Form 13F filers will need to file their first Form N-PX covering the period of July 1, 2023, to June 30, 2024, by August 31, 2024.
Rule 14Ad1 of the Securities Exchange Act of 1934 (Exchange Act), which was adopted by the US Securities and Exchange Commission (SEC) last fall, and will become effective on July 1, 2024, will institute a new requirement for institutional investment managers that are required to file Form 13F pursuant to Section 13(f) of the Exchange Act (13F Filers) to additionally publicly report how they voted via proxy for certain executive compensation matters on Form N-PX. Previously, the requirement to publicly report proxy voting records through Form N-PX was generally limited to registered investment companies.
In-Scope Executive Compensation Votes
The types of executive compensation votes that 13F Filers must report include votes on the:
- approval of executive compensation (say-on-pay);
- frequency of say-on-pay votes; and
- approval of golden parachute arrangements in connection with a merger or acquisition.
Exercising Voting Power Over Securities
A 13F Filer is required to report executive compensation votes for a security only if the 13F Filer “exercised voting power” over the security. Under the adopted two-part test, a 13F Filer will be deemed to have “exercised voting power” over a security if the 13F Filer:
- has the power to vote, or direct the voting of, a security either directly or indirectly through any contract, arrangement, understanding, or relationship (this power includes the ability to determine whether to vote the security or recall a loaned security before a vote); and
- exercises this power to vote or influence a voting decision for the security using its independent judgment (this refers to the actual use of the ability to vote or direct the vote of a security, rather than the mere possession of such ability).
The scope of securities subject to the Form N-PX reporting requirement is not limited to the securities required to be reported on Form 13F (identified on the SEC’s quarterly “Official List of Section 13(f) Securities”).
Specifically, a 13F Filer must report how it voted on say-on-pay shareholder votes for each security registered under Section 12 of the Exchange Act over which it “exercised voting power.” This scope includes votes for securities that do not appear on the Form 13F securities list and securities for which the Form 13F de minimis exemption would apply.
For each security reported on Form N-PX, a 13F Filer must disclose the following information:
- the name of the issuer;
- the Council on Uniform Securities Identification Procedures (CUSIP) number;
- the International Securities Identification Number (ISIN);
- the shareholder meeting date;
- an identification of the matter voted on and a designation of the category applicable to the matter voted on (e.g., “Section 14A executive compensation vote frequency”);
- the number of shares that were voted and how the shares were voted (e.g., for or against proposal, or abstain), whether the votes were cast in multiple manners (e.g., for and against), as well as the number of shares voted in each manner;
- whether the votes disclosed represented votes for or against management’s recommendation; and
- the number of shares that the reporting person loaned and did not recall.
Like Form 13F filings, joint reporting for Form N-PX filings — whereby non-reporting 13F Filers would be required to file a “notice” or “combination” report that identifies each 13F Filer reporting on its behalf — is permitted in the following scenarios:
- A single 13F Filer can report say-on-pay votes if multiple 13F Filers exercised voting power.
- A fund that does not file Form 13F can report say-on-pay votes on behalf of a 13F Filer that exercised voting power over some or all of the fund’s securities.
- Two or more 13F Filers that are affiliated persons can file a single report on Form N-PX for all affiliated person 13F Filers within the group. However, they must not have exercised voting power over the same securities.
Also similar to Form 13F, Form N-PX allows for the submission of requests to the SEC for confidential treatment.
Even if a 13F Filer did not exercise voting power over any reportable voting matter, and thus has no proxy votes to report, the 13F Filer must still file a Form N-PX notice and disclose this fact in the explanatory box provided.
13F Filers will be required to report say-on-pay votes annually on Form N-PX by August 31 of each year for the most recent 12-month period ended June 30.
Rule 14Ad1’s effective date is July 1, 2024. Current 13F Filers will thus need to file their first Form N-PX covering the period of July 1, 2023, to June 30, 2024, by August 31, 2024.
A new 13F Filer that triggers the 13F filing threshold in a given year will need to file Form N-PX for the 12-month period beginning in July of the following year and submit the form by August 31 of the year after that. Accordingly, a new 13F Filer that triggers the Form 13F filing threshold in 2023 will need to file Form N-PX by August 31, 2025, for the 12-month period from July 1, 2024 through June 30, 2025.
13F Filers should update their policies, procedures, and information systems now in order to begin capturing the required Form N-PX reporting information on a real-time basis from July 1, 2023.