\178\ Another 
commenter, however, expressed concerns with the cost, 
comprehensiveness, and timeliness of the data cited by those 
commenters.\179\ While similar data may be available commercially, we 
believe that this information should be made freely available to 
investors and that current users of data made available by third-
parties could nonetheless benefit from structured Form N-PX reports if 
the costs associated with third-party data analysis fell.
---------------------------------------------------------------------------

    \178\ Fidelity Letter on Concept Release; ICI Letter on Concept 
Release.
    \179\ See Ostrovsky Letter on Concept Release.
---------------------------------------------------------------------------

    One commenter stated that it did not believe shareholders were 
interested in proxy voting information using a structured data 
language.\180\ Other commenters and the Investor Advisory Committee, 
however, have indicated that investors would benefit from proxy voting 
data reported in a structured data language. Among other things, 
commenters have noted that structured data would improve investor 
analysis or allow for more informed decision-making.\181\ We believe 
that reporting in custom XML language will allow investors to aggregate 
and analyze the reported data in a much less labor-intensive manner.
---------------------------------------------------------------------------

    \180\ ICI Letter on Concept Release.
    \181\ See supra footnote 173 and accompanying text.
---------------------------------------------------------------------------

    One commenter stated that a structured data reporting requirement 
would increase reporting costs, noting the costs of reporting data in 
both the current ASCII or HTML markup language, as well as any 
structured data language.\182\ Another commenter suggested it would not 
be necessary to continue to require ASCII or HTML reporting, in 
addition to reporting in a structured data language, because data in a 
structured data language could be translated to human-readable form in 
an automated manner and at low cost.\183\ In order to minimize 
reporting burdens, we are proposing to replace the ASCII or HTML 
reporting requirement with the custom XML reporting requirement. We 
recognize that current Form N-PX filers could bear some additional 
reporting costs related to adjusting their systems to a different data 
language. However, in the intervening time period since the 2010 
proposal, many reporting persons have acquired substantial experience 
with reporting on web-based applications (or directly submitting 
information in a structured data language). We believe that aligning 
Form N-PX's reporting data language with the type of data language of 
other required reports may reduce costs and introduce additional 
efficiencies for reporting persons already accustomed to reporting 
using structured data and may reduce overall reporting costs in the 
longer term.\184\
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    \182\ ICI Letter on Concept Release.
    \183\ Ostrovsky Letter on Concept Release.
    \184\ See infra Section IV.
---------------------------------------------------------------------------

    Finally, a commenter indicated that there would be costs associated 
with rendering the reported data in a form that could be comprehensible 
to a human reader.\185\ We agree that there would be some costs 
associated with rendering XML data in a human-readable format, and we 
believe that it is appropriate for the Commission to bear these costs. 
We are proposing that the Commission would develop electronic ``style 
sheets'' that, when applied to the reported XML data, would represent 
that data in human-readable form. We developed similar style sheets for 
holdings data reported by managers in XML on Form 13F, and they have 
yielded useful, consistently formatted documents.
---------------------------------------------------------------------------

    \185\ ICI Letter on Concept Release (noting that the Proxy 
Mechanics Concept Release did not make clear who would bear those 
costs); but see Ostrovsky Letter on Concept Release (characterizing 
these costs as ``trivial'').
---------------------------------------------------------------------------

    We request comment on the reporting data language we are proposing 
to require for reports filed on Form N-PX, and, in particular, on the 
following issues:

[[Page 57497]]

    71. Should we require, as we are proposing, Form N-PX reports to be 
filed in a custom XML language? Is a custom XML language the 
appropriate type of data language for Form N-PX reports? Why or why 
not? If another structured data language would be more appropriate, 
which one, and why?
    72. Would this proposed requirement yield reported data that is 
more useful to investors, compared with not requiring Form N-PX to be 
filed in a custom XML language, or requiring Form N-PX to be filed in a 
structured data language other than a custom XML language?
    73. Are the standardized identification requirements we are 
proposing compatible with the proposed reporting data language?
    74. Should any subset of funds or managers be exempt from the 
proposed structured data reporting requirement? If so, what subset and 
why?

F. Time of Reporting

    Currently, funds must report their proxy voting records annually on 
Form N-PX no later than August 31 of each year, for the most recent 12-
month period ended June 30.\186\ We are proposing to retain the same 
reporting timeframe for funds and to apply this reporting timeframe to 
managers' reporting of say-on-pay votes.\187\ Commenters on the 2010 
proposal generally supported retaining the current reporting timeframe, 
though certain commenters advocated for longer or shorter 
timeframes.\188\
---------------------------------------------------------------------------

    \186\ See rule 30b1-4 under the Investment Company Act. We refer 
to this twelve-month period ending on June 30 of each year as the 
``reporting timeframe'' or the ``timeframe.''
    \187\ Proposed rule 14Ad-1(a); General Instruction A to proposed 
Form N-PX. The timing of a manager's Form N-PX filing obligations 
would differ when the manager enters and exits from the obligation 
to file Form 13F reports. See infra Section II.J.
    \188\ See, e.g., ABA Letter; CalPERS Letter; CII Letter; COPERA 
Letter; Glass Lewis Letter I; but see Jones Letter (requesting that 
managers and funds be required to report their votes on Form N-PX 
within four business days of each shareholder meeting); Letter of 
Adrienne Brown of Nationwide Investment Management Group (Nov. 18, 
2010) (``Brown Letter'') (suggesting a later filing deadline, such 
as September or October); Fidelity Letter (suggesting the filing 
deadline be moved from August 31 to October 31).
---------------------------------------------------------------------------

    We preliminarily believe that the proposed reporting timeframe for 
managers--and retaining the current reporting timeframe for funds--
appropriately balances the benefits of prompt reporting and the burdens 
associated with that reporting. We are not proposing to require, as 
suggested by one commenter, that managers and funds report their votes 
shortly after the relevant shareholder meeting.\189\ We preliminarily 
believe that the benefits of public reporting of proxy votes by funds 
and managers would not significantly increase with faster reporting and 
that publicly reporting each vote individually would make it difficult 
for investors reading a manager's Form N-PX reports to evaluate overall 
patterns in the manager's voting behavior.
---------------------------------------------------------------------------

    \189\ See Jones Letter.
---------------------------------------------------------------------------

    As it relates to managers' reporting of say-on-pay votes, the 
relevant proposals are typically unique to the issuer in question and 
votes may be heavily dependent on the particular facts and 
circumstances applicable to that issuer. Moreover, because such votes 
are reported on a retrospective basis, investors will not necessarily 
be able to use the information reported by managers on Form N-PX to 
engage in a dialogue with their manager about its voting policies or to 
switch to a manager who will vote differently with respect to any 
specific say-on-pay vote.\190\ In the context of fund reporting of 
proxy votes, however, we are mindful of the fact that similar proposals 
often appear on the ballots of many issuers in a given proxy season, 
especially those issuers within the same industry. In these instances, 
timelier public reporting of funds' proxy votes has the potential to 
facilitate fund shareholders' ability to monitor their funds' 
involvement in the governance activities of portfolio companies, 
including within a single proxy season.\191\ We request comment below 
on whether the benefits of timelier reporting of proxy votes--including 
those of both managers and funds--might outweigh any potential 
drawbacks.
---------------------------------------------------------------------------

    \190\ Requiring managers to disclose their intended votes on a 
prospective basis would allow investors to make such a change, but 
such an approach would be inconsistent with the statute and we are 
not proposing it here.
    \191\ Shareholders of a given fund may be able to monitor the 
fund's proxy voting record to evaluate whether the fund's votes are 
consistent with its disclosure. This information would promote 
shareholders' ability to engage with fund management on timely 
issues in the midst of proxy season, including as it relates to 
future votes on the same subject matter at another issuer.
---------------------------------------------------------------------------

    We also are not proposing, as some commenters on the 2010 proposal 
suggested, to extend the deadline for filing reports from August 31 to 
a later date because of additional proposed disclosure 
requirements.\192\ We believe that further delay after the close of the 
reporting period is unnecessary, particularly in light of other changes 
from the 2010 proposal that we believe should result in reporting 
persons having sufficient time to gather the data necessary to make the 
filing, such as the reduction in the quantitative information required 
to be disclosed.\193\
---------------------------------------------------------------------------

    \192\ See Brown Letter; Fidelity Letter.
    \193\ See supra Section II.C.3 (discussing modifications to the 
proxy voting information required on Form N-PX).
---------------------------------------------------------------------------

    We request comment on the proposed reporting timeframe for filing 
Form N-PX reports and, in particular, on the following:
    75. Should we, as proposed, require funds to file their proxy 
voting records on the same reporting timeline as currently required? 
Would investors benefit from more timely reporting of funds' proxy 
votes? Please explain. Do funds need more time than currently permitted 
to file Form N-PX reports that include the new disclosure this proposal 
would require? If so, why, and how much time?
    76. Should we, as proposed, require managers to report their say-
on-pay votes annually on Form N-PX not later than August 31, for the 
most recent 12-month period ended June 30? Should we instead require 
reporting as of some other period end date (e.g., May 31 or December 
31), or with a shorter or longer lag period after the end reporting 
period (e.g., a 45-day lag period to align with Form 13F)?
    77. Should we require reporting for managers and funds to occur 
more frequently than annually, such as monthly, quarterly, or close in 
time to each vote? Should we require more frequent voting to be 
reported on firm websites and annual reporting on Form N-PX? For 
example, should we require funds and managers to report their votes on 
a monthly or quarterly basis on their websites, and annually on Form N-
PX? Would requiring more frequent reporting to occur on managers' and 
funds' websites rather than on Form N-PX mitigate any of the potential 
issues with more frequent reporting, such as the cost of reporting or 
the ability of investors to read and identify patterns in fund or 
manager voting records?
    78. Would investors benefit from more frequent voting disclosure? 
For example, would more frequent disclosure enhance fund shareholders' 
ability to monitor their funds' involvement in the governance 
activities of portfolio companies? Conversely, would investors 
generally be most interested in analyzing a reporting person's voting 
record more holistically rather than focusing on individual votes on 
more frequent intervals or shortly after a vote is held? What are the 
advantages and disadvantages of more frequent reporting of proxy votes?
    79. Certain types of funds, such as index funds and the majority of

[[Page 57498]]

exchange-traded funds, provide a degree of transparency as to their 
holdings more frequently than required by Form N-PORT. Transparency as 
to these funds' holdings arises as a result of either: (1) Full 
portfolio disclosure (in the case of transparent ETFs), or (2) the 
tracking of an index whose constituents and weightings are transparent 
(in the case of index funds). Because of this transparency, more 
frequent disclosure of these funds' proxy voting records might not 
contribute to the potential risks otherwise associated with such a 
requirement. Should the Commission require more frequent or timely 
disclosure of proxy voting information for these or other types of 
funds whose characteristics mitigate the risks of such a requirement?
    80. Should funds and managers file Form N-PX reports on the same 
schedule, as proposed? Are there reasons they should be subject to 
different reporting schedules?

G. Requests for Confidential Treatment

    The information filed on Form N-PX would be publicly available 
through the Commission's EDGAR system, as is information filed on Form 
13F.\194\ Certain managers filing reports on Form 13F request 
confidential treatment of certain or all the positions reported on 
their Form 13F, and those managers may request that confidential 
information reported on their Form 13F also be treated as confidential 
on their Form N-PX.\195\ Pursuant to 17 CFR 240.24b-2 under the 
Exchange Act (``rule 24b-2''), which governs requests for confidential 
treatment of information required to be filed under the Act, a manager 
can request confidential treatment of information reported on proposed 
Form N-PX.\196\
---------------------------------------------------------------------------

    \194\ See rule 80(c)(3) promulgated under the Freedom of 
Information Act [17 CFR 200.80(c)(3)] (stating that filings made 
through the EDGAR system are publicly available on the Commission's 
website).
    \195\ Requests for confidential treatment can be based either on 
a claim that the information would identify securities held by the 
account of a natural person or an estate or trust, other than a 
business trust or investment company, in which case the Commission 
is required to keep the information confidential indefinitely, or on 
a claim that the information is confidential commercial or financial 
information (consistent with the requirements of Freedom of 
Information Act (``FOIA'') Exemption 4), in which case the grant is 
discretionary and generally only for a period of time. See generally 
sections 13(f)(4) and (5) of the Exchange Act [15 U.S.C. 78m(f)(4)] 
[15 U.S.C. 78m(f)(5)]; Form 13F Instructions for Confidential 
Treatment Requests; Rulemaking for EDGAR System, Investment Company 
Act Release No. 23640 (Jan. 12, 1999) [64 FR 2843].
    \196\ See 17 CFR 240.24b-2; Confidential Treatment Instruction 1 
to proposed Form N-PX. The confidential treatment instructions we 
are proposing for Form N-PX are based on the Form 13F confidential 
treatment instructions, which apply in similar circumstances. See 
Form 13F Instructions for Confidential Treatment Requests.
---------------------------------------------------------------------------

    Managers seeking confidential treatment for information on their 
Form 13F are required to file multiple lists of securities. One, filed 
publicly, lists only those securities for which it is not seeking 
confidential treatment, as well as a statement indicating that 
confidential information has been omitted and filed with the 
Commission. Managers must also file a separate list including those 
securities positions for which the manager seeks confidential 
treatment. Confidential treatment granted by the Commission may be 
subject to an expiration date, as is often the case when confidential 
treatment is granted to protect commercial information, such as a 
position that is still being built. Therefore, when the confidential 
treatment period ends, or if the confidential treatment request is 
denied, the manager must file an additional report on Form 13F publicly 
disclosing those securities for which confidential treatment expired, 
or was denied.
    We are proposing instructions in Form N-PX that are designed to 
provide a similar opportunity to prevent confidential information that 
is protected from disclosure on Form 13F from being disclosed on Form 
N-PX.\197\ These instructions provide that a person requesting 
confidential treatment of information filed on Form N-PX should follow 
the same procedures set forth in Form 13F for filing confidential 
treatment requests. They also prescribe the required content of a 
confidential treatment request and the required filing of information 
that is no longer entitled to confidential treatment.\198\ For 
instance, the confidential treatment request would be required to 
provide enough factual support for the request, including a 
demonstration that the information is both customarily and actually 
kept private by the reporting person, and that release of this 
information could cause harm to the reporting person. Although this 
differs somewhat from the current language in Form 13F regarding 
confidential treatment requests, we are proposing this standard in Form 
N-PX to conform to a June 2019 U.S. Supreme Court decision that 
overturned the standard for determining whether information is 
``confidential'' under Exemption 4 of the FOIA on which the current 
Form 13F instruction is based.\199\
---------------------------------------------------------------------------

    \197\ Section 13(f)(4) of the Exchange Act provides that the 
Commission, as it determines to be necessary or appropriate in the 
public interest or for the protection of investors, may delay or 
prevent public disclosure of information filed on Form 13F in 
accordance with the Freedom of Information Act. Section 13(f)(4) 
also provides that any information filed on Form 13F that identifies 
the securities held by the account of a natural person or an estate 
or trust (other than a business trust or investment company) shall 
not be disclosed to the public. As a result, we are unable to 
conclude, in advance, that confidential treatment of information 
filed on Form N-PX could, under no circumstances, be appropriate as 
suggested by one commenter. See Barnard Letter.
    \198\ Confidential Treatment Instructions to proposed Form N-PX. 
Upon the final adverse disposition of a request for confidential 
treatment, or upon the expiration of the confidential treatment, a 
reporting person would be required to electronically submit within 
six business days an amendment to its Form N-PX reporting the 
previously confidential proxy voting information. See Confidential 
Treatment Instruction 7 to proposed Form N-PX. Such amendment 
specifically would make publicly available through the Commission's 
EDGAR system the proxy voting information that previously was 
confidential. In the event that the required amendment is not filed, 
the Commission could make the proxy voting information available to 
the public through other means.
    \199\ 5 U.S.C. 552(b)(4). See Food Marketing Institute v. Argus 
Leader Media, 139 S.Ct. 2356 (2019) (``Food Marketing v. Argus 
Leader'') (stating that ``[a]t least where commercial or financial 
information is both customarily and actually treated as private by 
its owner and provided to the government under an assurance of 
privacy, the information is `confidential' within the meaning of 
Exemption 4''); see also Reporting Threshold for Institutional 
Investment Managers, Exchange Act Release No. 89290 (July 10, 2020) 
[85 FR 46016 (July 31, 2020)] (proposing a similar conforming 
amendment to the confidential treatment instructions in Form 13F).
---------------------------------------------------------------------------

    In light of the public disclosure intent of section 14A(d) and the 
confidential treatment requirements of rule 24b-2 under the Exchange 
Act, we believe that confidential treatment generally would not be 
merited solely in order to prevent proxy voting information from being 
made public. One commenter on the 2010 Proposing Release suggested that 
we should expand the standards for requesting and obtaining 
confidential treatment to cover situations in which a manager has a 
confidentiality agreement with a client regarding disclosure of 
portfolio information.\200\ We do not believe that such a private 
agreement should override the requirement to report proxy voting 
information publicly. We believe that confidential treatment could be 
justified only in narrowly tailored circumstances. For example, 
confidential treatment may be justified when a manager has filed a 
confidential treatment request for information reported on Form 13F 
that is pending or has been granted and where confidential treatment of 
information filed on Form N-PX would be necessary in order to protect 
information that is the subject of such Form 13F confidential treatment 
request, and the information is also

[[Page 57499]]

customarily treated as private, non-public information by the 
manager.\201\
---------------------------------------------------------------------------

    \200\ Mayer Brown Letter.
    \201\ In the case of information that is not reported on Form 
13F but would have been the subject of a Form 13F confidential 
treatment request if it were required to be reported (for example, a 
de minimis position that is not required to be reported on Form 13F 
but would have been eligible for confidential treatment if it were 
required to be reported on the form), we would follow similar 
procedures and apply similar standards to those followed for reports 
on Form 13F in processing requests for confidential treatment of 
information filed on Form N-PX.
---------------------------------------------------------------------------

    Existing Form N-PX does not include any confidential treatment 
instructions and, apart from Form N-PX, funds already disclose their 
portfolio holdings.\202\ As a result, we are not aware of any situation 
in which confidential treatment would be justified under rule 24b-2 for 
information filed by funds on Form N-PX.
---------------------------------------------------------------------------

    \202\ Portfolio holdings information is required to be disclosed 
by funds on a quarterly basis with a 60-day lag, through semiannual 
shareholder reports pursuant to rule 30e-1 under the Investment 
Company Act [17 CFR 270.30e-1] and Form N-PORT [17 CFR 274.150]. An 
exception exists for ``miscellaneous securities'' comprising less 
than 5% of a fund's portfolio and held for less than one year, but 
the number of votes relating to the securities in that category is 
generally expected to be small because of its short-term nature.
---------------------------------------------------------------------------

    We request comment on the proposed provisions regarding 
confidential treatment requests, including the following:
    81. Should we modify the proposed confidential treatment provisions 
in any way? Would it be appropriate to tie the confidential treatment 
provisions for Form N-PX to the confidential treatment provisions for 
Form 13F, for example by automatically granting confidential treatment 
for positions reported on Form N-PX when confidential treatment has 
been granted for those positions on Form 13F?
    82. As proposed, should we require reporting persons to file 
confidential treatment requests for Form N-PX in the same manner as 
Form 13F requires? Are there reasons for the filing processes for 
confidential treatment requests to differ between the two forms? If so, 
what approach should we permit or require reporting persons to use to 
file confidential treatment requests for Form N-PX?
    83. Do the proposed instructions for confidential treatment 
requests appropriately reflect the current requirements of FOIA, 
including the effect of the U.S. Supreme Court's June 24, 2019, 
decision in Food Marketing Institute v. Argus Leader Media on the type 
of information that is required to substantiate confidential treatment 
in accordance with rule 24b-2 under the Exchange Act?
    84. Are there circumstances in which say-on-pay votes should be 
publicly disclosed but our proposal could permit confidential 
treatment? Alternatively, are there circumstances in which our proposal 
would require public disclosure of a say-on-pay vote but where 
confidential treatment should be granted? Please explain.
    85. Should we allow funds to request confidential treatment under 
some circumstances? For example, should we allow a fund to request 
confidential treatment of votes on securities that were reported in the 
``miscellaneous securities'' category of its most recent disclosure of 
its portfolio holdings? If so, why should the result under the proposed 
rule differ from the result under current Form N-PX?

H. Proposed Website Availability of Fund Proxy Voting Records

    When the Commission adopted Form N-PX in 2003, it also required a 
fund to disclose that its proxy voting record is available to 
shareholders, either on (or through) the fund's website or upon 
request.\203\ We understand that, currently, most funds make their 
proxy voting records available to shareholders upon request but do not 
provide this information on their websites. We are proposing amendments 
to Forms N-1A, N-2, and N-3 to require a fund to disclose that its 
proxy voting record is publicly available on (or through) its website 
and available upon request, free of charge in both cases.\204\ We 
believe this proposed change would make a fund's proxy voting record 
more accessible to investors. Investors' access to the internet has 
increased substantially since 2003, and many investors go to fund or 
intermediary websites to get information about a fund.\205\ Because the 
proposal would require funds to file Form N-PX reports in a custom XML 
language, we are proposing to specify that the proxy voting record the 
fund posts on its website and provides upon request must be in a human-
readable format. A fund could comply with this requirement by using the 
human-readable version of its Form N-PX report that would appear on 
EDGAR (e.g., by providing a direct link on its website to the HTML-
rendered Form N-PX report on EDGAR).
---------------------------------------------------------------------------

    \203\ See Form N-PX Adopting Release, supra footnote 7; Items 
17(f) and 27(d)(5) of Form N-1A; Items 18.16, 24.6.d, and 24.8 of 
Form N-2; Item 23(f) and Instructions 4(d) and 6 to Item 31(a) of 
Form N-3.
    \204\ See proposed amendments to Items 17(f) and 27(d)(5) of 
Form N-1A; proposed amendments to Items 18.16, 24.6.d, and 24.8 of 
Form N-2; proposed amendments to Item 23(f) and Instructions 4(d) 
and 6 to Item 31(a) of Form N-3. The Commission has proposed other 
amendments that would replace current Item 27(d)(5) of Form N-1A 
with disclosure about the availability of different types of 
information for investors, including proxy voting information. See 
Tailored Shareholder Reports, Treatment of Annual Prospectus Updates 
for Existing Investors, and Improved Fee and Risk Disclosure for 
Mutual Funds and Exchange-Traded Funds; Fee Information in 
Investment Company Advertisements, Investment Company Act Release 
No. 33963 (Aug. 5, 2020) [85 FR 70716 (Nov. 5, 2020)] (``Tailored 
Shareholder Reports Proposing Release''). If those amendments were 
to be adopted, we would not amend current Item 27(d)(5) of Form N-1A 
as part of this rulemaking because it would no longer exist in its 
current form.
    \205\ See, e.g., ICI Research Perspective, ``Ownership of Mutual 
Funds, Shareholder Sentiment, and Use of the internet, 2020'' (Nov. 
2020) (noting that 96 percent of households owning mutual funds had 
internet access in 2020, up from 68 percent in 2000), available at 
https://www.ici.org/system/files/attachments/per26-08.pdf; Tailored 
Shareholder Reports Proposing Release, supra footnote 204, at n.69 
and accompanying text.
---------------------------------------------------------------------------

    We also propose to make conforming changes to Form N-1A and Form N-
3 provisions that discuss how a fund may make its proxy voting record 
available on request to require a fund to provide the email address, if 
any, that an investor may use to request the proxy voting record. Form 
N-2 currently includes a similar provision, while Form N-1A and Form N-
3 only refer to a fund providing a toll-free telephone number.
    We request comment on our proposed amendments to Forms N-1A, N-2, 
and N-3 to require funds to disclose that their proxy voting records 
are available on websites and upon request, including the following:
    86. Should we require funds to disclose that their proxy voting 
records is publicly available on (or through) their websites, free of 
charge and in a human-readable format, as proposed? Why or why not?
    87. Should we only require a fund to disclose that its proxy voting 
record is publicly available on (or through) its website, and not also 
require disclosure that the record is available upon request? Do 
investors need the option to request a copy of a fund's proxy voting 
record, or is website availability sufficient? If we retain the 
availability upon request provisions, should we require a fund to 
provide the email address, if any, that investors can use to request 
the proxy voting record, as proposed? If not, why not? Are there any 
other changes we should make that relate to an investor's ability to 
request delivery of a fund's proxy voting record, including that relate 
to the timeframe in which a fund delivers the voting record?
    88. Are there other ways we could improve the accessibility of 
funds' proxy voting records for investors? Please explain.

[[Page 57500]]

I. Compliance Dates

    As described above, we are proposing that managers would be 
required to report their say-on-pay votes annually on Form N-PX not 
later than August 31 of each year, for the most recent 12-month period 
ended June 30.\206\ We are proposing compliance dates that would vary 
depending on when the amendments become effective relative to the 
form's reporting deadline.
---------------------------------------------------------------------------

    \206\ Proposed rule 14Ad-1(a); General Instruction A to proposed 
Form N-PX. For further discussion of the time of reporting 
provisions, see the discussion in Section II.F.
---------------------------------------------------------------------------

    In the 2010 Proposing Release, we proposed that the first reports 
under then-proposed rule 14Ad-1 and amended Form N-PX would be required 
to be filed by August 31, 2011 (the same calendar year as the earliest 
anticipated adoption date). A number of commenters requested a delay in 
filing due to the compliance burden during initial implementation, with 
some commenters suggesting a compliance date as late as August 31, 2012 
(i.e. one calendar year after the proposed compliance date),\207\ or 
covering votes beginning no earlier than six months after such proposed 
rule's effective date.\208\
---------------------------------------------------------------------------

    \207\ See, e.g., ICI Letter; ISS Letter; Glass Lewis Letter I.
    \208\ See Letter of Glass Lewis & Co. (June 3, 2011).
---------------------------------------------------------------------------

    We agree with commenters that a longer compliance period is 
appropriate to provide reporting persons with a sufficient transition 
period to implement the changes that would be needed to record and 
report the information required by amended Form N-PX. We similarly 
provided a period between the effective date and the beginning of 
required compliance when we adopted proxy vote reporting requirements 
for funds.\209\ We are therefore proposing that, if the amendments are 
effective six months before June 30, the first reports on amended Form 
N-PX would be required to be filed by the August 31 that follows the 
rule's effective date. For a fund, the first report would disclose 
votes occurring at least six months after the effective date in 
conformance with the amended form, while applicable votes occurring 
before this period could be reported in conformance with current form 
requirements. A manager's requirement to report votes would begin six 
months after the effective date, since managers are not currently 
subject to Form N-PX reporting requirements. For example, if the 
amendments become effective on September 1, 2022, reporting persons 
would be required to report votes occurring between March 1, 2023 and 
June 30, 2023 in compliance with the amended form and include those 
votes in a report filed by August 31, 2023.
---------------------------------------------------------------------------

    \209\ See Form N-PX Adopting Release, supra footnote 7, at 
Section III.
---------------------------------------------------------------------------

    If the amendments are not effective six months before June 30, 
funds and managers would be required to file their first reports on 
amended Form N-PX by August 31 of the first complete reporting 
timeframe following the effective date of the proposed rule. As with 
the prior compliance date alternative, the first reports would be 
required to disclose votes occurring six months after the effective 
date of the amendments and thereafter in conformance with the amended 
form. That is, if the proposed rule takes effect on February 1, 2022, 
the first reports on amended Form N-PX would be due on August 31, 2023. 
For a fund, the first report would cover the reporting period of July 
1, 2022 through June 30, 2023, with votes occurring between August 1, 
2022 and June 30, 2023 reported in conformance with the amended form. 
For a manager, the first report would cover votes occurring between 
August 1, 2022 and June 30, 2023.
    We believe that, under either alternative, the initial reporting 
period would allow reporting persons and their third-party service 
providers additional time to develop or modify the necessary systems in 
order to record and report information on amended Form N-PX.
    We are proposing to require funds to comply with the amendments to 
Form N-PX at the same time as managers. This also allows funds 
additional time to implement applicable new Form N-PX requirements in 
the current proposal, including structured data reporting requirements, 
new quantification requirements, and new requirements to identify proxy 
voting matters and proxy voting categories. The proposed compliance 
date also is intended to provide a uniform mechanism of reporting votes 
at meetings that occur during the first reporting timeframe after the 
effective date of the proposed rule, because funds would be permitted 
to report say-on-pay votes for managers. As is currently the case, 
funds would be required to comply with current Form N-PX requirements 
until the end of the compliance period.
    We request comment on the proposed compliance dates, and in 
particular, on the following issues:
    89. Would the proposed compliance dates provide adequate time for 
managers that would be required to file Form N-PX for the first time 
and for funds that would be required to comply with the proposed 
amendments to Form N-PX? What, if any, implementation issues would 
managers and funds encounter in complying with the proposed rule and 
form amendments, and how should we address those issues (e.g., permit 
delayed filing for the first full reporting period after the rule is 
enacted)?
    90. Should we provide different compliance dates for managers or 
funds to comply with certain provisions of the proposal? For example, 
should the compliance date for structured data reporting differ from 
the compliance date for other amendments to Form N-PX?

J. Transition Rules for Managers

    We are proposing, as we did in the 2010 proposal, transition rules 
that govern the timing of a manager's Form N-PX filing obligations 
whenever the manager enters and exits from the obligation to file Form 
13F reports.\210\ In particular, the proposal would not require a 
manager to file a Form N-PX report for the 12-month period ending June 
30 of the calendar year in which the manager's initial filing on Form 
13F is due.\211\ Instead, the manager would be required to file a 
report on Form N-PX for the period ending June 30 for the calendar year 
following the manager's initial filing on Form 13F. For example, assume 
that a manager does not meet the $100 million threshold test on the 
last trading day of any month in 2023 but does meet the $100 million 
threshold test on the last trading day of at least one month in 2024. 
As a result, under the rules that currently apply to Form 13F, the 
manager would be required to file a Form 13F report no later than 
February 15, 2025, for the period ending December 31, 2024.\212\ 
Additionally, under proposed rule 14Ad-1(b), the manager would be 
required to file a Form N-PX report no later than August 31, 2026, for 
the 12-month period from July 1, 2025, through June 30, 2026.\213\ The 
following chart

[[Page 57501]]

illustrates the timing of the entrance of a manager to its obligation, 
under the proposed rule, to file Form N-PX.
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    \210\ For commenters supporting the transition rule, see ABA 
Letter; Fidelity Letter.
    \211\ Proposed Rule 14Ad-1(b); General Instruction F to proposed 
Form N-PX. For this purpose, an ``initial filing'' on Form 13F means 
any quarterly filing on Form 13F if no filing on Form 13F was 
required for the immediately preceding calendared quarter. Id.
    \212\ Currently, under rule 13f-1, the obligation to file Form 
13F arises when a manager exercises investment discretion over 
accounts holding at least $100 million in section 13(f) securities 
as of the ``last trading day of any month of any calendar year.'' 
However, the manager's obligation to file Form 13F commences with 
the report for December 31 of that year, which is required to be 
filed within 45 days after December 31. Rule 13f-1(a)(1); General 
Instruction 1 to Form 13F. See rule 0-3 under the Exchange Act [17 
CFR 240.0-3].
    \213\ Proposed Rule 14Ad-1(b); General Instruction F to proposed 
Form N-PX.

                                            Initial Form N-PX Filing
----------------------------------------------------------------------------------------------------------------
     Date filer exceeds reporting       First Form 13F filing    First proxy reporting
              threshold                          due                     period            First Form N-PX due
----------------------------------------------------------------------------------------------------------------
Mar. 31, 2023........................  Feb. 15, 2024..........  July 1, 2024-June 30,    Aug. 31, 2025.
                                                                 2025.
Dec. 31, 2023........................  Feb. 15, 2024..........  July 1, 2024-June 30,    Aug. 31, 2025.
                                                                 2025.
Jan. 31, 2024........................  Feb. 15, 2025..........  July 1, 2025-June 30,    Aug. 31, 2026.
                                                                 2026.
----------------------------------------------------------------------------------------------------------------

    In addition we are proposing, as we did in the 2010 Proposing 
Release, to not require a manager to file a report on Form N-PX with 
respect to any shareholder vote at a meeting that occurs after 
September 30 of the calendar year in which the manager's final filing 
on Form 13F is due.\214\ Instead, the manager would be required to file 
a report on Form N-PX for the period July 1 through September 30 of the 
calendar year in which the manager's final filing on Form 13F is due. 
This short-period Form N-PX filing would be due no later than March 1 
of the immediately following calendar year.\215\ A manager's obligation 
to file Form 13F reports always terminates with the September 30 
report, and the transition rule we are proposing conforms the ending 
date for reporting say-on-pay votes with the ending date for Form 13F 
reporting.\216\ The proposed February 28 due date would provide a two-
month period for filing after December 31, when the manager's Form 13F 
filing status would be conclusively determined for the coming 
year.\217\
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    \214\ Proposed Rule 14Ad-1(c); General Instruction F to proposed 
Form N-PX. For this purpose, a ``final filing'' on Form 13F means 
any quarterly filing on Form 13F if no filing on Form 13F is 
required for the immediately subsequent calendar quarter. Id.
    \215\ Proposed Rule 14Ad-1(c); General Instruction F to proposed 
Form N-PX.
    \216\ See rule 13f-1(a) (manager that meets $100 million 
threshold on last trading day of any month of any calendar year is 
required to file Form 13F for December 31 of that year and the first 
three calendar quarters of the subsequent calendar year).
    \217\ A manager is required to file a report on Form 13F in the 
coming year if it meets the $100 million threshold on the last 
trading day of any month of the current calendar year. As a result, 
in cases where the manager does not meet the threshold in January 
through November, its status will not be determined until December 
31.
---------------------------------------------------------------------------

    For example, assume that a manager ceases to meet the $100 million 
threshold in 2023. In other words, the manager meets the threshold on 
at least one of the last trading days of the months in 2022, but does 
not meet the threshold on any of the last trading days of the months in 
2023. The manager's final report on Form 13F would be filed for the 
quarter ended September 30, 2023. The manager's final report on Form N-
PX would include all say-on-pay votes cast during the period from July 
1, 2023, through September 30, 2023, and would be required to be filed 
no later than March 1, 2024. The following chart illustrates the timing 
of the exit of a manager from its obligation to file Form N-PX.

                                             Final Form N-PX Filing
----------------------------------------------------------------------------------------------------------------
                                        Final Form  13F filing   Final Proxy  reporting
 Date filer ceases to meet threshold             due                     period            Final Form  N-PX due
----------------------------------------------------------------------------------------------------------------
Mar. 30, 2023........................  Nov. 14, 2024..........  July 1, 2024-Sept. 30,   Mar. 1, 2025.
                                                                 2024.
Dec. 30, 2023........................  Nov. 14, 2024..........  July 1, 2024-Sept. 30,   Mar. 1, 2025.
                                                                 2024.
Feb. 1, 2024.........................  Nov. 14, 2025..........  July 1, 2025-Sept. 30,   Mar. 1, 2026.
                                                                 2025.
----------------------------------------------------------------------------------------------------------------

    We request comment on the proposed transition rules for managers 
required to file Form N-PX reports and, in particular, on the 
following:
    91. The proposal would not require a manager to file a Form N-PX 
report for the 12-month period ending June 30 of the calendar year in 
which the manager's initial filing on Form 13F is due. Is this 
transition rule appropriate for managers entering the Form 13F and Form 
N-PX filing requirements, or is some other rule more appropriate? For 
example, should we require a manager to report say-on-pay votes for the 
period commencing January 1 (rather than July 1) of the calendar year 
in which the manager's initial filing on Form 13F is due? Instead 
should we require a manager to report say-on-pay votes for the period 
commencing on the first day of the month immediately following the date 
on which it meets the $100 million threshold?
    92. Should we, as proposed, not require a manager to file a Form N-
PX report with respect to any shareholder vote at a meeting that occurs 
after September 30 of the calendar year in which the manager's final 
filing on Form 13F is due? Should we instead require a manager to 
report say-on-pay votes cast at meetings that occur during some period 
after September 30 of the calendar year in which the manager's final 
filing on Form 13F is due? If so, what should that period be?

K. Technical and Conforming Amendments

    We are proposing, as we did in the 2010 Proposing Release, two 
technical and conforming amendments. First, we are proposing to amend 
the heading of Subpart D of Part 249 of the Code of Federal Regulations 
to include new section 14A of the Exchange Act and to indicate that 
Exchange Act reports are filed by both issuers and other persons (e.g., 
managers). We are also proposing amendments to reflect the fact that 
Form N-PX would be an Exchange Act form, as well as an Investment 
Company Act form.\218\
---------------------------------------------------------------------------

    \218\ Rule 30b1-4; 17 CFR 249.326 and 274.129.
---------------------------------------------------------------------------

III. General Request for Comments

    The Commission requests comment on the rule and form amendments 
proposed in this release, whether any changes to our rules or forms are 
necessary or appropriate to implement the objectives of our proposed 
rule and form amendments, and other matters

[[Page 57502]]

that might affect the proposals contained in this release.

IV. Economic Analysis

A. Introduction

    The Commission is proposing to amend Form N-PX to enhance the 
information funds currently report annually about their proxy votes on 
both executive compensation and other matters to make these reports 
more informative and easier to analyze. The proposed amendments to Form 
N-PX would standardize the order in which reporting persons disclose 
information, categorize votes, structure and tag the data reported, and 
make the description of proxy voting issues consistent across multiple 
filings. The proposed amendments would also provide additional 
information about the extent to which a fund votes or loans its shares. 
The Commission is also proposing rule and form amendments that would 
complete the implementation of section 951 of the Dodd-Frank Act by 
requiring a manager to report how it voted proxies relating to 
executive compensation matters. Specifically, the proposed rule and 
form amendments would require managers to report their say-on-pay votes 
annually on Form N-PX.
    The Commission is sensitive to the economic effects, including the 
costs and benefits, imposed by the proposed rule and form amendments. 
At the outset, the Commission notes that, where practicable, we have 
attempted to quantify the costs, benefits, and effects on efficiency, 
competition, and capital formation expected to result from the proposed 
rule and form amendments. In some cases, however, data needed to 
quantify these economic effects are not currently available to the 
Commission or otherwise publicly available. For example, there would be 
costs and benefits associated with managers disclosing information 
about their votes on executive compensation. Those costs and benefits 
may depend on existing levels of voluntary disclosure by managers and 
the extent to which they exercise voting power on behalf of funds 
because such votes are already reported on Form N-PX, and the proposal 
would not require managers to report them separately. Furthermore, 
costs associated with the proposal may depend on existing systems and 
levels of technology expertise within the funds and managers, which 
could differ substantially across reporting persons.\219\
---------------------------------------------------------------------------

    \219\ We do not anticipate any significant costs associated with 
the technical and conforming amendments discussed in supra Section 
II.K.
---------------------------------------------------------------------------

B. Economic Baseline and Affected Parties

    The economic baseline against which we measure the economic effects 
of this rule, including its potential effects on efficiency, 
competition, and capital formation, is the state of the world as it 
currently exists.
1. Funds' Reporting of Proxy Voting Records
    Due to funds' significant voting power and the effects of funds' 
proxy voting practices on the actions of corporate issuers and the 
value of these issuers' securities, investors have an interest in how 
funds vote.\220\ Since 2003, funds have used Form N-PX to report their 
proxy voting records annually for each matter relating to a portfolio 
security considered at any shareholder meeting held during the 
reporting period and with respect to which the fund was entitled to 
vote. In 2020, we estimate that there were approximately 2,087 funds 
with total assets of $29.86 trillion that were required to file reports 
on Form N-PX.\221\
---------------------------------------------------------------------------

    \220\ See, e.g., Stuart Gillan and Laura Starks, ``The Evolution 
of Shareholder Activism in the United States.'' Journal of Applied 
Corporate Finance, Volume 19 (2007).
    \221\ These estimates are based on staff review of Form N-CEN 
filings of management investment companies registered with the 
Commission as of December 2020.
---------------------------------------------------------------------------

    On the current Form N-PX, among other things, a fund discloses 
whether it cast its votes on each proposal, how it voted (e.g., for or 
against the proposal, or abstained), and whether any votes cast were 
for or against management recommendations. Although the form specifies 
the information that each fund must provide, it does not specify the 
format of the disclosure or how funds must present or organize the 
information. Reports on Form N-PX also are not currently filed in a 
machine-readable, or ``structured,'' data language. Investors can 
access a fund's Form N-PX filings online through the EDGAR website. 
Funds also must disclose that their proxy voting records are available 
to investors either upon request or on (or through) their websites, 
with most funds disclosing that this information is available upon 
request.
    Current Form N-PX reports advanced transparency into fund voting. 
However, these reports can be difficult for investors to read and 
analyze. For example, under the current rules, Form N[hyphen]PX is 
routinely filed as a large HTML or plain[hyphen]text (ASCII) file. Many 
funds use automated systems to produce their Form N[hyphen]PX records, 
which is often a simple output from a database maintained by the filer 
that covers meetings, proposals, and votes over a given period. A fund 
may own hundreds of securities, sorted by firm, each of which may have 
ten or more proposals each year. As a result, Form N-PX reports 
disclosing proxy voting records for all securities and proposals can be 
overwhelmingly long.\222\ Investors also may have difficulty finding a 
particular fund's voting history within a single Form N-PX filing. Many 
fund complexes include information about several different funds in a 
single Form N-PX report, given the structure of many funds as series of 
a trust.
---------------------------------------------------------------------------

    \222\ See supra footnote 17.
---------------------------------------------------------------------------

    Funds also often use their own descriptions and abbreviations when 
describing a particular voting matter, which differ from the 
descriptions on an issuer's form of proxy. This can make it difficult 
for investors to identify a particular voting matter or category of 
similar voting matters, and to compare funds' voting records.
    In addition to difficulties to collect and analyze the data 
provided on Form N-PX, certain gaps in the required current disclosure 
may provide an incomplete picture of a fund's proxy voting practices. 
For example, current Form N-PX does not require funds to provide 
information about the potential effects of a fund's securities lending 
activities on its proxy voting. A fund's securities lending activities 
can generate additional income for the fund and its shareholders. 
However, when a fund lends its portfolio securities, it transfers 
incidents of ownership, including proxy voting rights, for the duration 
of the loan. As a result, the fund loses its ability to vote the 
proxies of such securities, unless the securities are recalled, the 
loan is terminated and the securities are returned to the fund before 
the record date for the vote. Current Form N-PX does not provide 
information about this effect.
2. Managers' Reporting of Say-on-Pay Votes
    Section 951 of the Dodd-Frank Act added new section 14A to the 
Exchange Act requiring issuers to provide shareholders with a vote on 
say-on-pay matters, and requires managers to report how they voted on 
those matters. Section 14A generally requires public companies to hold 
non-binding say-on-pay shareholder advisory votes to: (1) Approve the 
compensation of its named executive officers; (2) determine the 
frequency of such votes; and (3) approve ``golden parachute'' 
compensation in connection with a merger or acquisition.

[[Page 57503]]

Section 14A(d) requires that every manager report at least annually how 
it voted on say-on-pay votes, unless such vote is otherwise required to 
be reported publicly. However, there are currently no rules or forms in 
place governing how managers are to comply with their reporting 
obligation under section 14A(d).\223\ Some managers, such as public 
pension funds, do disclose their proxy voting records on their 
websites, although we understand that their disclosures generally do 
not contain quantitative information and presentation practices of 
website reporting vary across managers. Adopting say-on-pay vote 
reporting requirements for managers would complete implementation of 
section 951 of the Dodd-Frank Act.
---------------------------------------------------------------------------

    \223\ Although managers are not currently required to file 
reports on Form N-PX, there is a subset of managers that advise 
funds, and each of these funds is required to report its own proxy 
voting record, including say-on-pay votes, annually on Form N-PX.
---------------------------------------------------------------------------

    As of March 31, 2021, 7,550 managers with investment discretion 
over approximately $39.79 trillion in section 13(f) securities.\224\
---------------------------------------------------------------------------

    \224\ These estimates are based on staff review of Form 13F 
filings covering the first quarter of 2021. See also supra footnote 
24 and infra footnote 265.
---------------------------------------------------------------------------

C. Costs and Benefits

1. Amendments to Funds' Reporting of Proxy Votes
a. Benefits
    The fund-related proposed amendments to Form N-PX would benefit 
fund investors, other market participants, and other proxy voting data 
users,\225\ by enhancing the information funds currently report about 
their proxy votes and making that information easier to collect and 
analyze. The proposed amendments include the following principal 
elements: (1) Requiring the disclosure of information about the number 
of shares that were voted (or instructed to be voted) and the number of 
shares that a fund loaned and did not recall before the record date for 
the vote; (2) requiring that funds describe a voting matter using the 
description in the issuer's form of proxy; (3) requiring funds to 
categorize voting matters by type; (4) requiring funds to report 
information in a standardized order and provide disclosure separately 
by series of shares; (5) requiring the reporting of information on Form 
N-PX in a custom XML language created specifically for Form N-PX; and 
(6) requiring funds to disclose that their proxy voting records are 
publicly available on (or through) their websites and available upon 
request, free of charge in both cases.
---------------------------------------------------------------------------

    \225\ Other proxy voting data users include, for example, 
regulators such as the Commission, proxy voting advisers, equity 
analysts, corporate issuers, and third-party data providers.
---------------------------------------------------------------------------

    The amendments are designed to facilitate the benefits the 
Commission sought to provide with Form N-PX as articulated in the 
adopting release, namely: (1) To provide better information to 
investors who wish to determine to which fund managers they should 
allocate their capital, and whether their existing fund managers are 
adequately maximizing the value of their shares; (2) to deter fund 
voting decisions that are motivated by considerations of the interests 
of a fund's adviser rather than the interests of the fund's investors; 
and (3) to provide stronger incentives for fund managers to vote their 
proxies carefully.\226\ One academic study suggests that, currently, 
investors may be less inclined to use information provided in Form N-PX 
because the costs of gathering and understanding more granular details 
about the fund's proxy voting exceed the benefits.\227\
---------------------------------------------------------------------------

    \226\ Form N-PX Adopting Release, supra footnote 7. The 
discussion of the interests of funds' investors is not intended to 
describe the interests of any particular investor or investors, but 
instead refers to the fund's investors, considered as a whole.
    \227\ See Jonathon Zytnick, ``Do Mutual Funds Represent 
Individual Investors?'' NYU Law and Economics Research Paper No. 21-
04 (March 7, 2021) at page 4, (finding ``evidence consistent with 
limited attention, in which the costs [to shareholders] of acquiring 
more granular detail about funds, as compared to readily available 
information, exceed the benefits''), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3803690.
---------------------------------------------------------------------------

    We expect that the proposed amendments to the Form N-PX format and 
content would help investors and other data users more easily collect 
and analyze proxy voting information, resulting in lower costs of 
gathering and understanding this information. Specifically, the 
proposed amendments would require funds to use a consistent and 
standardized description, categorize voting matters, report in a custom 
XML data language, and make the form available on the fund's website 
and provide it to investors upon request, free of charge in both cases. 
We also expect these amendments could facilitate comparisons of voting 
patterns across a wide range of funds or within an individual fund over 
time. To the extent that investors choose among funds based on their 
proxy voting policies and records, in addition to other factors such as 
expenses, performance, and investment policies, we expect that 
investors would be able to select funds that suit their preferences 
more efficiently.
    We expect additional benefits to investors and other proxy voting 
data users from accessing the new information on the amended Form N-PX 
regarding the number of shares voted and the number of shares loaned. 
We believe that this additional information could benefit investors and 
other data users by helping them understand the scope of a fund's 
participation in proxy voting activities, the fund's voting 
preferences, and the fund's ability to affect the outcome of 
shareholder votes and influence the governance of corporate issuers. As 
an example, the additional transparency the proposal would provide may 
help assess concerns regarding the extent to which loaned shares could 
be used to sway proxy votes towards outcomes that enhance borrowers' 
private benefits instead of outcomes considered beneficial for funds' 
shareholders.\228\
---------------------------------------------------------------------------

    \228\ It may be possible that investors who borrow securities 
primarily to obtain votes could sway proxy votes towards outcomes 
that enhance their private benefits instead of outcomes considered 
beneficial for funds' shareholders. Hu and Black (2008) provide 
examples of situations when the use of borrowed shares may have 
swayed the outcome of a shareholder vote. See Henry Hu and Bernard 
Black, ``Equity and Debt Decoupling and Empty Voting: II Importance 
and Extensions.'' University of Pennsylvania Law Review, Volume 156 
(2008). To date, we are not aware of evidence on whether such voting 
with borrowed shares occurs on a regular basis or whether it has a 
significant effect on proxy voting outcomes.
---------------------------------------------------------------------------

    In light of the increased transparency the amendments would provide 
on fund voting, the proposal may also provide an incentive for fund 
managers to devote additional time and resources to their participation 
in voting proxies, which could lead to an improvement in the 
performance of corporate issuers and enhance shareholder wealth.\229\ 
Academic research provides some evidence that actively voting funds 
help sway shareholder votes toward value-maximizing outcomes when 
voting on the matters such as CEO turnover, executive compensation, 
anti-takeover provisions, and mergers.\230\ We note that

[[Page 57504]]

these potential corporate governance improvements resulting from more 
active participation in proxy voting by funds could have a positive 
externality effect as the benefits would be accessible to all equity 
holders, and not limited to fund investors.
---------------------------------------------------------------------------

    \229\ See Peter Iliev and Michelle Lowry, ``Are Mutual Funds 
Active Voters?'' Review of Financial Studies, Volume 28 Issue 2 
(2015); Vincente Cunat, Mireia Gine, and Maria Guadalupe, ``The Vote 
is Cast: The Effect of Corporate Governance On Shareholder Value.'' 
Journal of Finance, Volume 67 Issue 5 (2012). (finding that passing 
a governance provision is associated with an increase in shareholder 
value, and more so when proposals are sponsored by institutional 
investors).
    \230\ See, e.g., Angela Morgan, Annette Poulsen, Jack Wolf, and 
Tina Yang, ``Mutual Funds as Monitors: Evidence from Mutual Fund 
Voting.'' Journal of Corporate Finance, Volume 17 (2011). (finding 
that, ``in general, mutual funds vote more affirmatively for 
potentially wealth-increasing proposals and funds' voting approval 
rates for these beneficial resolutions are significantly higher than 
those of other investors''). See also Jean Helwege, Vincent 
Intintoli, and Andrew Zhang, ``Voting with Their Feet or Activism? 
Institutional Investors' Impact on CEO Turnover.'' Journal of 
Corporate Finance, Volume 18 Issue 1 (2012) for a review of the 
literature.
---------------------------------------------------------------------------

    In addition, the proposed amendments to the format and content of 
Form N-PX may also help deter fund votes motivated by conflicts of 
interest that compromise the fund's voting on proposals considered 
beneficial for the fund's investors.\231\ For example, some academic 
research finds that mutual funds' proxy voting may be affected by their 
business ties with the portfolio firms where the fund's adviser also 
manages the firm's pension plan, as well as through personal 
connections between fund managers and corporate executives.\232\ More 
generally, fund managers' proxy voting decisions may be driven by their 
economic interest in attracting more business for the fund.\233\ A 
fund's proxy voting also may be affected by the fund manager's personal 
preferences that do not align with the best interests of the fund's 
investors.\234\
---------------------------------------------------------------------------

    \231\ See, e.g., Gerald Davis and Han Kim, ``Business Ties and 
Proxy Voting by Mutual Funds.'' Journal of Financial Economics, 
Volume 85 Issue 2 (2007) (``To the extent that good corporate 
governance leads to higher valuations, fund managers have incentives 
to use their voting power to demand good corporate governance and 
accept (reject) proposals that may benefit (harm) investors. 
However, such fiduciary responsibilities may be compromised if 
mutual fund parents manage employee benefit plans (such as 401(k) 
plans) for their portfolio firms at the behest of management.''). 
According to the article, on average, earnings from 401(k)-related 
business equal 14% of the revenues that mutual fund families earn 
from their equity funds, and such income can represent as much as 
25% of fund family revenues.
    \232\ See, e.g., Ashraf, Jayaraman, and Ryan (2012) find that 
``fund families support management when they have pension ties to 
the firm'' and Cvijanovic, Dasgupta, and Zachariadis (2016) find 
that ``business ties significantly influence pro-management voting 
at the level of individual pairs of fund families and firms.'' 
Butler and Gurun (2012) observe that ``mutual funds whose managers 
are in the same educational network as the firm's CEO are more 
likely to vote against shareholder-initiated proposals to limit 
executive compensation than out-of-network funds are.'' See Rasha 
Ashraf, Narayanan Jayaraman, and Harley Ryan, ``Do Pension-Related 
Business Ties Influence Mutual Fund Proxy Voting? Evidence from 
Shareholder Proposals on Executive Compensation.'' Journal of 
Financial Quantitative Analysis, Volume 47 Issue 03 (2012); Dragana 
Cvijanovic, Amil Dasgupta, and Konstantinos Zachariadis, ``Ties That 
Bind: How Business Connections Affect Mutual Fund Activism'', 
Journal of Finance, Volume 71 Issue 6 (2016); Gerald Davis and Han 
Kim, ``Business Ties and Proxy Voting by Mutual Funds.'' Journal of 
Financial Economics, Volume 85 Issue 2 (2007); and Alexander Butler 
and Umit Gurun, ``Educational Networks, Mutual Fund Voting Patterns, 
and CEO Compensation.'' Review of Financial Studies, Volume 25 Issue 
8 (2012).
    \233\ See, e.g., Lucian Bebchuk, Alma Cohen, and Scott Hirst, 
``The Agency Problems of Institutional Investors.'' Journal of 
Economic Perspectives, Volume 31 Number 3 (2017) (discussing that 
fund managers' proxy voting decisions may be driven by their 
economic interest in attracting more business for the fund rather 
than engaging in generating governance gains at portfolio 
companies.) The Commission has brought at least one enforcement 
action against a registered investment adviser for having proxy 
voting policies that did not address material potential conflicts 
when the adviser selected voting guidelines explicitly favored by 
certain clients to vote all its clients' securities, in order to 
improve the adviser's ranking in a third-party proxy voting survey. 
See, In the Matter of INTECH Investment Management LLC, Investment 
Advisers Act Release No. 2872 (May 7, 2009) (settled order).
    \234\ See, e.g., Paul Mahoney and Julia Mahoney, ``The New 
Separation of Ownership and Control: Institutional Investors and 
ESG.'' Columbia Business Law Review, Volume 2 Number 2 (2021).
---------------------------------------------------------------------------

    To the extent that the increased transparency about fund's proxy 
votes, resulting from the proposed amendments, would provide an 
incentive for fund managers to focus more on shareholder value 
maximization, this could lead to an improvement in the performance of 
corporate issuers and enhance shareholder value. We note that assets 
held in funds account for approximately 30% of the market 
capitalization of all publicly traded U.S. corporations as of year-end 
2020, and therefore funds have the ability to exercise a considerable 
amount of influence in proxy votes which could affect the value of 
these corporations.\235\
---------------------------------------------------------------------------

    \235\ ICI 2020 Fact Book, supra footnote 5, Figure 2.7.
---------------------------------------------------------------------------

b. Costs
    The proposed amendments to Form N-PX would lead to some additional 
costs for funds. Any portion of these costs that is not borne by a 
fund's adviser or other sponsor would ultimately be borne by the fund's 
shareholders. Direct costs for funds would consist of both internal 
costs (for compliance attorneys and other non-legal staff of a fund, 
such as computer programmers, to prepare and review the required 
disclosure) and external costs (such as any costs associated with 
third-party service providers to collect and report the information 
disclosed in Form N-PX).\236\
---------------------------------------------------------------------------

    \236\ Based on the results of the PRA analysis provided in Table 
2, it is estimated that the annual direct costs attributable to 
information collection requirements in the proposed amendments for 
funds that hold equity securities would be approximately $6,577 per 
fund, which consists of $6,077 in internal costs and $500 in 
external costs. For funds not holding equity securities, the direct 
costs are not expected to change. For funds of funds, the direct 
costs would comprise internal and external costs and are estimated 
at $414 per fund. These annual direct costs include both ongoing, 
and initial costs, with the latter being amortized over three years.
---------------------------------------------------------------------------

    We anticipate that any additional direct costs associated with the 
proposed amendments aimed at reducing the costs of accessing and 
gathering proxy voting information for investors and other users of the 
data--the requirements to use a custom XML language and to publish 
proxy voting records on the fund's website--would be relatively low 
given that funds already accommodate similar requirements in their 
other reporting and can utilize their existing capabilities for 
preparing and publishing an updated Form N-PX.
    Indirect costs for funds would include the costs associated with 
additional actions that funds may decide to undertake in light of the 
increased transparency of their voting records and practices. To the 
extent that the proposed amendments provide an incentive for fund 
managers to devote additional time and resources to voting proxies, 
this may result in additional expenses for funds, some of which may be 
passed on to funds' investors. Also, as a result of the increased 
scrutiny by investors, a fund may be incentivized to vote against an 
issuer firm's management with whom the fund has business ties. This 
could jeopardize the fund's relationship with the client firm and 
result in lost revenue if the firm decides to relocate their employee 
benefit accounts elsewhere.
    The proposed requirement for funds to disclose the number of shares 
a fund voted and the number of shares the fund loaned and did not 
recall for voting could reduce the fund's proceeds from securities 
lending, which would reduce returns to the fund's investors.\237\ 
Specifically, in light of the increased transparency the amendments 
would provide on funds' securities lending activities, some funds may 
decide to recall their loaned securities to be able to vote the proxies 
of these securities. A change in the fund's lending activity could also 
affect the fund's adviser and its affiliates. For example, some funds 
use securities lending agents that are affiliated with the fund's 
adviser and that are compensated in their role as agent with a share of 
the proceeds generated by the lending program.
---------------------------------------------------------------------------

    \237\ Based on Form N-CEN filings received through May 2021, 67% 
of funds were authorized to engage and 40% participated in lending 
their securities. Funds that lent their securities reported 
aggregate net income from securities lending in the last year of 
$2.663 billion, representing an average of 0.036% of average total 
net assets in the last year.
---------------------------------------------------------------------------

    However, we expect the scope of the possible impact of the proposed 
amendments on funds' securities

[[Page 57505]]

lending practices and income would be limited for the following 
reasons:
     First, according to a survey of institutional investors 
referenced in one academic study, 37.9% of the respondents stated that 
a formal policy on securities lending is part of their proxy voting 
policy, with some institutional investors requiring a total recall of 
shares ahead of proxy voting, while others weigh the lost income from 
securities lending against the benefits of voting on a specific 
proposal.\238\ For funds with such existing securities lending 
policies, we expect no changes to their lending practices as a result 
of the proposed amendments.
---------------------------------------------------------------------------

    \238\ See, e.g., Aggarwal et al. (2015) at page 2314, supra 
footnote 20.
---------------------------------------------------------------------------

     Second, even if some funds decide to recall loaned 
securities ahead of proxy voting, we anticipate that these funds would 
lend their shares again immediately after the vote record date, thus 
resuming the income stream obtained through security lending. This is 
consistent with findings in academic research showing that the supply 
of shares available to lend starts to decrease about 20 days before the 
vote record date and it increases to its pre-event levels immediately 
after the vote record date.\239\ Therefore, we expect that the lost 
income to the funds from recalling their loaned shares to participate 
in proxy voting would be limited to the income from securities lending 
that could have been generated over the recall period.
---------------------------------------------------------------------------

    \239\ See id at page 2316.
---------------------------------------------------------------------------

     Third, we expect that funds would factor income from 
securities lending, among other considerations, into their lending 
decision and recall loaned securities when they expect the value of 
their voting rights would exceed lost income from securities lending. 
This is consistent with findings in academic research showing that the 
recall of shares ahead of the voting record date is sensitive to the 
borrowing fee and that recall is lower if the fee paid by borrowers is 
higher.\240\ Therefore, if, under the proposed amendments, some funds 
decided to recall their loaned shares to be able to participate in 
proxy voting, we anticipate that the fund managers will have determined 
that the benefits to these funds associated with their decision would 
outweigh the potential loss of lending income.
---------------------------------------------------------------------------

    \240\ See id at page 2328.
---------------------------------------------------------------------------

    Since stock loans can be used for many different purposes, 
including short selling and arbitrage and hedge trading strategies, 
changes in funds' securities lending practices could have an impact on 
these activities, which may impose additional costs on market 
participants. However, as discussed earlier, we would expect the 
securities lending supply to be largely unaffected by the proposed 
amendments and, therefore, we would expect other market activities that 
rely on securities lending to be largely unaffected too. If, as a 
result of increased transparency under the proposed amendments, some 
funds decide to recall their loaned shares, we expect the impact of 
this change on other related market activities such as short selling 
and arbitrage trading to be limited for the following reasons:
     As discussed earlier, we would expect the recall to be 
short-term and funds to return to their normal securities lending 
practices immediately after the vote record date. Therefore, we 
anticipate that other market activities that rely on securities lending 
would also return to normal levels after the vote record date.
     Additionally, we expect that the market for securities 
lending has sufficient depth to withstand these short-term recalls by 
some funds ahead the voting record date without experiencing 
significant changes. One academic study shows that the equity lending 
market has a slack in supply with approximately a quarter of a 
corporate issuer's market capitalization typically available for 
lending and less than one-fifth of these shares being on loan.\241\ 
Therefore, we expect that if some funds decided to recall their 
securities to participate in proxy voting, other lenders would step in 
to supply shares for loan on similar terms. This is consistent with 
findings in academic research showing that changes in borrowing fees 
during the recall period tend to be economically small or 
insignificant.\242\
---------------------------------------------------------------------------

    \241\ See id at page 2315.
    \242\ See id at page 2327. See also Susan Christoffersen, 
Cristopher Geczy, David Musto, and Adam Reed, ``Vote Trading and 
Information Aggregation.'' Journal of Finance, Volume 62 Issue 6 
(2007) at page 2912.
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     The impact on borrowing fees could be more pronounced for 
hard-to-borrow stocks such as stocks with low lendable supply and/or 
high borrowing demand, also known as ``special.'' \243\ If funds 
recalled a significant number of shares of such stocks ahead of the 
vote record date, it may potentially have an impact on the stock 
price.\244\ However, ``special'' stocks are typically associated with 
higher borrowing fees \245\ and, therefore, funds may be more reluctant 
to recall these shares from loans if the income from lending them 
exceeds the benefits of participating in proxy voting. For example, one 
academic study shows that lendable supply of ``special'' stocks changes 
by less than that of the non-special stocks prior to the vote record 
date.\246\ Therefore, we expect that the proposed amendments are 
unlikely to have an impact on securities lending and other related 
market activities for these stocks.
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    \243\ The Aggarwal et al. (2015) study estimated that such 
special stocks represented about 9% of their considered equity 
lending sample, which covers more than 85% of the securities lending 
market. The study finds that ``special'' stocks have a higher 
average annualized borrowing fee of 429 basis points, compared with 
a fee of 9.3 basis points for the non-special stocks.
    \244\ See, e.g. Jesse Blocher, Adam Reed, and Edward Van Wesep, 
``Connecting Two Markets: An Equilibrium Framework for Shorts, 
Longs, and Stock Loans.'' Journal of Financial Economics, Volume 108 
Issue 2 (2013) (finding that when share loan supply is ``reduced 
around dividend record dates, prices of hard-to-borrow stocks 
increase 1.1% while prices of easy-to-borrow stocks are 
unaffected''). While the study looks at the effect around the 
dividend record date, it is possible that similar results could hold 
around vote record dates.
    \245\ Supra footnote 243.
    \246\ See Aggarwal et al. (2015) at page 2323.
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2. Amendments To Require Manager Reporting of Say-on-Pay Votes
a. Benefits
    Under the proposal, managers would publicly disclose annually on 
Form N-PX information about their proxy votes relating to say-on-pay 
matters. The information would include a description of say-on-pay 
matters that is consistent with the description on an issuer's form of 
proxy, their standardized classification, the number of shares voted 
and number of shares loaned and not recalled, and how the shares were 
voted by the manager.
    We believe the proposed rule may benefit the securities markets by 
providing access to information about how managers vote on issuers' 
say-on-pay recommendations. As of March 31, 2021, managers that file 
reports on Form 13F exercised investment discretion over approximately 
$39.79 trillion in section 13(f) equity securities. In many cases, fund 
managers also exercise voting power for proxies relating to these 
equity securities. This voting power gives fund managers significant 
ability to affect the outcomes of shareholder votes and influence the 
governance of corporations.
    Recent academic literature shows that the requirement of holding 
say-on-pay votes could have an impact on executive compensation and 
other corporate governance practices for corporate issuers.\247\ The 
proposed rule would

[[Page 57506]]

enable investors to observe how managers exercised their proxy votes 
regarding such matters. To the extent the information contained in say-
on-pay votes is understood and valued by investors,\248\ investors can 
benefit from using this additional information in selecting managers, 
and in determining whether managers are adequately maximizing the value 
of their assets.
---------------------------------------------------------------------------

    \247\ See Peter Iliev and Svetla Vitanova, ``The Effect of the 
Say-on-Pay Vote in the United States.'' Management Science, Volume 
65 (2019); James Cotter, Alan Palmiter and Randall Thomas, ``The 
First Year of Say-on-Pay under Dodd-Frank: An Empirical Analysis and 
Look Forward.'' George Washington Law Review, Volume 81 Issue 3 
(2013).
    \248\ See, e.g., David Larcker, Ronald Schneider, Brian Tayan, 
and Aaron Boyd, ``2015 Investor Survey Deconstructing Proxy 
Statements--What Matters to Investors.'' Stanford University, RR 
Donnelley, and Equilar Report (February 2015) (finding that 58 
percent of shareholders believes that say-on-pay is effective in 
influencing or modifying pay practices).
---------------------------------------------------------------------------

    This information may also help deter votes motivated by conflicts 
of interest and promote accountability of executives who often are in a 
position to shape their own pay arrangements. To the extent that 
executives are sensitive to approval from their institutional 
shareholder base, the adoption of the proposed rule should help align 
the incentives of executives and investors, which would result in 
better corporate governance practices at corporate issuers.
    Public companies currently subject to the Dodd-Frank Act's say-on-
pay vote requirements may also benefit from the transparency provided 
by this rule. Knowing how managers have voted on executive compensation 
matters in the past, and knowing how they voted on say-on-pay matters 
at similar firms or other firms in the same industry, could be useful 
for the companies as they consider their own executive compensation 
practices and policies.
b. Costs
    The proposed rule would lead to some additional direct and indirect 
costs for managers associated with disclosing required information 
about their say-on-pay votes annually on Form N-PX. If a manager 
exercises voting power for a client's securities, the costs to report 
the vote may be passed on to the client. Some of these costs are a 
direct result of section 14A(d)'s statutory mandate for managers to 
report annually how they have voted.\249\
---------------------------------------------------------------------------

    \249\ In the 2010 Proposing Release, no commenter provided 
specific empirical data quantifying costs that may be incurred by a 
reporting person in complying with those proposed amendments.
---------------------------------------------------------------------------

    Direct costs to each manager would include both internal costs (for 
compliance attorneys and other non-legal staff, such as computer 
programmers, to prepare and review the required disclosure) and 
external costs (such as any costs associated with third-party service 
providers to collect and report the information disclosed in Form N-
PX).\250\ We anticipate that costs for managers associated with 
obtaining the information required to be reported by the proposed rule 
would be limited because we believe that many managers are already 
tracking some of these data.
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    \250\ Based on the results of the PRA analysis provided in Table 
2, it is estimated that the annual direct costs attributable to 
information collection requirements in the proposed amendments for 
managers would be approximately $5,925 per manager, consisting of 
$4,925 in internal costs and $1,000 in external costs. These annual 
direct costs include ongoing as well as initial costs, with the 
latter being amortized over three years.
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    Indirect costs to managers associated with the proposed amendments 
would be similar to the indirect costs to funds discussed in the prior 
section. More specifically, to the extent that the proposed amendments 
may provide an incentive for managers to devote additional time and 
resources to proxy voting, this may result in additional expenses for 
managers, some of which may be passed on to their clients. Also, an 
increase in scrutiny by investors as a result of increased transparency 
under the proposed amendments may incentivize managers to vote against 
the management of an issuer with which the manager may have a business 
relationship, which could weaken the manager's relationship with the 
issuer firm and result in lost revenue.
    Further, the proposed disclosure requirements for managers could 
create incentives for them to recall their loaned securities to cast 
proxy votes on say-on-pay matters for these securities. This could 
reduce these managers' and their clients' revenues and may have a 
short-term impact on the securities lending and underlying stock 
markets.\251\ However, similar to the impact on funds discussed in the 
prior section, we expect that the scope of the possible impact of the 
proposed amendments on managers' securities lending practices and 
revenues would be limited.
---------------------------------------------------------------------------

    \251\ See supra footnotes 238-240 and accompanying text for the 
discussion related to the effect on securities lending for funds. 
See supra footnotes 241-246 and accompanying text for a discussion 
of the potential effects on underlying markets, which would also 
apply to changes in managers' securities lending activities.
---------------------------------------------------------------------------

    We believe that the costs arising from the proposal to use Form N-
PX to implement section 14A's say-on-pay vote reporting requirements 
for managers would be mitigated by the experience that managers that 
are advisers to funds already have with filing Form N-PX reports on 
behalf of funds. In addition, the proposed move to a custom XML data 
language for Form N-PX is not expected to impose significant costs on 
managers subject to say-on-pay voting requirements, as managers have 
experience filing other EDGAR forms that use similar custom XML data 
languages, such as Form 13F.
    The costs associated with the proposed rule may vary depending on 
existing levels of voluntary disclosure, organizational structure, and 
investment objectives of each manager. For example, the cost of 
compliance with the proposed rule is likely to be lower for managers 
that exercise voting power on behalf of funds because such votes are 
already reported on Form N-PX, and the proposal would not require 
managers to separately report say-on-pay votes cast on behalf of funds 
in compliance with the joint reporting provisions. Also, the costs are 
likely to be lower for managers who already voluntarily track and 
disclose some of the data the proposed rule would require.

D. Effects on Efficiency, Competition, and Capital Formation

    In this section we consider whether the proposed rule and form 
amendments would promote efficiency, competition, and capital 
formation.
1. Amendments to Funds' Reporting of Proxy Votes
    The proposed amendments to Form N-PX would provide investors with 
greater access to information regarding the proxy voting decisions of 
the funds they invest in. This could help investors make better 
informed investment decisions when they want to take into account 
funds' voting records, which could promote more efficient allocation of 
capital by investors to funds.
    The amendments would also make it easier for investors and other 
proxy voting data users to compare and evaluate proxy voting records 
across a wide variety of funds. This may improve competition among 
funds, as funds may seek to differentiate themselves based on their 
voting records. This could further promote a more efficient allocation 
of capital by investors among competing funds.
    Further, as proxy voting information becomes easier to gather and 
analyze, data-collecting service providers could face an increased 
competitive pressure to improve and develop new tools and methodologies 
and/or reduce their service fees.
    Finally, we do not anticipate any significant effects of the 
proposed amendments on capital formation.

[[Page 57507]]

2. Amendments To Require Manager Reporting of Say-on-Pay Votes
    Because the proposed rule applies equally to all managers that are 
required to file reports under section 13(f) of the Exchange Act, we do 
not anticipate that any competitive disadvantages would be created. To 
the contrary, we anticipate that the proposed rule may encourage 
competition by raising awareness about manager voting on say-on-pay 
matters and may facilitate differentiation among managers.
    The proposed amendments to require manager reporting of say-on-pay 
votes could promote more efficient allocation of capital to managers. 
The proposed amendments could enable investors to obtain managers' 
proxy voting information which could help investors allocate assets to 
managers who cast proxy votes that are more consistent with investors' 
preference for voting on executive compensation matters.
    Finally, we do not anticipate any significant effects of the 
amendments on capital formation.

E. Reasonable Alternatives

1. Scope of Managers' Say-on-Pay Reporting Obligations
    We considered as an alternative whether to more closely align 
managers' reporting requirements on Form N-PX with their reporting 
requirements on Form 13F by adding a de minimis exception. Filers on 
Form 13F are permitted to exclude positions when the positions have a 
dollar value of less than $200,000 and consist of fewer than 10,000 
shares. Several commenters on the 2010 proposal suggested that we 
include a de minimis exception, with one suggesting that not doing so 
would reduce the value of the exception to Form 13F reporting and a 
different commenter suggesting that this could permit their positions 
to be front-run.\252\
---------------------------------------------------------------------------

    \252\ Intel Letter (suggesting that this would reduce the value 
of the Form 13F exception); Seward Letter (front-running). See also 
ABA Letter (general support for de minimis exception); Barnard 
Letter (same).
---------------------------------------------------------------------------

    The benefits of say-on-pay vote reporting to managers' clients and 
to other investors, as discussed above, do not appear to be limited to 
votes of a certain size. We also believe that the cost savings of a de 
minimis exception would be minimal. To the extent that a filing could 
reveal information about a filer's trading strategy that would permit 
it to be front-run, we believe that the instructions for requesting 
confidential treatment address this concern.
    We also considered as an alternative whether to reduce the burden 
on managers who have a stated practice of not voting shares, for 
instance by reducing their reporting obligations or not requiring them 
to make a filing at all. While this approach would reduce costs for 
relevant managers, it may limit the ability of investors to understand 
fully how managers exercise their voting power, including by 
determining not to vote shares.
    Another alternative we considered was allowing managers to not file 
on Form N-PX when they did not exercise voting power over securities 
that held say-on-pay votes during the reporting period. We do not 
believe this alternative would substantially reduce costs for relevant 
managers relative to the proposal because the proposal only requires 
these managers to state in a Form N-PX filing that they have no votes 
to report. Moreover, we believe that requiring all managers to make a 
filing would permit both Commission staff and investors to identify 
more easily managers who may have missed a filing obligation. Not 
requiring all managers to make a filing could reduce the usefulness of 
Form N-PX filings because investors would not necessarily understand 
whether a manager did not make a filing because it did not exercise 
voting power or because it simply neglected to file the form.
2. Amendments to Proxy Voting Information Reported on Form N-PX
    We are proposing changes to Form N-PX that would require disclosure 
of information about the number of shares that were voted (or, if not 
known, the number of shares that were instructed to be cast), as well 
as disclosure of the number of shares the reporting person loaned and 
did not recall.
    We considered proposing a requirement to disclose the number of 
shares voted (or instructed to be cast) and not proposing the 
requirement to disclose the number of shares the reporting person 
loaned and did not recall for these votes. This approach would provide 
information to understand split votes, but may have limited utility 
otherwise. Specifically, this approach would not provide information to 
help investors understand the full extent to which a reporting person 
is voting shares. While the alternative approach would reduce reporting 
burdens for some funds and managers, it would also have fewer benefits 
for investors such as transparency into how a reporting person's 
securities lending affects its proxy voting.\253\
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    \253\ See supra Section II.C.3.b. for detailed discussion.
---------------------------------------------------------------------------

3. Amendments to the Time of Reporting on Form N-PX or Placement of 
Funds' Voting Records
    As an alternative to maintaining the current timeline for filing 
reports on Form N-PX, we considered requiring funds or managers to 
report relevant proxy votes more frequently, such as on a semiannual, 
quarterly, or monthly basis, or shortly after a given vote is held. We 
also considered maintaining the current annual reporting requirement, 
but requiring reporting persons to file their reports more quickly 
(e.g., by the end of July, rather than by the end of August). In 
general, these alternatives would provide investors and other data 
users with more timely information about how a fund or manager votes.
    A semiannual reporting requirement could be incorporated into 
funds' current reporting of annual and semiannual shareholder reports 
on Form N-CSR. The Commission proposed a similar approach to requiring 
disclosure of funds' proxy voting records in 2002.\254\ At that time, 
some commenters raised concern about the burdens of such an approach 
for fund complexes with staggered fiscal year ends, as these fund 
complexes could be required to file reports on Form N-CSR with complete 
proxy voting records as many as twelve times per year.\255\ An approach 
to requiring more frequent reporting of proxy voting records that is 
tied to funds' fiscal year ends would likely create administrative 
complexity for many fund complexes and would increase costs associated 
with filing proxy voting information more frequently.
---------------------------------------------------------------------------

    \254\ See Disclosure of Proxy Voting Policies and Proxy Voting 
Records by Registered Management Investment Companies, Investment 
Company Act File No. 25739 (Sept. 20, 2002).
    \255\ See Form N-PX Adopting Release, supra footnote 7, at 
paragraph accompanying n.39.
---------------------------------------------------------------------------

    As for a semiannual or quarterly reporting requirement on Form N-PX 
that is based on the calendar year, either of these approaches may not 
significantly enhance the timeliness of voting information in many 
cases because most corporate issuers hold proxy votes within the few 
months leading up to June 30, which is the end of the current Form N-PX 
annual reporting period. As a result, if we required semiannual or 
quarterly reporting of Form N-PX, most votes would likely be in the 
reporting person's report for the first half of the year (for 
semiannual reports) or for the second calendar quarter (for quarterly 
reports). A semiannual or quarterly reporting requirement would also

[[Page 57508]]

increase reporting costs, as reporting persons would be required to 
file either two or four Form N-PX reports per year rather than one 
report per year.
    A requirement to report monthly or shortly after each proxy vote is 
held would provide voting information much more quickly to investors 
and this could provide certain benefits. For example, timelier public 
reporting of funds' proxy votes has the potential to facilitate fund 
shareholders' ability to monitor their funds' involvement in the 
governance activities of portfolio companies, including within a single 
proxy season.\256\ We currently are not proposing these alternative 
approaches, however, because we do not have evidence that most fund 
shareholders generally are interested in analyzing votes on a monthly 
basis or shortly after they are held rather than focusing on a 
reporting person's voting record more holistically. Also, these 
alternative approaches would require reporting persons to disclose a 
position in a security before disclosure of the position is required on 
Form 13F or Form N-PORT, increasing the potential for disclosure of 
sensitive information that competitors could use to front-run or 
reverse engineer investing strategies. In addition, we would expect 
both alternative approaches to increase costs associated with reporting 
proxy voting information more frequently.
---------------------------------------------------------------------------

    \256\ See supra footnote 191 and accompanying text.
---------------------------------------------------------------------------

    Shortening the timeline for filing annual Form N-PX reports, which 
is currently about two months after the end of the reporting period, 
would marginally improve the timeliness of the reported information. 
However, shortening the filing timeline by more than a few weeks would 
increase the possibility of a reporting person being required to 
disclose a vote on a security before otherwise being required to 
disclose a position in that security on Form 13F or Form N-PORT. As a 
result, this approach could to some extent increase the potential for 
disclosure of sensitive information that competitors could use to 
front-run or reverse engineer investing strategies.

F. Request for Comment

    We request comment on all aspects of our economic analysis, 
including the potential costs and benefits of the proposed amendments 
and alternatives thereto, and whether the amendments, if we were to 
adopt them, would promote efficiency, competition, and capital 
formation. In addition, we request comments on our selection of data 
sources, empirical methodology, and the assumptions we have made 
throughout the analysis. Commenters are requested to provide empirical 
data, estimation methodologies, and other factual support for their 
views, in particular, on costs and benefits estimates. In addition, we 
request comment on:
    93. To what extent would the proposed amendments affect funds' or 
managers' securities lending and have an impact on short-selling and 
arbitrage trading activities? What additional materials and data should 
we consider for estimating these effects?
    94. Are we correct to assume that the costs associated with the use 
of a custom XML language for preparing Form N-PX would be minimal for 
funds and managers? What would the impact of these costs be for small 
reporting persons?
    95. We considered requiring funds to report proxy votes 
semiannually, quarterly, or shortly after the vote is held. What are 
the costs and benefits of requiring funds to report proxy votes 
semiannually, quarterly, monthly, or shortly after the vote is held? 
Are we correct to assume that investors and other users of Form N-PX 
data generally are interested in analyzing a reporting person's voting 
record more holistically rather than focusing on individual votes held 
during time horizons shorter than one year and therefore likely would 
derive little additional benefit from this increased reporting 
frequency?

V. Paperwork Reduction Act

    Certain provisions of the proposed rules and form amendments 
contain ``collection of information'' requirements within the meaning 
of the Paperwork Reduction Act of 1995 (``PRA'').\257\ We are 
submitting the proposed collections of information to the Office of 
Management and Budget (``OMB'') for review in accordance with the 
PRA.\258\ The title for the collection of information is: ``Form N-PX--
Annual Report of Proxy Voting Record'' (OMB Control No. 3235-
0582).\259\ An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.
---------------------------------------------------------------------------

    \257\ 44 U.S.C. 3501 et seq.
    \258\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
    \259\ The title for the collection of information relating to 
Form N-PX would be renamed from ``Form N-PX--Annual Report of Proxy 
Voting Record of Registered Management Investment Companies.''
---------------------------------------------------------------------------

    Section 14A(d) of the Exchange Act requires that every manager 
subject to section 13(f) of the Exchange Act report at least annually 
how it voted on say-on-pay votes, unless such vote is otherwise 
required to be reported publicly by rule or regulation of the 
Commission. To implement section 14A(d), we are proposing new rule 
14Ad-1 under the Exchange Act, which would require managers to file 
their record of say-on-pay votes with the Commission annually on Form 
N-PX.\260\ We are also proposing to amend Form N-PX, which was adopted 
pursuant to section 30 of the Investment Company Act and is currently 
used by funds to file their complete proxy voting records with the 
Commission, to accommodate the new filings by managers and to enhance 
the information funds provide on their proxy votes.\261\ In addition, 
we propose to amend Forms N-1A, N-2, and N-3 to disclose that their 
proxy voting records are available on (or through) their websites. 
Although the website availability requirement would be located in the 
relevant registration form, the Commission is reflecting the burden for 
these requirements in the burden estimate for Form N-PX--Annual Report 
of Proxy Voting Record, and not in the burden for Forms N-1A, N-2, or 
N-3.
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    \260\ For purposes of the PRA analysis, the burden associated 
with the requirements of proposed rule 14Ad-1 is included in the 
collection of information requirements of Form N-PX.
    \261\ 15 U.S.C. 80a-29.
---------------------------------------------------------------------------

    Form N-PX, including the amendments, contains collection of 
information requirements. Compliance with the disclosure requirements 
of the form is mandatory. Responses to the disclosure requirements will 
not be kept confidential unless granted confidential treatment.\262\
---------------------------------------------------------------------------

    \262\ See Section II.F supra.
---------------------------------------------------------------------------

    The Commission estimates that there are approximately 2,087 funds 
registered with the Commission.\263\ These registrants represent 
approximately 11,619 fund portfolios that are required to file Form N-
PX reports. The 11,619 portfolios are composed of approximately 7,064 
portfolios that do or may hold equity securities, 3,188 portfolios 
holding no equity securities, and 1,367 portfolios holding fund 
securities (i.e., fund of funds).\264\ In addition, the Commission 
estimates that there are approximately

[[Page 57509]]

7,550 managers required to file Form 13F reports with the Commission, 
which would be required to file Form N-PX reports under the 
proposal.\265\
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    \263\ The estimate of 2,087 funds is based on staff review of 
Form N-CEN filings of management investment companies registered 
with the Commission as of December 2020.
    \264\ The Commission staff estimates that there are 
approximately 6,301 portfolios that invest primarily in equity 
securities, 763 ``hybrid'' portfolios that may hold some equity 
securities (6,301 + 763 = 7,064), 2,848 bond portfolios that hold no 
equity securities and 340 money market fund portfolios (2,848 + 340 
= 3,188), and 1,367 funds of funds, for a total of 11,619 portfolios 
required to file Form N-PX reports. See ICI 2021 Fact Book, supra 
footnote 5, at 214-221.
    \265\ The estimate of 7,550 filers is based on the number of 
managers who made Form 13F-HR or Form 13F-NT filings covering the 
first quarter of 2021. Form 13F-NT filers report their holdings on 
the Form 13F-HR of a different filer; while certain of those filers 
may be eligible to use the joint reporting provisions of Form N-PX, 
we have assumed for the purpose of this analysis that they will file 
their own reports on Form N-PX.
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    The tables below summarize the currently approved Form N-PX burden 
estimates and our initial and ongoing annual burden estimates 
associated with the proposed amendments, including proposed 
requirements to identify proxy matters using the language of the 
issuer's form of proxy, categorize proxy votes, provide quantitative 
information related to shares voted (or instructed to be voted) and 
shares the fund loaned and did not recall, follow specific formatting 
and presentation instructions, file Form N-PX using a custom XML 
language, and make proxy voting records available on (or through) fund 
websites.\266\
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    \266\ The estimates differ from the estimates in the 2010 
Proposing Release for a variety of reasons, including that our 
current proposal differs from the 2010 proposal in several ways and 
the burden estimates of current Form N-PX have changed to some 
extent since 2010. We are further updating our PRA estimates based 
on our current estimates of the number of funds required to file 
Form N-PX.
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[GRAPHIC] [TIFF OMITTED] TP15OC21.000


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[GRAPHIC] [TIFF OMITTED] TP15OC21.001


[[Page 57511]]


[GRAPHIC] [TIFF OMITTED] TP15OC21.002

BILLING CODE 8011-01-C
    Some commenters suggested that the burdens of the 2010 proposal on 
funds and managers would be greater than the Commission's estimates at 
that time, although none submitted quantitative estimates of a higher 
burden.\267\ We also received a comment letter in connection with the 
Proxy Mechanics Concept Release regarding the estimated average burden 
hours per response on current Form N-PX, in which the commenter 
indicated that it believed the then-current PRA burden estimate 
understated the burden of an investment company's Form N-PX reporting 
obligations.\268\ We are updating our estimates of the PRA burden 
associated with Form N-PX to reflect our proposed amendments and have 
taken commenters' feedback into account when developing these 
estimates.
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    \267\ Brown Letter; Fidelity Letter; Glass Lewis Letter I 
(suggesting that the time and expense to provide disclosure 
regarding shared voting authority would be greater than estimated); 
ICI Letter (suggesting that the preparation, filing, and 
recordkeeping activities associated with the proposed Form N-PX 
amendments in 2010 would involve more than 1.5 hours of review by a 
compliance attorney); ISS Letter; Reiland Letter.
    \268\ See BlackRock Letter on Concept Release (stating that the 
then-estimated PRA burden of 9.6 hours ``grossly understates'' the 
time and expense required for an investment company to complete Form 
N-PX); Memorandum from the Division of Investment Management 
regarding November 29, 2010 telephone call with BlackRock, Inc., 
representatives (November 30, 2010), available at http://www.sec.gov/comments/s7-30-10/s73010-33.pdf. Based on the staff's 
subsequent conversation with the commenter, we believe that the 
burden estimates of the current form requirements in this release 
are appropriate, recognizing that the burden estimates are on a per 
portfolio basis, rather than a per filing basis, and that Form N-PX 
filings often contain multiple portfolios.
---------------------------------------------------------------------------

    We estimate that the proposed amendments would result in initial 
and ongoing burdens for funds. For example, we recognize that funds may 
need to make systems and other changes to comply with the proposed 
requirement to file Form N-PX reports in an XML structured data 
language and to categorize proxy voting matters. In addition, we 
understand that the proposed requirement to categorize votes may 
require some manual categorization or review on an ongoing basis. 
Further, while funds should already have information about the number 
of shares they voted (or instructed to be voted), the number of shares 
loaned and not recalled, and the description of the voting matter from 
the issuer's form of proxy, some changes may be needed to report the 
currently available information on Form N-PX.
    In the 2010 proposal, we estimated that each manager required to 
file its record of say-on-pay votes on Form N-PX would have the same 
total internal hours burden and external cost burden as a fund. Our 
revised estimates take into account differences between the 2010 
proposal and our current proposal, as well as that managers will only 
be required to report say-on-pay votes

[[Page 57512]]

whereas funds are required to file their complete voting record. For 
example, we anticipate the proposed categorization requirement would be 
more burdensome for funds, which would be required to categorize each 
proxy vote, than for managers, which would be required to categorize 
only say-on-pay votes. We accordingly estimate that managers would bear 
approximately one-half of the ongoing annual burden borne by funds. We 
also estimate that managers would have larger initial burdens than 
funds because managers do not currently report on Form N-PX. While some 
managers advise funds and have experience with Form N-PX reporting, and 
some managers may otherwise be required to maintain records of their 
proxy voting decisions, we understand some systems or other changes may 
be needed to report information about say-on-pay votes on Form N-PX or 
to rely on the joint reporting provisions.\269\
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    \269\ See DOL Interpretive Bulletin 2016-01 [29 CFR 2509.2016-
01] (noting the Department of Labor's view that an investment 
manager or other ERISA plan fiduciary would be required to maintain 
accurate records as to proxy voting decisions). Some commenters on 
the 2010 proposal indicated that some changes to recordkeeping and 
reporting systems may be necessary if the Commission were to adopt 
those proposed amendments. See Glass Lewis Letter I; IAA Letter; ISS 
Letter; ABA Letter.
---------------------------------------------------------------------------

    We also estimate that managers would file approximately 194 
amendments to Form N-PX reports as a result of the final adverse 
disposition of a request for confidential treatment or upon expiration 
of confidential treatment.\270\ For purposes of this estimate, we are 
assuming that every manager will file its full record of say-on-pay 
votes on ``voting'' report, and not file a ``notice'' report. In 
practice, because certain managers exercise voting power over the same 
securities as other managers, or exercise voting power over say-on-pay 
votes that funds already report, the number of parties who need to 
separately maintain records and prepare filings may be lower.
---------------------------------------------------------------------------

    \270\ See Confidential Treatment Instructions 6 and 7 to Form N-
PX. In the 2010 proposal, we estimated that approximately 200 
amendments to Form N-PX reports would be filed annually by managers 
as a result of the final adverse disposition of a request for 
confidential treatment or upon expiration of confidential treatment. 
Our current estimate is based on the number of Form 13F amendments 
received by the Commission during each of the four quarters in 2020, 
divided by four. For purposes of this estimate, we are 
conservatively assuming that all 194 amendments filed are related to 
the adverse disposition of a request for confidential treatment or 
the expiration of confidential treatment, and that this results in 
the full burden of a new Form N-PX filing being borne by the 
manager. We do so even though we recognize that Form 13F amendments 
also are filed to correct errors or omissions in a filing that does 
not relate to a request for confidential treatment. Like the 
existing PRA estimate for Form N-PX, our estimate does not allocate 
a separate burden to amendments that merely correct errors or 
omissions in a separate filing. For that reason, and because we 
assume funds would not file confidential treatment-related 
amendments, we are not including a burden estimate for amendments 
filed by funds. See supra Section II.G.
---------------------------------------------------------------------------

    We request comment on whether our estimates are reasonable. 
Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments 
to: (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information will have practical 
utility; (2) evaluate the accuracy of the Commission's estimate of the 
burden of the proposed collection of information; (3) determine whether 
there are ways to enhance the quality, utility, and clarity of the 
information to be collected; and (4) determine whether there are ways 
to minimize the burden of the collection of information on those who 
are to respond, including through the use of automated collection 
techniques or other forms of information technology. Persons wishing to 
submit comments on the collection of information requirements of the 
proposed amendments should direct them to the OMB Desk Officer for the 
Securities and Exchange Commission, 
[email protected], and should send a copy to 
Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 
100 F Street NE, Washington, DC 20549-1090, with reference to File No. 
S7-11-21. OMB is required to make a decision concerning the collections 
of information between 30 and 60 days after publication of this 
release; therefore a comment to OMB is best assured of having its full 
effect if OMB receives it within 30 days after publication of this 
release. Requests for materials submitted to OMB by the Commission with 
regard to these collections of information should be in writing, refer 
to File No. S7-11-21, and be submitted to the Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549-2736.

VI. Regulatory Flexibility Act Certification for Managers and Initial 
Regulatory Flexibility Analysis for Funds

A. Regulatory Flexibility Act Certification for Managers

    Pursuant to section 605(b) of the Regulatory Flexibility Act 
(``RFA''), the Commission hereby certifies that proposed rule 14Ad-1 
and the proposed amendments to Form N-PX relating to managers would 
not, if adopted, have a significant economic impact on a substantial 
number of small entities.\271\ The Commission's rule under the Exchange 
Act that defines a ``small business'' and ``small organization'' does 
not explicitly reference managers.\272\ However, rule 0-10 provides 
that the Commission may ``otherwise define'' small entities for 
purposes of a particular rulemaking proceeding. For purposes of the 
proposed amendments relating to Form N-PX reporting requirements for 
managers, the Commission has determined to use the definition of small 
entity under 17 CFR 275.0-7(a) as more appropriate to the functions of 
managers. The Commission believes that the proposed definition would 
help ensure that all persons or entities that might be managers under 
section 13(f) of the Exchange Act will be included within a category 
addressed by the definition. Therefore, for purposes of this rulemaking 
and the RFA, a manager is a small entity if it: (i) Has assets under 
management having a total value of less than $25 million; (ii) did not 
have total assets of $5 million or more on the last day of its most 
recent fiscal year; and (iii) does not control, is not controlled by, 
and is not under common control with another investment adviser that 
has assets under management of $25 million or more, or any person 
(other than a natural person) that had total assets of $5 million or 
more on the last day of its most recent fiscal year.\273\ The 
Commission requests comments on the use of this definition.
---------------------------------------------------------------------------

    \271\ 5 U.S.C. 605(b).
    \272\ 17 CFR 240.0-10 (``rule 0-10'').
    \273\ 17 CFR 275.0-7(a) (``rule 0-7(a)'').
---------------------------------------------------------------------------

    We are proposing that rule 14Ad-1 and associated Form N-PX 
reporting obligations for say-on-pay votes would extend to each person 
that (i) is an ``institutional investment manager'' as defined in the 
Exchange Act; and (ii) is required to file reports under section 13(f) 
of the Exchange Act. Managers are not required to submit reports on 
Form 13F unless they exercise investment discretion with respect to 
accounts holding section 13(f) securities having an aggregate fair 
market value on the last trading day of any month of any calendar year 
of at least $100 million.\274\ Therefore, no small entities for 
purposes of rule 0-10 under the Exchange Act are affected by proposed 
rule 14Ad-1 and the amendments to Form N-PX relating to managers. Thus, 
there would be no significant economic impact on a substantial number 
of small entities associated with these aspects of the

[[Page 57513]]

proposal. The Commission requests comment regarding this certification. 
The Commission requests that commenters describe the nature of any 
impact on small businesses and provide empirical data to support the 
extent of the impact.
---------------------------------------------------------------------------

    \274\ See supra footnote 32.
---------------------------------------------------------------------------

B. Initial Regulatory Flexibility Act Analysis for Funds

    This Initial Regulatory Flexibility Analysis (``IRFA'') has been 
prepared in accordance with section 3 of the RFA.\275\ It relates to 
the Commission's proposed amendments to Form N-PX relating to funds, as 
well as proposed amendments to Forms N-1A, N-2, and N-3.
---------------------------------------------------------------------------

    \275\ 5 U.S.C. 603.
---------------------------------------------------------------------------

1. Reasons for and Objectives of the Proposed Actions
    The Commission is proposing to amend Form N-PX under Investment 
Company Act to enhance the information mutual funds, ETFs, and certain 
other funds currently report annually about their proxy votes and to 
make that information easier to analyze. In addition, we are proposing 
amendments to Forms N-1A, N-2, and N-3 to require these funds to 
disclose that their proxy voting records are publicly available on (or 
through) their websites and available upon request, free of charge in 
both cases.
2. Legal Basis
    The Commission is proposing the rule and form amendments that 
affect funds contained in this document under the authority set forth 
in the Securities Act [15 U.S.C. 77a et seq.], particularly sections 6, 
7, 10, and 19(a) thereof, the Exchange Act, particularly sections 
10(b), 13, 15(d), 23(a), 24, and 36 thereof [15 U.S.C. 78a et seq.], 
the Investment Company Act [15 U.S.C. 80a et seq.], particularly 
sections 8, 30, 31, 38, and 45 thereof.
3. Small Entities Subject to the Rule
    For purposes of Commission rulemaking in connection with the RFA, 
an investment company is a small entity if, together with other 
investment companies in the same group of related investment companies, 
it has net assets of $50 million or less as of the end of its most 
recent fiscal year.\276\ Commission staff estimates that, as of 
December 2020, approximately 31 registered open-end mutual funds, 9 
registered open-end ETFs, and 27 registered closed-end funds 
(collectively, 67 funds) are small entities.
---------------------------------------------------------------------------

    \276\ See 17 CFR 270.0-10(a) [rule 0-10(a) under the Investment 
Company Act] (``rule 0-10'').
---------------------------------------------------------------------------

4. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    We are proposing to amend Form N-PX, which funds currently use to 
file their complete proxy voting records with the Commission, to 
require reporting in a custom XML language, to require other formatting 
and presentation changes, and to add certain new or modified disclosure 
items.
    We are proposing amendments to Form N-PX that would affect funds 
that are currently required to report on the form, including those that 
are small entities. For instance, we propose to require funds to tie 
the description of the voting matter to the issuer's form of proxy and 
to categorize voting matters by type. In addition, we are proposing to 
require information about the number of shares that were voted (or, if 
not known, the number of shares that were instructed to be cast), as 
well as the number of shares the fund loaned and did not recall. We are 
also proposing to require reporting of information on Form N-PX in a 
structured data language either via a Commission-supplied web-based 
form or as an XML file.
    We are proposing a new section on the cover page of Form N-PX where 
the reporting person would provide information in cases where the form 
is filed as an amendment to a previously filed Form N-PX report. We are 
also requiring that the cover page include information to help users 
identify whether the reporting person is a fund or a manager. We are 
adding a new summary page to Form N-PX, on which a fund would be 
required to provide information about series whose votes are included 
in the report, if applicable.
    For purposes of the PRA analysis, we have estimated that the 
aggregate annual reporting, administrative, and paperwork costs imposed 
by the form amendments on funds will be approximately $29 million.\277\ 
We also estimate aggregate one-time reporting, administrative, and 
paperwork costs of approximately $55 million for funds that hold equity 
securities.\278\
---------------------------------------------------------------------------

    \277\ See supra Section V, Table 2.
    \278\ Id.
---------------------------------------------------------------------------

5. Duplicative, Overlapping, or Conflicting Federal Rules
    Except as otherwise discussed below, the Commission has not 
identified any Federal rules that duplicate, overlap, or conflict with 
the proposed rule. Currently, funds must file their proxy voting 
records on EDGAR and either disclose that they make those records 
available on their websites or deliver them to investors upon request. 
Under the proposal, funds would disclose that their proxy voting 
records are available on their websites and delivered upon request to 
investors. We acknowledge that filing proxy voting records with the 
Commission, posting them online, and delivering them upon request could 
result in some investors being able to access the same information in 
multiple ways or at multiple times, which could be duplicative. 
However, each of these different requirements would serve a unique 
purpose. We believe it is important for regulatory disclosures to be 
filed with the Commission for oversight and compliance purposes. 
Website posting would provide investors with broad access to this 
information and conforms with evolving investor preferences regarding 
the availability of fund disclosures.\279\ Finally, delivery-upon-
request could be especially important for investors who might not have 
reliable access to the internet or who might prefer paper disclosures.
---------------------------------------------------------------------------

    \279\ See supra footnote 205.
---------------------------------------------------------------------------

6. Significant Alternatives
    The RFA directs us to consider significant alternatives that would 
accomplish our stated objective, while minimizing any significant 
adverse impact on small entities. In connection with the amendments, 
the Commission considered the following alternatives: (i) The 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (ii) the clarification, consolidation, or simplification of 
compliance and reporting requirements under the amendments for small 
entities; (iii) the use of performance rather than design standards; 
and (iv) an exemption from coverage of the amendments, or any part 
thereof, for small entities.
    The Commission believes that, at the present time, special 
compliance or reporting requirements for small entities, or an 
exemption from coverage for small entities, would not be appropriate. 
The proposed amendments are designed to increase transparency about how 
funds vote. Different disclosure requirements for small entities, such 
as reducing the level of proxy voting disclosure for small entities, 
could raise investor protection concerns for investors in small funds 
to the extent they would not have access to the same disclosures as 
investors in large funds. Small funds currently must follow the same 
proxy voting reporting

[[Page 57514]]

requirements as large funds in light of these concerns.
    We have endeavored through the proposed amendments to Form N-PX to 
minimize the regulatory burden, including on small entities, while 
meeting our regulatory objectives. In response to comments on the 2010 
proposal, we have modified the proposed quantitative disclosures in 
Form N-PX to: (1) Clarify the proposed disclosure of the number of 
shares voted; and (2) no longer propose to require disclosure of the 
number of shares the fund was entitled to vote. Reporting persons would 
be able to use a web-based reporting application developed by the 
Commission to generate the reports. We believe that these modifications 
to the approach in the 2010 proposal result in retention of key 
disclosures to help investors understand how a fund votes, while 
reducing the burdens on funds.
    We have endeavored to clarify, consolidate, and simplify the 
proposed requirements applicable to funds, including those that are 
small entities. Finally, we do not consider the use of performance 
rather than design standards to be consistent with our statutory 
mandate of investor protection with respect to reporting of proxy 
voting records.
7. General Request for Comment
    The Commission requests comments regarding this IRFA. We request 
comments on the number of small entities that may be affected by our 
proposed rules and guidelines, and whether the proposed rules and 
guidelines would have any effects not considered in this analysis. We 
request that commenters describe the nature of any effects on small 
entities subject to the rules and forms and provide empirical data to 
support the nature and extent of such effects. We also request comment 
on the proposed compliance burdens and the effect these burdens would 
have on smaller entities.

VII. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),\280\ the Commission must advise OMB whether a 
proposed regulation constitutes a ``major'' rule. Under SBREFA, a rule 
is considered ``major'' where, if adopted, it results in or is likely 
to result in:
---------------------------------------------------------------------------

    \280\ Public Law 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 5 U.S.C., 15 U.S.C., and as a note 
to 5 U.S.C. 601).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment, or 
innovation.
    We request comment on whether our proposal would be a ``major 
rule'' for purposes of SBREFA. We solicit comment and empirical data 
on:
     The potential effect on the U.S. economy on an annual 
basis;
     Any potential increase in costs or prices for consumers or 
individual industries; and
     Any potential effect on competition, investment, or 
innovation.
    Commenters are requested to provide empirical data and other 
factual support for their views to the extent possible.

VIII. Statutory Authority

    The Commission is proposing new rule 14Ad-1 pursuant to the 
authority set forth in sections 13, 14A, 23(a), 24, and 36 of the 
Exchange Act [15 U.S.C. 78m, 78n-1, 78w(a), 78x, and 78mm]. The 
Commission is proposing amendments to rule 30b1-4 pursuant to the 
authority set forth in sections 8, 30, 31, 38, and 45 of the Investment 
Company Act [15 U.S.C. 80a-8, 80a-29, 80a-30, 80a-37, and 80a-44]. The 
Commission is proposing amendments to Form N-PX pursuant to the 
authority set forth in sections 13, 14A, 23(a), 24, and 36 of the 
Exchange Act [15 U.S.C. 78m, 78n-1, 78w(a), 78x, and 78mm]; and 
sections 8, 30, 31, 38, and 45 of the Investment Company Act [15 U.S.C. 
80a-8, 80a-29, 80a-30, 80a-37, and 80a-44]. The Commission is proposing 
amendments to Forms N-1A, N-2, and N-3 pursuant to the authority set 
forth in sections 5, 6, 7, 10, 19(a), and 28 of the Securities Act [15 
U.S.C. 77e, 77f, 77g, 77j, 77s(a), and 77z-3], sections 10(b), 13, 
15(d), 23(a), and 36 of the Exchange Act [15 U.S.C. 78j(b), 78m, 
78o(d), 78w(a), and 78mm], and sections 6(c), 8, 24(a), 30, and 38 of 
the Investment Company Act [15 U.S.C. 80a-6(c), 80a-8, 80a-24(a), 80a-
29, and 80a-37]. The Commission is proposing amendments to rule 101 of 
Regulation S-T pursuant to the authority set forth in sections 14A(d), 
23(a), and 35A of the Exchange Act [15 U.S.C. 78n-1, 78w(a), and 78ll]. 
The Commission is proposing to amend the heading of Subpart D of Part 
249 pursuant to the authority set forth in sections 13 and 14A(d) of 
the Exchange Act [15 U.S.C. 78m and 78n-1].

List of Subjects

17 CFR Part 232

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, Securities.

17 CFR Parts 240 and 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Parts 270 and 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

Text of Rule and Form Amendments

    For the reasons set out in the preamble, the Commission proposes to 
amend title 17, chapter II, of the Code of Federal Regulations as 
follows:

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
1. The general authority citation for part 232 is amended to read as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78n-1, 78o(d), 78w(a), 78ll, 80a-
6(c), 80a-8, 80a-29, 80a-30, 80a-37, 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted.
* * * * *
0
2. Amend section 232.101 by revising paragraph (a)(1)(iii) to read as 
follows:


Sec.  232.101  Mandated electronic submissions and exceptions.

    (a) * * *
    (1) * * *
    (iii) Statements, reports, and schedules filed with the Commission 
pursuant to sections 13, 14, 14A(d), 15(d), or 16(a) of the Exchange 
Act (15 U.S.C. 78m, 78n, 78n-1(d), 78o(d), and 78p(a)), and proxy 
materials required to be furnished for the information of the 
Commission in connection with annual reports on Form 10-K (Sec.  
249.310 of this chapter), or Form 10-KSB (Sec.  249.310b of this 
chapter) filed pursuant to section 15(d) of the Exchange Act;

    Note 1 to paragraph (a)(1)(iii).  Electronic filers filing 
Schedules 13D and 13G with respect to foreign private issuers should 
include in the submission header all zeroes (i.e., 00-0000000) for 
the IRS tax identification number because the EDGAR system requires 
an IRS number tag to be inserted for the subject company as a 
prerequisite to acceptance of the filing.


    Note 2 to paragraph (a)(1)(iii).  Foreign private issuers must 
file or submit their Form 6-K reports (Sec.  249.306 of this 
chapter) in electronic format, except as otherwise permitted by 
paragraphs (b)(1) and (b)(7) of this section.

* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
3. The general authority citation for part 240 continues to read as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn,

[[Page 57515]]

77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-
1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78o-10, 78p, 78q, 
78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 
80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 8302; 7 U.S.C. 
2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 111-203, 
939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, sec. 503 and 602, 
126 Stat. 326 (2012), unless otherwise noted.
* * * * *
0
4. Add section 240.14Ad-1 to read as follows:


Sec.  240.14Ad-1  Report of proxy voting record.

    (a) Subject to paragraphs (b) and (c) of this section, every 
institutional investment manager (as that term is defined in Section 
13(f)(6)(A) of the Act (15 U.S.C. 78m(f)(6)(A))) that is required to 
file reports under Section 13(f) of the Act (15 U.S.C. 78m(f)) must 
file an annual report on Form N-PX (Sec. Sec.  249.326 and 274.129 of 
this chapter) not later than August 31 of each year, for the most 
recent 12-month period ended June 30, containing the institutional 
investment manager's proxy voting record for each shareholder vote 
pursuant to Sections 14A(a) and (b) of the Act (15 U.S.C. 78n-1(a) and 
(b)) with respect to each security over which the manager exercised 
voting power (as defined in paragraph (d) of this section).
    (b) An institutional investment manager is not required to file a 
report on Form N-PX (Sec. Sec.  249.326 and 274.129 of this chapter) 
for the 12-month period ending June 30 of the calendar year in which 
the manager's initial filing on Form 13F (Sec.  249.325 of this 
chapter) is due pursuant to Sec.  240.13f-1 of this part. For purposes 
of this paragraph, ``initial filing'' on Form 13F means any quarterly 
filing on Form 13F if no filing on Form 13F was required for the 
immediately preceding calendar quarter.
    (c) An institutional investment manager is not required to file a 
report on Form N-PX (Sec. Sec.  249.326 and 274.129 of this chapter) 
with respect to any shareholder vote at a meeting that occurs after 
September 30 of the calendar year in which the manager's final filing 
on Form 13F (Sec.  249.325 of this chapter) is due pursuant to Sec.  
240.13f-1 of this chapter. An institutional investment manager is 
required to file a Form N-PX for the period July 1 through September 30 
of the calendar year in which the manager's final filing on Form 13F is 
due pursuant to Sec.  240.13f-1 of this chapter; this filing is 
required to be made not later than March 1 of the immediately following 
calendar year. For purposes of this paragraph, ``final filing'' on Form 
13F means any quarterly filing on Form 13F if no filing on Form 13F is 
required for the immediately subsequent calendar quarter.
    (d) For purposes of this section:
    (1) Voting power means the ability, through any contract, 
arrangement, understanding, or relationship, to vote the security or 
direct the voting of a security, including the ability to determine 
whether to vote the security or to recall a loaned security.
    (2) Exercise of voting power means using voting power to influence 
a voting decision with respect to a security.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
5. The general authority citation for part 249 continues to read as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; and 18 U.S.C. 1350; Sec. 953(b) Pub. L. 111-203, 124 
Stat. 1904; Sec 102(a)(3) Pub. L. 112-106, 126 Stat. 309 (2012), 
Sec. 107 Pub. L. 112-106, 126 Stat. 313 (2012), Sec. 72001 Pub. L. 
114-94, 129 Stat. 1312 (2015, and secs. 2 and 3 Pub. L. 116-222, 134 
Stat. 1063 (2020), unless otherwise noted.
* * * * *

Subpart D--Forms for Annual and Other Reports of Issuers and Other 
Persons Required Under Sections 13, 14A, and 15(d) of the 
Securities Exchange Act of 1934

0
6. Revise the heading for Subpart D to read as set forth above:
0
7. Add Sec.  249.326 to read as follows:


Sec.  249.326  Form N-PX, annual report of proxy voting record.

    This form shall be used by institutional investment managers to 
file an annual report pursuant to Sec.  240.14Ad-1 of this chapter 
containing the manager's proxy voting record.

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
8. The general authority citation for part 270 continues to read as 
follows:

    Authority:  15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, 
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless 
otherwise noted.
* * * * *


Sec.  270.30b1-4  [Amended]

0
9. Amend Sec.  270.30b1-4 by removing the phrase ``Form N-PX (Sec.  
274.129 of this chapter)'' and adding in its place ``Form N-PX 
(Sec. Sec.  249.326 and 274.129 of this chapter)''.

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
10. The authority citation for part 274 is revised to read as follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78n-1, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and Pub L. 111-
203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.

0
11. Amend Form N-1A (referenced in Sec. Sec.  239.15A and 274.11A) by 
revising Item 17(f) and Item 27(d)(5).
    The revisions read as follows:

    Note:  The text of Form N-1A does not, and these amendments will 
not, appear in the Code of Federal Regulations.

FORM N-1A

* * * * *

Item 17. Management of the Fund

* * * * *
    (f) Proxy Voting Policies. Unless the Fund invests exclusively in 
non-voting securities, describe the policies and procedures that the 
Fund uses to determine how to vote proxies relating to portfolio 
securities, including the procedures that the Fund uses when a vote 
presents a conflict between the interests of Fund shareholders, on the 
one hand, and those of the Fund's investment adviser; principal 
underwriter; or any affiliated person of the Fund, its investment 
adviser, or its principal underwriter, on the other. Include any 
policies and procedures of the Fund's investment adviser, or any other 
third party, that the Fund uses, or that are used on the Fund's behalf, 
to determine how to vote proxies relating to portfolio securities. 
Also, state that information regarding how the Fund voted proxies 
relating to portfolio securities during the most recent 12-month period 
ended June 30 is available (1) without charge, upon request, by calling 
a specified toll-free telephone number and, if any, contacting a 
specified email address; (2) on or through the Fund's website at a 
specified internet address; and (3) on the Commission's website at 
http://www.sec.gov.

Instructions

    1. A Fund may satisfy the requirement to provide a description of 
the policies and procedures that it uses to determine how to vote 
proxies relating to portfolio securities by including a copy of the 
policies and procedures themselves.
    2. If a Fund (or financial intermediary through which shares of the 
Fund may be purchased or sold) receives a request for the Fund's proxy 
voting record by

[[Page 57516]]

phone or email, the Fund (or financial intermediary) must send the 
information disclosed in the Fund's most recently filed report on Form 
N-PX in a human-readable format, within three business days of receipt 
of the request, by first-class mail or other means designed to ensure 
equally prompt delivery.
    3. A Fund must make publicly available free of charge the 
information disclosed in the Fund's most recently filed report on Form 
N-PX on or through its website as soon as reasonably practicable after 
filing the report with the Commission. The information disclosed in the 
Fund's most recently filed report on Form N-PX must be in a human-
readable format and remain available on or through the Fund's website 
for as long as the Fund remains subject to the requirements of Rule 
30b1-4 (17 CFR 270.30b1-4).
* * * * *

Item 27. Financial Statements

* * * * *
    (d) Annual and Semiannual Reports. Every annual and semiannual 
report to shareholders required by rule 30e-1 must contain the 
following:
* * * * *
    (5) Statement Regarding Availability of Proxy Voting Record. A 
statement that information regarding how the Fund voted proxies 
relating to portfolio securities during the most recent 12-month period 
ended June 30 is available (i) without charge, upon request, by calling 
a specified toll-free telephone number and, if any, contacting a 
specified email address; (ii) on or through the Fund's website at a 
specified internet address; and (iii) on the Commission's website at 
http://www.sec.gov.

Instructions

    1. If a Fund (or financial intermediary through which shares of the 
Fund may be purchased or sold) receives a request for the Fund's proxy 
voting record by phone or email, the Fund (or financial intermediary) 
must send the information disclosed in the Fund's most recently filed 
report on Form N-PX in a human-readable format, within three business 
days of receipt of the request, by first-class mail or other means 
designed to ensure equally prompt delivery.
    2. A Fund must make publicly available free of charge the 
information disclosed in the Fund's most recently filed report on Form 
N-PX on or through its website as soon as reasonably practicable after 
filing the report with the Commission. The information disclosed in the 
Fund's most recently filed report on Form N-PX must be in a human-
readable format and remain available on or through the Fund's website 
for as long as the Fund remains subject to the requirements of rule 
30b1-4 (17 CFR 270.30b1-4).
* * * * *
0
12. Amend Form N-2 (referenced in Sec. Sec.  239.14 and 274.11a-1) by 
revising Item 18.16, Item 24.6.d, and Item 24.8.
    The revisions read as follows:

    Note: The text of Form N-2 does not, and these amendments will 
not, appear in the Code of Federal Regulations.

FORM N-2

* * * * *

Item 18. Management

* * * * *
    16. Unless the Registrant invests exclusively in non-voting 
securities, describe the policies and procedures that the Registrant 
uses to determine how to vote proxies relating to portfolio securities, 
including the procedures that the Registrant uses when a vote presents 
a conflict between the interests of the Registrant's shareholders, on 
the one hand, and those of the Registrant's investment adviser; 
principal underwriter; or any affiliated person (as defined in Section 
2(a)(3) of the Investment Company Act and the rules thereunder) of the 
Registrant, its investment adviser, or its principal underwriter, on 
the other. Include any policies and procedures of the Registrant's 
investment adviser, or any other third party, that the Registrant uses, 
or that are used on the Registrant's behalf, to determine how to vote 
proxies relating to portfolio securities. Also, state that information 
regarding how the Registrant voted proxies relating to portfolio 
securities during the most recent 12-month period ended June 30 is 
available (i) without charge, upon request, by calling a specified 
toll-free telephone number and, if any, contacting a specified email 
address; (ii) on or through the Registrant's website at a specified 
internet address; and (iii) on the Commission's website at http://www.sec.gov.

Instructions

    1. A Registrant may satisfy the requirement to provide a 
description of the policies and procedures that it uses to determine 
how to vote proxies relating to portfolio securities by including a 
copy of the policies and procedures themselves.
    2. If a Registrant (or financial intermediary through which shares 
of the Registrant may be purchased or sold) receives a request for the 
Registrant's proxy voting record by phone or email, the Registrant (or 
financial intermediary) must send the information disclosed in the 
Registrant's most recently filed report on Form N-PX [17 CFR 274.129] 
in a human-readable format, within 3 business days of receipt of the 
request, by first-class mail or other means designed to ensure equally 
prompt delivery.
    3. A Registrant must make publicly available free of charge the 
information disclosed in the Registrant's most recently filed report on 
Form N-PX on or through its website as soon as reasonably practicable 
after filing the report with the Commission. The information disclosed 
in the Registrant's most recently filed report on Form N-PX must be in 
a human-readable format and remain available on or through the 
Registrant's website for as long as the Registrant remains subject to 
the requirements of Rule 30b1-4 under the Investment Company Act [17 
CFR 270.30b1-4].
* * * * *

Item 24. Financial Statements

* * * * *
    6. Every annual and semiannual report to shareholders required by 
Section 30(e) of the Investment Company Act and Rule 30e-1 thereunder 
shall contain the following information:
* * * * *
    d. A statement that information regarding how the Registrant voted 
proxies relating to portfolio securities during the most recent 12-
month period ended June 30 is available (1) without charge, upon 
request, by calling a specified toll-free telephone number and, if any, 
contacting a specified email address; (2) on or through the 
Registrant's website at a specified internet address; and (3) on the 
Commission's website at http://www.sec.gov.
* * * * *
    8. a. When a Registrant (or financial intermediary through which 
shares of the Registrant may be purchased or sold) receives a request 
for a description of the policies and procedures that the Registrant 
uses to determine how to vote proxies, the Registrant (or financial 
intermediary) must send the information most recently disclosed in 
response to Item 18.16 of this Form or Item 7 of Form N-CSR within 3 
business days of receipt of the request, by first-class mail or other 
means

[[Page 57517]]

designed to ensure equally prompt delivery.
    b. If a Registrant (or financial intermediary through which shares 
of the Registrant may be purchased or sold) receives a request for the 
Registrant's proxy voting record by phone or email, the Registrant (or 
financial intermediary) must send the information disclosed in the 
Registrant's most recently filed report on Form N-PX in a human-
readable format, within 3 business days of receipt of the request, by 
first-class mail or other means designed to ensure equally prompt 
delivery.
    c. A Registrant must make publicly available free of charge the 
information disclosed in the Registrant's most recently filed report on 
Form N-PX on or through its website as soon as reasonably practicable 
after filing the report with the Commission. The information disclosed 
in the Registrant's most recently filed report on Form N-PX must be in 
a human-readable format and remain available on or through the 
Registrant's website for as long as the Registrant remains subject to 
the requirements of Rule 30b1-4 under the Investment Company Act.
* * * * *
0
13. Amend Form N-3 (referenced in Sec. Sec.  239.17a and 274.11b) by 
revising Item 23(f), Item 31.4(d), and Item 31.6.
    The revisions read as follows:

    Note:  The text of Form N-3 does not, and these amendments will 
not, appear in the Code of Federal Regulations.

FORM N-3

* * * * *

Item 23. Management of the Registrant

* * * * *
    (f) Proxy Voting Policies. Unless the Registrant invests 
exclusively in non-voting securities, describe the policies and 
procedures that the Registrant uses to determine how to vote proxies 
relating to portfolio securities, including the procedures that the 
Registrant uses when a vote presents a conflict between the interests 
of investors, on the one hand, and those of the Registrant's investment 
adviser; principal underwriter; or any affiliated person of the 
Registrant, its investment adviser, or its principal underwriter, on 
the other. Include any policies and procedures of the Registrant's 
investment adviser, or any other third party, that the Registrant uses, 
or that are used on the Registrant's behalf, to determine how to vote 
proxies relating to portfolio securities. Also, state that information 
regarding how the Registrant voted proxies relating to portfolio 
securities during the most recent 12-month period ended June 30 is 
available (1) without charge, upon request, by calling a specified 
toll-free telephone number and, if any, contacting a specified email 
address; (2) on or through the Registrant's website at a specified 
internet address; and (3) on the Commission's website at http://www.sec.gov.

Instructions

    1. A Registrant may satisfy the requirement to provide a 
description of the policies and procedures that it uses to determine 
how to vote proxies relating to portfolio securities by including a 
copy of the policies and procedures themselves.
    2. If a Registrant (or financial intermediary through which shares 
of the Registrant may be purchased or sold) receives a request for the 
Registrant's proxy voting record by phone or email, the Registrant (or 
financial intermediary) must send the information disclosed in the 
Registrant's most recently filed report on Form N-PX [17 CFR 274.129] 
in a human-readable format, within three business days of receipt of 
the request, by first-class mail or other means designed to ensure 
equally prompt delivery.
    3. A Registrant must make publicly available free of charge the 
information disclosed in the Registrant's most recently filed report on 
Form N-PX on or through its website as soon as reasonably practicable 
after filing the report with the Commission. The information disclosed 
in the Registrant's most recently filed report on Form N-PX must be in 
a human-readable format and remain available on or through the 
Registrant's website for as long as the Registrant remains subject to 
the requirements of rule 30b1-4 [17 CFR 270.30b1-4].
* * * * *

Item 31. Financial Statements

* * * * *
    4. Every report required by section 30(e) of the 1940 Act and rule 
30e-1 under it [17 CFR 270.30e-1] shall contain the following 
information:
* * * * *
    (d) a statement that information regarding how the Registrant voted 
proxies relating to portfolio securities during the most recent 12-
month period ended June 30 is available (i) without charge, upon 
request, by calling a specified toll-free telephone number and, if any, 
contacting a specified email address; (ii) on or through the 
Registrant's website at a specified internet address; and (iii) on the 
Commission's website at http://www.sec.gov;
* * * * *
    6. (a) When a Registrant (or financial intermediary through which 
units of the Registrant may be purchased or sold) receives a request 
for a description of the policies and procedures that the Registrant 
uses to determine how to vote proxies, the Registrant (or financial 
intermediary) must send the information disclosed in response to Item 
23(f) of this Form, within three business days of receipt of the 
request, by first-class mail or other means designed to ensure equally 
prompt delivery.
    (b) If a Registrant (or financial intermediary through which units 
of the Registrant may be purchased or sold) receives a request for the 
Registrant's proxy voting record by phone or email, the Registrant (or 
financial intermediary) must send the information disclosed in the 
Registrant's most recently filed report on Form N-PX [17 CFR 274.129] 
in a human readable format, within three business days of receipt of 
the request, by first-class mail or other means designed to ensure 
equally prompt delivery.
    (c) A Registrant must make publicly available free of charge the 
information disclosed in the Registrant's most recently filed report on 
Form N-PX on or through its website as soon as reasonably practicable 
after filing the report with the Commission. The information disclosed 
in the Registrant's most recently filed report on Form N-PX must be in 
a human-readable format and remain available on or through the 
Registrant's website for as long as the Registrant remains subject to 
the requirements of rule 30b1-4 under the Investment Company Act [17 
CFR 270.30b1-4].
* * * * *
0
14. The heading of Sec.  274.129 is revised to read as follows:


Sec.  274.129   Form N-PX, annual report of proxy voting record.

* * * * *
0
15. Form N-PX (referenced in Sec. Sec.  249.326 and 274.129) is revised 
to read as follows:

    Note: The text of Form N-PX does not, and these amendments will 
not, appear in the Code of Federal Regulations.


[[Page 57518]]



UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Washington, DC 20549

FORM N-PX

Annual Report of Proxy Voting Record

General Instructions

A. Rule as to Use of Form N-PX

    Form N-PX is to be used by a registered management investment 
company, other than small business investment company registered on 
Form N-5 (17 CFR 239.24 and 274.5), to file the registered management 
investment company's complete proxy voting record pursuant to Section 
30 of the Investment Company Act of 1940 (``Investment Company Act'') 
and Rule 30b1-4 thereunder (17 CFR 270.30b1-4). Form N-PX also is to be 
used by a person that is required to file reports under Rule 13f-1 
(``Institutional Manager''), to file the Institutional Manager's proxy 
voting record regarding votes pursuant to Sections 14A(a) and (b) of 
the Securities Exchange Act of 1934 (``Exchange Act'') on certain 
executive compensation matters, pursuant to Section 14A(d) of the 
Exchange Act and Rule 14Ad-1 thereunder (17 CFR 240.14Ad-1). Form N-PX 
is to be filed not later than August 31 of each year for the most 
recent 12-month period ended June 30, except in the case of 
Institutional Managers that make initial or final filings on Form 13F 
during the relevant 12-month period as described in General Instruction 
F.

B. Application of General Rules and Regulations

    The General Rules and Regulations under the Investment Company Act 
and the Exchange Act contain certain general requirements that are 
applicable to reporting on any form under those Acts. These general 
requirements should be read and observed carefully in the preparation 
and filing of reports on this form, except that any provision in the 
form or in these instructions is controlling.

C. Joint Reporting Rules

    1. If two or more Institutional Managers, each of which is required 
by Rule 14Ad-1 to file a report on Form N-PX for the reporting period, 
exercised voting power over the same securities on a vote pursuant to 
Section 14A(a) or (b) of the Exchange Act, only one such Institutional 
Manager must include the information regarding that vote in its report 
on Form N-PX.
    2. Two or more Institutional Managers that are affiliated persons, 
as defined in Section 2(a)(3) of the Investment Company Act, may file a 
joint report on a single Form N-PX notwithstanding that such 
Institutional Managers do not exercise voting power over the same 
securities.
    3. An Institutional Manager is not required to report proxy votes 
that are reported on a Form N-PX report that is filed by a Fund.
    4. An Institutional Manager that exercised voting power over any 
security with respect to proxy votes that are reported by another 
Institutional Manager or Managers pursuant to General Instruction C.1 
or C.2, or are reported on a Form N-PX report filed by a Fund, must 
identify each Institutional Manager and Fund reporting on its behalf in 
the manner described in Special Instruction B.2.c. and d.
    5. An Institutional Manager reporting proxy votes on behalf of 
another Institutional Manager pursuant to General Instruction C.1 or 
C.2 must identify any other Institutional Managers on whose behalf the 
filing is made in the manner described in Special Instruction C.2.
    6. A Fund reporting proxy votes that would otherwise be required to 
be reported by an Institutional Manager must identify any Institutional 
Managers on whose behalf the filing is made in the manner described in 
Special Instruction C.2.

D. Signature and Filing of Report

    1. a. For reports filed by a Fund, the report must be signed on 
behalf of the Fund by its principal executive officer or officers. For 
reports filed by Institutional Managers, the report must be signed on 
behalf of the Institutional Manager by an authorized person. Attention 
is directed to Rule 12b-11 under the Exchange Act and Rule 8b-11 under 
the Investment Company Act concerning signatures.
    b. The name and title of each person who signs the report shall be 
typed or printed beneath his or her signature.
    2. A reporting person must file reports on Form N-PX electronically 
using the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (``EDGAR'') system in accordance with Regulation S-T, except 
as provided by the Confidential Treatment Instructions. Consult the 
EDGAR Filer Manual and Appendices for EDGAR filing instructions.

E. Definitions

    As used in this Form N-PX, the terms set out below have the 
following meanings:
    ``Fund'' means a registered management investment company (other 
than a small business investment company registered on Form N-5 (17 CFR 
239.24 and 274.5)) or a separate Series of the registered management 
investment company.
    ``Institutional Manager'' means a person that is required to file 
reports under Rule 13f-1 under the Exchange Act.
    ``Reporting Person'' means the Institutional Manager or Fund filing 
this report or on whose behalf the report is filed.
    ``Series'' means shares offered by a registered management 
investment company that represent undivided interests in a portfolio of 
investments and that are preferred over all other series of shares for 
assets specifically allocated to that series in accordance with Rule 
18f-2(a) under the Investment Company Act [17 CFR 270.18f-2(a)].

F. Transition Rules for Institutional Managers

    1. An Institutional Manager is not required to file a report on 
Form N-PX for the 12-month period ending June 30 of the calendar year 
in which the manager's initial filing on Form 13F is due pursuant to 
Rule 13f-1 under the Exchange Act. For purposes of this paragraph, an 
``initial filing'' on Form 13F means any quarterly filing on Form 13F 
if no filing on Form 13F was required for the immediately preceding 
calendar quarter.
    2. An Institutional Manager is not required to file a report on 
Form N-PX with respect to any shareholder vote at a meeting that occurs 
after September 30 of the calendar year in which the manager's final 
filing on Form 13F is due pursuant to Rule 13f-1 under the Exchange 
Act. An Institutional Manager is required to file a Form N-PX for the 
period July 1 through September 30 of the calendar year in which the 
manager's final filing on Form 13F is due pursuant to Rule 13f-1 under 
the Exchange Act; this filing is required to be made not later than 
March 1 of the immediately following calendar year. For purposes of 
this paragraph, a ``final filing'' on Form 13F means any quarterly 
filing on Form 13F if no filing on Form 13F is required for the 
immediately subsequent calendar quarter.

Special Instructions

A. Organization of Form N-PX

    1. This form consists of three parts: the Form N-PX Cover Page 
(``Cover Page''), the Form N-PX Summary Page (``Summary Page''), and 
the proxy voting information required by the form (``Proxy Voting 
Information'').
    2. Present the Cover Page and the Summary Page information in the

[[Page 57519]]

format and order provided in the form. Do not include any additional 
information on the Summary Page.

B. Cover Page

    1. Amendments to a Form N-PX report must either restate the Form N-
PX report in its entirety or include only proxy voting information that 
is being reported in addition to the information already reported in a 
current public Form N-PX report for the same period. If the Form N-PX 
report is filed as an amendment, then the reporting person must check 
the amendment box on the Cover Page, enter the amendment number, and 
check the appropriate box to indicate whether the amendment (a) is a 
restatement or (b) adds new Proxy Voting Information. Each amendment 
must include a complete Cover Page and, if applicable, a Summary Page.
    2. Designate the Report Type for the Form N-PX report by checking 
the appropriate box in the Report Type section of the Cover Page, and 
include, where applicable, the List of Other Persons Reporting for this 
Manager (on the Cover Page), the Summary Page, and the Proxy Voting 
Information, as follows:
    a. For a report by a Fund, check the box for Report Type 
``Registered Management Investment Company Report,'' omit from the 
Cover Page the List of Other Persons Reporting for this Manager, and 
include both the Summary Page and the Proxy Voting Information.
    b. For a report by an Institutional Manager that includes all proxy 
votes required to be reported by the Institutional Manager, check the 
box for Report Type ``Institutional Manager Voting Report,'' omit from 
the Cover Page the List of Other Persons Reporting for this Manager, 
and include both the Summary Page and the Proxy Voting Information.
    c. For a report by an Institutional Manager, when all proxy votes 
required to be reported by the Institutional Manager are reported by 
another Institutional Manager or Managers or by one or more Funds, 
check the box for Report Type ``Institutional Manager Notice,'' include 
(on the Cover Page) the List of Other Persons Reporting for this 
Manager, and file the Cover Page and required signature only.
    d. For a report by an Institutional Manager, if only part of the 
proxy votes required to be reported by the Institutional Manager are 
reported by another Institutional Manager or Managers or one or more 
Funds, check the box for Report Type ``Institutional Manager 
Combination Report,'' include (on the Cover Page) the List of Other 
Persons Reporting for this Manager, and include both the Summary Page 
and the Proxy Voting Information.
    3. If the Institutional Manager has a number assigned by the 
Financial Industry Regulatory Authority's Central Registration 
Depository system or by the Investment Adviser Registration Depository 
system (``CRD number''), provide the Manager's CRD number. If the 
Institutional Manager has a file number (e.g., 801-, 8-, 866-, 802-) 
assigned by the Commission (``SEC file number''), provide the Manager's 
SEC file number.
    4. The Cover Page may include information in addition to the 
required information, so long as the additional information does not, 
either by its nature, quantity, or manner of presentation, impede the 
understanding or presentation of the required information. Place all 
additional information at the end of the Cover Page, except as 
permitted by paragraph (m) of Item 1.

C. Summary Page

    1. Include on the Summary Page the number of included Institutional 
Managers with votes reported in this Form N-PX report pursuant to 
General Instruction C. Enter as the number of included Institutional 
Managers the total number of Institutional Managers in the list of 
included Institutional Managers on the Summary Page, and do not count 
the reporting person filing this report. See Special Instruction C.2. 
If none, enter the number zero (``0'').
    2. Include on the Summary Page the list of included Institutional 
Managers with votes reported in this Form N-PX report pursuant to 
General Instruction C. Use the title, column headings, and format 
provided.
    a. If this Form N-PX report does not report the proxy votes of any 
Institutional Manager other than the reporting person, enter the word 
``NONE'' under the title and omit the column headings and list entries.
    b. If this Form N-PX report reports the proxy votes of one or more 
Institutional Managers other than the reporting person, enter in the 
list of included Institutional Managers all such Institutional Managers 
together with their respective Form 13F file numbers, if known and 
their respective CRD Numbers and SEC File Numbers, if applicable and if 
known. (The Form 13F file numbers are assigned to Institutional 
Managers when they file their first Form 13F). Assign a number to each 
Institutional Manager in the list of included Institutional Managers, 
and present the list in sequential order. The numbers need not be 
consecutive. Do not include the reporting person filing this report.
    3. For reports filed by a Fund, include on the Summary Page the 
total number of Series of the Fund reported in this Form N-PX, if any, 
the name of each Series included, and each Series identification 
number. If this Form N-PX report does not report the proxy votes of any 
Series, enter the word ``NONE'' under the title and omit the column 
headings and list entries.

D. Proxy Voting Information

    1. Disclose the information required or permitted by Item 1 in the 
order presented in paragraphs (a) through (m) of Item 1.
    2. The CUSIP number or ISIN required by paragraph (b) or (c) of 
Item 1 may be omitted if it is not available through reasonably 
practicable means, e.g., in the case of certain securities of foreign 
issuers. The ISIN may also be omitted if the CUSIP number is reported.
    3. Item 1(e) requires an identification of the matter for all 
matters. In responding to Item 1(e), identify all matters in the same 
order as on the form of proxy and identify each matter using the same 
language as on the form of proxy. For election of directors, identify 
each director separately in the same order as on the form of proxy, 
even if the election of directors is presented as a single matter on 
the form of proxy.
    4. Item 1(f) requires the reporting person to categorize each 
matter from a list of categories and subcategories that may apply to 
such matter. In responding to Item 1(f), a reporting person must choose 
all categories or subcategories applicable to such matter.
    5. In responding to paragraph (h) of Item 1, a reporting person may 
use the number of shares voted as reflected in its records at the time 
of filing a report on Form N-PX. If the reporting person has not 
received confirmation of the actual number of votes cast prior to 
filing a report on Form N-PX, the numbers reported may reflect the 
number of shares instructed to be cast. A reporting person is not 
required to amend a previously filed Form N-PX report if the reporting 
person subsequently receives confirmation of the actual number of votes 
cast.
    6. In responding to paragraphs (h) and (i) of Item 1:
    a. An Institutional Manager must report the number of shares that 
the Institutional Manager is reporting on behalf of another 
Institutional Manager pursuant to General Instruction C.1 or C.2 
separately from the number of shares that the Institutional Manager is

[[Page 57520]]

reporting only on its own behalf. An Institutional Manager also must 
separately report shares when the groups of Institutional Managers on 
whose behalf the shares are reported are different. For example, if the 
reporting Institutional Manager is reporting on behalf of Manager A 
with respect to 10,000 shares and on behalf of Managers A and B with 
respect to 50,000 shares, then the groups of 10,000 and 50,000 shares 
must be separately reported.
    b. A Fund must separately report shares that are reported on behalf 
of different Institutional Managers or groups of Institutional Managers 
pursuant to General Instruction C.3.
    7. For purposes of paragraph (i) of Item 1, a reporting person is 
considered to have loaned securities if it loaned the securities 
directly or loaned the securities indirectly through a lending agent.
    8. If management did not make a recommendation on how to vote on a 
particular matter, a reporting person should respond ``none'' to 
paragraph (k) of Item 1 for that matter.
    9. In the case of a reporting person that is a Fund that offers 
multiple series of shares, provide the information required by Item 1 
separately by Series (for example, provide Series A's full proxy voting 
record, followed by Series B's full proxy voting record).
    10. In response to paragraph (m), a reporting person may provide 
additional information about the matter or how it voted, provided the 
information does not, either by its nature, quantity, or manner of 
presentation, impede the understanding or presentation of the required 
information. The disclosure permitted by paragraph (m) is optional. A 
reporting person is not required to respond to paragraph (m) for any 
vote, and if a reporting person does provide additional information for 
one or more votes, it is not required to provide this information for 
all votes.

Confidential Treatment Instructions

    1. A reporting person should make requests for confidential 
treatment of information reported on this form in accordance with Rule 
24b-2 under the Exchange Act (17 CFR 240.24b-2).
    2. Rule 24b-2 requires a person filing confidential information 
with the Commission to indicate at the appropriate place in the public 
filing that the confidential portion has been so omitted and filed 
separately with the Commission. A reporting person should comply with 
this provision by including on the Summary Page, after the number of 
included Institutional Managers and prior to the list of included 
Institutional Managers, a statement that confidential information has 
been omitted from the public Form N-PX report and filed separately with 
the Commission.
    3. A reporting person must file all requests for and information 
subject to the request for confidential treatment in accordance with 
the instructions for filing confidential treatment requests for 
information filed on Form 13F.
    4. A reporting person requesting confidential treatment must 
provide enough factual support for its request to enable the Commission 
to make an informed judgment as to the merits of the request, including 
a demonstration that the information is both customarily and actually 
kept private by the reporting person, and that release of this 
information could cause harm to the reporting person. If a request for 
confidential treatment of information filed on Form N-PX relates to a 
request for confidential treatment of information included in an 
Institutional Manager's filing on Form 13F, the Institutional Manager 
should so state and identify the related request. In such cases, the 
Institutional Manager need not repeat the analysis set forth in the 
request for confidential treatment in connection with the Form 13F 
filing. The Institutional Manager's request, however, must explain 
whether and, if so, how the Form N-PX and Form 13F confidential 
treatment requests are related and should identify if any of the 
analysis in its request for confidential treatment on Form 13F does not 
apply, or applies differently, to its report on Form N-PX.
    5. State the period of time for which confidential treatment of the 
proxy voting information is requested. The time period specified may 
not exceed one (1) year from the date that the Form N-PX report is 
required to be filed with the Commission. The request must include a 
justification of the time period for which confidential treatment is 
requested, as required by Rule 24b-2(b)(2)(ii).
    6. At the expiration of the period for which confidential treatment 
has been granted (the ``Expiration Date''), the Commission, without 
additional notice to the reporting person, will make the proxy voting 
information public unless a de novo request for confidential treatment 
of the information that meets the requirements of Rule 24b-2 and these 
Confidential Treatment Instructions is filed with the Commission at 
least fourteen (14) days in advance of the Expiration Date.
    7. Upon the final adverse disposition of a request for confidential 
treatment, or upon the expiration of the confidential treatment 
previously granted for a filing, unless a hardship exemption is 
available, the reporting person must submit electronically, within six 
(6) business days of the expiration or notification of the final 
disposition, as applicable, an amendment to its publicly filed Form N-
PX report that includes the proxy voting information as to which the 
Commission denied confidential treatment or for which confidential 
treatment has expired. An amendment filed under such circumstances must 
not be a restatement; the reporting person must designate it as an 
amendment which adds new proxy voting information. The reporting person 
must include at the top of the Form N-PX Cover Page the following 
legend to correctly designate the type of filing being made:
    This filing lists proxy vote information reported on the Form N-PX 
filed on (date) pursuant to a request for confidential treatment and 
for which (that request was denied/confidential treatment expired) on 
(date).

Paperwork Reduction Act Information

    Form N-PX is to be used by a Fund to file reports with the 
Commission pursuant to Section 30 of the Investment Company Act and 
Rule 30b1-4 thereunder. Form N-PX also is to be used by an 
Institutional Manager to file reports with the Commission as required 
by Section 14A(d) of the Exchange Act and Rule 14Ad-1 thereunder. Form 
N-PX is to be filed not later than August 31 of each year, containing 
the reporting person's proxy voting record for the most recent 12-month 
period ended June 30. The Commission may use the information provided 
on Form N-PX in its regulatory, disclosure review, inspection, and 
policymaking roles.
    Funds and Institutional Managers are required to disclose the 
information specified by Form N-PX, and the Commission will make this 
information public. Funds and Institutional Managers are not required 
to respond to the collection of information contained in Form N-PX 
unless the Form displays a currently valid Office of Management and 
Budget (``OMB'') control number. Please direct comments concerning the 
accuracy of the information collection burden estimate and any 
suggestions for reducing the burden to the Secretary, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. The 
OMB has reviewed this collection of information under the clearance 
requirements of 44 U.S.C. 3507.
BILLING CODE 8011-01-P

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FORM N-PX

Item 1. Proxy Voting Record

    If the reporting person is a Fund, disclose the following 
information for each matter relating to a portfolio security considered 
at any shareholder meeting held during the period covered by the report 
and with respect to which the reporting person was entitled to vote, 
including securities on loan for purposes of this form. If the 
reporting person is an Institutional Manager, disclose the following 
information for each shareholder vote pursuant to Sections 14A(a) and 
(b) of the Exchange Act over which the manager exercised voting power, 
as defined in Rule 14Ad-1(d) under the Exchange Act [17 CFR 240.14Ad-
1]. If a reporting person does not have any proxy votes to report for 
the reporting period, the reporting person must file a report with the 
Commission stating that the reporting person does not have proxy votes 
to report.
    (a) The name of the issuer of the security;
    (b) The Council on Uniform Securities Identification Procedures 
(``CUSIP'') number for the security;
    (c) The International Securities Identification Number (``ISIN'') 
for the security;
    (d) The shareholder meeting date;

[[Page 57524]]

    (e) An identification of the matter voted on;
    (f) All categories and subcategories applicable to the matter voted 
on from the following list of categories and subcategories:
    (A) Board of directors (subcategories: director election, term 
limits, committees, size of board, or other board of directors matters 
(along with a brief description));
    (B) Section 14A say-on-pay votes (subcategories: 14A executive 
compensation, 14A executive compensation vote frequency, or 14A 
extraordinary transaction executive compensation);
    (C) Audit-related (subcategories: Auditor ratification, auditor 
rotation, or other audit-related matters (along with a brief 
description));
    (D) Investment company matters (subcategories: Change to investment 
management agreement, new investment management agreement, assignment 
of investment management agreement, business development company 
approval of restricted securities, closed-end investment company 
issuance of shares below net asset value, business development company 
asset coverage ratio change, or other investment company matters (along 
with a brief description));
    (E) Shareholder rights and defenses (subcategories: Adoption or 
modification of a shareholder rights plan, control share acquisition 
provisions, fair price provisions, board classification, cumulative 
voting, or other shareholder rights and defenses matters (along with a 
brief description));
    (F) Extraordinary transactions (subcategories: Merger, asset sale, 
liquidation, buyout, joint venture, going private, spinoff, delisting, 
or other extraordinary transaction matters (along with a brief 
description));
    (G) Security issuance (subcategories: Equity, debt, convertible, 
warrants, units, rights, or other security issuance matters (along with 
a brief description));
    (H) Capital structure (subcategories: Stock split, reverse stock 
split, dividend, buyback, tracking stock, adjustment to par value, 
authorization of additional stock, or other capital structure matters 
(along with a brief description));
    (I) Compensation (subcategories: Board compensation, executive 
compensation (other than Section 14A say-on-pay), board or executive 
anti-hedging, board or executive anti-pledging, compensation clawback, 
10b5-1 plans, or other compensation matters (along with a brief 
description));
    (J) Corporate governance (subcategories: Articles of incorporation 
or bylaws, board committees, codes of ethics, or other corporate 
governance matters (along with a brief description));
    (K) Meeting governance (subcategories: Approval to adjourn, 
acceptance of minutes, or other meeting governance matters (along with 
a brief description));
    (L) Environment or climate (subcategories: Greenhouse gas (GHG) 
emissions, transition planning or reporting, biodiversity or ecosystem 
risk, chemical footprint, renewable energy or energy efficiency, water 
issues, waste or pollution, deforestation or land use, say-on-climate, 
environmental justice, or other environment or climate matters (along 
with a brief description));
    (M) Human rights or human capital/workforce (subcategories: 
Workforce-related mandatory arbitration, supply chain exposure to human 
rights risks, outsourcing or offshoring, workplace sexual harassment, 
or other human rights or human capital/workforce matters (along with a 
brief description));
    (N) Diversity, equity, and inclusion (subcategories: Board 
diversity, pay gap, or other diversity, equity, and inclusion matters 
(along with a brief description));
    (O) Political activities (subcategories: Lobbying, political 
contributions, or other political activity matters (along with a brief 
description));
    (P) Other social (subcategories: Data privacy, responsible tax 
policies, charitable contributions, consumer protection, or other 
social matters (along with a brief description)); or
    (Q) Other (along with a brief description).
    (g) For reports filed by Funds, disclose whether the matter was 
proposed by the issuer or by a security holder and, if by a security 
holder, whether the matter was a proposal or counterproposal;
    (h) The number of shares that were voted, with the number zero 
(``0'') entered if no shares were voted;
    (i) The number of shares that the reporting person loaned and did 
not recall;
    (j) How the shares in paragraph (h) were voted (e.g., for or 
against proposal, or abstain; for or withhold regarding election of 
directors) and, if the votes were cast in multiple manners (e.g., for 
and against), the number of shares voted in each manner;
    (k) Whether the votes disclosed in paragraph (j) represented votes 
for or against management's recommendation;
    (l) Identify each Institutional Manager on whose behalf this Form 
N-PX report is being filed (other than the reporting person filing the 
report) and that exercised voting power over the securities voted by 
entering the number assigned to the Institutional Manager in the List 
of Included Institutional Managers; and
    (m) Any other information the reporting person would like to 
provide about the matter or how it voted.

SIGNATURE

[See General Instruction D]
    Pursuant to the requirements of the [Securities Exchange Act of 
1934 (for Institutional Managers)] [Investment Company Act of 1940 (for 
Funds)], the reporting person has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized.
(Reporting Person)-----------------------------------------------------

By (Signature and Title) *---------------------------------------------

Date-------------------------------------------------------------------

    * Print the name and title of each signing officer under his or her 
signature.


    By the Commission.

    Dated: September 29, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-21549 Filed 10-14-21; 8:45 am]
BILLING CODE 8011-01-C