Press Releases

Today, Congressman Bill Huizenga (R-MI), Ranking Member of the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee and Congressman Blaine Luetkemeyer (R-MO), Ranking Member of the Subcommittee on Consumer Protection and Financial Institutions introduced HR 8521, the INDEX Act.

The INDEX Act would require investment advisors of passively-managed funds to vote proxies in accordance with the instructions of fund investors—not at the discretion of the adviser. The adviser would be responsible for passing through the proxies, collecting the instructions, and dutifully voting according to the investors’ wishes. The INDEX Act mirrors legislation that has been introduced in the Senate by Senator Dan Sullivan (R-AK).

“Millions of retail investors are currently having their voices silenced,” said Congressman Bill Huizenga. “For too long, passive investors have lacked the ability to influence decisions made by publicly traded companies they own stock in. I am introducing the INDEX Act to restore voting power for retail investors. With the Biden Administration and their allies in Congress unable to enact their radical social agenda, they are now relying on the bureaucrats at the Security and Exchange Commission to embolden activist investors in board rooms across America. Congress must act to hold asset management firms accountable for their politicized actions. The INDEX Act achieves this goal by increasing transparency and empowering retail investors.”

 “This bill will empower American investors who are currently at the mercy of investment advisers, many of whom are using their heavy influence to advance the far-Left’s progressive agenda,” said Congressman Blaine Luetkemeyer.  “The ‘Big 3’ investment advisors are the largest owners in 96% of the S&P 500 companies, which is an alarmingly high concentration of unchecked voting power. The INDEX Act will give investors - including anyone with a 401K, a pension plan, or who owns a mutual fund - a seat at the table and provide much-needed transparency in our corporate governance system.”

Summary

• Covered Funds: Includes passively-managed funds that are private funds, employer-sponsored retirement funds, defined benefit and contribution pension plans, and TSP funds.

• 1% Voting Power Limitation: To limit costs and not inundate fund investors with votes of every portfolio company (for example, the Vanguard Total Stock Market Index Fund holds 4,000+ companies), voting choice is only required if the investment adviser holds more than 1% of a company’s voting securities.

• Routine Matters Exception: Investment advisers cannot vote without instructions from fund investors, except for routine matters, like ratification of auditors, which will avoid concerns about shareholder meeting quorums. Most notable matters, such as changes of control, director elections, and shareholder proposals are not routine.

• Mirror Voting Exception: For shareholder votes requiring a majority or more of the outstanding stock (e.g., merger approval), advisers may “mirror vote,” where their votes are proportionately cast to not affect the outcome.

• Disclosure and Broker Obligations: Investment advisers must provide proxy statements and other materials to fund investors. Investment advisers that provide vote recommendations must permit third-party recommendations on a non-discriminatory basis that allows for a broad diversity of views.

• Cost Burden: Expenses for implementing pass-through voting are required to be borne by the funds or their investment advisers, and not by the portfolio companies.

• Safe Harbor: An investment adviser can simply refrain from voting altogether and avoid the costs of obtaining fund investor instructions. A safe harbor protects the decision to not vote from breaching any duty under federal or state law.