Committee backs disclosure requirement for proxy advisors' recommendations
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Summary
The committee passed a bill requiring proxy advisory firms to disclose whether recommendations are based on a financial analysis; the bill allows attorney general enforcement and a civil cause of action. Senator Mann asked about funds that use ESG criteria; sponsor said the measure is disclosure-focused.
Floor leader Senator Daniels presented legislation aimed at increasing transparency from proxy advisory firms by requiring disclosure when their recommendations are not based on a written financial analysis. Daniels said some proxy advisors do not always conduct financial analyses and may base votes on other factors; the bill would require disclosure to clients and would allow enforcement through the attorney general and civil action.
Senator Mann questioned whether funds that consider environmental, social and governance factors would be excluded; Daniels said the measure requires disclosure of the basis for recommendations but is intended to preserve funds that use other criteria while making clear when a financial analysis is not the basis for advice. "This is just to put people on notice that you need to tell those whom you're advising what was the basis for the decision and the advice that you're giving," Daniels said.
After limited questions and no extended debate, the committee recorded 9 ayes and 0 nays and declared the bill passed in committee.
