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Institutional investment managers that file Form 13F (each, an “Institutional Manager”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be required to file their first Form N-PX as soon as August 31, 2024, reporting how they voted proxies relating to executive compensation and golden parachute matters of any public company (each, a “Say-on-Pay” vote) during the period spanning July 1, 2023 to June 30, 2024.

While the first filing is not due until August 31, 2024, Institutional Managers will need to keep track of their votes now in order to accurately report on their first filing. This annual filing obligation is imposed by the new Rule 14Ad-1 adopted by the SEC on November 2, 2022 under the Exchange Act, to be effective as of July 1, 2024. This article familiarizes Institutional Managers with the new requirements and provides a practical guide for Institutional Managers to take appropriate measures now.

1. New Requirements for Institutional Managers

(1) Three Types of Say-on-Pay Votes

Every Institutional Manager must report annually its proxy voting record for each shareholder vote regarding the following three types of Say-on-Pay votes with respect to each security over which the Institutional Manager exercised voting power:

• votes on the approval of executive compensation;
• votes on the frequency of such executive compensation approval votes; and
• votes to approve “golden parachute” compensation in connection with mergers or acquisitions.

The above disclosure requirement alone is not new. It has been required under Section 951 of the Dodd-Frank Act of 2010. However, prior to Rule 14Ad-1, the form of such disclosure was not standardized and therefore Institutional Managers’ disclosure practices varied. Rule 14Ad-1 implemented and standardized this mandate.

(2) Reporting Format

The above Say-on-Pay voting matters will be reported in the format of the amended Form N-PX, as detailed in section 2 below. Registered funds have used Form N-PX to report proxy voting for two decades and have more burdensome reporting obligations under Form N-PX than do Institutional Managers in terms of scope of votes reported on. Institutional Managers and registered funds will use the same amended Form N-PX from July 1, 2024 onwards.

(3) Reporting Due Date and Timeframe of Covered Votes

Institutional Managers will be required to report their Say-on-Pay votes annually, not later than August 31 of each year, for the most recent twelve-month period ended June 30. Rule 14Ad-1 provides certain transitional leniencies for Institutional Managers which are first or final Form 13F filers.

2. Amended Form N-PX

(1) Standardized Structure

Form N-PX consists of the following three parts:

• Form N-PX Cover Page (“Cover Page”), which requires an Institutional Manager to provide its identifying information, designate the report type by checking the appropriate box, and if applicable, indicate confidential treatment has been requested. If all or a portion of proxy votes are reported by other reporting persons, then it needs to additionally include on the Cover Page the list of other persons reporting for it and provides their respective identifying information.
• Form N-PX Summary Page (“Summary Page”), which requires an Institutional Manager to provide identifying information of any included Institutional Managers if it files jointly with other Institutional Managers, and requires a registered fund to provide series-related information.
• Form N-PX Proxy Voting Record (“Proxy Voting Record”), which contains an “Item 1 Proxy Voting Record” and a signature block.

(2) Enhanced Proxy Voting Record

Compared to the current Form N-PX in use, the amended Form N-PX requires more details in the Proxy Voting Record part. For example, it additionally requires a filer to provide the number of shares voted and the number of shares loaned and not recalled, and requires cross references to the Summary Page, if applicable. It also categorizes all votes into 14 categories. Institutional Managers will need to assign their Say-on-Pay votes to the category “Section 14A say-on-pay votes.”

(3) Proxy Cards Alignments

If an SEC proxy card is available for the matter voted on (i.e., if the matter is subject to Rule 14a-4 under the Exchange Act), Item 1(f) of the Proxy Voting Record requires a filer to use the same language and the same order as on the issuer’s proxy card. If not available, a filer may instead provide a brief identification of the matter voted on.

3. Certain Streamlined Requirements

(1) Short-Form

Form N-PX allows an Institutional Manager to provide simplified notice reports by only filing the Cover Page and the required signature, under any of the following situations:

• all proxy votes are reported by other reporting persons;
• the Institutional Manager did not exercise voting power for any reportable voting matter and therefore does not have any proxy votes to report; or
• the Institutional Manager has a clearly disclosed policy of not voting, and did not actually vote, on any proxy voting matters.

(2) Joint Reporting

Form N-PX allows two or more Institutional Managers that are affiliated persons to file the form jointly. In addition, an Institutional Manager is not required to report proxy votes that are reported on a Form N-PX report by a registered fund, provided that such registered fund needs to provide such Institutional Manager’s identifying information on the Summary Page.

(3) Confidential Treatment

A manager may request confidential treatment of proxy voting information consistent with Section 13(f) of the Exchange Act.

4. Getting Prepared Now

Since the first Form N-PX filings to be made by Institutional Managers cover Say-on-Pay votes occurring on and after July 1, 2023, it is important for Institutional Managers to take actions now to align their proxy voting practices with Form N-PX reporting requirements. For example:

• If not yet, it is worthwhile for Institutional Managers to compare their current proxy voting policies and practices with the Form N-PX requirements, in particular the itemized details required under Proxy Voting Record, and make adjustments and calibrations if warranted.
• It is important to keep complete and accurate records of all required info under Form N-PX for every Say-on-Pay vote occurring on or after July 1, 2023.
• Institutional Managers also need to track their shares voted and shares loaned and not recalled before the record dates for the votes, as Form N-PX requires to provide the exact numbers of such shares.

Conclusion

Institutional Managers may be able to influence the outcome of Say-on-Pay matters of invested public companies by exercising proxy voting power on behalf of investors. New Rule 14Ad-1 requires Institutional Managers to disclose annually how they voted on such matters on the amended Form N-PX, which fulfills the mandate of the Dodd-Frank Act. In addition, the standardized format and XML structured data language of the amended Form N-PX could make it easier for investors to analyze, compare and monitor Institutional Managers’ involvement in “Say-on-Pay” governance matters of the underlying investments.

For more information on the topic discussed, contact:

• Wayne H. Davis  |  davis@thsh.com  |  212-508-6705
• Haylie Gordon  |  gordon@thsh.com  |  212-508-6745
• Michele Itri  |  itri@thsh.com  |  212-508-6732
• James Rieger  |  rieger@thsh.com  |  212-508-6728
• Beth Smigel  |  smigel@thsh.com  |  212-702-3176
• Michael G. Tannenbaum  |  tannenbaum@thsh.com  |  212-508-6701