The Government has announced that the new proxy advice reforms will improve transparency and bring more accountability to the sector.
It said the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021 would strengthen the transparency and accountability of proxy advice services, and improve the disclosure of superannuation funds’ voting records on company resolutions.
The reforms also extended the Australian Financial Services (AFS) licensing regime to cover a greater range of proxy adviser activities and require proxy advisers to become more independent of their institutional clients.
Additionally, proxy advisers would be required to provide a copy of their recommendations to companies on the same day they would be provided to investors while the superannuation funds exercising their voting rights on behalf of their members would be required to disclose more detailed information.
The licensing extension and the requirement to provide copies of proxy advice to companies would commence from 7 February, 2022, with the new independence and superannuation voting disclosure requirements commencing 1 July, 2022.
The proxy advice market in Australia was characterised by a high level of concentration, with a dominated position of just four firms and advise superannuation funds, which collectively owned around 20% of the Australian Stock Exchange (ASX) worth around $510 billion.
According to the Australian Institute of Superannuation Trustees (AIST) the changes to proxy advice would undermine members’ interests and they should be contained in legislation, to allow time to be debated by Parliament and understood by the wider community.
AIST expressed concerns that by not allowing the Parliament to debate, or even have oversight, prior to commencement over the major changes having a potential impact for affect all Australians’ superannuation, the Government could be seen as to “actively avoid Parliamentary scrutiny”.
General Manager of Advocacy at AIST, Mel Birks said: ““Other than putting the interests of directors ahead of the interests of working Australians who are shareholders through their super, it is entirely unclear why the Government would be pursuing a change such as this. There is no evidence of systemic issues in proxy advice that would support changes of this type.
“These changes will drive up the cost of proxy advice which will inevitably be passed on to members of funds. The Treasurer should explain how curtailing shareholder rights in this way is in members’ best financial interests?”