Hedge funds may have to disclose executive-pay votes under SEC plan

• The SEC proposed a new regulation that would require large funds to disclose information on how they voted on executive pay.
• The rule has been in the pipeline for over a decade due to resistance from other investment firms.
• The renewed effort would fulfill the SEC's mandate under the 2010 Dodd-Frank Act.

The US Securities and Exchange Commission on Wednesday proposed a new regulation that would require large hedge funds, pensions, and endowments to disclose information on how they voted on executive compensation.

The rule has been in the pipeline for over a decade due to resistance from other investment firms that are accustomed to less transparency than publicly traded companies are.

Under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, public companies must provide shareholders with an advisory vote on compensation for top executives.

But while funds file so-called Form N-PX reports disclosing voting proxies, the SEC said they are often done in an inconsistent manner and in a format that is not machine-readable, putting the burden on investors.

In addition to the executive-pay vote disclosures, the SEC is also proposing ways for funds to more clearly report on proxy votes and stock-lending activity, among other things.

If the proposals are approved by a majority of the five-member commission Wednesday, the changes would then be subject to a public comment period of 60 days.

The renewed effort of the US financial regulator ticks off one of the many changes in SEC Chair Gary Gensler's checklist to achieve his agenda of protecting consumers. The new chair has recently reined in the booming SPAC and cryptocurrency markets.

"This proposal will make it easier and more efficient for investors to get crucial information about proxy votes from funds," Gensler said in a statement. "I am pleased to support the staff's recommendations and look forward to putting them out to public comment."