H.R. 8265: Empowering Shareholders Act of 2026

The Empowering Shareholders Act of 2026 is designed to amend the Investment Advisers Act of 1940 to establish new requirements for how proxy voting is handled for passively managed funds.

Key Provisions

• Proxy Voting Instructions: Investment advisers responsible for voting on behalf of passively managed funds must follow the instructions of the beneficial owners of the voting securities. This includes options such as:
  • Voting according to the beneficial owner's guidance or a specified published voting policy.
  • Voting in line with the recommendations of the issuer's board of directors.
  • Abstaining from voting, while still being considered present for quorum purposes.
  • Instructing vote tabulators to reflect the shares voted by other shareholders.
• Exceptions: These voting requirements do not apply to routine matters, which typically include elections for boards of directors, compensation issues, auditor selections, and declassification proposals.
• Safe Harbor Provisions: Investment advisers who follow the outlined voting procedures will not be held liable for their voting decisions or for not soliciting instructions from shareholders, provided they comply with the rules established by this act.
• Foreign Private Issuers Exemption: The new proxy voting rules may not apply to foreign private issuers, as long as their voting policies are clearly communicated to beneficial owners.
• Information Dissemination: Advisers must ensure that relevant information about voting is communicated to owners, unless the owners choose not to receive such information. This may include providing materials electronically.

Definitions

Several terms are defined to clarify the scope of the legislation, including:

• Covered Security: This refers to a voting security in which a qualified fund is invested.
• Passively Managed Fund: Defined as a fund that tracks an index of securities or allocates a significant portion of its assets to such an index.
• Published Voting Policy: A documented guideline on how shares are anticipated to be voted, available to stakeholders.
• Routine Matter: Specific proposals that pertain to standard corporate governance practices.

Effective Date

The amendments made by this act will take effect one year after its enactment.

Relevant Companies

• Vanguard - A major investment management firm that offers various passively managed funds, which would need to adjust their proxy voting processes under this bill.
• BlackRock - Another leading asset management company that may be required to implement new compliance measures related to proxy voting for its passively managed funds.
• State Street Corporation - As a significant player in index funds and ETFs, changes in proxy voting procedures under this act could influence their management strategies.