Procedural Guidelines for Proxy Advisors

SEBI vide circular No. SEBI/HO/IMD/DF1/CIR/P/2020/147 dated 03rd August 2020, Procedural gudelines for proxy advisors has been issued.

As per SEBI (Research Analyst) Regulations, 2014 mandates proxy advisors to abide by Code of Conduct specified therein. It is decided that proxy advisors shall also comply with the following procedural guidelines:

  • Proxy Advisors shall formulate  the voting recommendation policies and disclose the  updated voting recomm-endation policies to its clients. Proxy Advisors shall ensure that the policies should be reviewed atleast once annually. The voting recomm-endation policies shall also disclose the circumstances when not to provide a voting recommendation.
  • Proxy Advisors shall disclose the methodologies and processes followed in the development of their research and corres-ponding recommendations to its clients.
  • Proxy Advisors shall alert clients, within 24 hours of receipt of information, about any factual errors or material revisions to the report.
  • Proxy Advisors shall have a stated process to commu-nicate with its clients and the company.
  • Proxy Advisors shall share their report with its clients and the company at the same time. This sharing  policy  should  be  disclosed  by  proxy  advisors  on  their  website.  Timeline  to  receive comments  from  company  may  be  defined  by  proxy  advisors  and  all  comments/clarifications rece-ived from the company, within timeline, shall be included as an addendum to the report. If the company  has  a  different  viewpoint on the  recommendations stated in  the report of the proxy advisors, then proxy advisors, after taking into account the said viewpoint, may either revise the recommendation in the addendum report or issue an addendum to the report with its remarks, as considered appropriate.
  • Proxy Advisors shall clearly  disclose in their  recomm-endations the legal require-ement vis-a-vis higher  standard  they  are  suggesting if any, and  the rationale behind the recommendation  of higher standards.
  • Proxy Advisors shall disclose conflict of interest on every specific document where they are giving their advice. Further, the disclosures should especially address possible areas of potential conflict and the safeguards that have been put in place to mitigate possible conflicts of interest.
  • Proxy Advisors shall establish clear procedures to disclose, manage and/or mitigateany potential conflicts of interest resulting from other business activities including consulting services, if any, undertaken by them and disclose the same to clients.

The provisions of this circular shall be applicable with effect from January 01, 2021(as per circular No. SEBI/HO/IMD/DF1/CIR/P/2020/157 dated August 27).

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