December 18, 2019
December 18, 2019 Vanessa Countryman Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549 Re: File Number S7-22-19 Secretary Countryman: My profession as a small-business owner operating in Sarasota County includes work with education start-ups to build out and grow their investment portfolios. I am proud of the work we do to strengthen and maximize revenue in education markets by providing sound financial and strategic investment advice. That is one of the many reasons why I am shocked by the many unscrupulous practices in which proxy advisory firms engage. In no uncertain terms, I would like to offer this letter as my statement of support for the Securities and Exchange Commission’s proposed rule changes regarding these proxy advisory firms. The duty of financial advisors should first and foremost be to maximize investor returns by providing smart recommendations to help grow investments as much as possible. However, that is far from what these proxy advisory firms are doing. Proxy advisors—who are contracted by a range of investment funds to provide recommendations on proxy proposals and advise institutions on how to vote—are instead allowing their own social and political stances to guide their decision-making and recommendations. By allowing their personal stances on political policies to cloud their judgement, proxy advisory firms are doing a tremendous disservice to investors. This approach to investing has been found to produce nearly 44 percent less return on investment than standard S&P 500 index funds. These investments include pensions and retirement accounts like 401Ks, which people expect to be managed in ways that will help deliver secure, stable retirement incomes—not be used to address political and social problems that investors may not even care about or support. Of course, I believe everyone is entitled to use their First Amendment right to support whatever cause they feel is important to them. However, that is not the point of investing, nor is it appropriate for proxy advisory firms to make these political and social statements by using workers’ retirement accounts and pensions as their leverage. In short, politics should not have a place in investing. I find it reprehensible that these proxy advisors are able to have so much influence over the investments of tens of millions Americans when the vast majority of investors have most likely never even heard of these firms. The fact that almost the proxy advisory marketplace is controlled by only two companies makes the situation even worse. Coupled with a troubling lack of regulatory oversight, these firms are allowed to continue getting away with their shady business practices, which deprive investors of a solid return on their investment. Something has to change. The SEC should start by implementing proposed rule changes to address some of the more questionable tactics proxy advisory firms use to advance their personal agendas. That means curtailing practices such as 1) automatic voting or “robo-voting,” in which pension fund managers simply vote in lockstep with proxy advisors’ recommendations regardless of how it would impact pensioners; and 2) specialty reports, which are reports used to give the appearance of third-party credibility when in fact all they really do is back up the specific preferences of certain investors in order to justify dubious voting patterns. These are just a couple examples of how proxy advisory are more concerned with advancing and enforcing on others their own ideological viewpoints rather than making sound financial decisions and recommendations that would actually be in the best interest of investors and pensioners. Again, I would just like to express my sincere gratitude that the SEC is looking further into the practices of these proxy advisory firms in an effort to foster a greater sense of accountability and oversight to help protect the investments and pensions of hardworking Americans. Please continue to investigate this matter and move forward with the proposed rule changes the SEC has outlined. Thank you for the opportunity to accept my input on this important matter. Sincerely, Rita Ferrandino Rita Ferrandino | Founding Partner | Arc Capital Development | Sarasota, FL Cell: [redacted] [redacted]