Home Listing rules SEC Adopts New Reporting Requirements for Form 13F Filers to Disclose Say-on-Pay Votes and Improves Vote Disclosure Required by Registered Funds – Executive Compensation

SEC Adopts New Reporting Requirements for Form 13F Filers to Disclose Say-on-Pay Votes and Improves Vote Disclosure Required by Registered Funds – Executive Compensation


On November 2, 2022, the Securities and Exchange Commission (“SEC”) adopted new Rule 14Ad-1 and amendments to Form N-PX. Under new Rule 14Ad-1, Form 13F filers will be required to disclose their proxy votes on executive compensation matters, otherwise known as “say-on-pay” 1 vote, each year on Form N-PX, a reporting form which previously had to be filed exclusively by investment companies registered under the Investment Companies Act 1940, as amended (“Act 1940 “). In addition to expanding the scope of Form N-PX to certain private funds and their investment advisers, the changes to Form N-PX will also require more comprehensive disclosures from mutual funds, stock exchange and certain other investment companies registered under the 1940 Act, and will facilitate the analysis of the information provided by these funds. The new rules and form changes will go into effect for votes taking place on or after July 1, 2023, with first filings subject to changes due in 2024.

The changes were originally proposed in September 2021 and discussed by SRZ lawyers here and here.

1. Reporting obligations extended to management companies and funds: Rule 14Ad-1 under the Exchange Act will now require “institutional investment managers” subject to the reporting requirements of Section 13(f) of the Exchange Act to deposit their “say-on-pay” votes ” pursuant to Subsections 14A and 14(b) of the Foreign Exchange Act2 with the SEC each year on Form N-PX by August 31 of each year.3 This means that not only registered investment companies must file Form N-PX as previously required by Section 30 of the 1940 Act, but certain private funds and managers must also do the same.4

A manager is required to report his “say on pay” votes if he “voted” a security with respect to those votes. The SEC has adopted a two-part test to determine whether a manager exercises voting rights on a security. The manager must (1) have the power to vote or direct the voting of a security and (2) “exercise” that power to influence a voting decision for the security. This test, according to the SEC’s Adopting Release, “focuses on the exercise, rather than the mere possession, of the right to vote.”5 There will be no reporting requirements where a voting decision is entirely determined by a manager’s client or other party.

A manager choosing not to vote or to recall loaned securities prior to a record date for a vote to vote for the shares exercises the right to vote in accordance with the SEC’s Adoption Release. For managers who have disclosed a non-proxy voting policy to their clients and who have not voted by proxy during the reporting period, the SEC has adopted a simplified reporting option that would indicate this status and not would not include security-by-security information as managers reporting votes would be required to do.6

2. More stringent information organization requirements: In an effort to make the information in the N-PX form “easier to parse, digest and access”,seven changes to N-PX forms:

a. Standardize votes into categories, such as director elections, say-on-pay, and audit matters;

b. require registrants to identify proxy voting questions using the same language as set out in the issuer’s proxy form, presented in the same order as the questions appear in the proxy form, and identify directors separately to director election matters, if any; and

vs. Allow managers to indicate that they have a disclosed policy not to vote by proxy and that they have not voted during the reporting period.

Additionally, Forms N-1A, N-2 and N-3 now require funds to disclose that their proxy voting records are available on (or through) their websites. These changes were instituted, in part, to help investors analyze voting reports, and so the new rules require filing using XML which is a machine-readable, or “structured” data language.

3. Disclosure of securities lending: In an effort to provide greater transparency about fund-lending practices and how those practices might affect voting practices, Form N-PX filers must now also disclose on Form N-PX the number of shares that have been voted on or have been instructed to vote, as well as the number of shares lent and not recalled and therefore not voted. As noted in the adopting release, however, there would be no disclosure requirement where (a) a manager is not involved, directly or indirectly, in the lending of shares in the account of a client, such as in cases where a broker remortgages shares under a margin account, or (b) where a client engages a securities lending agent for securities in the client’s account.

Effects of rules

As we noted last year, these changes may have the following effects on fund managers:

  • Fund managers may now feel compelled to justify their say-on-pay positions to investors, activists and company management.

  • Although the rule allows confidential treatment for say-on-pay votes, the SEC warned that confidential treatment would only be granted in “narrowly tailored circumstances”, such as when corresponding confidential treatment is granted for the 13F form.

  • Funds marketed as ESG funds are likely to come under greater scrutiny in terms of how they cast these types of votes.

  • Funds that do not vote for their shares and do not have a clearly disclosed policy on withholding from voting must now report their withholding from voting.

  • Finally, although the SEC argues that requiring disclosure of securities that have been loaned and not voted gives investors greater transparency as to whether a fund manager has decided to recall a loaned security to vote or essentially decided not to vote, it is important to note that while the rule provides investors with the end result, the rule provides no insight into the manager’s process for evaluating the relative benefits of voting versus lending8. As the SEC notes in the adopting release, the new loan disclosure requirements now incentivize managers to recall loans ahead of a vote to conceal loans (or possibly short positions as well), which could impact securities lending practices.9


1. “Say-on-pay” votes were introduced with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in 2010 and relate to votes of shareholders approving the compensation of an “appointed” executive, including “golden parachute” compensation terms, as well as the frequency with which shareholders can approve such compensation terms. The reporting requirements for Form 13F filers implement the requirements added by Dodd-Frank.

2. This includes “say on pay” votes of issuers that have a class of registered securities under Section 12 of the Securities Exchange Act of 1934, as amended, subject to proxy rules. The new reporting requirement, however, is not strictly limited to “say on pay” votes when voting for Section 13(f) securities.

4. The SEC estimates that approximately 8,147 Form 13F filers will now be required to file Form N-PX under the amendments.

5. “Enhanced Reporting of Proxy Votes by Registered Management Investment Companies; Reporting of Executive Compensation Votes by Institutional Investment Managers”, Exchange Act Release No. 34-96206 (November 2, 2022) (the “Adopting Announcement”) at section II .B.2, available here.

6. Embrace release at age 22.

7. Statement by Commissioner Caroline A. Crenshaw; “Statement on Enhanced Proxy Vote Reporting;” (Nov 2, 2022)
available at https://www.sec.gov/news/statement/crenshaw-statement-amendments-form-npx-110222.

8. The adoption release notes, however, that the form as amended will allow registrants to include additional information that could be used to explain the reason for not recalling loaned securities. Adoption of Liberation at 40-41 years old.

9. Adoption of release at 112.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.