Egan-Jones Letter Doesn’t Necessarily Require Case-by-Case Determinations
In a September 15 no-action letter, the Division of Investment Management staff confirmed that consistent with its May 2004 Egan-Jones no-action letter, an adviser may determine that a proxy voting firm is capable of making impartial proxy recommendations in the best interest of the adviserís clients based on the proxy voting firmís conflict procedures, rather than making that determination on a case-by-case basis.
Thatís good news for Institutional Shareholder Services, which requested the letter. Following the issuance of the Egan-Jones letter, some of ISSís competitors read the letter to imply that an adviser would have to make an issuer-by-issuer determination about the proxy voting servicesí conflicts (IM Insight, June 21, 2004). In the ISS letter, however, the staff said it agreed that a case-by-case evaluation of a firmís conflicts "is not the exclusive means by which an investment adviser may fulfill its fiduciary duty of care in connection with voting client proxies in accordance with a proxy voting firmís recommendations."