Protecting Americans’ Retirement Savings From Politics Act

(a) Short title.— This Act may be cited as the “Protecting Americans’ Retirement Savings From Politics Act”.

(b) Table of contents.— The table of contents for this Act is as follows:

(a) Securities Act of 1933.— Section 2(b) of the Securities Act of 1933 (15 U.S.C. 77b(b)) is amended—

(1) in the subsection heading, by inserting “; Limitation on Disclosure Requirements” after “Formation”;

(2) by striking “Whenever” and inserting the following:

“(1) In general.— Whenever”; and

(3) by adding at the end the following:

“(2) Limitation.—

(A) In general.— Whenever pursuant to this title the Commission is engaged in rulemaking regarding disclosure obligations of issuers, the Commission shall expressly provide that an issuer is only required to disclose information in response to such disclosure obligations to the extent the issuer has determined that such information is material with respect to a voting or investment decision regarding the securities of such issuer.

(B) Applicability.— Subparagraph (A) shall not apply with respect to the removal of any disclosure requirement with respect to an issuer.

(C) Rule of construction.— For the purposes of this paragraph, information is considered material with respect to a voting or investment decision regarding the securities of an issuer if there is a substantial likelihood that a reasonable investor would view the failure to disclose that information as having significantly altered the total mix of information made available to the investor.”.

(b) Securities Exchange Act of 1934.— Section 3(f) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(f)) is amended—

(1) in the subsection heading, by inserting “; Limitation on Disclosure Requirements” after “Formation”;

(2) by striking “Whenever” and inserting the following:

“(1) In general.— Whenever”; and

(3) by adding at the end the following:

“(2) Limitation.—

(A) In general.— Whenever pursuant to this title the Commission is engaged in rulemaking regarding disclosure obligations of issuers, the Commission shall expressly provide that an issuer is only required to disclose information in response to such disclosure obligations to the extent the issuer has determined that such information is material with respect to a voting or investment decision regarding the securities of such issuer.

(B) Applicability.— Subparagraph (A) shall not apply with respect to the removal of any disclosure requirement with respect to an issuer.

(C) Rule of construction.— For the purposes of this paragraph, information is considered material with respect to a voting or investment decision regarding the securities of an issuer if there is a substantial likelihood that a reasonable investor would view the failure to disclose that information as having significantly altered the total mix of information made available to the investor.”.

The Securities Exchange Act of 1934 is amended by inserting after section 40 (15 U.S.C. 78qq) the following:

“40A. Public Company Advisory Committee.—

(a) Establishment and purpose.—

(1) Establishment.— There is established within the Commission the Public Company Advisory Committee (referred to in this section as the “Committee”).

(2) Purpose.— The Committee shall—

(A) provide the Commission with advice on the rules, regulations, and policies of the Commission with regard to the Commission’s mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, as they relate to—

(i) existing and emerging regulatory priorities of the Commission;

(ii) issues relating to the public reporting and corporate governance of public companies;

(iii) issues relating to the proxy process for shareholder meetings held by public companies;

(iv) issues relating to trading in the securities of public companies; and

(v) issues relating to capital formation;

(B) not provide any advice with respect to any policies, practices, actions, or decisions concerning the Commission’s enforcement program; and

(C) submit to the Commission such findings and recommendations as the Committee determines are appropriate, including recommendations for proposed regulatory and legislative changes.

(b) Membership.—

(1) In general.— The membership of the Committee shall be not fewer than 10, and not more than 20, members appointed by the Commission from among individuals who—

(A) are officers, directors, or senior officials of public companies registered with the Commission under the Securities Act of 1933 and this Act, except for those public companies that own asset management, fixed income, investment advisory, broker-dealer, or proxy services businesses;

(B) are executives or other individuals with senior managerial responsibility in business, professional, trade, and industry associations that represent the interests of such public companies; and

(C) are professional advisers and service providers to such public companies (including attorneys, accountants, investment bankers, and financial advisers).

(2) Qualifications.— At least 50 percent of the Committee membership shall be drawn from individuals who would qualify for membership under paragraph (1)(A).

(3) Term.— Each member of the Committee appointed under paragraph (1) shall serve for a term of 4 years. Vacancies among the members, whether caused by the resignation, death, removal, expiration of a term, or otherwise, shall be filled consistent with the Commission’s procedures then in effect.

(4) Staggered terms.— The members of the Committee shall serve staggered terms, with half of the initial members of the Committee each serving for 2 years and half serving for 4 years.

(5) Members not on other advisory committees.— Public companies and other organizations that are currently represented on any other Commission Advisory Committee are not eligible to have representatives also serve on the Public Company Advisory Committee.

(6) Members not Commission employees.— Members appointed under paragraph (1) shall not be considered to be employees or agents of the Commission solely because of membership on the Committee.

(c) Chair; Vice Chair; Secretary; Assistant Secretary.—

(1) In general.— The members of the Committee shall elect, from among the members of the Committee—

(A) a Chair;

(B) a Vice Chair;

(C) a Secretary; and

(D) an Assistant Secretary.

(2) Term.— Each member elected under paragraph (1) shall serve for a term of 2 years in the capacity the member was elected under paragraph (1).

(3) Subcommittees.— The Chair may create subcommittees that hold public or non-public meetings and provide recommendations to the full Committee.

(d) Meetings.—

(1) Frequency of meetings.— The Committee shall meet—

(A) not less frequently than twice annually, at the call of the chair of the Committee; and

(B) from time to time, at the call of the Commission.

(2) Notice.— The Chair of the Committee shall give the members of the Committee written notice of each meeting, not later than 2 weeks before the date of the meeting.

(e) Staff.— The Commission shall make available to the Committee such staff as the Chair of the Committee determines are necessary to carry out this section.

(f) Review by Commission.— The Commission shall—

(1) review the findings and recommendations of the Committee; and

(2) each time the Committee submits a finding or recommendation to the Commission, promptly issue a public statement—

(A) assessing the finding or recommendation of the Committee; and

(B) disclosing the action, if any, the Commission intends to take with respect to the finding or recommendation.

(g) Committee findings.— Nothing in this section shall require the Commission to agree to or act upon any finding or recommendation of the Committee.

(h) Nonapplicability of the Federal Advisory Committee Act.— Chapter 10 of part I of title 5, United States Code, shall not apply to the Committee and the activities of the Committee.”.

(a) Study.— The Securities and Exchange Commission shall conduct a study to examine and evaluate—

(1) the detrimental impact and potential detrimental impact of each of the Directives on—

(A) United States companies, consumers, and investors; and

(B) the economy of the United States;

(2) the extent to which each of the Directives aligns with international conventions and declarations on human rights and environmental obligations; and

(3) the legal basis for the extraterritorial reach of each of the Directives.

(b) Report.— Not later than 1 year after the date of the enactment of this Act, the Securities and Exchange Commission shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Financial Services of the House of Representatives, the Secretary of State, the Secretary of Commerce, and the United States Trade Representative a report that includes—

(1) the results of the study conducted under this section; and

(2) recommendations for policymakers and relevant stakeholders on potential mitigating measures, alternative approaches, or modifications to each of the Directives that would address any concerns identified in the study.

(c) Access to information.— The Securities and Exchange Commission may request from private entities such relevant data and information as the Securities and Exchange Commission determines necessary to carry out the study required under this section and such private entities shall provide such requested data and information to the Securities and Exchange Commission.

(d) Directives defined.— In this section, the term Directives means—

(1) Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence;

(2) Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 on corporate sustainability reporting; and

(3) any directive of the European Parliament and of the Council that amends, supplements, replaces, or otherwise modifies a directive described in paragraph (1) or (2), including Directive (EU) 2026/470 of the European Parliament and of the Council of 26 February 2026.

Section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d) is amended by adding at the end the following:

“(k) Study of certain issues with respect to proxy advisory firms and the proxy process.—

(1) In general.— Not later than 180 days after the date of the enactment of this subsection, and every 5 years thereafter, the Commission shall conduct a comprehensive study on proxy advisory firms and the proxy process.

(2) Scope of study.— The studies required under paragraph (1) shall cover—

(A) the previous 10 years, with respect to the initial study; and

(B) the previous 5 years, with respect to each other study.

(3) Contents.— Each study required under paragraph (1) shall address the following issues:

(A) The financial and other incentives and obligations of all groups involved in the proxy process.

(B) A consideration of whether financial and other incentives have created a process that no longer serves the economic interests of retail investors.

(C) An analysis of whether regulations and financial incentives have created and protected the outsized influence of proxy advisors or a duopoly in proxy advice, and if so, what are the benefits and costs of that outsized influence or duopoly.

(D) The costs incurred by issuers in responding to politically-, environmentally-, or socially-motivated shareholder proposals.

(E) An analysis of the impact that shareholder proposals have on discouraging private companies from going public.

(F) A thorough assessment of the economic analysis, if any, conducted by proxy advisory firms and institutional shareholders when recommending or voting in favor of shareholder proposals.

(G) A review of the extent to which institutional investors, who owe fiduciary duties, rely on proxy advisory firm recommendations.

(H) An assessment of whether, in light of their significant influence on corporate actions and vote outcomes, proxy advisors are subject to sufficient and effective regulation to ensure that their policies and recommendations are accurate, free of conflicts, and benefit the best economic interest of shareholders at large.

(4) Report.— At the completion of each study required under paragraph (1), the Commission shall issue a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that includes the results of the study.”.

(a) Amendment.— The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 15G the following new section:

“15H. Registration of proxy advisory firms.—

(a) Conduct prohibited.— It shall be unlawful for a proxy advisory firm to make use of the mails or any means or instrumentality of interstate commerce to provide proxy voting advice, research, analysis, ratings or recommendations to any client, unless such proxy advisory firm is registered under this section.

(b) Registration procedures.—

(1) Application for registration.—

(A) In general.— A proxy advisory firm shall file with the Commission an application for registration, in such form as the Commission shall require, by rule, and containing the information described in subparagraph (B).

(B) Required information.— An application for registration under this section shall contain—

(i) a certification that the applicant is able to consistently provide proxy advice based on accurate information;

(ii) with respect to clients of the applicant that vote shares held on behalf of shareholders, a certification that the applicant—

(I) will provide proxy voting advice only in the best economic interest of those shareholders;

(II) has the requisite expertise to ensure that voting recommendations are in the best economic interest of those shareholders unless otherwise specified; and

(III) does not violate State or Federal law;

(iii) information on the procedures and methodologies that the applicant uses to ensure that proxy voting recommendations are in the best economic interest of the ultimate shareholders;

(iv) information on the organizational structure of the applicant;

(v) an explanation of whether or not the applicant has in effect a code of ethics, and if not, the reasons therefor;

(vi) a description of any potential or actual conflict of interest relating to the provision of proxy advisory services, including those arising out of or resulting from the ownership structure of the applicant or the provision of other services by the applicant or any person associated with the applicant;

(vii) the policies and procedures in place to publicly disclose and manage conflicts of interest under subsection (f);

(viii) information related to the professional and academic qualifications of staff tasked with providing proxy advisory services; and

(ix) any other information and documents concerning the applicant and any person associated with such applicant as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.

(2) Review of application.—

(A) Initial determination.— Not later than 90 days after the date on which the application for registration is filed with the Commission under paragraph (1) (or within such longer period as to which the applicant consents) the Commission shall—

(i) by order, grant registration; or

(ii) institute proceedings to determine whether registration should be denied.

(B) Conduct of proceedings.—

(i) Content.— Proceedings referred to in subparagraph (A)(ii) shall—

(I) include notice of the grounds for denial under consideration and an opportunity for hearing; and

(II) be concluded not later than 120 days after the date on which the application for registration is filed with the Commission under paragraph (1).

(ii) Determination.— At the conclusion of such proceedings, the Commission, by order, shall grant or deny such application for registration.

(iii) Extension authorized.— The Commission may extend the time for conclusion of such proceedings for not longer than 90 days, if the Commission finds good cause for such extension and publishes its reasons for so finding, or for such longer period as to which the applicant consents.

(C) Grounds for decision.— The Commission shall grant registration under this subsection—

(i) if the Commission finds that the requirements of this section are satisfied; and

(ii) unless the Commission finds (in which case the Commission shall deny such registration) that—

(I) the applicant has failed to certify to the Commission’s satisfaction that it is able to consistently provide proxy advice based on accurate information and to materially comply with the procedures and methodologies disclosed under paragraph (1)(B) and with subsections (f) and (g); or

(II) if the applicant were so registered, its registration would be subject to suspension or revocation under subsection (d).

(3) Public availability of information.— Subject to section 24, the Commission shall make the information and documents submitted to the Commission by a proxy advisory firm in its completed application for registration, or in any amendment submitted under paragraph (1) or (2) of subsection (c), publicly available on the Commission’s website, or through another comparable, readily accessible means.

(c) Update of registration.—

(1) Update.— Each registered proxy advisory firm shall promptly amend and update its application for registration under this section if any information or document provided therein becomes materially inaccurate, except that a registered proxy advisory firm is not required to amend the information required to be filed under subsection (b)(1)(B)(i) by filing information under this paragraph, but shall amend such information in the annual submission of the organization under paragraph (2) of this subsection.

(2) Certification.— Not later than 90 calendar days after the end of each calendar year, each registered proxy advisory firm shall file with the Commission an amendment to its registration, in such form as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors—

(A) certifying that the information and documents in the application for registration of such registered proxy advisory firm continue to be accurate in all material respects; and

(B) listing any material change that occurred to such information or documents during the previous calendar year.

(d) Censure, denial, or suspension of registration; notice and hearing.— The Commission, by order, shall censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding 12 months, or revoke the registration of any registered proxy advisory firm if the Commission finds, on the record after notice and opportunity for hearing, that such censure, placing of limitations, suspension, or revocation is necessary for the protection of investors and in the public interest and that such registered proxy advisory firm, or any person associated with such firm, whether prior to or subsequent to becoming so associated—

(1) has committed or omitted any act, or is subject to an order or finding, enumerated in subparagraph (A), (D), (E), (H), or (G) of section 15(b)(4), has been convicted of any offense specified in section 15(b)(4)(B), or is enjoined from any action, conduct, or practice specified in subparagraph (C) of section 15(b)(4), during the 10-year period preceding the date of commencement of the proceedings under this subsection, or at any time thereafter;

(2) has been convicted during the 10-year period preceding the date on which an application for registration is filed with the Commission under this section, or at any time thereafter, of—

(A) any crime that is punishable by imprisonment for 1 or more years, and that is not described in section 15(b)(4)(B); or

(B) a substantially equivalent crime by a foreign court of competent jurisdiction;

(3) is subject to any order of the Commission barring or suspending the right of the person to be associated with a registered proxy advisory firm;

(4) fails to furnish the certifications required under subsections (b)(2)(C)(ii)(I) and (c)(2);

(5) has engaged in one or more prohibited acts enumerated in paragraph (1);

(6) fails to maintain adequate financial and managerial resources to consistently offer advisory services to clients that vote shares held on behalf of shareholders consistent with the best economic interest of those shareholders, including by failing to comply with subsections (f) or (g);

(7) fails to maintain adequate expertise to ensure that proxy advisory services for clients that vote shares held on behalf of shareholders are tied to the best economic interest of those shareholders; or

(8) engages in a prohibited act enumerated in subsection (j).

(e) Termination of registration.—

(1) Voluntary withdrawal.— A registered proxy advisory firm may, upon such terms and conditions as the Commission may establish as necessary in the public interest or for the protection of investors, which terms and conditions shall include at a minimum that the registered proxy advisory firm will no longer conduct such activities as to bring it within the definition of proxy advisory firm in section 3(a)(82), withdraw from registration by filing a written notice of withdrawal to the Commission.

(2) Commission authority.— In addition to any other authority of the Commission under this title, if the Commission finds that a registered proxy advisory firm is no longer in existence or has ceased to do business as a proxy advisory firm, the Commission, by order, shall cancel the registration under this section of such registered proxy advisory firm.

(f) Management of conflicts of interest.—

(1) Organization policies and procedures.— Each registered proxy advisory firm shall establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of the business of such registered proxy advisory firm and associated persons, to publicly disclose and manage any conflicts of interest that arise or would reasonably be expected to arise from such business.

(2) Commission authority.— The Commission shall, within one year of the date of enactment of this section, issue final rules to prohibit, or require the management and public disclosure of, any conflicts of interest relating to the offering of proxy advisory services by a registered proxy advisory firm, including, without limitation, conflicts of interest relating to—

(A) the manner in which a registered proxy advisory firm is compensated by the client, any affiliate of the client, or any other person for providing proxy advisory services;

(B) business relationships, ownership interests, or any other financial or personal interests between a registered proxy advisory firm, or any person associated with such registered proxy advisory firm, and any client, or any affiliate of such client;

(C) the formulation of proxy voting policies;

(D) the execution, or assistance with the execution, of proxy votes if such votes are based upon recommendations made by the proxy advisory firm in which a person other than the issuer is a proponent; and

(E) any other potential conflict of interest, as the Commission deems necessary or appropriate in the public interest or for the protection of investors.

(3) Disclosure on factors influencing recommendations.— Each registered proxy advisory firm shall annually disclose to the Commission and make publicly available the economic and other factors that a reasonable investor would expect to influence the recommendations of such proxy advisory firm, including the ownership composition of such proxy advisory firm and any meetings with, or feedback received from, outside entities.

(g) Reliability of proxy advisory firm services.—

(1) In general.— Each registered proxy advisory firm shall—

(A) have staff and other resources sufficient to produce proxy voting recommendations that are based on accurate and current information and designed for clients that vote shares held on behalf of shareholders to advance the best economic interest of those shareholders unless otherwise specified;

(B) implement procedures that permit issuers that are the subject of proxy voting recommendations—

(i) access in a reasonable time to data and information used to make recommendations; and

(ii) a reasonable opportunity to provide meaningful comment and corrections to such data and information, including the opportunity to present (in person or telephonically) details to the person responsible for developing such data and information prior to the publication of proxy voting recommendations to clients;

(C) employ an ombudsman to receive complaints about the accuracy of information used in making recommendations from the companies that are the subject of the proxy advisory firm’s voting recommendations and seek to resolve those complaints in a timely fashion and prior to the publication of proxy voting recommendations to clients; and

(D) if the ombudsman is unable to resolve a complaint to a company’s satisfaction prior to the publication of proxy voting recommendations to clients, include in the final report of the firm to clients—

(i) a statement detailing the company’s complaints, if requested in writing by the company; and

(ii) a statement explaining why the proxy voting recommendation is in the best economic interest of shareholders.

(2) Definitions.— In this subsection:

(A) Data and information used to make recommendations.— The term data and information used to make voting recommendations—

(i) means the financial, operational, or descriptive data and information on an issuer used by proxy advisory firms and any contextual or substantive analysis impacting the recommendation; and

(ii) does not include the entirety of the proxy advisory firm’s final report to its clients.

(B) Reasonable time.— The term reasonable time—

(i) means not less than 1 week before the publication of proxy voting recommendations for clients; and

(ii) shall not otherwise interfere with a proxy advisory firm’s ability to provide its clients with timely access to accurate proxy voting research, analysis, or recommendations.

(h) Private right of action with respect to illegal recommendations.— Any proxy advisory firm that endorses a proposal that is not supported by the issuer but is approved and subsequently found by a court of competent jurisdiction to violate State or Federal law shall be liable to the applicable issuer for the costs associated with the approval of such proposal, including implementation costs and any penalties incurred by the issuer, and any issuer seeking to enforce such liability may sue at law or in equity in any court of competent jurisdiction.

(i) Designation of compliance officer.— Each registered proxy advisory firm shall designate an individual who reports directly to senior management as responsible for administering the policies and procedures that are required to be established pursuant to subsections (f) and (g), and for ensuring compliance with the securities laws and the rules and regulations thereunder, including those promulgated by the Commission pursuant to this section.

(j) Prohibited conduct.—

(1) Prohibited acts and practices.— Not later than one year after the date of enactment of this section, the Commission shall issue final rules to prohibit any act or practice relating to the offering of proxy advisory services by a registered proxy advisory firm that the Commission determines to be unfair, coercive, or abusive, including any act or practice relating to—

(A) advisory or consulting services (offered directly or indirectly, including through an affiliate) related to corporate governance issues; or

(B) modifying a voting recommendation or otherwise departing from its adopted systematic procedures and methodologies in the provision of proxy advisory services, based on whether an issuer, or affiliate thereof, subscribes or will subscribe to other services or product of the registered proxy advisory firm or any person associated with such organization.

(2) Rule of construction.— Nothing in paragraph (1), or in any rules or regulations adopted thereunder, may be construed to modify, impair, or supersede the operation of any of the antitrust laws (as defined in the first section of the Clayton Act, except that such term includes section 5 of the Federal Trade Commission Act, to the extent that such section 5 applies to unfair methods of competition).

(k) Annual report.—

(1) In general.— Each registered proxy advisory firm shall, not later than 90 calendar days after the end of each fiscal year, file with the Commission and make publicly available an annual report in such form as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.

(2) Contents.— Each annual report required under paragraph (1) shall include, at a minimum, disclosure by the registered proxy advisory firm of the following:

(A) A list of shareholder proposals the staff of the registered proxy advisory firm reviewed in the prior fiscal year.

(B) A list of the recommendations made in the prior fiscal year.

(C) The economic analysis conducted to determine that final recommendations provided in the prior fiscal year (other than recommendations relating to an issuer-sponsored proposal or recommendations consistent with that of a board of directors composed of a majority of independent directors) delivered to clients that vote shares held on behalf of shareholders were in the best economic interest of those shareholders.

(D) The staff who reviewed and made recommendations on such proposals in the prior fiscal year.

(E) The qualifications of such staff to ensure that each of the recommendations for clients that vote shares held on behalf of shareholders were tied to the best economic interest of those shareholders.

(F) The recommendations made in the prior fiscal year where the proponent of such recommendation was a client of or received services from the proxy advisory firm.

(G) A certification by the chief executive officer, chief financial officer, and the primary executive responsible for overseeing the compilation and dissemination of proxy voting advice that the final recommendations (other than recommendations relating to an issuer-sponsored proposal or recommendations consistent with that of a board of directors composed of a majority of independent directors) delivered to clients that vote shares held on behalf of shareholders in the last fiscal year—

(i) were based on internal controls and procedures that are designed to ensure accurate information and that such internal controls and procedures are effective; and

(ii) were based on the best economic interest of those shareholders unless otherwise specified.

(H) The economic and other factors that a reasonable investor would expect to influence the recommendations of such proxy advisory firm, including the ownership composition of such proxy advisory firm.

(3) Report format.— Each annual report required under paragraph (1) shall be made available in a structured, machine-readable format, consistent with existing electronic reporting standards.

(l) Transparent policies.— Each registered proxy advisory firm shall file with the Commission and make publicly available its methodology for the formulation of proxy voting policies and voting recommendations to clients that vote shares held on behalf of shareholders and how that methodology ensures that the firm’s voting recommendations are in the best economic interest of those shareholders unless otherwise specified.

(m) Rules of construction.— Registration under and compliance with this section does not constitute a waiver of, or otherwise diminish, any right, privilege, or defense that a registered proxy advisory firm may otherwise have under any provision of State or Federal law, including any rule, regulation, or order thereunder.

(n) Regulations.—

(1) New provisions.— Such rules and regulations as are required by this section or are otherwise necessary to carry out this section, including the application form required under subsection (a)—

(A) shall be issued by the Commission, not later than 180 days after the date of enactment of this section; and

(B) shall become effective not later than 1 year after the date of enactment of this section.

(2) Review of existing regulations.— Not later than 270 days after the date of enactment of this section, the Commission shall—

(A) review its existing rules and regulations which affect the operations of proxy advisory firms; and

(B) amend or revise such rules and regulations in accordance with the purposes of this section, and issue such guidance as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

(o) Applicability.— This section, other than subsection (m), which shall apply on the date of enactment of this section, shall apply on the earlier of—

(1) the date on which regulations are issued in final form under subsection (n)(1); or

(2) 270 days after the date of enactment of this section.

(p) Best economic interest defined.— In this section, the term best economic interest means decisions that seek to maximize investment returns over a time horizon consistent with the investment objectives and risk management profile of the fund in which the shareholders are invested.”.

(b) Conforming amendment.— Section 17(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(a)(1)) is amended by inserting “proxy advisory firm,” after “nationally recognized statistical rating organization,”.

(c) Proxy advisory firm definitions.— Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended—

(1) by redesignating the second paragraph (80) (relating to funding portal) as paragraph (81); and

(2) by adding at the end the following:

“(82) Proxy advisory firm.— The term proxy advisory firm—

(A) means any person that—

(i) makes a recommendation to a security holder as to the security holder’s vote, consent, or authorization on a specific matter for which security holder approval is solicited;

(ii) markets the person’s expertise as a provider of such proxy voting advice separately from other forms of investment advice; and

(iii) sells such proxy voting advice for a fee; and

(B) does not include—

(i) a registered investment adviser; or

(ii) any person that is exempt under law or regulation from the requirements otherwise applicable to persons engaged in such a solicitation.

(83) Person associated with a proxy advisory firm.— With respect to a proxy advisory firm—

(A) a person is “associated” with the proxy advisory firm if the person is—

(i) a partner, officer, or director of the proxy advisory firm (or any person occupying a similar status or performing similar functions);

(ii) a person directly or indirectly controlling, controlled by, or under common control with the proxy advisory firm;

(iii) an employee of the proxy advisory firm; or

(iv) a person the Commission determines by rule is controlled by the proxy advisory firm; and

(B) a person is not “associated” with the proxy advisory firm if the person only performs clerical or ministerial functions with respect to a proxy advisory firm.”.

Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) is amended by adding at the end the following:

“(l) False or misleading statements.— For purposes of subsection (a) and Rule 14a-9 (17 CFR 240.14a-9) and any successor rule, the failure to disclose material information (such as a proxy voting advice business’s methodology, sources of information, or conflicts of interest) or the making of a material misstatement regarding proxy voting advice that makes a recommendation to a security holder as to the security holder’s vote, consent, or authorization on a specific matter for which security holder approval is solicited, and that is furnished by a person that markets the person’s expertise as a provider of such proxy voting advice separately from other forms of investment advice, and sells such proxy voting advice for a fee, shall be considered to be false or misleading with respect to a material fact.”.

Section 13(f) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(f)) is amended by adding at the end the following:

“(7) Disclosures by institutional investment managers in connection with proxy advisory firms.—

(A) In general.— Every institutional investment manager which uses the mails, or any means or instrumentality of interstate commerce in the course of its business as an institutional investment manager, which engages a proxy advisory firm, and which exercises voting power with respect to accounts holding equity securities of a class described in subsection (d)(1) or otherwise becomes or is deemed to become a beneficial owner of any security of a class described in subsection (d)(1) upon the purchase or sale of a security-based swap that the Commission may define by rule, shall file an annual report with the Commission containing—

(i) an explanation of how the institutional investment manager voted with respect to each shareholder proposal;

(ii) the percentage of votes cast on shareholder proposals that were consistent with proxy advisory firm recommendations, for each proxy advisory firm retained by the institutional investment manager;

(iii) an explanation of—

(I) how the institutional investment manager took into consideration proxy advisory firm recommendations in making voting decisions, including the degree to which the institutional investment manager used those recommendations in making voting decisions;

(II) how often the institutional investment manager voted consistent with a recommendation made by a proxy advisory firm, expressed as a percentage;

(III) how such votes are reconciled with the fiduciary duty of the institutional investment manager to vote in the best economic interests of shareholders;

(IV) how frequently votes were changed when an error occurred or due to new information from issuers; and

(V) the degree to which investment professionals of the institutional investment manager were involved in proxy voting decisions; and

(iv) a certification that the voting decisions of the institutional investment manager were based solely on the best economic interest of the shareholders on behalf of whom the institutional investment manager holds shares.

(B) Requirements for larger institutional investment managers.— Every institutional investment manager described in subparagraph (A) that has regulatory assets under management with an aggregate fair market value on the last trading day in any of the preceding twelve months of at least $100,000,000,000 shall—

(i) in any materials provided to customers and related to customers voting their shares, clarify that shareholders are not required to vote on every proposal;

(ii) with respect to each shareholder proposal for which the institutional investment manager votes (other than votes consistent with the recommendation of a board of directors composed of a majority of independent directors) perform an economic analysis before making such vote, to determine that the vote is in the best economic interest of the shareholders on behalf of whom the institutional investment manager holds shares; and

(iii) include each economic analysis required under clause (ii) in the annual report required under subparagraph (A).

(C) Best economic interest defined.— In this paragraph, the term best economic interest means decisions that seek to maximize investment returns over a time horizon consistent with the investment objectives and risk management profile of the fund in which shareholders are invested.”.

Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by section 601, is further amended by adding at the end the following:

“(m) Prohibition on robovoting.—

(1) In general.— The Commission shall issue final rules prohibiting the use of robovoting with respect to votes related to proxy or consent solicitation materials.

(2) Robovoting defined.— In this subsection, the term robovoting means the practice of automatically voting in a manner consistent with the recommendations of a proxy advisory firm or on a proxy advisory firm’s electronic voting platform with the proxy advisory firm’s recommendations, in either case, without independent review and analysis.

(n) Prohibition on outsourcing voting decisions by institutional investors.— With respect to votes related to proxy or consent solicitation materials, an institutional investor may not outsource voting decisions to any person other than an investment adviser or a broker or dealer that is registered with the Commission, or is exempt from such registration, and has a fiduciary or best interest duty to the institutional investor.

(o) No requirement to vote.— No person may be required to cast votes related to proxy or consent solicitation materials, unless obligated by their fiduciary duty or Rule 206(4)–6 (17 CFR 275.206(4)–6).”.

(a) In general.— The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is amended by inserting after section 208 (15 U.S.C. 80b-8) the following:

“208A. Proxy voting of passively managed funds.—

(a) Investment adviser proxy voting.—

(1) In general.— An investment adviser that holds authority to vote a proxy solicited by an issuer pursuant to section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) in connection with any vote of covered securities held by a passively managed fund shall—

(A) vote in accordance with the instructions (which may include the selection or default choice of a published voting policy) of the beneficial owner (or fiduciary or other designee with investment and proxy voting authority on their behalf) of a voting security of the passively managed fund;

(B) vote in accordance with the voting recommendations of the board of directors (or similar governing body) of such issuer;

(C) abstain from voting such securities but make reasonable efforts to be considered present for purposes of establishing a quorum; or

(D) pursuant to rules issued by the Commission, instruct vote tabulators to make a reasonable effort to mirror vote shares to reflect the elections of the other shareholders in the covered security.

(2) Exception.— Paragraph (1) shall not apply with respect to a vote on a routine matter.

(b) Safe harbor.— With respect to a routine or non-routine vote, voted in the manner required by subsection (a)(1), an investment adviser shall not be liable to any person under any law or regulation of the United States, any constitution, law, or regulation of any State or political subdivision thereof, or under any contract or other legally enforceable agreement (including any arbitration agreement), for any of the following:

(1) Voting in accordance with the instructions of the beneficial owner (or that beneficial owner’s designee with investment and proxy voting authority) of a voting security of the passively managed fund.

(2) Not soliciting voting instructions from any person.

(3) Voting in accordance with the voting recommendations of an issuer under subsection (a)(1)(B) with respect to such vote.

(4) Abstaining from voting in accordance with subsection (a)(1)(C) with respect to such vote.

(5) Instructing vote tabulators to make a reasonable effort to mirror vote shares to reflect the elections of the other shareholders in a covered security, pursuant to rules issued by the Commission described in subsection (a)(1)(D).

(c) Foreign private issuers exemption.— Subsection (a) shall not apply with respect to a foreign private issuer if the published voting policy of the investment advisor with respect to such foreign private issuer is fully and fairly disclosed to beneficial owners, including the extent to which such policy differs from the published voting policy for non-exempt issuers.

(d) Dissemination of information.—

(1) In general.— Any investment adviser subject to the requirements of subsection (a)(1) shall, with respect to the dissemination of information and other material to a voting person, comply with the following requirements, unless the voting person affirmatively declines to receive that information and other material:

(A) Provide the voting person (or the relevant intermediary with whom the investment adviser has access) with a form to select a published voting policy.

(B) Provide the voting person with not less than 5 business days after the date on which the voting person receives the form described under subparagraph (A) to return that form to the investment adviser.

(2) Electronic delivery.— All, or any portion, of the materials that an investment adviser is required to provide under paragraph (1)(A) may be provided electronically, including through—

(A) an internet website;

(B) another digital, internet, or electronic-based information repository; or

(C) a mobile application.

(e) Definitions.— In this section:

(1) Covered security.— The term covered security—

(A) means a voting security, as that term is defined in section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)), in which a qualified fund is invested; and

(B) does not include any voting security (as defined in subparagraph (A)) of an issuer registered with the Commission as an investment company under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8).

(2) Passively managed fund.— The term passively managed fund means a qualified fund—

(A) that—

(i) is designed to track, or is derived from, an index of securities or a portion of such an index;

(ii) discloses that the qualified fund is a passive index fund; or

(iii) allocates not less than 60 percent of the total assets of the qualified fund to an investment strategy that is designed to track, or is derived from, an index of securities or a portion of such an index fund; and

(B) that commits to refrain from exercising control over an issuer through voting or investment authority.

(3) Published voting policy.— The term published voting policy means—

(A) a policy that—

(i) articulates how proportionate shares would be expected to be voted in anticipated proxy voting matters; and

(ii) is made available to investors, including via website or other electronic means; and

(B) in the case of a policy of a passively managed fund or an investment adviser, a policy that does not—

(i) seek to set the strategy or day-to-day management decisions of the issuer;

(ii) involve submitting shareholder proposals;

(iii) seek to nominate directors; and

(iv) coordinate votes with other index managers.

(4) Qualified fund.— The term qualified fund means—

(A) an investment company;

(B) a private fund;

(C) an eligible deferred compensation plan, as that term is defined in section 457(b) of the Internal Revenue Code of 1986;

(D) a trust, plan, account, or other entity described in section 3(c)(11) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(11));

(E) a plan maintained by an employer described in clause (i), (ii), or (iii) of section 403(b)(1)(A) of the Internal Revenue Code of 1986 to provide annuity contracts described in section 403(b) of such Code;

(F) a common trust fund, or similar fund, maintained by a bank;

(G) any fund established under section 8438(b)(1) of title 5, United States Code; or

(H) any separate managed account of a client of an investment adviser.

(5) Routine matter.— The term routine matter—

(A) includes a proposal that relates to—

(i) an election with respect to the board of directors of a registrant;

(ii) the compensation of management or the board of directors of a registrant;

(iii) the selection of auditors; or

(iv) declassification; and

(B) does not include—

(i) a proposal that is not submitted to a holder of covered securities by means of a proxy statement comparable to that described in section 240.14a-101 of title 17, Code of Federal Regulations, or any successor regulation; or

(ii) a proposal that is—

(I) the subject of a counter-solicitation; or

(II) part of a proposal made by a person other than the applicable registrant.”.

(b) Effective date.— The amendment made by this section shall take effect 1 year after the date of enactment of this Act.

(a) Best interest based on pecuniary factors.— Section 211(g) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–11(g)) is amended by adding at the end the following:

“(3) Best interest based on pecuniary factors.—

(A) In general.— For purposes of paragraph (1), when providing personalized investment advice, the best interest of a customer shall be determined using pecuniary factors, which, subject to applicable law, may not be subordinated to or limited by non-pecuniary factors, unless—

(i) the customer provides informed consent, whether by e-delivery or e-sign, that such non-pecuniary factors be considered; or

(ii) the personalized investment advice is consistent with the customer’s written investment profile information.

(B) Disclosure of pecuniary effects.— If a customer provides a broker, dealer, or investment adviser with the informed consent to consider non-pecuniary factors described under subparagraph (A), the broker, dealer, or investment adviser shall provide qualitative disclosure of the potential pecuniary effects to the customer of prioritizing non-pecuniary factors over pecuniary factors in making investment decisions.

(C) Pecuniary factor defined.— In this paragraph, the term pecuniary factor means a factor that a fiduciary prudently determines is expected to have a material effect on the risk or return of an investment based on investment objectives, risk tolerance, and time horizon.”.

(b) Rulemaking.— Not later than the end of the 12-month period beginning on the date of enactment of this Act, the Securities and Exchange Commission shall revise or issue such rules as may be necessary to implement the amendment made by paragraph (1).

(c) Applicability.— The amendment made by paragraph (1) shall apply to a recommendation made by a broker or dealer and investment advice provided by an investment adviser beginning on the date that is 12 months after the date of enactment of this Act.