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This story was updated on Aug. 22, 2019, to include comments from Institutional Shareholder Services Inc.

U.S. securities regulators issued new guidance Wednesday on proxy voting that’s seen as curbing the power of proxy advisory firms.

The U.S. Securities and Exchange Commission (SEC) set out its views on investment advisors fulfilling their proxy voting responsibilities. The guidance states that proxy voting advice constitutes a “solicitation” under federal rules and provides instructions on applying anti-fraud rules to proxy voting advice.

“Advisers who vote proxies must do so in a manner consistent with their fiduciary obligations and, to the extent they rely on voting advice from proxy advisory firms they must take reasonable steps to ensure the use of that advice is consistent with their fiduciary duties,” said SEC commissioner Elad Roisman, who led development of the new guidance.

“In addition, proxy advisory firms, to the extent they engage in solicitations, must comply with applicable law,” he noted.

The initiative is being applauded by business lobby group the U.S. Chamber of Commerce.

“For too long proxy advisory firms have exploited current SEC regulations to overwhelm public companies with voting recommendations that investors have no interest in advancing as part of the annual shareholder voting process. Proxy advisory firm reform is critical to reversing the decline of companies going and staying public in the United States and boosting American competitiveness in a global economy,” said Tom Quaadman, executive vice-president of the U.S. Chamber’s Center for Capital Markets Competitiveness, in a statement.

“Proxy advisory firms have been riddled with conflicts of interest, failed to link advice with economic return or company specific information, and lack process and transparency,” Quaadman said. “We hope the SEC and other regulators take further action to ensure that proxy advisory firms provide ‘decision useful’ information to investors.”

Back in 2015, the Canadian Securities Administrators (CSA) published their own guidance for proxy advisory firms, which sought to promote greater transparency in the industry, and to respond to the concerns from issuers and others about the role of proxy firms.

Leading proxy advisory firm Institutional Shareholder Services Inc. (ISS) indicated it has concerns with the SEC’s new guidance.

In a statement, ISS president & CEO Gary Retelny, said, “We will carefully review the guidance… to understand the potential impacts for our clients as well as to consider further actions that could improve the ability of our clients to meet their fiduciary obligations in a cost effective manner. However, we are deeply concerned that aspects of the guidance may significantly undermine our ability to deliver independent, timely and accurate data, research, insights and perspectives to aid in the discharge of our clients’ fiduciary duties.”

“We will have more to say once we have the opportunity to closely study the guidance,” he added.