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SEC to Consider Disclosure of Proxy Votes

Investments: Proposed rule would require mutual funds to include the records in their reports to the agency.

September 17, 2002|VICKY STAMAS | BLOOMBERG NEWS

WASHINGTON — The Securities and Exchange Commission will consider this week whether to require mutual funds to reveal how they vote shares in corporate proxy contests.

The five-member SEC is scheduled to take up a proposed rule Thursday that would force funds to report their proxy voting records to the SEC and to make the information available to their shareholders.

The action on the proposed rule comes as the SEC is trying to restore investor confidence shaken by accounting scandals at Enron Corp., WorldCom Inc. and other companies.

Supporters of greater disclosure say investors want mutual funds to play a bigger role in demanding accountability from companies.

"There's a real feeling going on today with all of these scandals that corporate America is running wild and investors are wondering, 'Can our voice be heard at all?' " said Don Phillips, managing director of mutual fund tracker Morningstar Inc. in Chicago. "Mutual funds are the natural conduit for that."

Critics of the proposed rule say the plan may overload investors with information they don't need.

"If the disclosure reaches the point where you include everything of interest to someone, you are going to have so much information that it starts to obscure the key information," said Chris Wloszczyna, a spokesman for the Investment Company Institute, the funds' chief trade association in Washington.

"Our members say that very few of their shareholders have ever expressed an interest in their funds' proxy votes," he said.

Shareholder activists have increasingly sought to put governance issues to shareholder vote at annual meetings by including them on official proxy ballots. Some investor advocates, for instance, have called for proxy contests on whether companies should formally record employee stock options as expenses.

The SEC also is scheduled to consider whether it should require funds and other registered management investment companies to disclose the policies and procedures they use to determine how they vote proxies for securities in their portfolios.

The proposed rule would require funds to disclose those policies to clients and tell clients how to get information about individual proxy votes, the SEC said.

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