Greater Transparency of Proxy Advice

Regulation Impact Statement – Department of the Treasury

On 17 December 2021, the Government introduced a number of reforms around transparency and accountability requirements of proxy advice services and disclosure of superannuation fund voting records.

The Department of the Treasury prepared a Regulation Impact Statement (RIS) to address a lack of clear regulatory settings around proxy advice and the potential for conflicts of interest between proxy advisers and their clients. The preferred option included the following measures:

1. extend the Australian Financial Services licensing regime to cover a greater range of proxy adviser activities;
2. require proxy advisers to be meaningfully independent from their clients;
3. require proxy advisers to provide a copy of their recommendations to companies at the same time the recommendations are provided to investors; and
4. require superannuation funds to disclose more detailed information on their voting actions.

The impacts of the various sub-options are described in the RIS. The Department has estimated that the preferred option will result in $2.3 million in annual regulatory costs.

The Office of Best Practice Regulation (OBPR) assessed the RIS as adequate with the Government’s requirements but not consistent with good practice. The OBPR considers that the RIS departs from good practice as it lacks sufficient evidence of a conflict of interest between proxy advisers and their clients and does not clearly demonstrate that the preferred option yields the highest net benefit over the status quo. More details are provided in the OBPR’s assessment advice to the Department.