circumstances (e.g., if it does not exercise voting power). Another
commenter requested guidance on whether an adviser or a sub-adviser
should be the primary filer when both exercise voting power. We do not
believe it is necessary to specify who should report under these
circumstances, because the joint reporting provisions are designed to
provide flexibility to reporting persons to divide that responsibility
among themselves or to each report independently.\141\ This may in
certain circumstances result in two managers reporting the same vote,
for instance if two managers provide voting advice regarding the same
securities and have not coordinated with each other regarding who will
make a report on Form N-PX. Because both managers would exercise voting
power (i.e., would influence the voting decision) under these
circumstances, we do not believe it would be inappropriate or confusing
for those managers to report the same vote separately. Like reports on
Form N-PX that rely on the joint reporting provisions, reports that
separately disclose the same votes would provide insight to clients and
other investors into how a manager voted.
---------------------------------------------------------------------------

    \140\ See ISS Letter.
    \141\ See Brown Letter.
---------------------------------------------------------------------------

    The second proposed amendment would permit a fund to report its
say-on-pay votes on behalf of a manager exercising voting power over
some or all of the fund's securities.\142\ This provision avoids a fund
and its adviser each having to file duplicative reports regarding the
same votes. Under our proposed approach, if a manager's say-on-pay
votes are reported by one or more funds over whose securities the
manager exercises voting power or by one or more other managers, the
non-reporting manager would be required to file a Form N-PX report that
identifies each manager and fund reporting on its behalf.\143\
---------------------------------------------------------------------------

    \142\ General Instruction C.3 to proposed Form N-PX.
    \143\ General Instruction C.4 to proposed Form N-PX. See infra
Section II.D.2 (discussing this proposed requirement).
---------------------------------------------------------------------------

    The third proposed amendment would permit affiliates to file joint
reports on Form N-PX notwithstanding that they do not exercise voting
power over the same securities. The Commission did not propose a
similar provision in 2010, but a few commenters suggested that we
broaden the circumstances where affiliates may file joint reports.\144\
These commenters

suggested that, to further promote operational efficiencies and ease
potential administrative burdens, the Commission should permit
affiliated managers to file jointly even where they do not jointly
exercise voting power, and allow managers to report at the holding
company level if they so choose.\145\ After considering these comments,
we are proposing to permit two or more persons who are affiliated
persons to file a single report on Form N-PX for all affiliated persons
in the group.\146\ This joint reporting provision is designed to
provide operational efficiencies without negatively affecting the
quality or accessibility of the information reported on Form N-PX.
---------------------------------------------------------------------------

    \144\ See Letter of Fidelity Investments (Nov. 18, 2010)
(``Fidelity Letter'') (suggesting flexibility for affiliated
managers to jointly file Form N-PX even where they do not share
voting power); IAA Letter (suggesting flexibility for corporate
groups to report at the holding company or subsidiary level
regardless of whether they share voting authority).
    \145\ Id.
    \146\ See General Instruction C.2 to proposed Form N-PX; section
2(a)(3) of the Investment Company Act (defining ``affiliated
person'').
---------------------------------------------------------------------------

    In all three cases, where another reporting person reports say-on-
pay votes on a manager's behalf, the report on Form N-PX that includes
the manager's votes would be required to identify the manager (and any
other managers) on whose behalf the filing is made and separately
identify the securities over which the non-reporting manager exercised
voting power.\147\ The manager's report on Form N-PX also would have to
identify the other managers or funds reporting on its behalf.\148\ This
approach is designed to allow managers' clients and investors to easily
search for all votes where the manager exercised voting power, whether
or not those votes are reported on the manager's own Form N-PX.
---------------------------------------------------------------------------

    \147\ For example, in the case of a Form N-PX report that
includes votes of multiple affiliated managers, the filing must
identify each affiliate the report covers and separately identify
the securities for which each affiliate exercised voting power.
    \148\ General Instructions C.5 and C.6 to proposed Form N-PX;
Special Instructions C.2 and D.6 to proposed Form N-PX. See infra
Sections II.D.3 and II.D.4 (discussing these proposed requirements
in more detail).
---------------------------------------------------------------------------

    Use of the proposed joint reporting provisions would be optional.
For example, where multiple managers exercise voting power over the
same securities, the managers could choose to report the relevant say-
on-pay votes individually instead of relying on the joint reporting
provisions. If a manager does not rely on the joint reporting
provisions, it would not be subject to the disclosure requirements tied
to joint reporting that facilitate identification of all of a manager's
say-on-pay votes.\149\ In this case, the manager's report on Form N-PX
would provide its complete proxy voting record for say-on-pay votes
during the reporting period, without reference to any other reports on
Form N-PX, and would not include any votes where the manager did not
exercise voting power.
---------------------------------------------------------------------------

    \149\ In this case, the manager would report on its own behalf
and would not have to analyze if any other manager also is required
to report the vote.
---------------------------------------------------------------------------

    We request comment on the proposal to address duplicative reporting
and, in particular, on the following issues:
    54. Should we, as proposed, permit a single manager to report say-
on-pay votes in cases where multiple managers exercise voting power?
Should we, as proposed, permit a manager to satisfy its reporting
obligations by reference to the Form N-PX report of a fund that
includes the manager's say-on-pay votes? Is there any reason not to
permit joint reporting? For example, would joint reporting confuse
investors or make Form N-PX harder to use? Would the potential for
confusion or for reduced usability decline if, as proposed, Form N-PX
reports were reported in a structured data language? \150\ Are there
other ways to address potentially duplicative reporting that are
consistent with section 14A(d) of the Exchange Act that we should
consider?
---------------------------------------------------------------------------

    \150\ Proposed rule 14Ad-1(a); Item 1 of proposed Form N-PX.
---------------------------------------------------------------------------

    55. Should the rule and form amendments provide, as we are
proposing, that two or more managers that are affiliated persons may
file a joint report on a single Form N-PX notwithstanding that the
managers do not exercise voting power over the same securities? Does
this standard permit a level of consolidated reporting by corporate
groups that is sufficient to address common arrangements? Are there
other frameworks for consolidated reporting that would be more
appropriate? Rather than use the Investment Company Act definition of
``affiliated person,'' is there a different standard we should use? For
example, similar to Form 13F, should we deem a manager to exercise
voting power over any securities over which any person under its
control exercises voting power?
    56. Would the ability of a manager to report say-on-pay votes that
another manager or a fund also reports lead to investor confusion or
inappropriate double-counting? Should we prohibit a manager from
reporting say-on-pay votes that another manager or a fund also reports?
Should any such prohibition be qualified based on a manager's
knowledge, belief, or some other standard? Should a manager be required
to take any steps to determine whether another manager or fund is
reporting say-on-pay votes for the same securities? Would it confuse
investors if, as provided in our proposal, joint reporting of say-on-
pay votes is optional?
    57. Are the joint reporting provisions necessary in light of
differences between our current proposal's standard for exercising
voting power and the 2010 proposal's standard of directly or indirectly
having or sharing the power to vote or to direct the voting of a
security? If so, are there any changes we should make to the joint
reporting provisions to better align with our proposed standard of
exercising voting power over a security?
2. The Cover Page
    The Commission proposed changes to the cover page of Form N-PX in
the 2010 proposal to address the addition of managers as a class of
reporting persons and to help operationalize the joint reporting
provisions. Commenters did not address these cover page changes, and we
are proposing the same changes. Consistent with current Form N-PX cover
page requirements, the proposed cover page of Form N-PX would require
the name of the reporting person, the address of its principal
executive offices, the name and address of the agent for service, the
telephone number of the reporting person, identification of the
reporting period, and the reporting person's file number.\151\ We also
propose that a manager provide its CRD number and other SEC file
number, if any, which we believe would facilitate identification of
other regulatory filings of the manager and interrelationships between
managers who rely on the proposed joint reporting provisions.\152\ We
are proposing to require that the cover page include information to
identify more readily whether the reporting person is a fund or a
manager. If the reporting person is a manager, this information would
also help investors identify reports filed by other managers and funds
that contain say-on-pay votes of the reporting person under the joint
reporting provisions. Specifically, the reporting person would be
required to

check a box in order to identify the report as one of the following
four types:
---------------------------------------------------------------------------

    \151\ In the case of a fund, the file number would be an
Investment Company Act number beginning with ``811-.'' In the case
of a manager, the file number would be a Form 13F number beginning
with ``028-.''
    \152\ A CRD number is a number assigned by the Financial
Industry Regulatory Authority's Central Registration Depository
system or by the Investment Adviser Registration Depository system.
The SEC file number would be any file number (e.g., 801-, 8-, 866-,
802-) assigned by the Commission to the manager other than the
manager's 13F file number, which all managers would be required to
provide on the cover page. See Special Instruction B.3 of proposed
Form N-PX.
---------------------------------------------------------------------------

     Registered management investment company report;
     Manager ``voting'' report when the report contains all
say-on-pay votes of the manager;
     Manager ``notice'' when the report contains no say-on-pay
votes of the manager and all say-on-pay votes are reported by other
managers or funds under the joint reporting provisions; and
     Manager ``combination'' report when the report contains
some say-on-pay votes of the manager and some say-on-pay votes of the
manager are reported by other managers or funds under the joint
reporting provisions.
    In addition, the cover page of a ``notice'' or ``combination''
report would include a list of the file numbers and names, as well as
CRD numbers (if any), of the other managers and funds whose Form N-PX
reports include say-on-pay votes of the reporting manager.\153\ This
cross-referencing, which is modeled after Form 13F requirements, will
help investors locate the reports of say-on-pay votes by other such
managers.\154\
---------------------------------------------------------------------------

    \153\ Special Instruction B.2 to proposed Form N-PX.
    \154\ See Special Instruction 6 to Form 13F.
---------------------------------------------------------------------------

    We request comment on the proposed cover page of Form N-PX and, in
particular, on the following issues:
    58. Should we adopt the cover page of Form N-PX as proposed, or
should we modify it in any way, e.g., by adding or removing
information? For example, should we require managers to include their
CRD numbers and SEC file numbers, if any, as proposed? Should we also
require managers to include their legal entity identifiers (``LEIs''),
if any? \155\ Would the proposed cover page adequately identify the
reporting person and the reporting period? Would the proposed cover
page sufficiently enable investors to identify a reporting person's
Form N-PX report for a given period and any amendments to that report?
Would the proposed cover page enable users to identify the type of
reporting person?
---------------------------------------------------------------------------

    \155\ An LEI is a unique identifier generally associated with a
single corporate entity and is intended to provide a uniform
international standard for identifying counterparties to a
transaction.
---------------------------------------------------------------------------

    59. In the case of a ``notice'' or ``combination'' report filed by
a manager, would the proposed cover page adequately enable investors to
identify reports filed by other persons that contain say-on-pay votes
for which the manager exercised voting power? Should these reports be
required to include a list of the file numbers and names, as well as
CRD numbers (if any), of the other managers and funds whose Form N-PX
reports include say-on-pay votes of the reporting manager, as proposed?
Is there other information that would help investors find a given
manager's votes?
    60. Should ``notice'' filings contain any additional required
disclosure? As currently contemplated, does the proposed notice filing
requirement provide useful information to investors?
    61. Is there additional information that would be helpful to
include on the cover page of Form N-PX?
3. The Summary Page
    We are proposing to add a new summary page to Form N-PX to enable
investors to readily identify any additional managers (besides the
reporting person) with say-on-pay votes included on the Form N-PX
report.\156\ The summary page would be required in any fund's Form N-PX
report, as well as any manager's Form N-PX other than a ``notice''
filing.\157\ Commenters did not address the proposed summary page
requirements, and we are proposing the summary page requirements
largely without any changes from the 2010 proposal.
---------------------------------------------------------------------------

    \156\ For example, this disclosure might contain managers
included under the joint reporting requirements. See Special
Instruction B.2.b-d of proposed Form N-PX.
    \157\ Special Instructions B.2.a-d of proposed Form N-PX. The
summary page would not be required in a ``notice'' report by
managers because, since the notice report would not contain any say-
on-pay votes at all, it would not report any say-on-pay votes of
other managers.
---------------------------------------------------------------------------

    The summary page of Form N-PX would require reporting persons to
identify the names and total number of additional managers with say-on-
pay votes included in the report in list format.\158\ The proposed
instructions to Form N-PX specify the contents of this information,
including the title, column headings, and format.\159\
---------------------------------------------------------------------------

    \158\ Special Instruction C.1 to proposed Form N-PX.
    \159\ Special Instruction C.2 to proposed Form N-PX.
---------------------------------------------------------------------------

    If a Form N-PX report includes the say-on-pay votes of additional
managers, the summary page list would be required to include all such
managers together with their respective Form 13F file numbers and, if
any, CRD numbers and other SEC file numbers.\160\ In addition, and
similar to Form 13F, the proposal would require the reporting person to
assign a number (which need not be consecutive) for each such manager,
and present the list in sequential order.\161\ These numbers would help
identify the particular manager(s) who exercised the power to vote the
securities. While we are proposing the sequential numbering requirement
to make the list easier to use, the proposal would permit non-
consecutive numbering to allow managers to retain the same number
across filings of different reporting persons and different time
periods.
---------------------------------------------------------------------------

    \160\ Special Instruction C.2.b to proposed Form N-PX.
    \161\ Id.; see also Special Instruction 8.b to Form 13F.
---------------------------------------------------------------------------

    If a Form N-PX filing does not disclose the proxy votes of a
manager other than the reporting person, the reporting person would
enter the word ``NONE'' under the title and would not include the
column headings and list entries.\162\
---------------------------------------------------------------------------

    \162\ Special Instruction C.2.a to proposed Form N-PX.
---------------------------------------------------------------------------

    To the extent a fund's report on Form N-PX includes the votes of
multiple series, the summary page would require the name and the series
identifier (if any) of each series.\163\ We believe this would assist
investors in discerning the funds covered by the Form N-PX report.
While the Commission did not propose this requirement in 2010, the
Commission has since adopted Form N-CEN and Form N-PORT, which contain
similar series identification requirements for funds.\164\
---------------------------------------------------------------------------

    \163\ Special Instruction C.3 to proposed Form N-PX.
    \164\ Item B.6.a.ii of Form N-CEN; Item A.2 of Form N-PORT.
---------------------------------------------------------------------------

    We request comment on the proposed summary page of Form N-PX and,
in particular, on the following issues:
    62. Should we adopt the summary page of Form N-PX, as proposed, or
should we modify it in any way? For example, should we require the
inclusion of additional information with respect to the additional
managers in the list? What information would be helpful for investors
to review in summary format? Would such information be practicable for
the reporting person to acquire and report? Should we remove any of the
proposed information requirements, such as the requirements for CRD
numbers and other SEC file numbers for managers, if any?
    63. Would the proposed sequential and/or non-consecutive listing of
other managers in the summary page help investors identify specific
managers? Is the other identifying information we are proposing to
require (including a manager's 13F file number and, if any, CRD number
and other SEC file numbers) sufficient for purposes of identifying
managers whose votes are included in a given report?

    64. Would the proposed summary page enable investors to readily
identify any managers whose say-on-pay votes are included in a Form N-
PX report? Would additional formatting constraints be helpful?
    65. Should there be additional summary page requirement differences
between funds and managers?
    66. Should we, as proposed, require fund Form N-PX reports that
include the votes of multiple series to identify on the summary page
the names and EDGAR identifier of each series that the report covers?
Is there other information we should require of funds that would enable
investors to more easily identify which funds the report covers? For
example, should we also require disclosure of the series' LEI?
    67. Should we provide any exceptions to the summary page reporting
requirement? If so, how should any such exception be defined?
    68. We request information on how clients of managers or other
investors would utilize the information contained on the summary page.
Would it provide useful data?
4. Other Proposed Amendments to Form N-PX To Accommodate Manager
Reporting
    We are proposing other modifications to the format and content of
the information currently required by Form N-PX to accommodate the
proposed requirement for managers to report on Form N-PX. Specifically,
we are proposing to require a manager to report the number of shares
the manager is reporting on behalf of another manager pursuant to the
joint reporting provisions separately from the number of shares the
manager is reporting only on its own behalf.\165\ A manager would also
be required to separately report shares when the groups of managers on
whose behalf the shares are reported are different. For example, if the
reporting manager is reporting on behalf of Manager A with respect to
10,000 shares and on behalf of Managers A and B with respect to 50,000
shares, then the groups of 10,000 and 50,000 shares must be separately
reported. Similarly, a fund would be required to separately report
shares that are reported on behalf of different managers or groups of
managers.\166\ We believe this requirement would further our goal of
providing meaningful information to investors by allowing investors to
clearly see how a particular manager exercised voting power.
---------------------------------------------------------------------------

    \165\ See Special Instruction D.6 to proposed Form N-PX. See
also supra Section II.D.1 (discussing the proposed joint reporting
provisions).
    \166\ See id. We are also clarifying, as a commenter suggested,
that reporting persons would not be required to report shares
separately when they are not relying on the joint reporting
provisions, even if another manager exercised voting power over some
of the shares reported. See IAA Letter.
---------------------------------------------------------------------------

    One commenter suggested limiting disclosure regarding manager
shared voting power to the summary page of Form N-PX.\167\ We are not
proposing this approach because we believe it would make it difficult
for investors to identify which entities are responsible for the
particular say-on-pay votes reported, which would undermine the purpose
of reporting say-on-pay votes. The summary page is intended to identify
any additional managers (besides the reporting person) with say-on-pay
votes included on the Form N-PX report. We believe disclosure with
respect to shared voting power should be included in the body of Form
N-PX containing proxy voting information, in order to assist
identifying which of the votes reported on Form N-PX were those over
which the manager exercised voting power.
---------------------------------------------------------------------------

    \167\ See ISS Letter.
---------------------------------------------------------------------------

    We request comment on the other proposed amendments to Form N-PX to
accommodate new reporting requirements for managers, including the
following:
    69. Should we, as proposed, require a reporting person relying on
the joint reporting provisions to identify, for each applicable vote
reported, each manager who exercised voting power as to the securities
voted? Why or why not? Alternatively, would it be sufficient to require
a reporting person to disclose on the summary page the managers for
whom it is reporting, without identifying, for each vote reported, the
managers that exercised voting power?
    70. Are there other changes we should make to Form N-PX to
accommodate manager say-on-pay vote reporting requirements?

E. Form N-PX Reporting Data Language

    We are proposing to require reporting persons to file reports on
Form N-PX in a structured data language.\168\ In particular, and as
discussed in more detail below, we are proposing to require filing of
Form N-PX reports in a custom eXtensible Markup Language (``XML'')-
based structured data language created specifically for reports on Form
N-PX (``custom XML'').\169\ We believe use of a custom XML language
would make it easier for reporting persons to prepare and submit the
information required by Form N-PX accurately, and would make the
submitted information more useful.
---------------------------------------------------------------------------

    \168\ See General Instruction D.2. of proposed Form N-PX
(specifying that reporting persons must file reports on Form N-PX
electronically on EDGAR, except as provided by the form's
confidential treatment instructions, and consult the EDGAR Filer
Manual for EDGAR filing instructions). See also 17 CFR 232.301
(requiring filers to prepare electronic filings in the manner
prescribed by the EDGAR Filer Manual). We are also proposing to
amend rule 101(a)(1)(iii) of Regulation S-T to provide that reports
filed pursuant to section 14A(d) of the Exchange Act must be
submitted in electronic format. Reports filed pursuant to section 30
of the Investment Company Act are already subject to electronic
filing. See rule 101(a)(1)(iv) of Regulation S-T.
    \169\ This would be consistent with the approach used for other
XML-based structured data languages created by the Commission for
certain EDGAR Forms, including the data languages used for reports
on each of Form N-CEN, Form N-PORT, and Form 13F.
---------------------------------------------------------------------------

    Reports on Form N-PX are currently required to be filed in HTML or
ASCII.\170\ We understand that, in order to prepare reports in HTML and
ASCII, reporting persons generally need to reformat required
information from the way the information is stored for normal business
uses. In this process, reporting persons typically strip out
incompatible metadata (i.e., syntax that is not part of the HTML or
ASCII specification) that their business systems use to ascribe meaning
to the stored data items and to represent the relationships among
different data items. The resulting code, when rendered in an end-
user's web browser, is comprehensible to a human reader, but it is not
suitable for automated validation or aggregation.
---------------------------------------------------------------------------

    \170\ See Regulation S-T, 17 CFR 232.101(a)(1)(iv); 17 CFR
232.301; EDGAR Filer Manual (Volume II) version 58 (June 2021), at
5-1 (requiring EDGAR filers generally to use ASCII or HTML for their
document submissions, subject to certain exceptions).
---------------------------------------------------------------------------

    The Commission requested comment in both the 2010 Proposing Release
and the Proxy Mechanics Concept Release on whether to require reporting
of the information required by Form N-PX in a structured data
language.\171\ Among other things, we requested comment on the
feasibility of identifying proxy voting matters in a uniform way and on
the costs of providing data in a

structured data language.\172\ Commenters on these releases were mixed.
Commenters that expressed support suggested that structured data would:
Improve investor analysis or allow for more informed decision-making,
improve third-party analyses of voting information or reduce the costs
associated with preparing them, and generally benefit investors or
improve the usefulness and accessibility of reported data.\173\ The
Commission's Investor Advisory Committee also recommended that reports
on Form N-PX be filed in a structured data language, stating that
investors would be better able to assess the voting records of mutual
funds.\174\ We believe that the modifications we are proposing
regarding the identification of proxy voting matters would result in
reported data that is sufficiently standardized to make structured data
useful for interested parties.\175\
---------------------------------------------------------------------------

    \171\ 2010 Proposing Release, supra footnote 25, at text
subsequent to footnote 91 (``Are there methods other than
standardizing the order of information that would render the
information reported on Form N-PX more useful? Should we require
reporting persons to provide the information reported on Form N-PX
in interactive data format?''); Proxy Mechanics Concept Release,
supra footnote 60 at text accompanying n. 225. The 2010 Proposing
Release and the Proxy Mechanics Concept Release referred to an
``interactive data format.'' Some comments on these releases
similarly referred to an ``interactive data format.'' For purposes
of this release, we consider the terms ``interactive data format''
and ``structured data language'' to be synonymous and use the terms
``structured data language'' or ``structured data'' throughout for
consistency.
    \172\ 2010 Proposing Release, supra footnote 25, at requests for
comment subsequent to n. 91; Proxy Mechanics Concept Release, supra
footnote 60, at requests for comment at n. 225.
    \173\ Letter of Broadridge Financial Solutions (Oct. 19, 2010)
(File No. S7-14-10) (``Broadridge Letter on Concept Release'');
Florida Board Letter on Concept Release,; ISS Letter on Concept
Release; Letter of Dominic Jones (Nov. 2, 2010) (``Jones Letter'');
Ostrovsky Letter on Concept Release; Proxy Exchange Letter on
Concept Release; Letter of Shareowners Education Network (Oct. 20,
2010) (File No. S7-14-10) (``Shareholder Education Letter on Concept
Release''); Towns Letter on Concept Release; Letter of
VoterMedia.org (Sept. 29, 2010) (File No. S7-14-10) (``VoterMedia
Letter on Concept Release'').
    \174\ See supra footnote 22.
    \175\ See supra Section II.C.1 (Identification of Proxy Voting
Matters). Some commenters agreed with statements in the 2010
Proposing Release and the Proxy Mechanics Concept Release suggesting
that having uniform identification of proxy voting matters would
make structured data more useful. See Fidelity Letter on Concept
Release; ICI Letter on Concept Release; see also Ostrovsky Letter on
Concept Release (indicating that uniform identification is
essential, but feasible).
---------------------------------------------------------------------------

    Two commenters on the Proxy Mechanics Concept Release urged the
Commission to evaluate its then-new structured data requirements before
adopting similar requirements elsewhere.\176\ In the time since the
Commission issued the 2010 Proposing Release and the Proxy Mechanics
Concept Release, we have gained additional experience with different
reporting data languages, including with reports in an XML-based
structured data language. For example, we have used customized XML data
languages for reports filed on Form N-CEN, Form N-PORT, and Form
13F.\177\ We have found the XML-based structured data languages used
for those reports allow investors to aggregate and analyze reported
data in a much less labor-intensive manner than data filed in ASCII or
HTML. Based on our consideration of comments and our understanding of
how fund and managers currently disclose required information in a
structured data language, we believe that requiring a custom XML
language for Form N-PX would minimize reporting costs while yielding
reported data that would be more useful to investors. Reporting persons
would be able to, at their option, either submit XML reports directly
or use a web-based reporting application developed by the Commission to
generate the reports, as managers are able to do today when submitting
holdings reports on Form 13F.
---------------------------------------------------------------------------

    \176\ Fidelity Letter on Concept Release; ICI Letter on Concept
Release.
    \177\ See e.g., Investment Company Reporting Modernization,
Investment Company Act Release No. 32314 (Oct. 13, 2016) [81 FR
81870 (Nov. 18, 2016)] (adopting Form N-CEN and Form N-PORT);
Adoption of Updated EDGAR Filer Manual, Securities Act Release 9403
(May 14, 2013) [78 FR 29616 (May 21, 2013)] (requiring managers to
report their holdings in an XML-based structured data language on
Form 13F).
---------------------------------------------------------------------------

    Some commenters observed that interested data users can procure
structured voting data from third-party service providers.\178\ Another
commenter, however, expressed concerns with the cost,
comprehensiveness, and timeliness of the data cited by those
commenters.\179\ While similar data may be available commercially, we
believe that this information should be made freely available to
investors and that current users of data made available by third-
parties could nonetheless benefit from structured Form N-PX reports if
the costs associated with third-party data analysis fell.
---------------------------------------------------------------------------

    \178\ Fidelity Letter on Concept Release; ICI Letter on Concept
Release.
    \179\ See Ostrovsky Letter on Concept Release.
---------------------------------------------------------------------------

    One commenter stated that it did not believe shareholders were
interested in proxy voting information using a structured data
language.\180\ Other commenters and the Investor Advisory Committee,
however, have indicated that investors would benefit from proxy voting
data reported in a structured data language. Among other things,
commenters have noted that structured data would improve investor
analysis or allow for more informed decision-making.\181\ We believe
that reporting in custom XML language will allow investors to aggregate
and analyze the reported data in a much less labor-intensive manner.
---------------------------------------------------------------------------

    \180\ ICI Letter on Concept Release.
    \181\ See supra footnote 173 and accompanying text.
---------------------------------------------------------------------------

    One commenter stated that a structured data reporting requirement
would increase reporting costs, noting the costs of reporting data in
both the current ASCII or HTML markup language, as well as any
structured data language.\182\ Another commenter suggested it would not
be necessary to continue to require ASCII or HTML reporting, in
addition to reporting in a structured data language, because data in a
structured data language could be translated to human-readable form in
an automated manner and at low cost.\183\ In order to minimize
reporting burdens, we are proposing to replace the ASCII or HTML
reporting requirement with the custom XML reporting requirement. We
recognize that current Form N-PX filers could bear some additional
reporting costs related to adjusting their systems to a different data
language. However, in the intervening time period since the 2010
proposal, many reporting persons have acquired substantial experience
with reporting on web-based applications (or directly submitting
information in a structured data language). We believe that aligning
Form N-PX's reporting data language with the type of data language of
other required reports may reduce costs and introduce additional
efficiencies for reporting persons already accustomed to reporting
using structured data and may reduce overall reporting costs in the
longer term.\184\
---------------------------------------------------------------------------

    \182\ ICI Letter on Concept Release.
    \183\ Ostrovsky Letter on Concept Release.
    \184\ See infra Section IV.
---------------------------------------------------------------------------

    Finally, a commenter indicated that there would be costs associated
with rendering the reported data in a form that could be comprehensible
to a human reader.\185\ We agree that there would be some costs
associated with rendering XML data in a human-readable format, and we
believe that it is appropriate for the Commission to bear these costs.
We are proposing that the Commission would develop electronic ``style
sheets'' that, when applied to the reported XML data, would represent
that data in human-readable form. We developed similar style sheets for
holdings data reported by managers in XML on Form 13F, and they have
yielded useful, consistently formatted documents.
---------------------------------------------------------------------------

    \185\ ICI Letter on Concept Release (noting that the Proxy
Mechanics Concept Release did not make clear who would bear those
costs); but see Ostrovsky Letter on Concept Release (characterizing
these costs as ``trivial'').
---------------------------------------------------------------------------

    We request comment on the reporting data language we are proposing
to require for reports filed on Form N-PX, and, in particular, on the
following issues:

    71. Should we require, as we are proposing, Form N-PX reports to be
filed in a custom XML language? Is a custom XML language the
appropriate type of data language for Form N-PX reports? Why or why
not? If another structured data language would be more appropriate,
which one, and why?
    72. Would this proposed requirement yield reported data that is
more useful to investors, compared with not requiring Form N-PX to be
filed in a custom XML language, or requiring Form N-PX to be filed in a
structured data language other than a custom XML language?
    73. Are the standardized identification requirements we are
proposing compatible with the proposed reporting data language?
    74. Should any subset of funds or managers be exempt from the
proposed structured data reporting requirement? If so, what subset and
why?

F. Time of Reporting

    Currently, funds must report their proxy voting records annually on
Form N-PX no later than August 31 of each year, for the most recent 12-
month period ended June 30.\186\ We are proposing to retain the same
reporting timeframe for funds and to apply this reporting timeframe to
managers' reporting of say-on-pay votes.\187\ Commenters on the 2010
proposal generally supported retaining the current reporting timeframe,
though certain commenters advocated for longer or shorter
timeframes.\188\
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    \186\ See rule 30b1-4 under the Investment Company Act. We refer
to this twelve-month period ending on June 30 of each year as the
``reporting timeframe'' or the ``timeframe.''
    \187\ Proposed rule 14Ad-1(a); General Instruction A to proposed
Form N-PX. The timing of a manager's Form N-PX filing obligations
would differ when the manager enters and exits from the obligation
to file Form 13F reports. See infra Section II.J.
    \188\ See, e.g., ABA Letter; CalPERS Letter; CII Letter; COPERA
Letter; Glass Lewis Letter I; but see Jones Letter (requesting that
managers and funds be required to report their votes on Form N-PX
within four business days of each shareholder meeting); Letter of
Adrienne Brown of Nationwide Investment Management Group (Nov. 18,
2010) (``Brown Letter'') (suggesting a later filing deadline, such
as September or October); Fidelity Letter (suggesting the filing
deadline be moved from August 31 to October 31).
---------------------------------------------------------------------------

    We preliminarily believe that the proposed reporting timeframe for
managers--and retaining the current reporting timeframe for funds--
appropriately balances the benefits of prompt reporting and the burdens
associated with that reporting. We are not proposing to require, as
suggested by one commenter, that managers and funds report their votes
shortly after the relevant shareholder meeting.\189\ We preliminarily
believe that the benefits of public reporting of proxy votes by funds
and managers would not significantly increase with faster reporting and
that publicly reporting each vote individually would make it difficult
for investors reading a manager's Form N-PX reports to evaluate overall
patterns in the manager's voting behavior.
---------------------------------------------------------------------------

    \189\ See Jones Letter.
---------------------------------------------------------------------------

    As it relates to managers' reporting of say-on-pay votes, the
relevant proposals are typically unique to the issuer in question and
votes may be heavily dependent on the particular facts and
circumstances applicable to that issuer. Moreover, because such votes
are reported on a retrospective basis, investors will not necessarily
be able to use the information reported by managers on Form N-PX to
engage in a dialogue with their manager about its voting policies or to
switch to a manager who will vote differently with respect to any
specific say-on-pay vote.\190\ In the context of fund reporting of
proxy votes, however, we are mindful of the fact that similar proposals
often appear on the ballots of many issuers in a given proxy season,
especially those issuers within the same industry. In these instances,
timelier public reporting of funds' proxy votes has the potential to
facilitate fund shareholders' ability to monitor their funds'
involvement in the governance activities of portfolio companies,
including within a single proxy season.\191\ We request comment below
on whether the benefits of timelier reporting of proxy votes--including
those of both managers and funds--might outweigh any potential
drawbacks.
---------------------------------------------------------------------------

    \190\ Requiring managers to disclose their intended votes on a
prospective basis would allow investors to make such a change, but
such an approach would be inconsistent with the statute and we are
not proposing it here.
    \191\ Shareholders of a given fund may be able to monitor the
fund's proxy voting record to evaluate whether the fund's votes are
consistent with its disclosure. This information would promote
shareholders' ability to engage with fund management on timely
issues in the midst of proxy season, including as it relates to
future votes on the same subject matter at another issuer.
---------------------------------------------------------------------------

    We also are not proposing, as some commenters on the 2010 proposal
suggested, to extend the deadline for filing reports from August 31 to
a later date because of additional proposed disclosure
requirements.\192\ We believe that further delay after the close of the
reporting period is unnecessary, particularly in light of other changes
from the 2010 proposal that we believe should result in reporting
persons having sufficient time to gather the data necessary to make the
filing, such as the reduction in the quantitative information required
to be disclosed.\193\
---------------------------------------------------------------------------

    \192\ See Brown Letter; Fidelity Letter.
    \193\ See supra Section II.C.3 (discussing modifications to the
proxy voting information required on Form N-PX).
---------------------------------------------------------------------------

    We request comment on the proposed reporting timeframe for filing
Form N-PX reports and, in particular, on the following:
    75. Should we, as proposed, require funds to file their proxy
voting records on the same reporting timeline as currently required?
Would investors benefit from more timely reporting of funds' proxy
votes? Please explain. Do funds need more time than currently permitted
to file Form N-PX reports that include the new disclosure this proposal
would require? If so, why, and how much time?
    76. Should we, as proposed, require managers to report their say-
on-pay votes annually on Form N-PX not later than August 31, for the
most recent 12-month period ended June 30? Should we instead require
reporting as of some other period end date (e.g., May 31 or December
31), or with a shorter or longer lag period after the end reporting
period (e.g., a 45-day lag period to align with Form 13F)?
    77. Should we require reporting for managers and funds to occur
more frequently than annually, such as monthly, quarterly, or close in
time to each vote? Should we require more frequent voting to be
reported on firm websites and annual reporting on Form N-PX? For
example, should we require funds and managers to report their votes on
a monthly or quarterly basis on their websites, and annually on Form N-
PX? Would requiring more frequent reporting to occur on managers' and
funds' websites rather than on Form N-PX mitigate any of the potential
issues with more frequent reporting, such as the cost of reporting or
the ability of investors to read and identify patterns in fund or
manager voting records?
    78. Would investors benefit from more frequent voting disclosure?
For example, would more frequent disclosure enhance fund shareholders'
ability to monitor their funds' involvement in the governance
activities of portfolio companies? Conversely, would investors
generally be most interested in analyzing a reporting person's voting
record more holistically rather than focusing on individual votes on
more frequent intervals or shortly after a vote is held? What are the
advantages and disadvantages of more frequent reporting of proxy votes?
    79. Certain types of funds, such as index funds and the majority of

exchange-traded funds, provide a degree of transparency as to their
holdings more frequently than required by Form N-PORT. Transparency as
to these funds' holdings arises as a result of either: (1) Full
portfolio disclosure (in the case of transparent ETFs), or (2) the
tracking of an index whose constituents and weightings are transparent
(in the case of index funds). Because of this transparency, more
frequent disclosure of these funds' proxy voting records might not
contribute to the potential risks otherwise associated with such a
requirement. Should the Commission require more frequent or timely
disclosure of proxy voting information for these or other types of
funds whose characteristics mitigate the risks of such a requirement?
    80. Should funds and managers file Form N-PX reports on the same
schedule, as proposed? Are there reasons they should be subject to
different reporting schedules?

G. Requests for Confidential Treatment

    The information filed on Form N-PX would be publicly available
through the Commission's EDGAR system, as is information filed on Form
13F.\194\ Certain managers filing reports on Form 13F request
confidential treatment of certain or all the positions reported on
their Form 13F, and those managers may request that confidential
information reported on their Form 13F also be treated as confidential
on their Form N-PX.\195\ Pursuant to 17 CFR 240.24b-2 under the
Exchange Act (``rule 24b-2''), which governs requests for confidential
treatment of information required to be filed under the Act, a manager
can request confidential treatment of information reported on proposed
Form N-PX.\196\
---------------------------------------------------------------------------

    \194\ See rule 80(c)(3) promulgated under the Freedom of
Information Act [17 CFR 200.80(c)(3)] (stating that filings made
through the EDGAR system are publicly available on the Commission's
website).
    \195\ Requests for confidential treatment can be based either on
a claim that the information would identify securities held by the
account of a natural person or an estate or trust, other than a
business trust or investment company, in which case the Commission
is required to keep the information confidential indefinitely, or on
a claim that the information is confidential commercial or financial
information (consistent with the requirements of Freedom of
Information Act (``FOIA'') Exemption 4), in which case the grant is
discretionary and generally only for a period of time. See generally
sections 13(f)(4) and (5) of the Exchange Act [15 U.S.C. 78m(f)(4)]
[15 U.S.C. 78m(f)(5)]; Form 13F Instructions for Confidential
Treatment Requests; Rulemaking for EDGAR System, Investment Company
Act Release No. 23640 (Jan. 12, 1999) [64 FR 2843].
    \196\ See 17 CFR 240.24b-2; Confidential Treatment Instruction 1
to proposed Form N-PX. The confidential treatment instructions we
are proposing for Form N-PX are based on the Form 13F confidential
treatment instructions, which apply in similar circumstances. See
Form 13F Instructions for Confidential Treatment Requests.
---------------------------------------------------------------------------

    Managers seeking confidential treatment for information on their
Form 13F are required to file multiple lists of securities. One, filed
publicly, lists only those securities for which it is not seeking
confidential treatment, as well as a statement indicating that
confidential information has been omitted and filed with the
Commission. Managers must also file a separate list including those
securities positions for which the manager seeks confidential
treatment. Confidential treatment granted by the Commission may be
subject to an expiration date, as is often the case when confidential
treatment is granted to protect commercial information, such as a
position that is still being built. Therefore, when the confidential
treatment period ends, or if the confidential treatment request is
denied, the manager must file an additional report on Form 13F publicly
disclosing those securities for which confidential treatment expired,
or was denied.
    We are proposing instructions in Form N-PX that are designed to
provide a similar opportunity to prevent confidential information that
is protected from disclosure on Form 13F from being disclosed on Form
N-PX.\197\ These instructions provide that a person requesting
confidential treatment of information filed on Form N-PX should follow
the same procedures set forth in Form 13F for filing confidential
treatment requests. They also prescribe the required content of a
confidential treatment request and the required filing of information
that is no longer entitled to confidential treatment.\198\ For
instance, the confidential treatment request would be required to
provide enough factual support for the request, including a
demonstration that the information is both customarily and actually
kept private by the reporting person, and that release of this
information could cause harm to the reporting person. Although this
differs somewhat from the current language in Form 13F regarding
confidential treatment requests, we are proposing this standard in Form
N-PX to conform to a June 2019 U.S. Supreme Court decision that
overturned the standard for determining whether information is
``confidential'' under Exemption 4 of the FOIA on which the current
Form 13F instruction is based.\199\
---------------------------------------------------------------------------

    \197\ Section 13(f)(4) of the Exchange Act provides that the
Commission, as it determines to be necessary or appropriate in the
public interest or for the protection of investors, may delay or
prevent public disclosure of information filed on Form 13F in
accordance with the Freedom of Information Act. Section 13(f)(4)
also provides that any information filed on Form 13F that identifies
the securities held by the account of a natural person or an estate
or trust (other than a business trust or investment company) shall
not be disclosed to the public. As a result, we are unable to
conclude, in advance, that confidential treatment of information
filed on Form N-PX could, under no circumstances, be appropriate as
suggested by one commenter. See Barnard Letter.
    \198\ Confidential Treatment Instructions to proposed Form N-PX.
Upon the final adverse disposition of a request for confidential
treatment, or upon the expiration of the confidential treatment, a
reporting person would be required to electronically submit within
six business days an amendment to its Form N-PX reporting the
previously confidential proxy voting information. See Confidential
Treatment Instruction 7 to proposed Form N-PX. Such amendment
specifically would make publicly available through the Commission's
EDGAR system the proxy voting information that previously was
confidential. In the event that the required amendment is not filed,
the Commission could make the proxy voting information available to
the public through other means.
    \199\ 5 U.S.C. 552(b)(4). See Food Marketing Institute v. Argus
Leader Media, 139 S.Ct. 2356 (2019) (``Food Marketing v. Argus
Leader'') (stating that ``[a]t least where commercial or financial
information is both customarily and actually treated as private by
its owner and provided to the government under an assurance of
privacy, the information is `confidential' within the meaning of
Exemption 4''); see also Reporting Threshold for Institutional
Investment Managers, Exchange Act Release No. 89290 (July 10, 2020)
[85 FR 46016 (July 31, 2020)] (proposing a similar conforming
amendment to the confidential treatment instructions in Form 13F).
---------------------------------------------------------------------------

    In light of the public disclosure intent of section 14A(d) and the
confidential treatment requirements of rule 24b-2 under the Exchange
Act, we believe that confidential treatment generally would not be
merited solely in order to prevent proxy voting information from being
made public. One commenter on the 2010 Proposing Release suggested that
we should expand the standards for requesting and obtaining
confidential treatment to cover situations in which a manager has a
confidentiality agreement with a client regarding disclosure of
portfolio information.\200\ We do not believe that such a private
agreement should override the requirement to report proxy voting
information publicly. We believe that confidential treatment could be
justified only in narrowly tailored circumstances. For example,
confidential treatment may be justified when a manager has filed a
confidential treatment request for information reported on Form 13F
that is pending or has been granted and where confidential treatment of
information filed on Form N-PX would be necessary in order to protect
information that is the subject of such Form 13F confidential treatment
request, and the information is also

customarily treated as private, non-public information by the
manager.\201\
---------------------------------------------------------------------------

    \200\ Mayer Brown Letter.
    \201\ In the case of information that is not reported on Form
13F but would have been the subject of a Form 13F confidential
treatment request if it were required to be reported (for example, a
de minimis position that is not required to be reported on Form 13F
but would have been eligible for confidential treatment if it were
required to be reported on the form), we would follow similar
procedures and apply similar standards to those followed for reports
on Form 13F in processing requests for confidential treatment of
information filed on Form N-PX.
---------------------------------------------------------------------------

    Existing Form N-PX does not include any confidential treatment
instructions and, apart from Form N-PX, funds already disclose their
portfolio holdings.\202\ As a result, we are not aware of any situation
in which confidential treatment would be justified under rule 24b-2 for
information filed by funds on Form N-PX.
---------------------------------------------------------------------------

    \202\ Portfolio holdings information is required to be disclosed
by funds on a quarterly basis with a 60-day lag, through semiannual
shareholder reports pursuant to rule 30e-1 under the Investment
Company Act [17 CFR 270.30e-1] and Form N-PORT [17 CFR 274.150]. An
exception exists for ``miscellaneous securities'' comprising less
than 5% of a fund's portfolio and held for less than one year, but
the number of votes relating to the securities in that category is
generally expected to be small because of its short-term nature.
---------------------------------------------------------------------------

    We request comment on the proposed provisions regarding
confidential treatment requests, including the following:
    81. Should we modify the proposed confidential treatment provisions
in any way? Would it be appropriate to tie the confidential treatment
provisions for Form N-PX to the confidential treatment provisions for
Form 13F, for example by automatically granting confidential treatment
for positions reported on Form N-PX when confidential treatment has
been granted for those positions on Form 13F?
    82. As proposed, should we require reporting persons to file
confidential treatment requests for Form N-PX in the same manner as
Form 13F requires? Are there reasons for the filing processes for
confidential treatment requests to differ between the two forms? If so,
what approach should we permit or require reporting persons to use to
file confidential treatment requests for Form N-PX?
    83. Do the proposed instructions for confidential treatment
requests appropriately reflect the current requirements of FOIA,
including the effect of the U.S. Supreme Court's June 24, 2019,
decision in Food Marketing Institute v. Argus Leader Media on the type
of information that is required to substantiate confidential treatment
in accordance with rule 24b-2 under the Exchange Act?
    84. Are there circumstances in which say-on-pay votes should be
publicly disclosed but our proposal could permit confidential
treatment? Alternatively, are there circumstances in which our proposal
would require public disclosure of a say-on-pay vote but where
confidential treatment should be granted? Please explain.
    85. Should we allow funds to request confidential treatment under
some circumstances? For example, should we allow a fund to request
confidential treatment of votes on securities that were reported in the
``miscellaneous securities'' category of its most recent disclosure of
its portfolio holdings? If so, why should the result under the proposed
rule differ from the result under current Form N-PX?

H. Proposed Website Availability of Fund Proxy Voting Records

    When the Commission adopted Form N-PX in 2003, it also required a
fund to disclose that its proxy voting record is available to
shareholders, either on (or through) the fund's website or upon
request.\203\ We understand that, currently, most funds make their
proxy voting records available to shareholders upon request but do not
provide this information on their websites. We are proposing amendments
to Forms N-1A, N-2, and N-3 to require a fund to disclose that its
proxy voting record is publicly available on (or through) its website
and available upon request, free of charge in both cases.\204\ We
believe this proposed change would make a fund's proxy voting record
more accessible to investors. Investors' access to the internet has
increased substantially since 2003, and many investors go to fund or
intermediary websites to get information about a fund.\205\ Because the
proposal would require funds to file Form N-PX reports in a custom XML
language, we are proposing to specify that the proxy voting record the
fund posts on its website and provides upon request must be in a human-
readable format. A fund could comply with this requirement by using the
human-readable version of its Form N-PX report that would appear on
EDGAR (e.g., by providing a direct link on its website to the HTML-
rendered Form N-PX report on EDGAR).
---------------------------------------------------------------------------

    \203\ See Form N-PX Adopting Release, supra footnote 7; Items
17(f) and 27(d)(5) of Form N-1A; Items 18.16, 24.6.d, and 24.8 of
Form N-2; Item 23(f) and Instructions 4(d) and 6 to Item 31(a) of
Form N-3.
    \204\ See proposed amendments to Items 17(f) and 27(d)(5) of
Form N-1A; proposed amendments to Items 18.16, 24.6.d, and 24.8 of
Form N-2; proposed amendments to Item 23(f) and Instructions 4(d)
and 6 to Item 31(a) of Form N-3. The Commission has proposed other
amendments that would replace current Item 27(d)(5) of Form N-1A
with disclosure about the availability of different types of
information for investors, including proxy voting information. See
Tailored Shareholder Reports, Treatment of Annual Prospectus Updates
for Existing Investors, and Improved Fee and Risk Disclosure for
Mutual Funds and Exchange-Traded Funds; Fee Information in
Investment Company Advertisements, Investment Company Act Release
No. 33963 (Aug. 5, 2020) [85 FR 70716 (Nov. 5, 2020)] (``Tailored
Shareholder Reports Proposing Release''). If those amendments were
to be adopted, we would not amend current Item 27(d)(5) of Form N-1A
as part of this rulemaking because it would no longer exist in its
current form.
    \205\ See, e.g., ICI Research Perspective, ``Ownership of Mutual
Funds, Shareholder Sentiment, and Use of the internet, 2020'' (Nov.
2020) (noting that 96 percent of households owning mutual funds had
internet access in 2020, up from 68 percent in 2000), available at
https://www.ici.org/system/files/attachments/per26-08.pdf; Tailored
Shareholder Reports Proposing Release, supra footnote 204, at n.69
and accompanying text.
---------------------------------------------------------------------------

    We also propose to make conforming changes to Form N-1A and Form N-
3 provisions that discuss how a fund may make its proxy voting record
available on request to require a fund to provide the email address, if
any, that an investor may use to request the proxy voting record. Form
N-2 currently includes a similar provision, while Form N-1A and Form N-
3 only refer to a fund providing a toll-free telephone number.
    We request comment on our proposed amendments to Forms N-1A, N-2,
and N-3 to require funds to disclose that their proxy voting records
are available on websites and upon request, including the following:
    86. Should we require funds to disclose that their proxy voting
records is publicly available on (or through) their websites, free of
charge and in a human-readable format, as proposed? Why or why not?
    87. Should we only require a fund to disclose that its proxy voting
record is publicly available on (or through) its website, and not also
require disclosure that the record is available upon request? Do
investors need the option to request a copy of a fund's proxy voting
record, or is website availability sufficient? If we retain the
availability upon request provisions, should we require a fund to
provide the email address, if any, that investors can use to request
the proxy voting record, as proposed? If not, why not? Are there any
other changes we should make that relate to an investor's ability to
request delivery of a fund's proxy voting record, including that relate
to the timeframe in which a fund delivers the voting record?
    88. Are there other ways we could improve the accessibility of
funds' proxy voting records for investors? Please explain.

I. Compliance Dates

    As described above, we are proposing that managers would be
required to report their say-on-pay votes annually on Form N-PX not
later than August 31 of each year, for the most recent 12-month period
ended June 30.\206\ We are proposing compliance dates that would vary
depending on when the amendments become effective relative to the
form's reporting deadline.
---------------------------------------------------------------------------

    \206\ Proposed rule 14Ad-1(a); General Instruction A to proposed
Form N-PX. For further discussion of the time of reporting
provisions, see the discussion in Section II.F.
---------------------------------------------------------------------------

    In the 2010 Proposing Release, we proposed that the first reports
under then-proposed rule 14Ad-1 and amended Form N-PX would be required
to be filed by August 31, 2011 (the same calendar year as the earliest
anticipated adoption date). A number of commenters requested a delay in
filing due to the compliance burden during initial implementation, with
some commenters suggesting a compliance date as late as August 31, 2012
(i.e. one calendar year after the proposed compliance date),\207\ or
covering votes beginning no earlier than six months after such proposed
rule's effective date.\208\
---------------------------------------------------------------------------

    \207\ See, e.g., ICI Letter; ISS Letter; Glass Lewis Letter I.
    \208\ See Letter of Glass Lewis & Co. (June 3, 2011).
---------------------------------------------------------------------------

    We agree with commenters that a longer compliance period is
appropriate to provide reporting persons with a sufficient transition
period to implement the changes that would be needed to record and
report the information required by amended Form N-PX. We similarly
provided a period between the effective date and the beginning of
required compliance when we adopted proxy vote reporting requirements
for funds.\209\ We are therefore proposing that, if the amendments are
effective six months before June 30, the first reports on amended Form
N-PX would be required to be filed by the August 31 that follows the
rule's effective date. For a fund, the first report would disclose
votes occurring at least six months after the effective date in
conformance with the amended form, while applicable votes occurring
before this period could be reported in conformance with current form
requirements. A manager's requirement to report votes would begin six
months after the effective date, since managers are not currently
subject to Form N-PX reporting requirements. For example, if the
amendments become effective on September 1, 2022, reporting persons
would be required to report votes occurring between March 1, 2023 and
June 30, 2023 in compliance with the amended form and include those
votes in a report filed by August 31, 2023.
---------------------------------------------------------------------------

    \209\ See Form N-PX Adopting Release, supra footnote 7, at
Section III.
---------------------------------------------------------------------------

    If the amendments are not effective six months before June 30,
funds and managers would be required to file their first reports on
amended Form N-PX by August 31 of the first complete reporting
timeframe following the effective date of the proposed rule. As with
the prior compliance date alternative, the first reports would be
required to disclose votes occurring six months after the effective
date of the amendments and thereafter in conformance with the amended
form. That is, if the proposed rule takes effect on February 1, 2022,
the first reports on amended Form N-PX would be due on August 31, 2023.
For a fund, the first report would cover the reporting period of July
1, 2022 through June 30, 2023, with votes occurring between August 1,
2022 and June 30, 2023 reported in conformance with the amended form.
For a manager, the first report would cover votes occurring between
August 1, 2022 and June 30, 2023.
    We believe that, under either alternative, the initial reporting
period would allow reporting persons and their third-party service
providers additional time to develop or modify the necessary systems in
order to record and report information on amended Form N-PX.
    We are proposing to require funds to comply with the amendments to
Form N-PX at the same time as managers. This also allows funds
additional time to implement applicable new Form N-PX requirements in
the current proposal, including structured data reporting requirements,
new quantification requirements, and new requirements to identify proxy
voting matters and proxy voting categories. The proposed compliance
date also is intended to provide a uniform mechanism of reporting votes
at meetings that occur during the first reporting timeframe after the
effective date of the proposed rule, because funds would be permitted
to report say-on-pay votes for managers. As is currently the case,
funds would be required to comply with current Form N-PX requirements
until the end of the compliance period.
    We request comment on the proposed compliance dates, and in
particular, on the following issues:
    89. Would the proposed compliance dates provide adequate time for
managers that would be required to file Form N-PX for the first time
and for funds that would be required to comply with the proposed
amendments to Form N-PX? What, if any, implementation issues would
managers and funds encounter in complying with the proposed rule and
form amendments, and how should we address those issues (e.g., permit
delayed filing for the first full reporting period after the rule is
enacted)?
    90. Should we provide different compliance dates for managers or
funds to comply with certain provisions of the proposal? For example,
should the compliance date for structured data reporting differ from
the compliance date for other amendments to Form N-PX?

J. Transition Rules for Managers

    We are proposing, as we did in the 2010 proposal, transition rules
that govern the timing of a manager's Form N-PX filing obligations
whenever the manager enters and exits from the obligation to file Form
13F reports.\210\ In particular, the proposal would not require a
manager to file a Form N-PX report for the 12-month period ending June
30 of the calendar year in which the manager's initial filing on Form
13F is due.\211\ Instead, the manager would be required to file a
report on Form N-PX for the period ending June 30 for the calendar year
following the manager's initial filing on Form 13F. For example, assume
that a manager does not meet the $100 million threshold test on the
last trading day of any month in 2023 but does meet the $100 million
threshold test on the last trading day of at least one month in 2024.
As a result, under the rules that currently apply to Form 13F, the
manager would be required to file a Form 13F report no later than
February 15, 2025, for the period ending December 31, 2024.\212\
Additionally, under proposed rule 14Ad-1(b), the manager would be
required to file a Form N-PX report no later than August 31, 2026, for
the 12-month period from July 1, 2025, through June 30, 2026.\213\ The
following chart

illustrates the timing of the entrance of a manager to its obligation,
under the proposed rule, to file Form N-PX.
---------------------------------------------------------------------------

    \210\ For commenters supporting the transition rule, see ABA
Letter; Fidelity Letter.
    \211\ Proposed Rule 14Ad-1(b); General Instruction F to proposed
Form N-PX. For this purpose, an ``initial filing'' on Form 13F means
any quarterly filing on Form 13F if no filing on Form 13F was
required for the immediately preceding calendared quarter. Id.
    \212\ Currently, under rule 13f-1, the obligation to file Form
13F arises when a manager exercises investment discretion over
accounts holding at least $100 million in section 13(f) securities
as of the ``last trading day of any month of any calendar year.''
However, the manager's obligation to file Form 13F commences with
the report for December 31 of that year, which is required to be
filed within 45 days after December 31. Rule 13f-1(a)(1); General
Instruction 1 to Form 13F. See rule 0-3 under the Exchange Act [17
CFR 240.0-3].
    \213\ Proposed Rule 14Ad-1(b); General Instruction F to proposed
Form N-PX.

                                            Initial Form N-PX Filing
----------------------------------------------------------------------------------------------------------------
     Date filer exceeds reporting       First Form 13F filing    First proxy reporting
              threshold                          due                     period            First Form N-PX due
----------------------------------------------------------------------------------------------------------------
Mar. 31, 2023........................  Feb. 15, 2024..........  July 1, 2024-June 30,    Aug. 31, 2025.
                                                                 2025.
Dec. 31, 2023........................  Feb. 15, 2024..........  July 1, 2024-June 30,    Aug. 31, 2025.
                                                                 2025.
Jan. 31, 2024........................  Feb. 15, 2025..........  July 1, 2025-June 30,    Aug. 31, 2026.
                                                                 2026.
----------------------------------------------------------------------------------------------------------------

    In addition we are proposing, as we did in the 2010 Proposing
Release, to not require a manager to file a report on Form N-PX with
respect to any shareholder vote at a meeting that occurs after
September 30 of the calendar year in which the manager's final filing
on Form 13F is due.\214\ Instead, the manager would be required to file
a report on Form N-PX for the period July 1 through September 30 of the
calendar year in which the manager's final filing on Form 13F is due.
This short-period Form N-PX filing would be due no later than March 1
of the immediately following calendar year.\215\ A manager's obligation
to file Form 13F reports always terminates with the September 30
report, and the transition rule we are proposing conforms the ending
date for reporting say-on-pay votes with the ending date for Form 13F
reporting.\216\ The proposed February 28 due date would provide a two-
month period for filing after December 31, when the manager's Form 13F
filing status would be conclusively determined for the coming
year.\217\
---------------------------------------------------------------------------

    \214\ Proposed Rule 14Ad-1(c); General Instruction F to proposed
Form N-PX. For this purpose, a ``final filing'' on Form 13F means
any quarterly filing on Form 13F if no filing on Form 13F is
required for the immediately subsequent calendar quarter. Id.
    \215\ Proposed Rule 14Ad-1(c); General Instruction F to proposed
Form N-PX.
    \216\ See rule 13f-1(a) (manager that meets $100 million
threshold on last trading day of any month of any calendar year is
required to file Form 13F for December 31 of that year and the first
three calendar quarters of the subsequent calendar year).
    \217\ A manager is required to file a report on Form 13F in the
coming year if it meets the $100 million threshold on the last
trading day of any month of the current calendar year. As a result,
in cases where the manager does not meet the threshold in January
through November, its status will not be determined until December
31.
---------------------------------------------------------------------------

    For example, assume that a manager ceases to meet the $100 million
threshold in 2023. In other words, the manager meets the threshold on
at least one of the last trading days of the months in 2022, but does
not meet the threshold on any of the last trading days of the months in
2023. The manager's final report on Form 13F would be filed for the
quarter ended September 30, 2023. The manager's final report on Form N-
PX would include all say-on-pay votes cast during the period from July
1, 2023, through September 30, 2023, and would be required to be filed
no later than March 1, 2024. The following chart illustrates the timing
of the exit of a manager from its obligation to file Form N-PX.

                                             Final Form N-PX Filing
----------------------------------------------------------------------------------------------------------------
                                        Final Form  13F filing   Final Proxy  reporting
 Date filer ceases to meet threshold             due                     period            Final Form  N-PX due
----------------------------------------------------------------------------------------------------------------
Mar. 30, 2023........................  Nov. 14, 2024..........  July 1, 2024-Sept. 30,   Mar. 1, 2025.
                                                                 2024.
Dec. 30, 2023........................  Nov. 14, 2024..........  July 1, 2024-Sept. 30,   Mar. 1, 2025.
                                                                 2024.
Feb. 1, 2024.........................  Nov. 14, 2025..........  July 1, 2025-Sept. 30,   Mar. 1, 2026.
                                                                 2025.
----------------------------------------------------------------------------------------------------------------

    We request comment on the proposed transition rules for managers
required to file Form N-PX reports and, in particular, on the
following:
    91. The proposal would not require a manager to file a Form N-PX
report for the 12-month period ending June 30 of the calendar year in
which the manager's initial filing on Form 13F is due. Is this
transition rule appropriate for managers entering the Form 13F and Form
N-PX filing requirements, or is some other rule more appropriate? For
example, should we require a manager to report say-on-pay votes for the
period commencing January 1 (rather than July 1) of the calendar year
in which the manager's initial filing on Form 13F is due? Instead
should we require a manager to report say-on-pay votes for the period
commencing on the first day of the month immediately following the date
on which it meets the $100 million threshold?
    92. Should we, as proposed, not require a manager to file a Form N-
PX report with respect to any shareholder vote at a meeting that occurs
after September 30 of the calendar year in which the manager's final
filing on Form 13F is due? Should we instead require a manager to
report say-on-pay votes cast at meetings that occur during some period
after September 30 of the calendar year in which the manager's final
filing on Form 13F is due? If so, what should that period be?

K. Technical and Conforming Amendments

    We are proposing, as we did in the 2010 Proposing Release, two
technical and conforming amendments. First, we are proposing to amend
the heading of Subpart D of Part 249 of the Code of Federal Regulations
to include new section 14A of the Exchange Act and to indicate that
Exchange Act reports are filed by both issuers and other persons (e.g.,
managers). We are also proposing amendments to reflect the fact that
Form N-PX would be an Exchange Act form, as well as an Investment
Company Act form.\218\
---------------------------------------------------------------------------

    \218\ Rule 30b1-4; 17 CFR 249.326 and 274.129.
---------------------------------------------------------------------------

III. General Request for Comments

    The Commission requests comment on the rule and form amendments
proposed in this release, whether any changes to our rules or forms are
necessary or appropriate to implement the objectives of our proposed
rule and form amendments, and other matters

that might affect the proposals contained in this release.

IV. Economic Analysis

A. Introduction

    The Commission is proposing to amend Form N-PX to enhance the
information funds currently report annually about their proxy votes on
both executive compensation and other matters to make these reports
more informative and easier to analyze. The proposed amendments to Form
N-PX would standardize the order in which reporting persons disclose
information, categorize votes, structure and tag the data reported, and
make the description of proxy voting issues consistent across multiple
filings. The proposed amendments would also provide additional
information about the extent to which a fund votes or loans its shares.
The Commission is also proposing rule and form amendments that would
complete the implementation of section 951 of the Dodd-Frank Act by
requiring a manager to report how it voted proxies relating to
executive compensation matters. Specifically, the proposed rule and
form amendments would require managers to report their say-on-pay votes
annually on Form N-PX.
    The Commission is sensitive to the economic effects, including the
costs and benefits, imposed by the proposed rule and form amendments.
At the outset, the Commission notes that, where practicable, we have
attempted to quantify the costs, benefits, and effects on efficiency,
competition, and capital formation expected to result from the proposed
rule and form amendments. In some cases, however, data needed to
quantify these economic effects are not currently available to the
Commission or otherwise publicly available. For example, there would be
costs and benefits associated with managers disclosing information
about their votes on executive compensation. Those costs and benefits
may depend on existing levels of voluntary disclosure by managers and
the extent to which they exercise voting power on behalf of funds
because such votes are already reported on Form N-PX, and the proposal
would not require managers to report them separately. Furthermore,
costs associated with the proposal may depend on existing systems and
levels of technology expertise within the funds and managers, which
could differ substantially across reporting persons.\219\
---------------------------------------------------------------------------

    \219\ We do not anticipate any significant costs associated with
the technical and conforming amendments discussed in supra Section
II.K.
---------------------------------------------------------------------------

B. Economic Baseline and Affected Parties

    The economic baseline against which we measure the economic effects
of this rule, including its potential effects on efficiency,
competition, and capital formation, is the state of the world as it
currently exists.
1. Funds' Reporting of Proxy Voting Records
    Due to funds' significant voting power and the effects of funds'
proxy voting practices on the actions of corporate issuers and the
value of these issuers' securities, investors have an interest in how
funds vote.\220\ Since 2003, funds have used Form N-PX to report their
proxy voting records annually for each matter relating to a portfolio
security considered at any shareholder meeting held during the
reporting period and with respect to which the fund was entitled to
vote. In 2020, we estimate that there were approximately 2,087 funds
with total assets of $29.86 trillion that were required to file reports
on Form N-PX.\221\
---------------------------------------------------------------------------

    \220\ See, e.g., Stuart Gillan and Laura Starks, ``The Evolution
of Shareholder Activism in the United States.'' Journal of Applied
Corporate Finance, Volume 19 (2007).
    \221\ These estimates are based on staff review of Form N-CEN
filings of management investment companies registered with the
Commission as of December 2020.
---------------------------------------------------------------------------

    On the current Form N-PX, among other things, a fund discloses
whether it cast its votes on each proposal, how it voted (e.g., for or
against the proposal, or abstained), and whether any votes cast were
for or against management recommendations. Although the form specifies
the information that each fund must provide, it does not specify the
format of the disclosure or how funds must present or organize the
information. Reports on Form N-PX also are not currently filed in a
machine-readable, or ``structured,'' data language. Investors can
access a fund's Form N-PX filings online through the EDGAR website.
Funds also must disclose that their proxy voting records are available
to investors either upon request or on (or through) their websites,
with most funds disclosing that this information is available upon
request.
    Current Form N-PX reports advanced transparency into fund voting.
However, these reports can be difficult for investors to read and
analyze. For example, under the current rules, Form N[hyphen]PX is
routinely filed as a large HTML or plain[hyphen]text (ASCII) file. Many
funds use automated systems to produce their Form N[hyphen]PX records,
which is often a simple output from a database maintained by the filer
that covers meetings, proposals, and votes over a given period. A fund
may own hundreds of securities, sorted by firm, each of which may have
ten or more proposals each year. As a result, Form N-PX reports
disclosing proxy voting records for all securities and proposals can be
overwhelmingly long.\222\ Investors also may have difficulty finding a
particular fund's voting history within a single Form N-PX filing. Many
fund complexes include information about several different funds in a
single Form N-PX report, given the structure of many funds as series of
a trust.
---------------------------------------------------------------------------

    \222\ See supra footnote 17.
---------------------------------------------------------------------------

    Funds also often use their own descriptions and abbreviations when
describing a particular voting matter, which differ from the
descriptions on an issuer's form of proxy. This can make it difficult
for investors to identify a particular voting matter or category of
similar voting matters, and to compare funds' voting records.
    In addition to difficulties to collect and analyze the data
provided on Form N-PX, certain gaps in the required current disclosure
may provide an incomplete picture of a fund's proxy voting practices.
For example, current Form N-PX does not require funds to provide
information about the potential effects of a fund's securities lending
activities on its proxy voting. A fund's securities lending activities
can generate additional income for the fund and its shareholders.
However, when a fund lends its portfolio securities, it transfers
incidents of ownership, including proxy voting rights, for the duration
of the loan. As a result, the fund loses its ability to vote the
proxies of such securities, unless the securities are recalled, the
loan is terminated and the securities are returned to the fund before
the record date for the vote. Current Form N-PX does not provide
information about this effect.
2. Managers' Reporting of Say-on-Pay Votes
    Section 951 of the Dodd-Frank Act added new section 14A to the
Exchange Act requiring issuers to provide shareholders with a vote on
say-on-pay matters, and requires managers to report how they voted on
those matters. Section 14A generally requires public companies to hold
non-binding say-on-pay shareholder advisory votes to: (1) Approve the
compensation of its named executive officers; (2) determine the
frequency of such votes; and (3) approve ``golden parachute''
compensation in connection with a merger or acquisition.

Section 14A(d) requires that every manager report at least annually how
it voted on say-on-pay votes, unless such vote is otherwise required to
be reported publicly. However, there are currently no rules or forms in
place governing how managers are to comply with their reporting
obligation under section 14A(d).\223\ Some managers, such as public
pension funds, do disclose their proxy voting records on their
websites, although we understand that their disclosures generally do
not contain quantitative information and presentation practices of
website reporting vary across managers. Adopting say-on-pay vote
reporting requirements for managers would complete implementation of
section 951 of the Dodd-Frank Act.
---------------------------------------------------------------------------

    \223\ Although managers are not currently required to file
reports on Form N-PX, there is a subset of managers that advise
funds, and each of these funds is required to report its own proxy
voting record, including say-on-pay votes, annually on Form N-PX.
---------------------------------------------------------------------------

    As of March 31, 2021, 7,550 managers with investment discretion
over approximately $39.79 trillion in section 13(f) securities.\224\
---------------------------------------------------------------------------

    \224\ These estimates are based on staff review of Form 13F
filings covering the first quarter of 2021. See also supra footnote
24 and infra footnote 265.
---------------------------------------------------------------------------

C. Costs and Benefits

1. Amendments to Funds' Reporting of Proxy Votes
a. Benefits
    The fund-related proposed amendments to Form N-PX would benefit
fund investors, other market participants, and other proxy voting data
users,\225\ by enhancing the information funds currently report about
their proxy votes and making that information easier to collect and
analyze. The proposed amendments include the following principal
elements: (1) Requiring the disclosure of information about the number
of shares that were voted (or instructed to be voted) and the number of
shares that a fund loaned and did not recall before the record date for
the vote; (2) requiring that funds describe a voting matter using the
description in the issuer's form of proxy; (3) requiring funds to
categorize voting matters by type; (4) requiring funds to report
information in a standardized order and provide disclosure separately
by series of shares; (5) requiring the reporting of information on Form
N-PX in a custom XML language created specifically for Form N-PX; and
(6) requiring funds to disclose that their proxy voting records are
publicly available on (or through) their websites and available upon
request, free of charge in both cases.
---------------------------------------------------------------------------

    \225\ Other proxy voting data users include, for example,
regulators such as the Commission, proxy voting advisers, equity
analysts, corporate issuers, and third-party data providers.
---------------------------------------------------------------------------

    The amendments are designed to facilitate the benefits the
Commission sought to provide with Form N-PX as articulated in the
adopting release, namely: (1) To provide better information to
investors who wish to determine to which fund managers they should
allocate their capital, and whether their existing fund managers are
adequately maximizing the value of their shares; (2) to deter fund
voting decisions that are motivated by considerations of the interests
of a fund's adviser rather than the interests of the fund's investors;
and (3) to provide stronger incentives for fund managers to vote their
proxies carefully.\226\ One academic study suggests that, currently,
investors may be less inclined to use information provided in Form N-PX
because the costs of gathering and understanding more granular details
about the fund's proxy voting exceed the benefits.\227\
---------------------------------------------------------------------------

    \226\ Form N-PX Adopting Release, supra footnote 7. The
discussion of the interests of funds' investors is not intended to
describe the interests of any particular investor or investors, but
instead refers to the fund's investors, considered as a whole.
    \227\ See Jonathon Zytnick, ``Do Mutual Funds Represent
Individual Investors?'' NYU Law and Economics Research Paper No. 21-
04 (March 7, 2021) at page 4, (finding ``evidence consistent with
limited attention, in which the costs [to shareholders] of acquiring
more granular detail about funds, as compared to readily available
information, exceed the benefits''), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3803690.
---------------------------------------------------------------------------

    We expect that the proposed amendments to the Form N-PX format and
content would help investors and other data users more easily collect
and analyze proxy voting information, resulting in lower costs of
gathering and understanding this information. Specifically, the
proposed amendments would require funds to use a consistent and
standardized description, categorize voting matters, report in a custom
XML data language, and make the form available on the fund's website
and provide it to investors upon request, free of charge in both cases.
We also expect these amendments could facilitate comparisons of voting
patterns across a wide range of funds or within an individual fund over
time. To the extent that investors choose among funds based on their
proxy voting policies and records, in addition to other factors such as
expenses, performance, and investment policies, we expect that
investors would be able to select funds that suit their preferences
more efficiently.
    We expect additional benefits to investors and other proxy voting
data users from accessing the new information on the amended Form N-PX
regarding the number of shares voted and the number of shares loaned.
We believe that this additional information could benefit investors and
other data users by helping them understand the scope of a fund's
participation in proxy voting activities, the fund's voting
preferences, and the fund's ability to affect the outcome of
shareholder votes and influence the governance of corporate issuers. As
an example, the additional transparency the proposal would provide may
help assess concerns regarding the extent to which loaned shares could
be used to sway proxy votes towards outcomes that enhance borrowers'
private benefits instead of outcomes considered beneficial for funds'
shareholders.\228\
---------------------------------------------------------------------------

    \228\ It may be possible that investors who borrow securities
primarily to obtain votes could sway proxy votes towards outcomes
that enhance their private benefits instead of outcomes considered
beneficial for funds' shareholders. Hu and Black (2008) provide
examples of situations when the use of borrowed shares may have
swayed the outcome of a shareholder vote. See Henry Hu and Bernard
Black, ``Equity and Debt Decoupling and Empty Voting: II Importance
and Extensions.'' University of Pennsylvania Law Review, Volume 156
(2008). To date, we are not aware of evidence on whether such voting
with borrowed shares occurs on a regular basis or whether it has a
significant effect on proxy voting outcomes.
---------------------------------------------------------------------------

    In light of the increased transparency the amendments would provide
on fund voting, the proposal may also provide an incentive for fund
managers to devote additional time and resources to their participation
in voting proxies, which could lead to an improvement in the
performance of corporate issuers and enhance shareholder wealth.\229\
Academic research provides some evidence that actively voting funds
help sway shareholder votes toward value-maximizing outcomes when
voting on the matters such as CEO turnover, executive compensation,
anti-takeover provisions, and mergers.\230\ We note that

these potential corporate governance improvements resulting from more
active participation in proxy voting by funds could have a positive
externality effect as the benefits would be accessible to all equity
holders, and not limited to fund investors.
---------------------------------------------------------------------------

    \229\ See Peter Iliev and Michelle Lowry, ``Are Mutual Funds
Active Voters?'' Review of Financial Studies, Volume 28 Issue 2
(2015); Vincente Cunat, Mireia Gine, and Maria Guadalupe, ``The Vote
is Cast: The Effect of Corporate Governance On Shareholder Value.''
Journal of Finance, Volume 67 Issue 5 (2012). (finding that passing
a governance provision is associated with an increase in shareholder
value, and more so when proposals are sponsored by institutional
investors).
    \230\ See, e.g., Angela Morgan, Annette Poulsen, Jack Wolf, and
Tina Yang, ``Mutual Funds as Monitors: Evidence from Mutual Fund
Voting.'' Journal of Corporate Finance, Volume 17 (2011). (finding
that, ``in general, mutual funds vote more affirmatively for
potentially wealth-increasing proposals and funds' voting approval
rates for these beneficial resolutions are significantly higher than
those of other investors''). See also Jean Helwege, Vincent
Intintoli, and Andrew Zhang, ``Voting with Their Feet or Activism?
Institutional Investors' Impact on CEO Turnover.'' Journal of
Corporate Finance, Volume 18 Issue 1 (2012) for a review of the
literature.
---------------------------------------------------------------------------

    In addition, the proposed amendments to the format and content of
Form N-PX may also help deter fund votes motivated by conflicts of
interest that compromise the fund's voting on proposals considered
beneficial for the fund's investors.\231\ For example, some academic
research finds that mutual funds' proxy voting may be affected by their
business ties with the portfolio firms where the fund's adviser also
manages the firm's pension plan, as well as through personal
connections between fund managers and corporate executives.\232\ More
generally, fund managers' proxy voting decisions may be driven by their
economic interest in attracting more business for the fund.\233\ A
fund's proxy voting also may be affected by the fund manager's personal
preferences that do not align with the best interests of the fund's
investors.\234\
---------------------------------------------------------------------------

    \231\ See, e.g., Gerald Davis and Han Kim, ``Business Ties and
Proxy Voting by Mutual Funds.'' Journal of Financial Economics,
Volume 85 Issue 2 (2007) (``To the extent that good corporate
governance leads to higher valuations, fund managers have incentives
to use their voting power to demand good corporate governance and
accept (reject) proposals that may benefit (harm) investors.
However, such fiduciary responsibilities may be compromised if
mutual fund parents manage employee benefit plans (such as 401(k)
plans) for their portfolio firms at the behest of management.'').
According to the article, on average, earnings from 401(k)-related
business equal 14% of the revenues that mutual fund families earn
from their equity funds, and such income can represent as much as
25% of fund family revenues.
    \232\ See, e.g., Ashraf, Jayaraman, and Ryan (2012) find that
``fund families support management when they have pension ties to
the firm'' and Cvijanovic, Dasgupta, and Zachariadis (2016) find
that ``business ties significantly influence pro-management voting
at the level of individual pairs of fund families and firms.''
Butler and Gurun (2012) observe that ``mutual funds whose managers
are in the same educational network as the firm's CEO are more
likely to vote against shareholder-initiated proposals to limit
executive compensation than out-of-network funds are.'' See Rasha
Ashraf, Narayanan Jayaraman, and Harley Ryan, ``Do Pension-Related
Business Ties Influence Mutual Fund Proxy Voting? Evidence from
Shareholder Proposals on Executive Compensation.'' Journal of
Financial Quantitative Analysis, Volume 47 Issue 03 (2012); Dragana
Cvijanovic, Amil Dasgupta, and Konstantinos Zachariadis, ``Ties That
Bind: How Business Connections Affect Mutual Fund Activism'',
Journal of Finance, Volume 71 Issue 6 (2016); Gerald Davis and Han
Kim, ``Business Ties and Proxy Voting by Mutual Funds.'' Journal of
Financial Economics, Volume 85 Issue 2 (2007); and Alexander Butler
and Umit Gurun, ``Educational Networks, Mutual Fund Voting Patterns,
and CEO Compensation.'' Review of Financial Studies, Volume 25 Issue
8 (2012).
    \233\ See, e.g., Lucian Bebchuk, Alma Cohen, and Scott Hirst,
``The Agency Problems of Institutional Investors.'' Journal of
Economic Perspectives, Volume 31 Number 3 (2017) (discussing that
fund managers' proxy voting decisions may be driven by their
economic interest in attracting more business for the fund rather
than engaging in generating governance gains at portfolio
companies.) The Commission has brought at least one enforcement
action against a registered investment adviser for having proxy
voting policies that did not address material potential conflicts
when the adviser selected voting guidelines explicitly favored by
certain clients to vote all its clients' securities, in order to
improve the adviser's ranking in a third-party proxy voting survey.
See, In the Matter of INTECH Investment Management LLC, Investment
Advisers Act Release No. 2872 (May 7, 2009) (settled order).
    \234\ See, e.g., Paul Mahoney and Julia Mahoney, ``The New
Separation of Ownership and Control: Institutional Investors and
ESG.'' Columbia Business Law Review, Volume 2 Number 2 (2021).
---------------------------------------------------------------------------

    To the extent that the increased transparency about fund's proxy
votes, resulting from the proposed amendments, would provide an
incentive for fund managers to focus more on shareholder value
maximization, this could lead to an improvement in the performance of
corporate issuers and enhance shareholder value. We note that assets
held in funds account for approximately 30% of the market
capitalization of all publicly traded U.S. corporations as of year-end
2020, and therefore funds have the ability to exercise a considerable
amount of influence in proxy votes which could affect the value of
these corporations.\235\
---------------------------------------------------------------------------

    \235\ ICI 2020 Fact Book, supra footnote 5, Figure 2.7.
---------------------------------------------------------------------------

b. Costs
    The proposed amendments to Form N-PX would lead to some additional
costs for funds. Any portion of these costs that is not borne by a
fund's adviser or other sponsor would ultimately be borne by the fund's
shareholders. Direct costs for funds would consist of both internal
costs (for compliance attorneys and other non-legal staff of a fund,
such as computer programmers, to prepare and review the required
disclosure) and external costs (such as any costs associated with
third-party service providers to collect and report the information
disclosed in Form N-PX).\236\
---------------------------------------------------------------------------

    \236\ Based on the results of the PRA analysis provided in Table
2, it is estimated that the annual direct costs attributable to
information collection requirements in the proposed amendments for
funds that hold equity securities would be approximately $6,577 per
fund, which consists of $6,077 in internal costs and $500 in
external costs. For funds not holding equity securities, the direct
costs are not expected to change. For funds of funds, the direct
costs would comprise internal and external costs and are estimated
at $414 per fund. These annual direct costs include both ongoing,
and initial costs, with the latter being amortized over three years.
---------------------------------------------------------------------------

    We anticipate that any additional direct costs associated with the
proposed amendments aimed at reducing the costs of accessing and
gathering proxy voting information for investors and other users of the
data--the requirements to use a custom XML language and to publish
proxy voting records on the fund's website--would be relatively low
given that funds already accommodate similar requirements in their
other reporting and can utilize their existing capabilities for
preparing and publishing an updated Form N-PX.
    Indirect costs for funds would include the costs associated with
additional actions that funds may decide to undertake in light of the
increased transparency of their voting records and practices. To the
extent that the proposed amendments provide an incentive for fund
managers to devote additional time and resources to voting proxies,
this may result in additional expenses for funds, some of which may be
passed on to funds' investors. Also, as a result of the increased
scrutiny by investors, a fund may be incentivized to vote against an
issuer firm's management with whom the fund has business ties. This
could jeopardize the fund's relationship with the client firm and
result in lost revenue if the firm decides to relocate their employee
benefit accounts elsewhere.
    The proposed requirement for funds to disclose the number of shares
a fund voted and the number of shares the fund loaned and did not
recall for voting could reduce the fund's proceeds from securities
lending, which would reduce returns to the fund's investors.\237\
Specifically, in light of the increased transparency the amendments
would provide on funds' securities lending activities, some funds may
decide to recall their loaned securities to be able to vote the proxies
of these securities. A change in the fund's lending activity could also
affect the fund's adviser and its affiliates. For example, some funds
use securities lending agents that are affiliated with the fund's
adviser and that are compensated in their role as agent with a share of
the proceeds generated by the lending program.
---------------------------------------------------------------------------

    \237\ Based on Form N-CEN filings received through May 2021, 67%
of funds were authorized to engage and 40% participated in lending
their securities. Funds that lent their securities reported
aggregate net income from securities lending in the last year of
$2.663 billion, representing an average of 0.036% of average total
net assets in the last year.
---------------------------------------------------------------------------

    However, we expect the scope of the possible impact of the proposed
amendments on funds' securities

lending practices and income would be limited for the following
reasons:
     First, according to a survey of institutional investors
referenced in one academic study, 37.9% of the respondents stated that
a formal policy on securities lending is part of their proxy voting
policy, with some institutional investors requiring a total recall of
shares ahead of proxy voting, while others weigh the lost income from
securities lending against the benefits of voting on a specific
proposal.\238\ For funds with such existing securities lending
policies, we expect no changes to their lending practices as a result
of the proposed amendments.
---------------------------------------------------------------------------

    \238\ See, e.g., Aggarwal et al. (2015) at page 2314, supra
footnote 20.
---------------------------------------------------------------------------

     Second, even if some funds decide to recall loaned
securities ahead of proxy voting, we anticipate that these funds would
lend their shares again immediately after the vote record date, thus
resuming the income stream obtained through security lending. This is
consistent with findings in academic research showing that the supply
of shares available to lend starts to decrease about 20 days before the
vote record date and it increases to its pre-event levels immediately
after the vote record date.\239\ Therefore, we expect that the lost
income to the funds from recalling their loaned shares to participate
in proxy voting would be limited to the income from securities lending
that could have been generated over the recall period.
---------------------------------------------------------------------------

    \239\ See id at page 2316.
---------------------------------------------------------------------------

     Third, we expect that funds would factor income from
securities lending, among other considerations, into their lending
decision and recall loaned securities when they expect the value of
their voting rights would exceed lost income from securities lending.
This is consistent with findings in academic research showing that the
recall of shares ahead of the voting record date is sensitive to the
borrowing fee and that recall is lower if the fee paid by borrowers is
higher.\240\ Therefore, if, under the proposed amendments, some funds
decided to recall their loaned shares to be able to participate in
proxy voting, we anticipate that the fund managers will have determined
that the benefits to these funds associated with their decision would
outweigh the potential loss of lending income.
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    \240\ See id at page 2328.
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    Since stock loans can be used for many different purposes,
including short selling and arbitrage and hedge trading strategies,
changes in funds' securities lending practices could have an impact on
these activities, which may impose additional costs on market
participants. However, as discussed earlier, we would expect the
securities lending supply to be largely unaffected by the proposed
amendments and, therefore, we would expect other market activities that
rely on securities lending to be largely unaffected too. If, as a
result of increased transparency under the proposed amendments, some
funds decide to recall their loaned shares, we expect the impact of
this change on other related market activities such as short selling
and arbitrage trading to be limited for the following reasons:
     As discussed earlier, we would expect the recall to be
short-term and funds to return to their normal securities lending
practices immediately after the vote record date. Therefore, we
anticipate that other market activities that rely on securities lending
would also return to normal levels after the vote record date.
     Additionally, we expect that the market for securities
lending has sufficient depth to withstand these short-term recalls by
some funds ahead the voting record date without experiencing
significant changes. One academic study shows that the equity lending
market has a slack in supply with approximately a quarter of a
corporate issuer's market capitalization typically available for
lending and less than one-fifth of these shares being on loan.\241\
Therefore, we expect that if some funds decided to recall their
securities to participate in proxy voting, other lenders would step in
to supply shares for loan on similar terms. This is consistent with
findings in academic research showing that changes in borrowing fees
during the recall period tend to be economically small or
insignificant.\242\
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    \241\ See id at page 2315.
    \242\ See id at page 2327. See also Susan Christoffersen,
Cristopher Geczy, David Musto, and Adam Reed, ``Vote Trading and
Information Aggregation.'' Journal of Finance, Volume 62 Issue 6
(2007) at page 2912.
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     The impact on borrowing fees could be more pronounced for
hard-to-borrow stocks such as stocks with low lendable supply and/or
high borrowing demand, also known as ``special.'' \243\ If funds
recalled a significant number of shares of such stocks ahead of the
vote record date, it may potentially have an impact on the stock
price.\244\ However, ``special'' stocks are typically associated with
higher borrowing fees \245\ and, therefore, funds may be more reluctant
to recall these shares from loans if the income from lending them
exceeds the benefits of participating in proxy voting. For example, one
academic study shows that lendable supply of ``special'' stocks changes
by less than that of the non-special stocks prior to the vote record
date.\246\ Therefore, we expect that the proposed amendments are
unlikely to have an impact on securities lending and other related
market activities for these stocks.
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    \243\ The Aggarwal et al. (2015) study estimated that such
special stocks represented about 9% of their considered equity
lending sample, which covers more than 85% of the securities lending
market. The study finds that ``special'' stocks have a higher
average annualized borrowing fee of 429 basis points, compared with
a fee of 9.3 basis points for the non-special stocks.
    \244\ See, e.g. Jesse Blocher, Adam Reed, and Edward Van Wesep,
``Connecting Two Markets: An Equilibrium Framework for Shorts,
Longs, and Stock Loans.'' Journal of Financial Economics, Volume 108
Issue 2 (2013) (finding that when share loan supply is ``reduced
around dividend record dates, prices of hard-to-borrow stocks
increase 1.1% while prices of easy-to-borrow stocks are
unaffected''). While the study looks at the effect around the
dividend record date, it is possible that similar results could hold
around vote record dates.
    \245\ Supra footnote 243.
    \246\ See Aggarwal et al. (2015) at page 2323.
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2. Amendments To Require Manager Reporting of Say-on-Pay Votes
a. Benefits
    Under the proposal, managers would publicly disclose annually on
Form N-PX information about their proxy votes relating to say-on-pay
matters. The information would include a description of say-on-pay
matters that is consistent with the description on an issuer's form of
proxy, their standardized classification, the number of shares voted
and number of shares loaned and not recalled, and how the shares were
voted by the manager.
    We believe the proposed rule may benefit the securities markets by
providing access to information about how managers vote on issuers'
say-on-pay recommendations. As of March 31, 2021, managers that file
reports on Form 13F exercised investment discretion over approximately
$39.79 trillion in section 13(f) equity securities. In many cases, fund
managers also exercise voting power for proxies relating to these
equity securities. This voting power gives fund managers significant
ability to affect the outcomes of shareholder votes and influence the
governance of corporations.
    Recent academic literature shows that the requirement of holding
say-on-pay votes could have an impact on executive compensation and
other corporate governance practices for corporate issuers.\247\ The
proposed rule would

enable investors to observe how managers exercised their proxy votes
regarding such matters. To the extent the information contained in say-
on-pay votes is understood and valued by investors,\248\ investors can
benefit from using this additional information in selecting managers,
and in determining whether managers are adequately maximizing the value
of their assets.
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    \247\ See Peter Iliev and Svetla Vitanova, ``The Effect of the
Say-on-Pay Vote in the United States.'' Management Science, Volume
65 (2019); James Cotter, Alan Palmiter and Randall Thomas, ``The
First Year of Say-on-Pay under Dodd-Frank: An Empirical Analysis and
Look Forward.'' George Washington Law Review, Volume 81 Issue 3
(2013).
    \248\ See, e.g., David Larcker, Ronald Schneider, Brian Tayan,
and Aaron Boyd, ``2015 Investor Survey Deconstructing Proxy
Statements--What Matters to Investors.'' Stanford University, RR
Donnelley, and Equilar Report (February 2015) (finding that 58
percent of shareholders believes that say-on-pay is effective in
influencing or modifying pay practices).
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    This information may also help deter votes motivated by conflicts
of interest and promote accountability of executives who often are in a
position to shape their own pay arrangements. To the extent that
executives are sensitive to approval from their institutional
shareholder base, the adoption of the proposed rule should help align
the incentives of executives and investors, which would result in
better corporate governance practices at corporate issuers.
    Public companies currently subject to the Dodd-Frank Act's say-on-
pay vote requirements may also benefit from the transparency provided
by this rule. Knowing how managers have voted on executive compensation
matters in the past, and knowing how they voted on say-on-pay matters
at similar firms or other firms in the same industry, could be useful
for the companies as they consider their own executive compensation
practices and policies.
b. Costs
    The proposed rule would lead to some additional direct and indirect
costs for managers associated with disclosing required information
about their say-on-pay votes annually on Form N-PX. If a manager
exercises voting power for a client's securities, the costs to report
the vote may be passed on to the client. Some of these costs are a
direct result of section 14A(d)'s statutory mandate for managers to
report annually how they have voted.\249\
---------------------------------------------------------------------------

    \249\ In the 2010 Proposing Release, no commenter provided
specific empirical data quantifying costs that may be incurred by a
reporting person in complying with those proposed amendments.
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    Direct costs to each manager would include both internal costs (for
compliance attorneys and other non-legal staff, such as computer
programmers, to prepare and review the required disclosure) and
external costs (such as any costs associated with third-party service
providers to collect and report the information disclosed in Form N-
PX).\250\ We anticipate that costs for managers associated with
obtaining the information required to be reported by the proposed rule
would be limited because we believe that many managers are already
tracking some of these data.
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    \250\ Based on the results of the PRA analysis provided in Table
2, it is estimated that the annual direct costs attributable to
information collection requirements in the proposed amendments for
managers would be approximately $5,925 per manager, consisting of
$4,925 in internal costs and $1,000 in external costs. These annual
direct costs include ongoing as well as initial costs, with the
latter being amortized over three years.
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    Indirect costs to managers associated with the proposed amendments
would be similar to the indirect costs to funds discussed in the prior
section. More specifically, to the extent that the proposed amendments
may provide an incentive for managers to devote additional time and
resources to proxy voting, this may result in additional expenses for
managers, some of which may be passed on to their clients. Also, an
increase in scrutiny by investors as a result of increased transparency
under the proposed amendments may incentivize managers to vote against
the management of an issuer with which the manager may have a business
relationship, which could weaken the manager's relationship with the
issuer firm and result in lost revenue.
    Further, the proposed disclosure requirements for managers could
create incentives for them to recall their loaned securities to cast
proxy votes on say-on-pay matters for these securities. This could
reduce these managers' and their clients' revenues and may have a
short-term impact on the securities lending and underlying stock
markets.\251\ However, similar to the impact on funds discussed in the
prior section, we expect that the scope of the possible impact of the
proposed amendments on managers' securities lending practices and
revenues would be limited.
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    \251\ See supra footnotes 238-240 and accompanying text for the
discussion related to the effect on securities lending for funds.
See supra footnotes 241-246 and accompanying text for a discussion
of the potential effects on underlying markets, which would also
apply to changes in managers' securities lending activities.
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    We believe that the costs arising from the proposal to use Form N-
PX to implement section 14A's say-on-pay vote reporting requirements
for managers would be mitigated by the experience that managers that
are advisers to funds already have with filing Form N-PX reports on
behalf of funds. In addition, the proposed move to a custom XML data
language for Form N-PX is not expected to impose significant costs on
managers subject to say-on-pay voting requirements, as managers have
experience filing other EDGAR forms that use similar custom XML data
languages, such as Form 13F.
    The costs associated with the proposed rule may vary depending on
existing levels of voluntary disclosure, organizational structure, and
investment objectives of each manager. For example, the cost of
compliance with the proposed rule is likely to be lower for managers
that exercise voting power on behalf of funds because such votes are
already reported on Form N-PX, and the proposal would not require
managers to separately report say-on-pay votes cast on behalf of funds
in compliance with the joint reporting provisions. Also, the costs are
likely to be lower for managers who already voluntarily track and
disclose some of the data the proposed rule would require.

D. Effects on Efficiency, Competition, and Capital Formation

    In this section we consider whether the proposed rule and form
amendments would promote efficiency, competition, and capital
formation.
1. Amendments to Funds' Reporting of Proxy Votes
    The proposed amendments to Form N-PX would provide investors with
greater access to information regarding the proxy voting decisions of
the funds they invest in. This could help investors make better
informed investment decisions when they want to take into account
funds' voting records, which could promote more efficient allocation of
capital by investors to funds.
    The amendments would also make it easier for investors and other
proxy voting data users to compare and evaluate proxy voting records
across a wide variety of funds. This may improve competition among
funds, as funds may seek to differentiate themselves based on their
voting records. This could further promote a more efficient allocation
of capital by investors among competing funds.
    Further, as proxy voting information becomes easier to gather and
analyze, data-collecting service providers could face an increased
competitive pressure to improve and develop new tools and methodologies
and/or reduce their service fees.
    Finally, we do not anticipate any significant effects of the
proposed amendments on capital formation.

2. Amendments To Require Manager Reporting of Say-on-Pay Votes
    Because the proposed rule applies equally to all managers that are
required to file reports under section 13(f) of the Exchange Act, we do
not anticipate that any competitive disadvantages would be created. To
the contrary, we anticipate that the proposed rule may encourage
competition by raising awareness about manager voting on say-on-pay
matters and may facilitate differentiation among managers.
    The proposed amendments to require manager reporting of say-on-pay
votes could promote more efficient allocation of capital to managers.
The proposed amendments could enable investors to obtain managers'
proxy voting information which could help investors allocate assets to
managers who cast proxy votes that are more consistent with investors'
preference for voting on executive compensation matters.
    Finally, we do not anticipate any significant effects of the
amendments on capital formation.

E. Reasonable Alternatives

1. Scope of Managers' Say-on-Pay Reporting Obligations
    We considered as an alternative whether to more closely align
managers' reporting requirements on Form N-PX with their reporting
requirements on Form 13F by adding a de minimis exception. Filers on
Form 13F are permitted to exclude positions when the positions have a
dollar value of less than $200,000 and consist of fewer than 10,000
shares. Several commenters on the 2010 proposal suggested that we
include a de minimis exception, with one suggesting that not doing so
would reduce the value of the exception to Form 13F reporting and a
different commenter suggesting that this could permit their positions
to be front-run.\252\
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    \252\ Intel Letter (suggesting that this would reduce the value
of the Form 13F exception); Seward Letter (front-running). See also
ABA Letter (general support for de minimis exception); Barnard
Letter (same).
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    The benefits of say-on-pay vote reporting to managers' clients and
to other investors, as discussed above, do not appear to be limited to
votes of a certain size. We also believe that the cost savings of a de
minimis exception would be minimal. To the extent that a filing could
reveal information about a filer's trading strategy that would permit
it to be front-run, we believe that the instructions for requesting
confidential treatment address this concern.
    We also considered as an alternative whether to reduce the burden
on managers who have a stated practice of not voting shares, for
instance by reducing their reporting obligations or not requiring them
to make a filing at all. While this approach would reduce costs for