Introduction
Form 13F filers will need to prepare soon for the new SEC reporting requirements mandated under the final N-PX rule. Mutual Funds report their proxy votes on Form N-PX. Under the new rule, they will be required to file in XML format instead of the previous HTML/ASCII format. I reviewed the impact of the rule for Mutual Funds in a recent blog, The SEC modernizes Form N-PX to require Mutual Funds to report proxy votes in XML. This rule impacts more than just funds. Institutional investment managers who report on Form 13F will be required to report their say on pay vote information on Form N-PX.
The N-PX report filed annually by 13F managers will consist of the standard cover and proxy vote record information table, similar to their existing Form 13F holdings reports also filed in XML format. The proxy vote record table requires information about the securities which the manager exercises their vote when the company holds a say-on-pay vote. The SEC requires public companies to conduct an advisory shareholder vote at least once every three years related to their executive compensation, called a “say-on-pay” vote. While the vote is not binding, the results often receive significant attention from shareholders and financial markets. In the N-PX proxy vote table, managers will report required information about the issuer and how they voted for the “Say-On-Pay” item. Additionally, two or more institutional managers can file jointly on Form N-PX, similar to Form 13F.
Confidential treatment
Currently, institutional managers can request confidential treatment from publicly reporting on Form 13F some or all of the 13F securities they hold during a given period. This provision is designed to protect their specific investing strategy from becoming made public. Similarly, the SEC included a provision in the N-PX rule to allow 13F filers to request confidential treatment from reporting their say-on-pay proxy votes on Form N-PX. New EDGAR form types N-PX CTR and N-PX CTR/A are available for this process.
Notice filing
The final rule requires all institutional managers to file some form of N-PX for securities they hold related to “say-on-pay” votes. Even if the manager has a practice of not voting and does not vote for any say-on-pay proxy, they must still file an N-PX notice report. In this case, they are not required to disclose any security-level information in the proxy vote record table. The notice needs to include the N-PX cover page and signatures. A Notice filing would also be used by managers whose say-on-pay voting records are being reported by another 13F manager.
Compliance timing
The data for the say-on-pay votes will need to be recorded for all shareholder meetings held between July 1st of one year to June 30th of the following year. This information is then reported annually on Form N-PX by August 31st. Affected Institutional managers need to file their first N-PX (in the new XML format) by August 31, 2024, for the annual reporting period from July 1, 2023, to June 30, 2024. The SEC adopted timing adjustments for investment managers that become newly subject to Form 13F filing requirements or that cease being subject to Form 13F requirements in the final rule. 13F filers must collect the required say-on-pay vote data now to prepare for the upcoming N-PX filing obligation.
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Resources
- Form N-PX Worksheets: https://www.toppanmerrill.com/sec-edgar-resources/form-n-px/
