On Thursday, market regulator SEBI (1) extended the timeline to implement procedural guidelines for proxy advisors to January 1. The regulator issued the guidelines which were supposed to come into force from September 1 on August 3.
The Securities and Exchange Board of India (SEBI) stated the timeline was extended. The decision was made after taking into rumination requests received from registered proxy advisors. Another reason stated by SEBI was the enduring business and market conditions due to the COVID-19 pandemic. SEBI said in a circular that following the extension shall be applicable with effect from January 1, 2021.
Through its circular issued in August, proxy advisors shall plan their actions. It includes voting recommendation policies. The proxy advisors must also disclose the updated voting recommendation policies to its clients, added SEBI. They were also asked to confirm that the policies are reviewed at least once annually.
Further, the recommendation policies should also disclose the conditions when not to provide a voting recommendation, said SEBI.
Guidelines for Proxy Advisors
Proxy advisors must implement the procedural rules according to the guidelines. They will have to disclose the methodologies and the processes followed in developing their research and corresponding recommendations to its clients. Furthermore, the advisors must share their reports with their clients and the company at the same time.
Proxy advisors may define the timeline to receive comments from the company. All clarifications or comments received from the company within the timeline will be included as the report’s appendix.
As per the guidelines, Proxy advisors are asked to disclose the legal requirement and the rationale behind the recommendation of a higher standard in their bid. Additionally, revealing a conflict of interest on every specific document where they provide their advice is also necessary.
The regulator said proxy advisors would initiate clear procedures. It includes strategies to disclose, mitigate, and manage any potential conflicts of interest resulting from other business activities. Such as, consulting services if any, handled by them and tell the same to clients.