,i #aagth ,,congress #b;d ,session ,h4 ,r4 #heba ,,in ,,the ,,house ,,of ,,representatives ,july #bg1 #bjbb,mr4 ,huizenga 7for himself and ,mr4 ,luetkemeyer7 introduced the following bill2 which was referred to the ,committee on ,financial ,services ,a ,,bill ,to amend the ,investment ,advisers ,act of #aidj to require investment advisers for passively managed funds to arrange for pass-through voting of proxies for certain securities1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,i,nvestor ,democracy is ,e,xpected ,act or the ,,index ,act4 #b4 ,proxy voting of passively managed funds 7a7 ,in general ,the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#a et seq47 is amended by inserting after section #bjh 7#ae ,u4,s4,c4 #hj;b-#h7 the following3 #bjh;,a4 ,requirement with respect to proxy voting of passively managed funds 7a7 ,definitions ,in this section-- 7#a7 the term covered security-- 7,a7 means a voting security1 as that term is defined in section #b7;a7 of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#b7;a771 in which a qualified fund is invested2 and 7,b7 does not include any voting security 7as defined in subparagraph 7,a77 of an issuer registered with the ,commission as an investment company under section #h of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#h72 7#b7 the term passively managed fund means a qualified fund that-- 7,a7 is designed to track1 or is derived from1 an index of securities or a portion of such an index2 7,b7 discloses that the qualified fund is a passive fund or an index fund2 7,c7 allocates not less than #dj percent of the total assets of the qualified fund to an investment strategy that is designed to track1 or is derived from1 an index of securities or a portion of such an index2 or 7,d7 discloses that an allocation described in subparagraph 7,c7 follows an investment strategy that is passive or based on an index of securities2 7#c7 the term qualified fund means-- 7,a7 an investment company1 as that term is defined in section #c of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#c72 7,b7 a private fund2 7,c7 an eligible deferred compensation plan1 as that term is defined in section #deg7;b7 of the ,internal ,revenue ,code of #aihf2 7,d7 an entity described in section #c7;c77#aa7 of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#c7;c77#aa772 7,e7 a plan maintained by an employer described in clause 7i71 7ii71 or 7iii7 of section #djc7;b77#a77;,a7 of the ,internal ,revenue ,code of #aihf to provide annuity contracts described in section #djc7;b7 of such ,code2 7,f7 a common trust fund1 or similar fund1 maintained by a bank2 7,g7 any fund established under section #hdch7;b77#a7 of title #e1 ,united ,states ,code2 or 7,h7 any separate managed account of a client of an investment adviser2 7#d7 the term registrant means an issuer of covered securities2 7#e7 the term routine matter does not include-- 7,a7 a proposal that is not submitted to a holder of covered securities by means of a proxy statement comparable to that described in section #bdj4ad;a-#aja of title #ag1 ,code of ,federal ,regulations1 or any successor regulation2 7,b7 a proposal that is-- 7i7 the subject of a counter-solicitation2 or 7ii7 part of a proposal made by a person other than the applicable registrant2 7,c7 a proposal that relates to a merger or consolidation1 except when1 with respect to a registrant-- 7i7 the proposal is to merge with a wholly owned subsidiary of the registrant2 and 7ii7 holders of covered securities issued by the registrant that dissent to the proposal do not have rights of appraisal2 7,d7 a proposal that relates to the sale1 lease1 or exchange of all1 or substantially all1 of the property and assets of a registrant2 7,e7 an election for directors 7or comparable positions72 or 7,f7 any other matter determined by the ,commission or an exchange registered under section #f of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;f7 to be not routine2 and 7#f7 the term voting person means a person that provides voting instructions under subsection 7b7 or 7c74 7b7 ,requirement 7#a7 ,in general ,subject to subsection 7g71 if an investment adviser holds authority to vote a proxy solicited pursuant to section #ad of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghn7 in connection with any vote of covered securities held by a passively managed fund1 and the voting authority held by that investment adviser with respect to those covered securities 7when combined with the voting authority of other persons controlled by1 or under common control with1 that investment adviser7 is more than #a percent of the voting authority of the outstanding securities of the registrant subject to the vote1 the investment adviser shall vote proportionate amounts of those covered securities in accordance with the voting instructions of-- 7,a7 in the case of a passively managed fund that issues securities1 persons holding securities in the passively managed fund1 such that1 solely for the purposes of that vote1 the percentage of securities held by such a person shall be deemed to be the percentage of the covered securities beneficially owned by that person2 and 7,b7 in all cases other than a case described in subparagraph 7,a71 persons holding economic interests in the passively managed fund1 such that1 solely for purposes of that vote1 the percentage of economic interests held by such a person shall be deemed to be the percentage of the covered securities beneficially owned by that person4 7#b7 ,prohibition ,if paragraph 7#a7 applies with respect to any vote of covered securities and the investment adviser to which that paragraph applies does not receiving voting instructions from all persons described in subparagraphs 7,a7 and 7,b7 of that paragraph1 the investment adviser may not vote the proportion of the shares of the covered securities for which the investment adviser does not receive voting instructions4 7c7 ,passively managed fund as security holder of another passively managed fund ,if a passively managed fund 7referred to in this subsection as the holding fund7 holds securities of another passively managed fund 7referred to in this subsection as the held fund71 and there is a vote with respect to covered securities held by the held fund1 the investment adviser of the holding fund shall obtain voting instructions from persons holding securities in the holding fund1 or to persons holding economic interests in the holding fund1 as applicable1 with respect to that vote in the manner described in subsection 7b74 7d7 ,prohibitions 7#a7 ,reimbursement ,no person may seek reimbursement from a registrant1 or require any expenses incurred to be paid by a registrant1 with respect to the obligations imposed under this section4 7#b7 ,partial compliance ,an investment adviser may not solicit voting instructions from some1 but not all1 voting persons under subsection 7b77#a7 or 7c71 as applicable4 7e7 ,exceptions 7#a7 ,voting on routine matters ,notwithstanding subsections 7b77#a71 7b77#b71 and 7d77#b71 if an investment adviser chooses not to solicit voting instructions with respect to a vote described in subsection 7b77#a7 or 7c71 or1 as of the date that is #aj days before such a vote1 the investment adviser has not received voting instructions from a person described in subparagraph 7,a7 or 7,b7 of subsection 7b77#a7 or subsection 7c71 as applicable1 the investment adviser may vote the covered securities for which the investment adviser has not received voting instructions with respect to a routine matter4 7#b7 ,mirror voting exception for matters requiring approval of a majority of outstanding securities ,notwithstanding subsections 7b77#a71 7b77#b71 and 7d77#b71 if a matter to be considered at a meeting of a registrant requires the approval of a majority of the outstanding securities of the registrant entitled to vote on the matter1 an investment adviser to which any such provision applies may1 with respect to any covered securities for which voting instructions have not been received1 as of the date that is #aj days before that vote1 vote the uninstructed covered securities in a manner that is proportionate to the votes submitted on the matter by all other security holders of the registrant4 7f7 ,dissemination of information 7#a7 ,in general ,any investment adviser subject to the requirements of subsection 7b7 or 7c7 shall1 with respect to the dissemination of information and other materials to a voting person1 comply with the following requirements1 unless the voting person affirmatively declines to receive that information and other materials3 7,a7 ,provide to the voting person-- 7i7 a proxy statement1 other proxy soliciting material1 or an information statement2 7ii7 an annual report from the applicable registrant2 7iii7 a form of voting instruction to return to the investment adviser2 and 7iv7 any control or identification number that the voting person needs to return to the investment adviser the voting instruction provided under subparagraph 7,b74 7,b7 ,provide the voting person with not less than #e business days after the date on which the voting person receives the materials provided under paragraph 7#a7 to return those materials to the investment adviser4 7#b7 ,electronic delivery ,all1 or any portion1 of the materials that an investment adviser is required to provide under paragraph 7#a77;,a7 may be provided electronically1 including an internet web site address provided by the applicable registrant or a third party4 7#c7 ,option for investment advisers ,an investment adviser may provide recommendations to voting persons with the material provided under paragraph 7#a77;,a71 or after providing the material under that paragraph1 if the investment adviser permits voting recommendations to be provided to voting persons by third parties on a nondiscriminatory basis and on a wide range of views4 7#d7 ,satisfaction of requirements by passively managed fund ,with respect to any requirement applicable to an investment adviser under this subsection1 the requirement may be satisfied by the applicable passively managed fund1 which may cover any expenses1 direct or indirect1 incurred in carrying out that requirement4 7g7 ,safe harbor and rule of construction regarding duties ,an investment adviser-- 7#a7 with respect to a matter that is not a routine matter1 may choose not to solicit voting instructions from any person under subsection 7b77#a7 or 7c71 subject to subsections 7d77#b7 and 7e72 and 7#b7 if the investment adviser chooses not to solicit voting instructions under subparagraph 7,a71 shall not be considered to be in violation of any duty under any ,federal or ,state law for failing to vote the applicable securities4 4 7b7 ,effective date ,section #bjh;,a of the ,investment ,advisers ,act of #aidj1 as added by subsection 7a71 shall take effect on the first ,august #a that occurs after the date that is #b years after the date of enactment of this ,act4 #c4 ,voting instructions from customers ,section #ad7;b77#a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #ghn7b77#a77 is amended by inserting voting instruction1 after consent14