draft recommendations, with an opportunity to pro-
vide meaningful comment thereon, including the op-
portunity to present details to the person responsible 
for developing the recommendation in person or tele-
phonically. Each registered proxy advisory firm shall 
employ an ombudsman to receive complaints about 
the accuracy of voting information used in making 
recommendations from the subjects of the proxy ad-
visory firm’s voting recommendations, and shall seek 
to resolve those complaints in a timely fashion and 
in any event prior to voting on the matter to which 
the recommendation relates. If the ombudsman is 
unable to resolve such complaints prior to voting on 
the matter, the proxy advisory firm shall include in 
its final report to its clients a statement from the 
company detailing its complaints, if requested in 
writing by the company. 
‘‘(2) REASONABLE TIME DEFINED.—For pur-
poses of this subsection, the term ‘reasonable 
time’— 
‘‘(A) means not less than 3 business days 
unless otherwise defined through a final rule 
issued by the Commission; and 
‘‘(B) shall not otherwise interfere with a 
proxy advisory firm’s ability to provide its cli-
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ents with timely access to accurate proxy voting 
research, analysis, or recommendations. 
‘‘(3) DRAFT
RECOMMENDATIONS
DEFINED.— 
For purposes of this subsection, the term ‘draft rec-
ommendations’— 
‘‘(A) means the overall conclusions of 
proxy voting recommendations prepared for the 
clients of a proxy advisory firm, including any 
public data cited therein, any company informa-
tion or substantive analysis impacting the rec-
ommendation, and the specific voting rec-
ommendations on individual proxy ballot issues; 
and 
‘‘(B) does not include the entirety of the 
proxy advisory firm’s final report to its clients. 
‘‘(h) DESIGNATION
OF COMPLIANCE OFFICER.— 
Each registered proxy advisory firm shall designate an in-
dividual responsible for administering the policies and pro-
cedures 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 there-
under, including those promulgated by the Commission 
pursuant to this section. 
‘‘(i) PROHIBITED CONDUCT.— 
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‘‘(1) PROHIBITED ACTS AND PRACTICES.—The 
Commission shall issue final rules to prohibit any 
act or practice relating to the offering of proxy advi-
sory services by a registered proxy advisory firm 
that the Commission determines to be unfair, coer-
cive, or abusive, including any act or practice relat-
ing to— 
‘‘(A) conditioning a voting recommendation 
or other proxy advisory firm recommendation 
on the purchase by an issuer or an affiliate 
thereof of other services or products, of the reg-
istered proxy advisory firm or any person asso-
ciated with such registered proxy advisory firm; 
and 
‘‘(B) modifying a voting recommendation 
or otherwise departing from its adopted system-
atic procedures and methodologies in the provi-
sion of proxy advisory services, based on wheth-
er an issuer, or affiliate thereof, subscribes or 
will subscribe to other services or product of the 
registered proxy advisory firm or any person as-
sociated with such organization. 
‘‘(2) RULE
OF
CONSTRUCTION.—Nothing in 
paragraph (1), or in any rules or regulations adopt-
ed thereunder, may be construed to modify, impair, 
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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 competi-
tion). 
‘‘(j) STATEMENTS OF FINANCIAL CONDITION.—Each 
registered proxy advisory firm shall, on a confidential 
basis, file with the Commission, at intervals determined 
by the Commission, such financial statements, certified (if 
required by the rules or regulations of the Commission) 
by an independent public auditor, and information con-
cerning its financial condition, as the Commission, by rule, 
may prescribe as necessary or appropriate in the public 
interest or for the protection of investors. 
‘‘(k) ANNUAL REPORT.—Each registered proxy advi-
sory firm shall, at the beginning of each fiscal year of such 
firm, report to the Commission on the number of share-
holder proposals its staff reviewed in the prior fiscal year, 
the number of recommendations made in the prior fiscal 
year, the number of staff who reviewed and made rec-
ommendations on such proposals in the prior fiscal year, 
and the number of recommendations made in the prior 
fiscal year where the proponent of such recommendation 
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was a client of or received services from the proxy advisory 
firm. 
‘‘(l) TRANSPARENT
POLICIES.—Each registered 
proxy advisory firm shall file with the Commission and 
make publicly available its methodology for the formula-
tion of proxy voting policies and voting recommendations. 
‘‘(m) RULES OF CONSTRUCTION.— 
‘‘(1) NO WAIVER OF RIGHTS, PRIVILEGES, OR 
DEFENSES.—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. 
‘‘(2) NO PRIVATE RIGHT OF ACTION.—Nothing 
in this section may be construed as creating any pri-
vate right of action, and no report filed by a reg-
istered proxy advisory firm in accordance with this 
section or section 17 shall create a private right of 
action under section 18 or any other provision of 
law. 
‘‘(n) REGULATIONS.— 
‘‘(1) NEW PROVISIONS.—Such rules and regula-
tions as are required by this section or are otherwise 
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necessary to carry out this section, including the ap-
plication form required under subsection (a)— 
‘‘(A) shall be issued by the Commission, 
not later than 180 days after the date of enact-
ment of this section; and 
‘‘(B) shall become effective not later than 
1 year after the date of enactment of this sec-
tion. 
‘‘(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 regula-
tions which affect the operations of proxy advi-
sory firms; 
‘‘(B) amend or revise such rules and regu-
lations in accordance with the purposes of this 
section, and issue such guidance, as the Com-
mission may prescribe as necessary or appro-
priate in the public interest or for the protec-
tion of investors; and 
‘‘(C) direct Commission staff to withdraw 
the Egan Jones Proxy Services (May 27, 2004), 
and Institutional Shareholder Services, Inc. 
(September 15, 2004), no-action letters. 
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‘‘(o) APPLICABILITY.—This section, other than sub-
section (n), 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.’’. 
(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 organiza-
tion,’’. 
SEC. 4. COMMISSION ANNUAL REPORT. 
The Commission shall make an annual report publicly 
available on the Commission’s Internet website. Such re-
port shall, with respect to the year to which the report 
relates— 
(1) identify applicants for registration under 
section 15H of the Securities Exchange Act of 1934, 
as added by this Act; 
(2) specify the number of and actions taken on 
such applications; 
(3) specify the views of the Commission on the 
state of competition, transparency, policies and 
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methodologies, and conflicts of interest among proxy 
advisory firms; 
(4) include the determination of the Commis-
sion with regards to— 
(A) the quality of proxy advisory services 
issued by proxy advisory firms; 
(B) the financial markets; 
(C) competition among proxy advisory 
firms; 
(D) the incidence of undisclosed conflicts 
of interest by proxy advisory firms; 
(E) the process for registering as a proxy 
advisory firm; and 
(F) such other matters relevant to the im-
plementation of this Act and the amendments 
made by this Act, as the Commission deter-
mines necessary to bring to the attention of the 
Congress; 
(5) identify problems, if any, that have resulted 
from the implementation of this Act and the amend-
ments made by this Act; and 
(6) recommend solutions, including any legisla-
tive or regulatory solutions, to any problems identi-
fied under paragraphs (4) and (5). 
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Union Calendar No. 333 
115TH CONGRESS 
1ST SESSION 
H. R. 4015 
[Report No. 115–451] 
A BILL 
To improve the quality of proxy advisory firms for 
the protection of investors and the U.S. economy, 
and in the public interest, by fostering account-
ability, transparency, responsiveness, and com-
petition in the proxy advisory firm industry. 
DECEMBER 7, 2017 
Committed to the Committee of the Whole House on the 
State of the Union and ordered to be printed 
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