Q&A Blog Series: Regulatory Changes on the Proxy Shareholder Horizon

COVID-19 disrupted how the global capital markets get business done but some things remain the same. Proxy shareholder meetings and voting continue. Employees and their management are learning to get more done online and via virtual meetings as shareholders still demand their say and regulators want to ensure that they have it.

In the next entry of our Thought Leadership Blog Series, Mediant Senior Vice President of Operations Gussie Tate and Mediant Director Jean Luther share their thoughts on the future of proxy regulations, including the impact of technology, the need for increased outreach to regulators and the challenges of establishing much-needed best practices.

Q: Where do you see the future of proxy regulations heading?

Jean: A few things going on right now are interesting. We are currently very active in some working groups discussing what, as an industry, we can solve without even going to regulation changes. Hopefully, the parties involved can all come to some agreement as to how to better process certain things.

An issue that people in the forefront of the industry are now talking about is end-to-end vote confirmation and making sure that not only every shareholder’s vote has been counted but also has been counted as cast and gotten a confirmation that their vote has been received and recorded. It exists in bits and pieces today but not in an overall methodology that everyone is applying.

What are the obstacles to a better proxy regulation future?

Jean: I don't think there are any major stumbling blocks. The big part is just getting everybody around the table. Many different players are in this space and they all come from a very different perspective, whether it's the institutional or retail space, the proxy service provider, the transfer agent or the issuer themselves. It’s a matter of getting a very diverse group to compromise and come to some agreement as to what are the best ways to move certain things forward.

Gussie: And to build on that, I think the challenge for all of this, particularly regulators, is being proactive versus reactive. We should be viewing regulators as partners. How do we all move forward together to get regulations that really fit and keep up with all the innovation in the industry?

Continuing from your previous thought, do you think that regulators, and regulations, are keeping up with technology?

Gussie: We're seeing the SEC moving in a digital direction. For example, it has recently released another level of proposed rules for Rule 30e-3, which not only drives shareholders online to look at documents but also makes them engaging and easy-to-read.

Constructive delivery is another instance where the SEC recognizes that perhaps getting all these documents is a burden for the investor, possibly a burden for the advisor, and for what use? Now at the advisor level, the firm can choose to suppress those deliveries.

Will digital transformation bring a big price tag? Do brokers have to buy a whole row of servers or invest in greater cloud infrastructure? 

Jean: I don't think so. There may be some cost to it. Whenever you have to put your development teams to work and put that effort towards maybe restructuring how you are delivering particular information, a cost is involved. But I don't think it's a huge expense.

This isn't a revenue-generating project. Is that a challenge, that brokers might not want to funnel dollars into this because it's not particularly exciting?

Gussie: I don't think it's a question of spending money. I think because it doesn’t generate revenue, it gets pushed to the bottom of the list. As in all shops, you have a certain amount of development resources and must decide where to spend that resource. It will go towards things that either get you revenue or new clients. This probably doesn't neatly fall into any of those categories other than there is a push for increasing shareholder interaction and shareholder interest. That push may be what generates a little bit more incentive for people to do things in this particular area.

Who's going to pay especially now that we're in this era of commission-free trading?

Jean: In the proxy world, it goes back to the issuer. Proxy fees is another topic that I think people are taking a second look at right now, and does that whole fee schedule need to be reconfigured? My opinion is that the fee schedule as it is could be tweaked, but not in a major sense. It may be where some of this cost is recouped to the point of just covering expenses and not generating more.

Keep an eye out for more insights from other Mediant executives on navigating a new digital world.

In the meantime, please contact us with any questions or comments about this post.