The SEBI on 3 August 2020 issued circular providing procedural guidelines for all SEBI registered Proxy Advisors. The said guidelines are issued with the intention to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.
In addition with the prescribed code of conduct, the Proxy Adviser (‘PA’) are also required to comply with the following procedural guidelines from 1 September 2020.
- Voting recommendation policy (the same should also be reviewed annually).
- Disclose methodologies and processes followed in development of research and recommendations. – Alert clients of any factual error/ material revision in report.
- Define process of communication with clients and company.
- Sharing report with clients and company simultaneously on its website. Comments, if any, received from the Company should be disclosed as addendum to report or by way of revision of recommendation.
- Disclose in the recommendation the legal standard vis-à-vis higher standard and the rationale behind suggesting the same.
- Disclose the conflict of interest and the safeguards in place to mitigate the conflict of interest. – Establish procedures to disclose, manage and/or mitigate any potential conflict of interest from other business activities (like consulting services) undertaken by them and disclose the same to clients.
What is Proxy Adviser
PA means any person who provide advice, through any means, to institutional investor or shareholder of a company, in relation to exercise of their rights in the company including recommendations on public offer or voting recommendation on agenda items.
PA are required to obtain registration from SEBI.