Spectrem Group Study Reveals Wide Retail Investor Support for Proposed SEC Amendments - January 10, 2020

CHICAGO, Jan. 10, 2020 /PRNewswire/ -- A new study released today by wealth management research specialist Spectrem Group, updates the views of retail investors on proxy advisors and shareholder proposals from a previous April 2019 survey, and shows both heightened awareness and apprehension among respondents.

The initial survey, which gauged awareness and sentiment around the U.S. proxy process, found significant concern among retail investors over the role of proxy advisory firms. Today's survey re-examines their views, following the SEC's proposed amendments to improve the accuracy and transparency of proxy voting advice and modernize the shareholder proposal rule, which retail investors were found to widely support.

The survey was again designed in collaboration with J.W. Verret, board member of the Investor Advisory Committee of the Securities and Exchange Commission and an expert in corporate governance law. The results come at a critical time as the SEC is currently gathering public feedback on the proposed rule amendments.

The study's key findings include:

• At the start of the survey, 69% of retail investors supported increased SEC oversight of proxy advisors broadly. Following the survey, support grew to 81%.
• Retail investor support of the specific SEC amendments proposed for proxy advisors is 75% or higher. 
• 90% of retail investors support disabling robo-voting when a hyperlink to additional information is included in proxy advisor reports.
• Retail investor support for the SEC's shareholder proposal amendments is 68% or higher, and investors are at least twice as likely to indicate they expect to engage more with companies as a result of the changes. 

Commenting on the findings, J.W. Verret said, "These results are a true measure of investor sentiment and clearly show that mom and pop investors support the Commission's attempts to protect the value of their investments. It's critical that the SEC hears more of these voices, and that the general public and retail investors have their say in how additional oversight of proxy advisors is incorporated into the regulations that protect them and their investments.

"While this analysis largely focuses on the survey's findings regarding proxy advisors, it's important to note and briefly discuss the other subject of the SEC's proposed rules: shareholder proposals. State corporation law originally envisaged that those proposing resolutions would bear the proxy solicitation costs themselves. Today that situation has reversed, and many proposals effectively function as a tax on company shareholders."

The most notable change since the April 2019 survey is the growing awareness by retail investors of the issues and flaws of proxy advisors. Retail investors also support further measures by the SEC to protect their investments and address robo-voting—the most concerning proxy advisor issue to investors—despite not being included in the proposed rule amendments.

"As the research shows, the well-being and success of their investments, which they have entrusted to money managers and institutional investors, is incredibly important to retirees and ordinary investors," said George H. Walper, Jr., President of Spectrem Group. "They are not only aware, but actively concerned about the impact of proxy advisory firms and their practices, and rely upon the SEC to implement the proper rules and procedures to safeguard this wealth."

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Notes to Editors

Survey Methodology
A continuation of the April 2019 study, Spectrem conducted an online survey of 5,000 qualifying persons between November 13, 2019 to November 21, 2019.

Respondents were required to be at least 19 years old and have at least $10,000 in assets in any combination of stocks and bonds, mutual funds and ETFs held in various types of accounts, such as defined contribution plans (such as 401ks) advisory accounts, brokerage accounts, IRAS and other similar investment accounts.

The survey was conducted to mirror the age distribution of the overall U.S. population above the age of 19. Of all respondents contributing to the sample, 61% have a defined contribution plan, 26% have a managed or advisory account, and 56% have an IRA. All survey data, including detailed demographic data, can be found on Spectrem's website. Additional findings include:

• 79% of retail investors support the SEC's new proposed rule requiring proxy advisory firms to give companies an opportunity to review and provide feedback on an advice before it is issued.
• 78% of retail investors support the proposed rule to require proxy advisors to disclose conflicts of interest, and 75% support the proposed hyperlink rule.
• 77% of retail investors support the proposed rule requiring shareholder-proponents to provide their identity, role and interest when submitting proposals, and 73% support requiring shareholder-proponents to meet with companies to discuss proposals.
• 71% of retail investors support the SEC's proposal to limit proposals to one per shareholder, and 68% favor increased thresholds for resubmission of previously failed proposals.
• 72% of retail investors support modernizing criteria requiring shareholders to own higher amounts of shares for longer to be eligible to submit proposals.
• Respondents who are aware of proxy advisors increased from 50% in April to 57% in November.
• 47% of retail investors are familiar with the issue of robo-voting, up from 39% in April.
• 80% of retail investors are concerned (35% said they're very concerned) with robo-voting guided by pre-determined "custom policies."
• 90% of retail investors support disabling robo-voting when a hyperlink to additional information is included in proxy advisor reports.

SOURCE Spectrem Group