Monday, September 11. 2023
Changing Form N-PX to an XML structured data format will make the data easier to analyze. Additionally, the form amendments will also standardize the order of disclosure requirements on Form N-PX and require that each fund, including each series of a multi-series trust, present its complete voting record separately.
In addition to the change in format, amendments were made to the contents of Form N-PX to increase the usefulness of the proxy voting information that funds report on Form N-PX.
Form N-PX Reporting Obligations
Currently, funds are required to report information for each matter relating to a portfolio security considered at any shareholder meeting held during the reporting period and for each matter with respect to which the fund was entitled to vote. Recent amendments at the SEC provide that, for purposes of Form N-PX, a fund would be entitled to vote on a matter if its portfolio securities are on loan as of the record date for the meeting. Because the reporting fund could recall and vote these loaned securities, the amendment was designed to ensure that a fund’s filings on Form N-PX reflect the effect of its securities lending activities on its proxy voting, providing context to the information that funds already provide about revenue from securities lending.
Additionally, each person that (1) is an “institutional investment manager” as defined in the Exchange Act; and (2) is required to file reports under Section 13(f) of the Exchange Act, will be required to report its say-on-pay votes on Form N-PX. The types of say-on-pay votes that managers must report are the same as the types of shareholder advisory votes section 14A of the Exchange Act requires. This includes votes on the approval of executive compensation and on the frequency of such executive compensation approval votes, as well as votes to approve “golden parachute” compensation in connection with a merger or acquisition.
A manager is required to report a say-on-pay vote for a security only if the manager: (1) has the power to vote, or direct the voting of, a security; and (2) “exercises” this power to influence a voting decision for the security. The exercise of voting power means the actual use of voting power to influence a voting decision. Managers will exercise voting power when they vote or influence a vote using their own independent judgment.
Managers are required to report say-on-pay votes under Section 14A with respect to any security over which it exercised voting power. There is no exception from reporting where the manager does not vote. The amendments to Form N-PX do limit the reporting obligation for managers who have a disclosed policy of not voting proxies and who, in line with those policies, have in fact not voted proxies during the reporting period.
Identification of Proxy Voting Matters and Categories
For proxy votes in which an SEC proxy card is required to be filed with the Commission, the rule and form amendments will require funds to use the same language as the issuer’s proxy card to identify matters on which the fund has voted, presented in the same order as the matters appear in the proxy card. Where an SEC proxy card is not available for a matter, reports will instead be required to provide a “brief identification of the matter voted on.” Such descriptions will be required to limit the use of abbreviations to commonly understood terms or terms that the issuer abbreviated in its description of the matter.
Funds will also be required to select from specified, standardized categories to identify the subject matter of each reported proxy voting item.
Disclosure of Number of Shares Voted or Instructed to Be Voted
The amendments to Form N-PX will require reporting persons to disclose the number of shares voted (or instructed to be voted) and how those shares were voted (for or against proposal, or abstain), as reflected in their records at the time of filing the Form N-PX. If a reporting person has not received confirmation of the actual number of votes cast, Form N-PX instead may reflect the number of shares instructed to be cast on the date of the vote. If the votes were cast in multiple manners (e.g., both for and against), reporting persons will be required to disclose the number of shares voted (or instructed to be voted) in each manner.
If the reporting person learns prior to filing its Form N-PX that a different number of shares were voted than were instructed to be cast, the reporting person will be required to report the actual number of votes cast. However, if confirmation of the actual number of votes cast occurs after the reporting person files the Form N-PX report, a reporting person will not be required to amend a previously filed Form N-PX report.
Disclosure of Number of Shares the Reporting Person Loaned and Did Not Recall
In addition to requiring disclosure of the number of shares a reporting person voted, the amendments to Form N-PX will also require disclosure of the number of shares the reporting person loaned and did not recall. This requirement is designed to provide transparency into how a reporting person’s securities lending activities affects its proxy voting. Because quantitative disclosures of this nature will not provide the full context of the decision of whether to recall a security on loan, reporting persons will have the option to provide additional information on the cover page and/or on a vote-by-vote basis on Form N-PX.
Additional changes are being made to the disclosure obligations for Form N-PX as follows:
- Funds that have multiple series of shares must provide each series’ Form N-PX disclosure separately by series.
- Information otherwise required or permitted to be reported on Form N-PX must be reported in the order presented on the form.
- The revised form will require that a reporting person disclose whether a vote was for or against management’s recommendation.
The reporting person must report only one security identifier: the security’s Committee on Uniform Securities Identification Procedures (“CUSIP”) number or International Securities Identification Number (“ISIN”). Currently, the form requires both a security’s CUSIP and ticker symbol. Under the changes, the reporting person must report only the security’s CUSIP unless it is not available. If the CUSIP number is not reported, then Form N-PX will require the security’s ISIN unless it also is not available. The current requirement to report the ticker symbol of a security has been removed.
- The option of reporting a Financial Instrument Global Identifier (FIGI), in addition to the mandatory CUSIP number, has been added.
- A designation will be added to Form N-PX that would permit managers who have a disclosed policy of not voting proxies, and who did not in fact vote during the reporting period, to indicate such in a “notice” report.
- There are amendments that permit reporting persons to report jointly their say-on-pay votes in three scenarios as follows:
- A single manager can report say-on-pay votes in cases where multiple managers exercise voting power.
- A fund can report a manager’s say-on-pay votes on behalf of a manager exercising voting power over some or all of the fund’s securities.
- Two or more managers who are affiliated persons can file a single report on Form N-PX for all affiliated person managers within the group, notwithstanding that they do not exercise voting power over the same securities.
Form N-PX in XML format will be similar to other forms already filed by investment managers and funds, such as Form 13F and Form N-PORT. These forms use XML tagging to identify data. Form N-PX will have a "cover page" within the XML, which contains information identifying the registrant and the agent for service. It will also contain "summary" pages to denote the series and managers that are included in the report. The bulk of the data being disclosed will be contained on the "proxy voting record" page, which will contain any voting records that are being reported on the form. The form also includes a "signature" page.
Additionally, Form N-PX will have the normal EDGAR submission information as well as the series and class information as neccessary for registered management investment companies. Because these last pages are common to most EDGAR submissions being filed by funds and managers, this sheet will not cover the information that is included on these pages.
Changes to the N-PX cover page will require reporting persons to identify whether the reporting person is a fund or a manager and the type of report being filed. Managers also will be required to disclose on the cover page of Form N-PX the following information:
- the name of the reporting person
- the address of its principal executive offices
- the name and address of the agent for service
- the telephone number of the reporting person
- the reporting period
- the reporting person’s file number
- the manager's Central Registration Depository (“CRD”) number and other SEC file number, if any
Additionally, reporting persons will be required to check a box in order to identify the report as one of the following types:
- Fund Voting Report: to be used when the fund holds one or more securities it is entitled to vote. This reporting type is for registered investment companies with votes to report.
- Fund Notice Report: to be used when the fund does not hold any securities it is entitled to vote. If a reporting person did not have any proxy votes to report for the reporting period, the fund should: (i) indicate that the fund has no votes to report by ticking this box on the cover page; and (ii) file only the cover page, required signature, and information about the series on the summary page.
- Institutional Manager Voting Report: to be used when a manager is reporting all of its proxy votes that are required to be reported in a single report. This reporting type is for managers when the report contains all say-on-pay votes of the manager.
- Institutional Manager Notice Report: to be used when the report contains no say-on-pay votes of the manager. A manager would use the notice report option when all of its say-on-pay votes are reported by other managers or funds under the joint reporting provisions. A manager also will be permitted to file a notice report in two additional circumstances: (i) a manager that does not exercise voting power for any reportable voting matter during the reporting period and therefore does not have any proxy votes to report would file a notice report and indicate this fact on the cover page; and (ii) managers that have a disclosed policy of not voting proxies and that did not vote during the reporting period would indicate this on Form N-PX without providing additional information about each voting matter individually.
- Institutional Manager Combination Report: to be used when the report contains some say-on-pay votes of the manager but additional votes are reported by other managers or funds under the joint reporting provisions. This reporting type addresses situations in which the manager is reporting some say-on-pay votes and other votes are reported by other managers or by funds.
Any “notice” or “combination” report must include on the cover page a list of the file numbers and names, as well as CRD numbers (if any), of any other managers and funds whose Form N-PX reports include say-on-pay votes of the reporting manager.
The cover page will also contain an area to provide explanatory information in addition to the required information, so long as the additional information does not, either by its nature, quantity, or manner of presentation, impede the understanding or presentation of the required information.
A new summary page is being added to Form N-PX to facilitate joint reporting. Also, this summary page will enable investors to readily identify which fund series are intended to be covered by the report and which managers (besides the reporting person) with say-on-pay votes are included on the report. The summary page will be required on all Form N-PX reports by funds as well as manager “voting” and “combination” filings.
For included managers, reporting persons must identify the names and total number of included managers in the report. Information about each manager should be included as follows:
- the name
- the 13F file number
- the CRD number (if any)
- the SEC file number (if any)
- the LEI (if any)
In addition, and similar to Form 13F, reporting persons must assign a number (which need not be consecutive) for each such manager and present the list in sequential order. Non-consecutive numbering is permitted to allow managers to retain the same number across filings of different reporting persons and different time periods. If there are no included managers, the reporting person should enter the word "NONE" under the title of the page and should not include the column headings and list entries.
To the extent that a fund's report includes the votes of multiple series, the summary page will contain the total number of series included and identify those series with the following information:
- the series name
- the series identifier
- the LEI of the series
Proxy Voting Record
If the reporting person is a Fund, the reporting person must disclose the information below for each matter relating to a portfolio security considered at any shareholder meeting held during the period covered by the report and for each matter with respect to which the Fund was entitled to vote, including securities on loan. If the reporting person is an Institutional Manager, the reporting person must disclose the information below for each shareholder vote pursuant to Sections 14A(a) and (b) of the Exchange Act over which the Institutional Manager exercised voting power, as defined in Rule 14Ad-1(d) under the Exchange Act [17 CFR 240.14Ad-1].
The following information must be disclosed on the proxy voting record for each matter relating to a portfolio security:
- the name of the issuer of the security
- the Council on Uniform Securities Identification Procedures (“CUSIP”) number for the security
- the International Securities Identification Number (“ISIN”) for the security
- (optional) the global share class Financial Instrument Global Identifier (“FIGI”) for the security
- the shareholder meeting date
- an identification of the matter voted on
- all categories applicable to the matter voted on from the following list of categories (more than one category can be selected):
- Director elections
- Section 14A say-on-pay votes (examples: Section 14A executive compensation, Section 14A executive compensation vote frequency, Section 14A extraordinary transaction executive compensation)
- Audit-related (examples: auditor ratification, auditor rotation)
- Investment company matters (examples: new or changed investment management agreement, assignment of investment management agreement, business development company approval of restricted securities or asset coverage ratio change, closed-end investment company issuance of shares below net asset value)
- Shareholder rights and defenses (examples: adoption or modification of a shareholder rights plan, control share acquisition provisions, fair price provisions, board classification, cumulative voting)
- Extraordinary transactions (examples: merger, asset sale, liquidation, buyout, joint venture, going private, spinoff, delisting)
- Capital structure (examples: security issuance, stock split, reverse stock split, dividend, buyback, tracking stock, adjustment to par value, authorization of additional stock)
- Compensation (examples: board compensation, executive compensation (other than Section 14A say-on-pay), board or executive anti-hedging, board or executive anti-pledging, compensation clawback, 10b5-1 plans)
- Corporate governance (examples: term limits, board committee issues, size of board, articles of incorporation or bylaws, codes of ethics, approval to adjourn, acceptance of minutes, proxy access)
- Environment or climate (examples: greenhouse gas (GHG) emissions, transition planning or reporting, biodiversity or ecosystem risk, chemical footprint, renewable energy or energy efficiency, water issues, waste or pollution, deforestation or land use, say-on-climate, environmental justice)
- Human rights or human capital/workforce (examples: workforce-related mandatory arbitration, supply chain exposure to human rights risks, outsourcing or offshoring, workplace sexual harassment)
- Diversity, equity, and inclusion (examples: board diversity, pay gap)
- Other social issues (examples: lobbying, political or charitable activities, data privacy, responsible tax policies, consumer protection)
- Other (along with a brief description)
- (for reports filed by Funds) whether the matter was proposed by the issuer or by a security holder
- the number of shares that were voted, with the number zero (“0”) entered if no shares were voted
- the number of shares that the reporting person loaned and did not recall
- how the shares were voted (e.g., for or against proposal, or abstain; for or withhold regarding election of directors) and, if the votes were cast in multiple manners (e.g., for and against), the number of shares voted in each manner
- whether the votes represented votes for or against management’s recommendation
- (if applicable) the identification of each Institutional Manager on whose behalf this Form N-PX report is being filed (other than the reporting person filing the report) that exercised voting power over the security using the number assigned to the Institutional Manager on the Summary Page
- (if applicable) the series that was eligible to vote the security using the Series identification number listed on the Summary Page
- any other information the reporting person would like to provide about the matter or how it voted
The final page of Form N-PX is the signature page, which should include the signature, printed name and title of the reporting person and the date of the signature as well as the name, title, signature, and signature date of each signing officer.
SEC Issue Date: November 2, 2022
Effective Date: July 1, 2024
Compliance Date: August 31, 2024
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