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Sebi issues procedural guidelines for proxy advisors
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SME Times News Bureau | 03 Aug, 2020
The Securities and Exchange Board of India (SEBI) on Monday came up with a set of procedural guidelines for proxy advisors.
Proxy
advisory firms advise shareholders on corporate governance-related
issues and give recommendations regarding voting on resolutions.
In
a circular, Sebi said that proxy advisors shall formulate the voting
recommendation policies and disclose the updated voting recommendation
policies to its clients.
"Proxy advisors shall ensure that the
policies should be reviewed at least once annually. The voting
recommendation policies shall also disclose the circumstances when not
to provide a voting recommendation," it said.
They would also
have to disclose the methodologies and processes followed in the
development of their research and corresponding recommendations to its
clients, as per the guidelines. The advisors shall alert their clients
within 24 hours of receipt of information about any factual errors or
material revisions to the report.
The market regulator has made
it mandatory for the proxy advisors to share their report with their
clients and the company at the same time.
"This sharing policy
should be disclosed by proxy advisors on their website. The timeline to
receive comments from the company may be defined by proxy advisors and
all comments/clarifications received from the company, within the
timeline, shall be included as an addendum to the report," said the Sebi
circular.
If the company has a different viewpoint on the
recommendations stated in the report of the proxy advisors, then the
advisors, after taking into account the said viewpoint, may either
revise the recommendation in the addendum report or issue an addendum to
the report with its remarks, as considered appropriate.
Among
other requirements, the circular said: "Proxy advisors shall disclose
conflict of interest on every specific document where they are giving
their advice. Further, the disclosures should especially address the
possible areas of potential conflict and the safeguards that have been
put in place to mitigate possible conflicts of interest.
The new guidelines will come into effect from September 1, 2020.
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