‘SEBI should handle proxy firms’ disputes’

Regulator should first examine a dispute between companies and proxy advisers

July 29, 2019 10:23 pm | Updated 11:01 pm IST - Mumbai

First say: Only after SEBI gives comments in the matter, the 
party may approach the court of law, the report said. Reuters

First say: Only after SEBI gives comments in the matter, the party may approach the court of law, the report said. Reuters

A working group formed to look into issues related to proxy advisory firms has proposed that the Securities and Exchange Board of India (SEBI) should be the forum to handle disputes between such advisory firms and listed companies.

“Any dispute arising between corporate and proxy advisers needs to be first examined by SEBI to ascertain the non-compliance, if any, of the proposed additional Code of Conduct for proxy advisers. SEBI will give appropriate comments in the matter wrt. [with respect to] compliance of code of conduct by proxy advisor. Only thereafter the person may approach the court of law,” stated the report.

The working group has suggested that the capital markets regulator should make the necessary changes in the Listing Obligations and Disclosure Requirements Regulations — which every listed company has to comply with — to make listed entities approach SEBI with their grievances.

Currently, there are no explicitly stated legal provisions to handle such disputes arising between a company and a proxy adviser. Proxy advisory firms, which advise shareholders — mostly institutional — on voting on various board resolutions are often found to be at loggerheads with companies. In perhaps the most famous instance, Uday Kotak, in August last year, publicly stated that global proxy advisory firms needed to be domestically regulated.

His statements were made in the backdrop of U.S. proxy advisory firm ISS advising shareholders to vote against the reappointment of Deepak Parekh as a director on the board of HDFC.

Avoiding ‘conflict’

The report has also given recommendations on the ways to avoid any conflict of interest situations between the advisory firm and the company, and also ways to establish a ‘Chinese Wall’ if the proxy advisory firm also offers consultancy services.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.