The Securities and Exchange Commission adopted rule and form amendments that will require institutional investment managers who file Form 13F to use Form N-PX to report how they voted proxies on executive compensation (or “say-on-pay”) proposals. Although Form N-PX has been required to be filed by mutual funds, exchange-traded funds and certain other registered funds for many years, changes were approved in 2022 which are now going into effect for investment managers. Filers of Form 13F face an upcoming August 31, 2024 deadline to report their votes from the period of July 1, 2023 to June 30, 2024.

The Change

Rule 14Ad-1 now requires investment managers who exercised voting power over say-on-pay votes to report those votes by filing Form N-PX annually. In completing the reporting obligations, managers have the option to use joint reporting in certain circumstances. Further, as managers use Form N-PX to complete their reporting they must follow the additional form amendments including identifying matters using the same language and order as the issuer’s proxy, disclosing the number of shares voted or instructed and additionally shares loaned or recalled, and filing reports using structured data language. The additional disclosure by managers on their say-on-pay votes is intended to satisfy requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Investment Managers Affected

This change will affect each person that (i) falls under the definition of “institutional investment manager” under the Securities Exchange Act of 1934 (Exchange Act) (defined in Section 13(f)(6)(A) as any person “investing in or buying and selling securities for its own account, and any person exercising investment discretion with respect to the account of any other person”); and (ii) faces reporting requirements under Section 13(f) of the Exchange Act (Section 13(f)(1) establishes a reporting obligation for institutional investment managers exercising investment discretion over at least $100 million of Section 13(f) securities).

What Must be Reported

The executive compensation votes falling under the reporting requirements are the same as what is required under Section 14A of the Exchange Act. Accordingly, for each security over which an institutional investment manager exercises voting power, the manager must report on a Form N-PX the manager’s proxy voting record for the proposals related to say-on-pay matters. This covers shareholder advisory votes on several proposals related to executive compensation including approval of executive compensation, frequency of executive compensation approval votes, and votes on golden parachute compensation in connection with a merger or acquisition.

Exercising Voting Power. A manager will be found to have “exercised voting power” triggering the reporting of say-on-pay votes on a Form N-PX if the manager has power to vote or direct the voting of a security and exercises this power to influence a voting decision. Additional indications of the power to vote or direct voting may be satisfied by deciding whether to vote a security at all or to recall loaned securities before the vote.

It is also important to note that the SEC will not apply Form 13F’s de minimis exemption to Form N-PX and the securities subject to Form N-PX are not limited to those required under Form 13F.

Of further note, in certain circumstances a confidential treatment request may be available for managers.

Joint Reporting Provisions

The rules allow for joint reporting of say-on-pay votes in specific scenarios:

• A single manager may report votes when multiple managers exercise voting power over the same securities.
• A single report on Form N-PX is allowed for two or more managers who are affiliated persons, even if they do not exercise voting power over the same securities.
• A fund may report a manager’s votes in cases where the manager exercises voting power over some or all of the fund’s securities.

In cases where a manager is a non-reporting person (i.e., votes are reported by another - either by a manager, managers, or fund), then the non-reporting person must file a “Notice” or “Combination” Form N-PX report. This filing should include information on each fund or manager that is reporting on its behalf.

In cases where a manager or fund is a reporting person and is reporting on behalf of another manager, then the reporting person must identify the managers who they are voting on behalf of and report the number of shares the manager is reporting for another.

Structure of Form N-PX and Related Changes

Form N-PX consists of a Cover Page, Summary Page, and the Proxy Voting Information required by the Form. Below are changes to take note of for each section.

Cover Page

Form N-PX will have a new Report Type section where filers will select a box to indicate what type of information they are filing. The Report Type is completed by checking the relevant box on the cover page and providing the “List of Other Persons Reporting for this Manager” if applicable. The Report Types for Managers include:

• An “Institutional Manager Voting Report” is used when a manager uses a single report to disclose all of its proxy votes that are required to be reported.
• An “Institutional Manager Notice Report” is used when no proxy votes are reported by the manager in the filing. This must be selected together with the relevant explanation of either: (i) proxy votes are reported by other reporting persons (fund or managers) under joint reporting, (ii) the reporting person did not exercise voting power for any reportable voting matter, or (iii) the reporting person has disclosed a policy of not voting and did not vote.
• An “Institutional Manager Combination Report” is used when the manager reports some of its votes, but additional votes are reported by another under the joint voting provisions.

Summary Page

To facilitate joint reporting, the Form N-PX summary page will allow managers to designate which managers have votes reported on the Form. On the summary page, the total number of institutional managers with votes reported in the Form N-PX must be reported (not including the reporting person completing the filing). Additionally, if the Form reports the proxy votes of managers other than the reporting person, then a list of each manager along with additional identifying information must be included.

Proxy Voting Information

• In identifying the matter voted on in the Form, the matter must be identified using the same language and listed in the same order as reflected on the issuer’s form of proxy.
• In completing the Form N-PX, a manager is required to report the number of shares voted and how the shares were voted (for, against, or abstain). A manager may rely on the number of shares instructed to be voted if there has been no confirmation of the actual votes. If before filing, a manager becomes aware that a different number of shares were voted than what was instructed, then the actual number must be reported. But if the confirmation of the actual votes occurs after the filing, then a person is not required to amend their previous filing. Further, if votes were distributed amongst the for, against, or abstain options then the manager is required to report the number of shares voted in each category.
• Additionally, for joint reporting the reporting manager must separate the number of shares it is reporting on its own behalf from the number reported on behalf of other managers. Also, the manager must separate the number of shares reported when the reporting manager is reporting on behalf of different groups of managers.

Transition Periods for Initial and Final Form 13F Filings

The changes take into consideration managers who enter and exit from Form 13F reporting obligations during the period.

• Initial Filing on Form 13F
  • A manager is not required to file a report on Form N-PX for the 12-month period ending June 30 in which the manager’s initial filing on Form 13F is due. (Where an "initial filing" on Form 13F means “any quarterly filing on Form 13F if no filing on Form 13F was required for the immediately preceding calendar quarter.”)
• Final Filing on Form 13F
  • A manager is not required to file a report on Form N-PX for any shareholder vote at a meeting occurring after September 30 for the year in which the manager’s final filing on Form 13F is due.
  • A manager would be required to file a Form N-PX for the period July 1 through September 30 for the year in which the manager’s final filing on Form 13 F is due. Filing must be made before March 1 of the immediately following calendar year.
  • (A “final filing” on Form 13F means “any quarterly filing on Form 13F if no filing on Form 13F is required for the immediately subsequent calendar quarter.”)

Structured Data Language Requirement

The amendments require that Form N-PX reports must be filed with eXtensible Markup Language (“XML”)-based structured data language specific to reports on Form N-PX.

Effective Date/ Future Deadlines

• For this Year: The upcoming deadline of August 31, 2024 is the first date by which managers must file the Form N-PX for the period of July 1, 2023 to June 30, 2024.
• In General: Thereafter, managers must complete Form N-PX annually by August 31 of each year covering the previous 12-month period ending on June 30.