Last week, the SEC’s Division of Investment Management Director Brian Daly delivered this speech that discussed fiduciary duties and proxy voting. Here are the main points of the speech:
1. Proxy Voting is a Key Focus: Daly emphasized that proxy voting is a central part of the SEC’s regulatory agenda. He referenced President Trump’s Executive Order directing the SEC Chairman to reconsider the regulation of proxy advisors, highlighting uncertainty in the regulatory landscape.
2. Two Key Questions for Investment Advisers: Daly noted that investment advisers are seeking clarity on these two questions:
(1) Must I vote client proxies?
(2) If I do vote, can – or must – I use a proxy advisor?
3. Fiduciary Duty and the Decision Not to Vote: On the first question, Daly cited the SEC’s position that fiduciary duty includes monitoring corporate actions and voting proxies. However, the SEC also acknowledges that not voting can sometimes be in a client’s best interest. Daly affirmed that not voting “makes sense in many situations,” advocating for flexibility between investment advisers and clients.
4. Use of Proxy Advisors and Innovation: On the second question, Daly encouraged continued innovation in proxy voting, referencing “voting choice” programs. He stated there’s “nothing inherently wrong” with using a proxy advisor.
5. AI Tools in the Proxy Voting Process: Daly pointed to AI tools like large language models and agentic AI as “compelling opportunities” for handling the scale and complexity of proxy voting. He stressed that AI must be “done right,” with proper training and oversight to align with fiduciary duties. This comes amid news of J.P. Morgan Asset Management dropping proxy advisors in favor of its own internal AI platform, known as “Proxy IQ.”
6. Call to Reassess Voting Practices: Daly closed by urging investment advisers dissatisfied with the current landscape to “re-evaluate and reassess” their proxy voting strategies. He underscored the importance for companies to stay aligned with their investors and adapt to ongoing developments.
Authored by
Broc Romanek