SEBI Working Group Issues Guidelines For Proxy Advisory Firms

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A working group formed by SEBI has recommended that proxy firms, which advise shareholders on corporate governance matters and assist them in voting on resolutions, will be fully regulated by SEBI now. The working group provided recommendations on various aspects of proxy adviser and also suggested that SEBI may like to obtain public comments on the substantive matters stated in the report before any regulatory review is undertaken.

In addition to the recommendations of the working group on regulating foreign proxy advisors, it is also proposed that institutional investors like Foreign Portfolio Investors, Portfolio Managers, Alternative Investment Funds, Real Estate Investment Trusts, and Infrastructure Investment Trusts etc. maybe mandated to ensure that proxy advisory firms employed by them (if any) should have appropriate capacity & capability to issue proxy advice and such firm is complying with code of conduct for proxy advisers as specified by SEBI.

Proxy adviser is a person who provides advice to institutional investors or shareholder of a company, in relation to exercise of their rights in the company including recommendations on public offer or voting recommendation on agenda items. SEBI regulates the activities of proxy advisors in India under SEBI (Research Analyst) Regulations, 2014. Under these regulations, such entities are required to register with SEBI and comply with the provisions pertaining to formation of internal policies and procedures, disclosures in the reports, code of conduct, maintaining record of voting recommendations etc.

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