Vedder Price

Vedder Thinking | Articles SEC Settles Charges Against Adviser for Violating Proxy Voting Rule


Reader View

On September 20, 2022, the SEC announced that it had settled charges against a registered investment adviser for alleged violations of its obligation to vote proxies on behalf of clients in a manner that is in the clients’ best interests.

According to the SEC’s order, the investment adviser had engaged a third-party service provider to vote proxies on behalf of registered funds it advised. From January 2017 through January 2022, the adviser had a standing instruction that directed the service provider to vote the funds’ securities in favor of any proposal put forth by the respective issuers’ management and against any shareholder proposals. Throughout the relevant period, the service provider voted proxies in this manner without exception, and the adviser never deviated from the standing instruction. Further, the SEC alleged that the adviser did not review proxy materials for more than 200 shareholder meetings for which it cast votes, nor did it take any other steps to determine whether votes were cast in the best interests of fund shareholders. During this time, the adviser stated in its Form ADV that proxies are voted in clients’ best interests. The adviser also had in place policies and procedures requiring that the adviser vote proxies with the goals of, among other things, maximizing the value of fund investments and promoting accountability of management and boards, and that reasonable care and diligence be exercised to ensure that voting rights are properly and timely exercised.

The SEC found that the investment adviser had willfully violated Section 206(2) of the Investment Advisers Act, which makes it unlawful for any adviser to engage in a transaction, practice or course of business that operates as a fraud or deceit upon a client or prospective client; Section 206(4) of the Advisers Act, which makes it unlawful for any adviser to engage in any act, practice or course of business that is fraudulent, deceptive or manipulative; and Rule 206(4)-6 under the Advisers Act, which requires advisers to adopt and implement written policies and procedures that are reasonably designed to ensure that advisers vote client securities in the best interests of clients.

In the settlement of the charges, without admitting or denying the findings set forth in the SEC’s order, the investment adviser agreed to be censured, to cease and desist from committing or causing violations of applicable law and regulation and to pay a $150,000 civil penalty.

The SEC’s order is available here. A related press release is available here.


John S. Marten


Nathaniel Segal


Jacob C. Tiedt


Nicholas A. Portillo