[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 448 Introduced in House (IH)]

<DOC>






118th CONGRESS
  1st Session
                                H. R. 448

      To amend the Securities Exchange Act of 1934 to require the 
     registration of proxy advisory firms, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 24, 2023

    Mr. Steil (for himself, Mr. Barr, Mr. Davidson, Mr. Amodei, Mr. 
  Gimenez, Mr. Ferguson, Mr. Flood, Mr. Joyce of Ohio, Mr. Rose, Mr. 
  Meuser, Mr. Fitzgerald, Ms. Stefanik, and Mr. Hill) introduced the 
   following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 A BILL


 
      To amend the Securities Exchange Act of 1934 to require the 
     registration of proxy advisory firms, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Putting Investors First Act of 
2023''.

SEC. 2. DEFINITIONS.

    (a) In General.--In this Act:
            (1) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (2) Proxy advisory firm.--The term ``proxy advisory firm'' 
        has the meaning given the term in paragraph (81) of section 
        3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)), 
        as added by this Act.
            (3) State.--The term ``State'' has the meaning given the 
        term in section 3(a) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a)).
    (b) Securities Exchange Act of 1934 Definitions.--Section 3(a) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by 
adding at the end the following:
            ``(81) Proxy advisory firm.--The term `proxy advisory 
        firm'--
                    ``(A) means any person who is primarily engaged in 
                the business of providing proxy voting advice, 
                research, analysis, ratings, or recommendations to 
                clients, which conduct constitutes a solicitation 
                within the meaning of section 14; and
                    ``(B) does not include any person that is exempt 
                under law or regulation from the requirements otherwise 
                applicable to persons engaged in such a solicitation.
            ``(82) Person associated with a proxy advisory firm.--The 
        term `person associated' with a proxy advisory firm--
                    ``(A) means--
                            ``(i) any partner, officer, or director of 
                        a proxy advisory firm (or any person occupying 
                        a similar status or performing similar 
                        functions);
                            ``(ii) any person directly or indirectly 
                        controlling, controlled by, or under common 
                        control with a proxy advisory firm;
                            ``(iii) any employee of a proxy advisory 
                        firm; or
                            ``(iv) any person the Commission determines 
                        by rule is controlled by a proxy advisory firm; 
                        and
                    ``(B) does not include any person that performs 
                clerical or ministerial functions with respect to a 
                proxy advisory firm.''.

SEC. 3. REGISTRATION OF PROXY ADVISORY FIRMS.

    (a) Amendment.--The Securities Exchange Act of 1934 (15 U.S.C. 78a 
et seq.) is amended by inserting after section 15G the following new 
section:

``SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS.

    ``(a) Conduct Prohibited.--It shall be unlawful for a proxy 
advisory firm to make use of the mails or any means or instrumentality 
of interstate commerce to provide proxy voting advice, research, 
analysis, ratings or recommendations to any client, unless such proxy 
advisory firm is registered under this section.
    ``(b) Registration Procedures.--
            ``(1) Application for registration.--
                    ``(A) In general.--A proxy advisory firm shall file 
                with the Commission an application for registration, in 
                such form as the Commission shall require, by rule or 
                regulation, and containing the information described in 
                subparagraph (B).
                    ``(B) Required information.--An application for 
                registration under this section shall contain 
                information regarding--
                            ``(i) a certification that the applicant is 
                        able to consistently provide proxy advice based 
                        on accurate information;
                            ``(ii) the procedures and methodologies 
                        that the applicant uses in developing proxy 
                        voting recommendations;
                            ``(iii) the organizational structure of the 
                        applicant;
                            ``(iv) whether or not the applicant has in 
                        effect a code of ethics, and if not, the 
                        reasons therefor;
                            ``(v) any potential or actual conflict of 
                        interest relating to the provision of proxy 
                        advisory services, including those arising out 
                        of or resulting from the ownership structure of 
                        the applicant or the provision of other 
                        services by the applicant or any person 
                        associated with the applicant;
                            ``(vi) the policies and procedures in place 
                        to publicly disclose and manage conflicts of 
                        interest under subsection (f);
                            ``(vii) information related to the 
                        professional and academic qualifications of 
                        staff tasked with providing proxy advisory 
                        services; and
                            ``(viii) any other information and 
                        documents concerning the applicant and any 
                        person associated with such applicant as the 
                        Commission, by rule, may prescribe as necessary 
                        or appropriate in the public interest or for 
                        the protection of investors.
            ``(2) Review of application.--
                    ``(A) Initial determination.--Not later than 90 
                days after the date on which the application for 
                registration is filed with the Commission under 
                paragraph (1) (or within such longer period as to which 
                the applicant consents) the Commission shall--
                            ``(i) by order, grant registration; or
                            ``(ii) institute proceedings to determine 
                        whether registration should be denied.
                    ``(B) Conduct of proceedings.--
                            ``(i) Content.--Proceedings referred to in 
                        subparagraph (A)(ii) shall--
                                    ``(I) include notice of the grounds 
                                for denial under consideration and an 
                                opportunity for hearing; and
                                    ``(II) be concluded not later than 
                                120 days after the date on which the 
                                application for registration is filed 
                                with the Commission under paragraph 
                                (1).
                            ``(ii) Determination.--At the conclusion of 
                        such proceedings, the Commission, by order, 
                        shall grant or deny such application for 
                        registration.
                            ``(iii) Extension authorized.--The 
                        Commission may extend the time for conclusion 
                        of such proceedings for not longer than 90 
                        days, if the Commission finds good cause for 
                        such extension and publishes its reasons for so 
                        finding, or for such longer period as to which 
                        the applicant consents.
                    ``(C) Grounds for decision.--The Commission shall 
                grant registration under this subsection--
                            ``(i) if the Commission finds that the 
                        requirements of this section are satisfied; and
                            ``(ii) unless the Commission finds (in 
                        which case the Commission shall deny such 
                        registration) that--
                                    ``(I) the applicant has failed to 
                                certify to the Commission's 
                                satisfaction that it is able to 
                                consistently provide proxy advice based 
                                on accurate information and to 
                                materially comply with the procedures 
                                and methodologies disclosed under 
                                paragraph (1)(B) and with subsections 
                                (f) and (g); or
                                    ``(II) if the applicant were so 
                                registered, its registration would be 
                                subject to suspension or revocation 
                                under subsection (d).
            ``(3) Public availability of information.--Subject to 
        section 24, the Commission shall make the information and 
        documents submitted to the Commission by a proxy advisory firm 
        in its completed application for registration, or in any 
        amendment submitted under paragraph (1) or (2) of subsection 
        (c), publicly available on the Commission's website, or through 
        another comparable, readily accessible means.
    ``(c) Update of Registration.--
            ``(1) Update.--Each registered proxy advisory firm shall 
        promptly amend and update its application for registration 
        under this section if any information or document provided 
        therein becomes materially inaccurate, except that a registered 
        proxy advisory firm is not required to amend the information 
        required to be filed under subsection (b)(1)(B)(i) by filing 
        information under this paragraph, but shall amend such 
        information in the annual submission of the organization under 
        paragraph (2) of this subsection.
            ``(2) Certification.--Not later than 90 calendar days after 
        the end of each calendar year, each registered proxy advisory 
        firm shall file with the Commission an amendment to its 
        registration, in such form as the Commission, by rule, may 
        prescribe as necessary or appropriate in the public interest or 
        for the protection of investors--
                    ``(A) certifying that the information and documents 
                in the application for registration of such registered 
                proxy advisory firm continue to be accurate in all 
                material respects; and
                    ``(B) listing any material change that occurred to 
                such information or documents during the previous 
                calendar year.
    ``(d) Censure, Denial, or Suspension of Registration; Notice and 
Hearing.--The Commission, by order, shall censure, place limitations on 
the activities, functions, or operations of, suspend for a period not 
exceeding 12 months, or revoke the registration of any registered proxy 
advisory firm if the Commission finds, on the record after notice and 
opportunity for hearing, that such censure, placing of limitations, 
suspension, or revocation is necessary for the protection of investors 
and in the public interest and that such registered proxy advisory 
firm, or any person associated with such an organization, whether prior 
to or subsequent to becoming so associated--
            ``(1) has committed or omitted any act, or is subject to an 
        order or finding, enumerated in subparagraph (A), (D), (E), 
        (H), or (G) of section 15(b)(4), has been convicted of any 
        offense specified in section 15(b)(4)(B), or is enjoined from 
        any action, conduct, or practice specified in subparagraph (C) 
        of section 15(b)(4), during the 10-year period preceding the 
        date of commencement of the proceedings under this subsection, 
        or at any time thereafter;
            ``(2) has been convicted during the 10-year period 
        preceding the date on which an application for registration is 
        filed with the Commission under this section, or at any time 
        thereafter, of--
                    ``(A) any crime that is punishable by imprisonment 
                for 1 or more years, and that is not described in 
                section 15(b)(4)(B); or
                    ``(B) a substantially equivalent crime by a foreign 
                court of competent jurisdiction;
            ``(3) is subject to any order of the Commission barring or 
        suspending the right of the person to be associated with a 
        registered proxy advisory firm;
            ``(4) fails to furnish the certifications required under 
        subsections (b)(2)(C)(ii)(I) and (c)(2);
            ``(5) has engaged in one or more prohibited acts enumerated 
        in paragraph (1);
            ``(6) fails to maintain adequate financial and managerial 
        resources to consistently offer advisory services with 
        integrity, including by failing to comply with subsection (f) 
        or (g); or
            ``(7) engages in a prohibited act enumerated in subsection 
        (j).
    ``(e) Termination of Registration.--
            ``(1) Voluntary withdrawal.--A registered proxy advisory 
        firm may, upon such terms and conditions as the Commission may 
        establish as necessary in the public interest or for the 
        protection of investors, which terms and conditions shall 
        include at a minimum that the registered proxy advisory firm 
        will no longer conduct such activities as to bring it within 
        the definition of proxy advisory firm in section 3(a)(81), 
        withdraw from registration by filing a written notice of 
        withdrawal to the Commission.
            ``(2) Commission authority.--In addition to any other 
        authority of the Commission under this title, if the Commission 
        finds that a registered proxy advisory firm is no longer in 
        existence or has ceased to do business as a proxy advisory 
        firm, the Commission, by order, shall cancel the registration 
        under this section of such registered proxy advisory firm.
    ``(f) Management of Conflicts of Interest.--
            ``(1) Organization policies and procedures.--Each 
        registered proxy advisory firm shall establish, maintain, and 
        enforce written policies and procedures reasonably designed, 
        taking into consideration the nature of the business of such 
        registered proxy advisory firm and associated persons, to 
        publicly disclose and manage any conflicts of interest that 
        arise or would reasonably be expected to arise from such 
        business.
            ``(2) Commission authority.--The Commission shall, within 
        one year of enactment, issue final rules to prohibit, or 
        require the management and public disclosure of, any conflicts 
        of interest relating to the offering of proxy advisory services 
        by a registered proxy advisory firm, including, without 
        limitation, conflicts of interest relating to--
                    ``(A) the manner in which a registered proxy 
                advisory firm is compensated by the client, any 
                affiliate of the client, or any other person for 
                providing proxy advisory services;
                    ``(B) business relationships, ownership interests, 
                or any other financial or personal interests between a 
                registered proxy advisory firm, or any person 
                associated with such registered proxy advisory firm, 
                and any client, or any affiliate of such client;
                    ``(C) the formulation of proxy voting policies;
                    ``(D) the execution, or assistance with the 
                execution, of proxy votes if such votes are based upon 
                recommendations made by the proxy advisory firm in 
                which a person other than the issuer is a proponent; 
                and
                    ``(E) any other potential conflict of interest, as 
                the Commission deems necessary or appropriate in the 
                public interest or for the protection of investors.
            ``(3) Disclosure.--Each registered proxy advisory firm 
        shall annually disclose to the Commission and make publicly 
        available the economic and other factors that a reasonable 
        investor would expect to influence the recommendations of such 
        proxy advisory firm, including the ownership composition of 
        such proxy advisory firm.
    ``(g) Reliability of Proxy Advisory Firm Services.--
            ``(1) In general.--Each registered proxy advisory firm 
        shall--
                    ``(A) have staff and other resources sufficient to 
                produce proxy voting recommendations that are based on 
                accurate and current information;
                    ``(B) implement procedures that permit issuers that 
                are the subject of proxy voting recommendations--
                            ``(i) access in a reasonable time to data 
                        and information used to make recommendations; 
                        and
                            ``(ii) a reasonable opportunity to provide 
                        meaningful comment and corrections to such data 
                        and information, including the opportunity to 
                        present (in person or telephonically) details 
                        to the person responsible for developing such 
                        data and information prior to the publication 
                        of proxy voting recommendations to clients; and
                    ``(C) employ an ombudsman to receive complaints 
                about the accuracy of information used in making 
                recommendations from the subjects of the proxy advisory 
                firm's voting recommendations and seek to resolve those 
                complaints in a timely fashion and prior to the 
                publication of proxy voting recommendations to clients;
                    ``(D) if such ombudsman is unable to resolve such 
                complaints prior to the publication of proxy voting 
                recommendations to clients, include in the final report 
                of the firm to clients a statement detailing its 
                complaints, if requested in writing by the company; and
                    ``(E) provide to clients receiving proxy advisory 
                firm recommendations--
                            ``(i) information demonstrating that draft 
                        recommendations (other than recommendations 
                        relating to an issuer-sponsored proposal or 
                        recommendations consistent with that of the 
                        majority of the board of directors of the 
                        issuer) are in the best economic interest of 
                        shareholders; and
                            ``(ii) a certification by the chief 
                        executive officer, chief financial officer, and 
                        the primary executive responsible for 
                        overseeing the compilation and dissemination of 
                        proxy voting advice that the draft 
                        recommendations (other than recommendations 
                        relating to an issuer-sponsored proposal or 
                        recommendations consistent with that of the 
                        majority of the board of directors of the 
                        issuer)--
                                    ``(I) are based on internal 
                                controls and procedures that are 
                                designed to ensure accurate 
                                information;
                                    ``(II) do not violate applicable 
                                State or Federal law; and
                                    ``(III) prioritize economic returns 
                                to shareholders.
            ``(2) Definitions.--In this subsection:
                    ``(A) Data and information used to make 
                recommendations.--The term `data and information used 
                to make voting recommendations'--
                            ``(i) means the financial, operational, or 
                        descriptive data and information on an issuer 
                        used by proxy advisory firms and any contextual 
                        or substantive analysis impacting the 
                        recommendation; and
                            ``(ii) does not include the entirety of the 
                        proxy advisory firm's final report to its 
                        clients.
                    ``(B) Reasonable time.--The term `reasonable 
                time'--
                            ``(i) means not less than 1 week before the 
                        publication of proxy voting recommendations for 
                        clients, unless otherwise defined through a 
                        final rule issued by the Commission; and
                            ``(ii) shall not otherwise interfere with a 
                        proxy advisory firm's ability to provide its 
                        clients with timely access to accurate proxy 
                        voting research, analysis, or recommendations.
    ``(h) Private Right of Action With Respect to Illegal 
Recommendations.--Any proxy advisory firm that endorses a proposal that 
is not supported by the issuer but is approved and subsequently found 
by a court of competent jurisdiction to violate State or Federal law 
shall be liable to the applicable issuer for the costs associated with 
the approval of such proposal, including implementation costs and any 
penalties incurred by the issuer.
    ``(i) Designation of Compliance Officer.--Each registered proxy 
advisory firm shall designate an individual who reports directly to 
senior management as responsible for administering the policies and 
procedures that are required to be established pursuant to subsections 
(f) and (g), and for ensuring compliance with the securities laws and 
the rules and regulations thereunder, including those promulgated by 
the Commission pursuant to this section.
    ``(j) Prohibited Conduct.--
            ``(1) Prohibited acts and practices.--Not later than one 
        year after the date of enactment of this section, the 
        Commission shall issue final rules to prohibit any act or 
        practice relating to the offering of proxy advisory services by 
        a registered proxy advisory firm that the Commission determines 
        to be unfair, coercive, or abusive, including any act or 
        practice relating to--
                    ``(A) advisory or consulting services (offered 
                directly or indirectly, including through an affiliate) 
                related to corporate governance issues; or
                    ``(B) modifying a voting recommendation or 
                otherwise departing from its adopted systematic 
                procedures and methodologies in the provision of proxy 
                advisory services, based on whether an issuer, or 
                affiliate thereof, subscribes or will subscribe to 
                other services or product of the registered proxy 
                advisory firm or any person associated with such 
                organization.
            ``(2) Rule of construction.--Nothing in paragraph (1), or 
        in any rules or regulations adopted thereunder, may be 
        construed to modify, impair, or supersede the operation of any 
        of the antitrust laws (as defined in the first section of the 
        Clayton Act, except that such term includes section 5 of the 
        Federal Trade Commission Act, to the extent that such section 5 
        applies to unfair methods of competition).
    ``(k) Statements of Financial Condition.--Each registered proxy 
advisory firm shall, on a confidential basis, file with the Commission, 
at intervals determined by the Commission, such financial statements, 
certified (if required by the rules or regulations of the Commission) 
by an independent public auditor, and information concerning its 
financial condition, as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the protection 
of investors.
    ``(l) Annual Report.--Each registered proxy advisory firm shall, at 
the beginning of each fiscal year of such firm, report to the 
Commission on the number of--
            ``(1) shareholder proposals its staff reviewed in the prior 
        fiscal year;
            ``(2) recommendations made in the prior fiscal year;
            ``(3) staff who reviewed and made recommendations on such 
        proposals in the prior fiscal year (and the qualifications of 
        such staff); and
            ``(4) recommendations made in the prior fiscal year where 
        the proponent of such recommendation was a client of or 
        received services from the proxy advisory firm.
    ``(m) Transparent Policies.--Each registered proxy advisory firm 
shall file with the Commission and make publicly available its 
methodology for the formulation of proxy voting policies and voting 
recommendations.
    ``(n) Rules of Construction.--Registration under and compliance 
with this section does not constitute a waiver of, or otherwise 
diminish, any right, privilege, or defense that a registered proxy 
advisory firm may otherwise have under any provision of State or 
Federal law, including any rule, regulation, or order thereunder.
    ``(o) Regulations.--
            ``(1) New provisions.--Such rules and regulations as are 
        required by this section or are otherwise necessary to carry 
        out this section, including the application form required under 
        subsection (a)--
                    ``(A) shall be issued by the Commission, not later 
                than 180 days after the date of enactment of this 
                section; and
                    ``(B) shall become effective not later than 1 year 
                after the date of enactment of this section.
            ``(2) Review of existing regulations.--Not later than 270 
        days after the date of enactment of this section, the 
        Commission shall--
                    ``(A) review its existing rules and regulations 
                which affect the operations of proxy advisory firms; 
                and
                    ``(B) amend or revise such rules and regulations in 
                accordance with the purposes of this section, and issue 
                such guidance as the Commission may prescribe as 
                necessary or appropriate in the public interest or for 
                the protection of investors.
    ``(p) Applicability.--This section, other than subsection (n), 
which shall apply on the date of enactment of this section, shall apply 
on the earlier of--
            ``(1) the date on which regulations are issued in final 
        form under subsection (o)(1); or
            ``(2) 270 days after the date of enactment of this 
        section.''.
    (b) Conforming Amendment.--Section 17(a)(1) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78q(a)(1)) is amended by inserting 
``proxy advisory firm,'' after ``nationally recognized statistical 
rating organization,''.

SEC. 4. DUTIES OF INVESTMENT ADVISORS, ASSET MANAGERS, AND PENSION 
              FUNDS.

    (a) Reporting Requirements.--Not later than 1 year after the date 
of the enactment of this Act and annually thereafter, any covered 
entity that retains the services of a proxy advisory firm with respect 
to the preceding year shall provide to the beneficiaries and customers 
of the covered entity, as applicable, a report that includes--
            (1) the percentage of votes cast on shareholder proposals 
        that follow proxy advisor firm recommendations for each proxy 
        advisory firm retained by the covered entity;
            (2) the percentage of votes cast on environmental-, social-
        , or governance-related shareholder proposals that follow proxy 
        advisory firm recommendations for each proxy advisory firm 
        retained by the covered entity; and
            (3) an explanation of--
                    (A) how proxy advisory firm recommendations are 
                used by the covered entity in making voting decisions;
                    (B) how such recommendations are reconciled with 
                the fiduciary duty of the covered entity to vote in the 
                best economic interests of shareholders;
                    (C) how frequently votes are changed when an error 
                occurs or due to new information from issuers; and
                    (D) the degree to which investment professionals of 
                the covered entity are involved in such voting 
                decisions.
    (b) Requirements.--With respect to shareholder proposals of an 
issuer, a covered entity with more than $100,000,000,000 in assets 
under management shall--
            (1) provide customers with a mechanism to indicate how the 
        covered entity should vote on their behalf;
            (2) in any materials provided to customers and related to 
        customers voting their shares, clarify that shareholders are 
        not required to vote on every proposal; and
            (3) with respect to each shareholder proposal for which the 
        covered entity voted (other than an issuer-sponsored proposal 
        or a vote consistent with the recommendation of the majority of 
        the board of directors of the issuer), make publicly available 
        the economic analysis the covered entity conducted to determine 
        that the vote is in the best economic interest of the 
        customers.
    (c) Covered Entity Defined.--In this section, the term ``covered 
entity'' means an investment advisor, asset manager, or pension fund 
with more than $100,000,000 in assets under management.

SEC. 5. TRANSPARENCY REGARDING ESG FUNDS.

    Section 10 of the Securities Act of 1933 (15 U.S.C. 77j) is amended 
by adding at the end the following:
    ``(g) Transparency Regarding ESG Funds.--An investment company that 
holds itself out as offering an index fund under which investments are 
made pursuant to a set of environmental, social, or governance 
standards shall disclose in tabular form on the first page of each 
prospectus required pursuant to this section the 1-, 3-, and 5-year 
annual returns and fees charged to investors with respect to such fund 
compared with the annual returns and fees charged to investors for the 
most readily comparable broad-based index fund offered by such 
investment company under which investments are not made pursuant to 
such standards, or if such investment company does not offer a 
comparable index fund, a reasonably similar comparison to a readily 
comparable broad-based index fund.''.

SEC. 6. RESUBMISSION THRESHOLDS FOR SHAREHOLDER PROPOSALS.

    Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) 
is amended by adding at the end the following:
    ``(k) Exclusion of Certain Shareholder Proposal Resubmissions.--A 
shareholder proposal may be excluded from any proxy or consent 
solicitation material for an annual meeting of the shareholders of an 
issuer if the proposal--
            ``(1) is not germane (without regard to whether the 
        proposal involves a significant social policy issue); or
            ``(2) addresses substantially the same subject matter 
        (without regard to whether the proposal involves a significant 
        social policy issue) as a proposal previously included in the 
        proxy or consent solicitation material for an annual meeting of 
        the shareholders of an issuer--
                    ``(A) for a meeting of the shareholders conducted 
                in the preceding 5 years; and
                    ``(B) if the most recent vote--
                            ``(i) occurred in the preceding 3 years; 
                        and
                            ``(ii)(I) if voted on once during such 
                        period, received less than 5 percent of the 
                        votes;
                            ``(II) if voted on twice during such 
                        period, received less than 15 percent of the 
                        votes; or
                            ``(III) if voted on three or more times 
                        during such period, received less 25 percent of 
                        the votes.''.

SEC. 7. PROHIBITION ON ROBOVOTING.

    Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) 
is further amended by adding at the end the following:
    ``(l) Prohibition on Robovoting.--
            ``(1) In general.--The Commission shall issue final rules 
        prohibiting the use of robovoting with respect to votes related 
        to proxy or consent solicitation materials.
            ``(2) Robovoting defined.--The term `robovoting' means the 
        practice of automatically voting in a manner consistent with 
        the recommendations of a proxy advisory firm.''.

SEC. 8. LIABILITY FOR CERTAIN FAILURES TO DISCLOSE MATERIAL 
              INFORMATION.

    Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) 
is further amended by adding at the end the following:
    ``(m) False or Misleading Statements.--For purposes of section 18, 
failure to disclose material information regarding proxy voting advice 
that makes a recommendation to a security holder as to its vote, 
consent, or authorization on a specific matter for which security 
holder approval is solicited, and that is furnished by a person that 
markets its expertise as a provider of such proxy voting advice, 
separately from other forms of investment advice, and sells such proxy 
voting advice for a fee, shall be considered to be false or misleading 
with respect to a material fact.''.

SEC. 9. STUDY OF CERTAIN ISSUES WITH RESPECT TO SHAREHOLDER PROPOSALS 
              AND PROXY ADVISORY FIRMS.

    Not later than 180 days after the date of the enactment of this 
Act, and every 5 years thereafter, the Securities and Exchange 
Commission, including the Office of the Advocate for Small Business 
Capital Formation, shall carry out a study and submit a report to the 
Committee on Banking, Housing, and Urban Affairs of the Senate and the 
Committee on Financial Services of the House of Representatives on 
shareholder proposals and proxy advisory firms that includes, with 
respect to, in the case of the first report, the preceding 10 years, 
and in the case of each subsequent report, the preceding 5 years, the 
following:
            (1) The costs that issuers incurred in responding to--
                    (A) politically, environmentally, or socially 
                motivated shareholder proposals; and
                    (B) shareholder proposals that failed to be agreed 
                to more than once.
            (2) The amount of fees that public companies paid to proxy 
        advisory firms and persons associated with proxy advisory 
        firms.
            (3) The source of funds with respect to payment of such 
        fees.
            (4) The academic or professional qualifications of the 
        staff members that provide proxy advisory services at proxy 
        advisory firms.
            (5) The number of shareholder proposals that, if adopted, 
        would require an issuer to violate a State or Federal law.
            (6) An estimate of the costs that issuers would incur if 
        such proposals were adopted.
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