Submitted by Office of State Senator Scott Baldwin
Baldwin
A bill sponsored by State Sen. Scott Baldwin (R-Noblesville) that would establish transparency requirements for proxy advisors who issue voting recommendations on entity management to shareholders and companies passed the Indiana House of Representatives Wednesday, Feb. 25 with bipartisan support.
Under House Enrolled Act 1273, people who are compensated for giving advice to shareholders and companies would be considered proxy advisors. This would require them to make certain disclosures based on their use or lack of use of a written financial analysis when recommending a shareholder or company vote against entity management, which is a business management group or a person offering business management services.
“These provisions would provide more transparency for investors, prevent shareholders from relying on recommendations without financial analysis and promote higher-quality proxy advisory services,” State Sen. Baldwin said. “I am glad to see this bill pass the Senate and House, and I appreciate State Rep. Kyle Pierce for his work on House Enrolled Act 1273.”
When a proxy advisor uses a written financial analysis for their recommendation, they are required to disclose that they analyzed short- and long-term costs and benefits, concluded the action that provides the most positive effect on the shareholder and explained their processes and qualifications.
If a proxy advisor does not use a written financial analysis, they would be required to disclose the services they are providing, their recommendation on the issues and share that their suggestions are made without a written financial analysis to shareholders and entity management. The proxy advisor would also be required to display on their website that their recommendation was made without a financial analysis while providing services for the specific shareholder or company.
HEA 1273 would make any violation of the bill’s provisions by a proxy advisor a deceptive act.
The bill now heads to governor for further consideration.
State Sen. Scott Baldwin (R-Noblesville) represents Senate District 20, which includes Noblesville, Carmel, Cicero, and unincorporated areas of Hamilton County.