Transcript PROXY VOTING - FIRMA

FIDUCIARY AND INVESTMENT RISK MANAGEMENT ASSOCIATION
2008 NATIONAL RISK MANAGEMENT TRAINING CONFERENCE
PROXY VOTING
Presented by
Jeffrey S. Kropschot, VP and CCO
A.G. Edwards Trust Company FSB
PROXY VOTING
Power/Duty to Vote Proxies
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The trustee has a duty to actively manage and protect the trust
estate, which includes the power to vote proxies related to
shares of stock held in a fiduciary capacity.
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The trustee has a duty to act solely in the economic interest of
the trust, based on the intentions of the grantor.
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The duty of care requires an investment adviser with proxy
voting authority to monitor corporate events and to vote
proxies.
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An investment adviser must cast proxy votes in a manner
consistent with the best interest of its clients and must not
subrogate client interests to its own.
PROXY VOTING
Types of Proxy Issues
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Routine – Matters that do not include authorization for a merger,
consolidation or any matter which may affect substantially the
rights or privileges of such stock. Examples include:
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–
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Election of Directors
Selection of External Auditor
Non-Routine - Matters that do include authorization for a
merger, consolidation or any matter which may affect
substantially the rights or privileges of such stock. NYSE Rule
452.11 lists eighteen non-routine proxy issues.
PROXY VOTING
Bank Regulatory Guidance - OCC
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Should have internal policies that outline the bank’s position for
voting proxies and for handling related social or controversial
issues. The policy should include a provision that the bank
maintain a record of how proxies are voted and, when a
decision is made not to vote a proxy, the reasons why that
decision was made.
•
Should have a policy addressing investments in and voting of
own bank stock, holding company stock, or stock of companies
for which directors, officer, employees or related organizations
have an interest that might interfere with the bank’s judgment.
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With respect to the financial report disclosures in 12 CFR
9.18(b)(6), a national bank should consider making the proxy
voting policy and proxy voting records available to interested
persons.
PROXY VOTING
Bank Regulatory Guidance - OTS
•
The investment policy should contain guidelines and standards
for voting proxies, particularly in regards to investments in the
savings association’s own securities or proprietary mutual
funds. The policy should require that it vote shares in the best
interest of each account.
PROXY VOTING
Bank Regulatory Guidance - FDIC
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Should have a policy addressing the voting of routine, as well
as controversial, issues. The policy should require that it vote
proxies in the best interest of the clients. The policy should
also establish voting and recordkeeping procedures.
PROXY VOTING
Bank Regulatory Guidance - FRB
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Should have proxy voting policies and procedures suitable to
assumed responsibilities. Policies should address voting of
routine and non-routine issues (i.e., issues involving sensitive
social issues, conflicts of interest, significant increases in
management power or perquisites, or merger or buy-out
proposals).
PROXY VOTING
SEC Investment Adviser Guidance
17 CFR 275.206(4)-6
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It is a fraudulent, deceptive, or manipulative act, practice or
course of business for an investment adviser to exercise voting
authority with respect to client securities unless the adviser:
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Adopts and implements written policies and procedures that are
reasonably designed to ensure that the adviser votes proxies in
the best interests of its clients;
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Discloses to its clients how they may obtain information
regarding how their proxies were voted; and
–
Describes its proxy voting policies and procedures to its clients
and provides copies upon request.
PROXY VOTING
•
Must adopt and implement written policies and procedures that
are reasonably designed to ensure the adviser votes proxies in
the best interests of its clients.
–
Procedures should address situations where it would be in the
client’s best interest not to vote every proxy (e.g., cost of voting
exceeds expected benefit to the client) .
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Procedures must address how the adviser addresses material
conflicts arising between its interests and those of its clients.
•
•
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Advisers that vote securities based on a pre-determined voting
policy could demonstrate that the vote was not a product of the
conflict of interest.
Advisers that vote securities based on a pre-determined voting
policy, based on the recommendations of an independent third
party, could demonstrate that the vote was not a product of the
conflict of interest.
Advisers can suggest that clients engage another party to
determine how proxies should be voted.
PROXY VOTING
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Must disclose to clients how they may obtain information
regarding how their proxies were voted.
PROXY VOTING
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Must describe proxy voting policies and procedures to clients
and provides copies upon request.
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Description should be a concise summary of the adviser’s
policies and procedures and should indicate that a copy of the
policies and procedures is available upon request.
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Some advisers use a brochure (in lieu of Part II of Form ADV ) to
make this concise summary and to offer clients the opportunity
to request copies of the policies and procedures.
PROXY VOTING
SEC Investment Adviser Guidance
17 CFR 275.204-2(c)(2)(i-v)
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Adviser must retain the following records:
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Copies of all required policies and procedures;
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Copies of each proxy statement received;
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Records of each vote cast on behalf of its clients;
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Copies of documents created by the adviser that were material
to making a decision on how to vote proxies on behalf of a
client or that memorializes the basis for that decision; and
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A copy of each written client request for information on how the
adviser voted proxies on behalf of the client, and a copy of any
written response by the investment adviser to any client
request for information on how the adviser voted proxies on
behalf of the requesting client.
QUESTIONS
REFERENCES
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OCC Handbooks (Various)
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OTS Trust and Asset Management Handbook
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FDIC Trust Examination Manual
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FRB Trust Examination Manual
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Federal Register Vol.68, No. 26 / Friday, February 7, 2003
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17 CFR 275.206(4)-6
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17 CFR 275.204-2(c)(2)(i-v)
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ISS Proxy Voting Guidelines
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Summary of Proxy Voting Policies and Procedures
http://www.occ.treas.gov/handbook/amgt.htm
http://www.ots.treas.gov/da.cfm?catnumber=106&an=7
http://www.fdic.gov/regulations/examinations/trustmanual/index.html
http://www.federalreserve.gov/boarddocs/supmanual/
http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/
2003/pdf/03-2952.pdf
http://a257.g.akamaitech.net/7/257/2422/03jul20071500/edocket.access.gpo.gov/cf
r_2007/aprqtr/pdf/17cfr275.206(4)-6.pdf
http://a257.g.akamaitech.net/7/257/2422/03jul20071500/edocket.access.gpo.gov/cf
r_2007/aprqtr/pdf/17cfr275.204-2.pdf
http://www.issproxy.com/pdf/2007USSummaryGuidelines.pdf