Jan. 21, 2020
January 21st, 2020
The Honorable Jay Clayton
Chairman
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
Vanessa A. Countryman
Secretary, Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
Via Electronic Submission
Re: Comments on Proposed Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice (File No.: S7-22-19) and Proposed Amendments to Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8 (File No: S7-23-19)
Dear Chairman Clayton and Secretary Countryman:
Cartica Management, LLC submits the following comments in response to the Securities and Exchange Commission's proposed rulemakings published in the federal register on December 4, 2019 (84 FR 66518 and 84 FR 66458).
Cartica Management, LLC is an active manager in public equities. We believe in shareholder democracy and corporate engagement as positive drivers of value, not only for individual companies and investors, but for the efficient functioning of the economy and financial markets.
The proposed rules are prejudicial and unnecessary, and we urge the SEC to withdraw them.
The founding purpose of the Securities and Exchange Commission is to protect investors, yet the SEC's proposed rules will curtail the rights of investors, especially smaller investors, to raise concerns about business practices at the companies they own. Shareholder resolutions are a powerful way to encourage corporate responsibility and discourage practices that are unsustainable, unethical, or expose a company to legal and reputational risk.
The first proposed rule not only dramatically increases the number of shares investors must hold to file resolutions at their companies, it significantly increases the vote thresholds necessary for refiling, and creates steps that make it more difficult for others to file resolutions on their behalf. The second proposed rule suppresses the voices of independent proxy advisory firms that make informed participation possible for small shareholders.
The proposed rules improperly impinge on asset managers’ ability to carry out their fiduciary duty
Proxy advisory firms help individuals and institutional investors by providing independent, efficient, and cost-effective research to inform proxy voting decisions. This is particularly crucial where fiduciary responsibilities exist. The proposed amendments will slow this process, create additional costs and burdens to the proxy firms and therefore to their clients, and will unfairly allow companies to interfere in the provision of information to shareholders. Companies have ample opportunity to share their opinions and justifications with their shareholders within the existing regulatory framework.
At Cartica, we vote our own shares, and we do not “blindly” follow the advice of proxy firms. However, we consider proxy advisors’ recommendations in determining how to vote our shares, as they provide a valuable external perspective. Under the proposed amendments, we would have to operate under the assumption that the advice provided by proxy firms is no longer fully independent. As a result, the total available mix of reliable information available to us for making investment and voting decisions would diminish, curtailing our ability to effectively carry out our fiduciary duty.
The proposed rules have global implications
We also note that US rules and regulation often set the standards for the rest of the world. Many countries look to the US as an example. The proposed rules damage this positive image and set a terrible precedent for other countries. Jurisdictions where shareholders already enjoy fewer rights might follow suit, worsening corporate governance standards across the globe, and ultimately threatening the interests of US companies and investors worldwide.
“If it ain’t broke, don’t fix it.”
The existing rules work. Most issues raised by shareholder proposals have consistently proven to be timely and important in reducing risk to companies and increasing value to shareholders. The SEC's proposed rules have not demonstrated a clear need that would justify impinging on important shareholder rights. Because the proposed rules are arbitrary and capricious and detrimental to the rights of shareholders, we urge the SEC to withdraw the proposed rules and to ensure that the important elements of shareholder democracy are maintained.
Sincerely,
Teresa Barger
Teresa Barger, CEO
Cartica Management LLC
1775 I St NW, Suite 900
Washington DC 20006
USA
[redacted]
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