‘‘(2) CERTIFICATION.—Not later than 90 cal-
endar 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 oc-
curred to such information or documents during 
the previous calendar year. 
‘‘(d) CENSURE, DENIAL, OR SUSPENSION OF REG-
ISTRATION; NOTICE AND HEARING.—The Commission, by 
order, shall censure, place limitations on the activities, 
functions, or operations of, suspend for a period not ex-
ceeding 12 months, or revoke the registration of any reg-
istered proxy advisory firm if the Commission finds, on 
the record after notice and opportunity for hearing, that 
such censure, placing of limitations, suspension, or revoca-
tion 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 an organization, 
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whether prior to or subsequent to becoming so associ-
ated— 
‘‘(1) has committed or omitted any act, or is 
subject to an order or finding, enumerated in sub-
paragraph (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 ac-
tion, conduct, or practice specified in subparagraph 
(C) of section 15(b)(4), during the 10-year period 
preceding the date of commencement of the pro-
ceedings under this subsection, or at any time there-
after; 
‘‘(2) has been convicted during the 10-year pe-
riod 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 im-
prisonment 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; 
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‘‘(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 with integrity, including by failing to comply 
with subsection (f) or (g); or 
‘‘(7) 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 con-
ditions as the Commission may establish as nec-
essary 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)(81), withdraw from registration by 
filing a written notice of withdrawal to the Commis-
sion. 
‘‘(2) COMMISSION AUTHORITY.—In addition to 
any other authority of the Commission under this 
title, if the Commission finds that a registered proxy 
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advisory firm is no longer in existence or has ceased 
to do business as a proxy advisory firm, the Com-
mission, 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
PROCE-
DURES.—Each registered proxy advisory firm shall 
establish, maintain, and enforce written policies and 
procedures reasonably designed, taking into consid-
eration the nature of the business of such registered 
proxy advisory firm and associated persons, to pub-
licly disclose and manage any conflicts of interest 
that arise or would reasonably be expected to arise 
from such business. 
‘‘(2) COMMISSION AUTHORITY.—The Commis-
sion shall, within one year of enactment, 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 reg-
istered proxy advisory firm, including, without limi-
tation, conflicts of interest relating to— 
‘‘(A) the manner in which a registered 
proxy advisory firm is compensated by the cli-
ent, any affiliate of the client, or any other per-
son for providing proxy advisory services; 
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‘‘(B) business relationships, ownership in-
terests, or any other financial or personal inter-
ests between a registered proxy advisory firm, 
or any person associated with such registered 
proxy advisory firm, and any client, or any af-
filiate of such client; 
‘‘(C) the formulation of proxy voting poli-
cies; 
‘‘(D) the execution, or assistance with the 
execution, of proxy votes if such votes are based 
upon recommendations made by the proxy advi-
sory firm in which a person other than the 
issuer is a proponent; and 
‘‘(E) any other potential conflict of inter-
est, as the Commission deems necessary or ap-
propriate in the public interest or for the pro-
tection of investors. 
‘‘(3) DISCLOSURE.—Each registered proxy ad-
visory firm shall annually disclose to the Commission 
and make publicly available the economic and other 
factors that a reasonable investor would expect to in-
fluence the recommendations of such proxy advisory 
firm, including the ownership composition of such 
proxy advisory firm. 
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‘‘(g) RELIABILITY OF PROXY ADVISORY FIRM SERV-
ICES.— 
‘‘(1) IN GENERAL.—Each registered proxy advi-
sory firm shall— 
‘‘(A) have staff and other resources suffi-
cient to produce proxy voting recommendations 
that are based on accurate and current infor-
mation; 
‘‘(B) implement procedures that permit 
issuers that are the subject of proxy voting rec-
ommendations— 
‘‘(i) access in a reasonable time to 
data and information used to make rec-
ommendations; and 
‘‘(ii) a reasonable opportunity to pro-
vide meaningful comment and corrections 
to such data and information, including 
the opportunity to present (in person or 
telephonically) details to the person re-
sponsible for developing such data and in-
formation prior to the publication of proxy 
voting recommendations to clients; and 
‘‘(C) employ an ombudsman to receive 
complaints about the accuracy of information 
used in making recommendations from the sub-
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ommendations (other than recommenda-
tions relating to an issuer-sponsored pro-
posal or recommendations consistent with 
that of the majority of the board of direc-
tors of the issuer)— 
‘‘(I) are based on internal con-
trols and procedures that are designed 
to ensure accurate information; 
‘‘(II) do not violate applicable 
State or Federal law; and 
‘‘(III) prioritize economic returns 
to shareholders. 
‘‘(2) DEFINITIONS.—In this subsection: 
‘‘(A) DATA AND INFORMATION USED TO 
MAKE
RECOMMENDATIONS.—The term ‘data 
and information used to make voting rec-
ommendations’— 
‘‘(i) means the financial, operational, 
or descriptive data and information on an 
issuer used by proxy advisory firms and 
any contextual or substantive analysis im-
pacting the recommendation; and 
‘‘(ii) does not include the entirety of 
the proxy advisory firm’s final report to its 
clients. 
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‘‘(B) REASONABLE TIME.—The term ‘rea-
sonable time’— 
‘‘(i) means not less than 1 week be-
fore the publication of proxy voting rec-
ommendations for clients, unless otherwise 
defined through a final rule issued by the 
Commission; 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 rec-
ommendations. 
‘‘(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 associ-
ated with the approval of such proposal, including imple-
mentation costs and any penalties incurred by the issuer. 
‘‘(i) DESIGNATION OF COMPLIANCE OFFICER.—Each 
registered proxy advisory firm shall designate an indi-
vidual who reports directly to senior management as re-
sponsible for administering the policies and procedures 
that are required to be established pursuant to subsections 
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(f) and (g), and for ensuring compliance with the securi-
ties laws and the rules and regulations thereunder, includ-
ing 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 offer-
ing 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 (of-
fered directly or indirectly, including through 
an affiliate) related to corporate governance 
issues; or 
‘‘(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. 
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‘‘(2) RULE
OF
CONSTRUCTION.—Nothing in 
paragraph (1), or in any rules or regulations adopt-
ed 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 competi-
tion). 
‘‘(k) STATEMENTS
OF FINANCIAL CONDITION.— 
Each registered proxy advisory firm shall, on a confiden-
tial basis, file with the Commission, at intervals deter-
mined by the Commission, such financial statements, cer-
tified (if required by the rules or regulations of the Com-
mission) by an independent public auditor, and informa-
tion concerning its financial condition, as the Commission, 
by rule, may prescribe as necessary or appropriate in the 
public interest or for the protection of investors. 
‘‘(l) 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— 
‘‘(1) shareholder proposals its staff reviewed in 
the prior fiscal year; 
‘‘(2) recommendations made in the prior fiscal 
year; 
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‘‘(3) staff who reviewed and made recommenda-
tions on such proposals in the prior fiscal year (and 
the qualifications of such staff); and 
‘‘(4) 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. 
‘‘(m) 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. 
‘‘(n) 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 other-
wise have under any provision of State or Federal law, 
including any rule, regulation, or order thereunder. 
‘‘(o) REGULATIONS.— 
‘‘(1) NEW PROVISIONS.—Such rules and regula-
tions as are required by this section or are otherwise 
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 
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‘‘(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; and 
‘‘(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. 
‘‘(p) 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 (o)(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,’’ 
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after ‘‘nationally recognized statistical rating organiza-
tion,’’. 
SEC. 4. DUTIES OF INVESTMENT ADVISORS, ASSET MAN-
AGERS, AND PENSION FUNDS. 
(a) REPORTING REQUIREMENTS.—Not later than 1 
year after the date of the enactment of this Act and annu-
ally thereafter, any covered entity that retains the services 
of a proxy advisory firm with respect to the preceding year 
shall provide to the beneficiaries and customers of the cov-
ered entity, as applicable, a report that includes— 
(1) the percentage of votes cast on shareholder 
proposals that follow proxy advisor firm rec-
ommendations for each proxy advisory firm retained 
by the covered entity; 
(2) the percentage of votes cast on environ-
mental-, social-, or governance-related shareholder 
proposals that follow proxy advisory firm rec-
ommendations for each proxy advisory firm retained 
by the covered entity; and 
(3) an explanation of— 
(A) how proxy advisory firm recommenda-
tions are used by the covered entity in making 
voting decisions; 
(B) how such recommendations are rec-
onciled with the fiduciary duty of the covered 
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entity to vote in the best economic interests of 
shareholders; 
(C) how frequently votes are changed when 
an error occurs or due to new information from 
issuers; and 
(D) the degree to which investment profes-
sionals of the covered entity are involved in 
such voting decisions. 
(b) REQUIREMENTS.—With respect to shareholder 
proposals of an issuer, a covered entity with more than 
$100,000,000,000 in assets under management shall— 
(1) provide customers with a mechanism to in-
dicate how the covered entity should vote on their 
behalf; 
(2) in any materials provided to customers and 
related to customers voting their shares, clarify that 
shareholders are not required to vote on every pro-
posal; and 
(3) with respect to each shareholder proposal 
for which the covered entity voted (other than an 
issuer-sponsored proposal or a vote consistent with 
the recommendation of the majority of the board of 
directors of the issuer), make publicly available the 
economic analysis the covered entity conducted to 
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determine that the vote is in the best economic inter-
est of the customers. 
(c) COVERED ENTITY DEFINED.—In this section, the 
term ‘‘covered entity’’ means an investment advisor, asset 
manager, or pension fund with more than $100,000,000 
in assets under management. 
SEC. 5. TRANSPARENCY REGARDING ESG FUNDS. 
Section 10 of the Securities Act of 1933 (15 U.S.C. 
77j) is amended by adding at the end the following: 
‘‘(g) TRANSPARENCY REGARDING ESG FUNDS.—An 
investment company that holds itself out as offering an 
index fund under which investments are made pursuant 
to a set of environmental, social, or governance standards 
shall disclose in tabular form on the first page of each 
prospectus required pursuant to this section the 1-, 3-, 
and 5-year annual returns and fees charged to investors 
with respect to such fund compared with the annual re-
turns and fees charged to investors for the most readily 
comparable broad-based index fund offered by such invest-
ment company under which investments are not made pur-
suant to such standards, or if such investment company 
does not offer a comparable index fund, a reasonably simi-
lar comparison to a readily comparable broad-based index 
fund.’’. 
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SEC. 6. RESUBMISSION THRESHOLDS FOR SHAREHOLDER 
PROPOSALS. 
Section 14 of the Securities Exchange Act of 1934 
(15 U.S.C. 78n) is amended by adding at the end the fol-
lowing: 
‘‘(k) EXCLUSION OF CERTAIN SHAREHOLDER PRO-
POSAL RESUBMISSIONS.—A shareholder proposal may be 
excluded from any proxy or consent solicitation material 
for an annual meeting of the shareholders of an issuer 
if the proposal— 
‘‘(1) is not germane (without regard to whether 
the proposal involves a significant social policy 
issue); or 
‘‘(2) addresses substantially the same subject 
matter (without regard to whether the proposal in-
volves a significant social policy issue) as a proposal 
previously included in the proxy or consent solicita-
tion material for an annual meeting of the share-
holders of an issuer— 
‘‘(A) for a meeting of the shareholders con-
ducted in the preceding 5 years; and 
‘‘(B) if the most recent vote— 
‘‘(i) occurred in the preceding 3 years; 
and 
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‘‘(ii)(I) if voted on once during such 
period, received less than 5 percent of the 
votes; 
‘‘(II) if voted on twice during such pe-
riod, received less than 15 percent of the 
votes; or 
‘‘(III) if voted on three or more times 
during such period, received less 25 per-
cent of the votes.’’. 
SEC. 7. PROHIBITION ON ROBOVOTING. 
Section 14 of the Securities Exchange Act of 1934 
(15 U.S.C. 78n) is further amended by adding at the end 
the following: 
‘‘(l) PROHIBITION ON ROBOVOTING.— 
‘‘(1) IN GENERAL.—The Commission shall issue 
final rules prohibiting the use of robovoting with re-
spect to votes related to proxy or consent solicitation 
materials. 
‘‘(2) 
ROBOVOTING
DEFINED.—The 
term 
‘robovoting’ means the practice of automatically vot-
ing in a manner consistent with the recommenda-
tions of a proxy advisory firm.’’. 
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SEC. 8. LIABILITY FOR CERTAIN FAILURES TO DISCLOSE 
MATERIAL INFORMATION. 
Section 14 of the Securities Exchange Act of 1934 
(15 U.S.C. 78n) is further amended by adding at the end 
the following: 
‘‘(m) FALSE
OR MISLEADING STATEMENTS.—For 
purposes of section 18, failure to disclose material infor-
mation regarding proxy voting advice that makes a rec-
ommendation to a security holder as to its vote, consent, 
or authorization on a specific matter for which security 
holder approval is solicited, and that is furnished by a per-
son that markets its 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.’’. 
SEC. 9. STUDY OF CERTAIN ISSUES WITH RESPECT TO 
SHAREHOLDER PROPOSALS AND PROXY AD-
VISORY FIRMS. 
Not later than 180 days after the date of the enact-
ment of this Act, and every 5 years thereafter, the Securi-
ties and Exchange Commission, including the Office of the 
Advocate for Small Business Capital Formation, shall 
carry out a study and submit a report to the Committee 
on Banking, Housing, and Urban Affairs of the Senate 
and the Committee on Financial Services of the House of 
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Representatives on shareholder proposals and proxy advi-
sory firms that includes, with respect to, in the case of 
the first report, the preceding 10 years, and in the case 
of each subsequent report, the preceding 5 years, the fol-
lowing: 
(1) The costs that issuers incurred in respond-
ing to— 
(A) politically, environmentally, or socially 
motivated shareholder proposals; and 
(B) shareholder proposals that failed to be 
agreed to more than once. 
(2) The amount of fees that public companies 
paid to proxy advisory firms and persons associated 
with proxy advisory firms. 
(3) The source of funds with respect to pay-
ment of such fees. 
(4) The academic or professional qualifications 
of the staff members that provide proxy advisory 
services at proxy advisory firms. 
(5) The number of shareholder proposals that, 
if adopted, would require an issuer to violate a State 
or Federal law. 
(6) An estimate of the costs that issuers would 
incur if such proposals were adopted. 
Æ 
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