Photo: Mint
Photo: Mint

Sebi seeks public comments on issues related to proxy advisers

  • A Sebi panel suggests that proxy advisers should have a publicly available conflict of interest policy and a clear approach to manage concerns
  • Comments can be submitted by 18 August

MUMBAI : The Securities and Exchange Board of India (Sebi) on Monday said that it has sought public comments on report submitted by the working group on issues related to proxy adviser. Comments can be submitted by 18 August.

Proxy adviser is a person who provides advice to institutional investors or shareholder of a company to exercise their rights in the company including recommendations on public offer or voting recommendation on agenda items.

The working group formed by Sebi, in November 2018, has submitted a report to the market regulator, providing recommendations on various aspects of proxy adviser. It has also suggested that Sebi may obtain public comments on the substantive matters stated in the report before any regulatory review is undertaken.

“In addition to the recommendations of the working group on regulating foreign proxy advisers, it has also proposed that institutional investors may be mandated to ensure that proxy advisory firms employed by them (if any) should have appropriate capacity and capability to issue proxy advice and such firm is complying with code of conduct for proxy advisers as specified by Sebi," it said.

Institutional investors include foreign portfolio investors (FPI), portfolio managers, alternative investment funds, real estate investment trusts (REIT) and infrastructure investment trusts (InvIT) etc.

The working group, chaired by Sandeep Parekh, former executive director of Sebi and founder of Finsec Law Advisors, has advised proxy advisers should have a publicly available conflict of interest policy and a clear approach to manage concerns.

“Proxy advisors should disclose their policy on engagement with companies. Disclosures regarding the business model should be made public. There should be a clear separation between the proxy voting advice to shareholders and the advice to the (listed) companies regarding advisory services and indices and governance engagement services," the working group’s report said.

The group proposed that board of proxy advisors should be independent of its shareholders. Proxy advisors should set parameters around the communications they have with companies and other stakeholders. Further, they are to disclose their policies for managing and responding to complaints, comments or feedback about their service.

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