,,ii #aaith ,,congress #ast ,session ,s4 #cjee ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,october #bc1 #bjbe ,mr4 ,reed 7for himself and ,mr4 ,tillis7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to amend the ,investment ,advisers ,act of #aidj to require proxy advisory firms to register as investment advisers under that ,act1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,corporate ,governance ,fairness ,act4 #b4 ,proxy advisory firms ,the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#a et seq47 is amended-- 7#a7 in section #bjb7;a7 7#ae ,u4,s4,c4 #hj;b-#b7;a77-- 7,a7 in paragraph 7#aa7-- 7i7 in the matter preceding subparagraph 7,a71 by inserting 1 and includes a proxy advisory firm after promulgates analyses or reports concerning securities2 and 7ii7 in subparagraph 7,f71 by striking on behalf of others22 and inserting on behalf of others or acts as a proxy advisory firm22 7,b7 by redesignating the second paragraph 7#bi7 7relating to commodity pool and other terms7 as paragraph 7#ca72 and 7,c7 by adding at the end the following3 7#cb7 7,a7 ,the term proxy advisory firm-- 7i7 subject to clause 7ii71 means any person that is engaged in the business of providing proxy voting research1 analysis1 ratings1 or recommendations to investors in issuers by means of written or oral statements that are reasonably designed to meet the objectives or needs of specific clients1 investors1 or their accounts1 including proxy voting research1 analysis1 ratings1 or recommendations that are tailored to or reflect particular proxy voting guidelines developed or selected by investors2 and 7ii7 does not include any person described in clause 7i7 that1 together with the parent1 subsidiaries1 and affiliates of the person1 receives on a consolidated basis in a fiscal year gross receipts from the clients of the person in an amount that is not more than #e1jjj1jjj1 as adjusted annually by the ,commission to reflect the percentage change for the previous calendar year in the gross domestic product of the ,united ,states1 as calculated by the ,bureau of ,economic ,analysis of the ,department of ,commerce1 except that a person described in this clause may choose to be considered a proxy advisory firm for the purposes of this ,act4 7,b7 ,notwithstanding any other provision of law or regulation-- 7i7 for the purposes of this ,act1 a proxy advisory firm may not be considered to be excluded from the definition of the term investment adviser under paragraph 7#aa7 because of the application of subparagraph 7,d7 of that paragraph2 and 7ii7 only the ,commission1 under subparagraph 7,h7 of paragraph 7#aa71 may designate a proxy advisory firm as a person described in that subparagraph1 except that the ,commission may not make such a designation if the proxy advisory firm is described in any of paragraphs 7#a7 through 7#i7 of section #bjc7;e74 2 7#b7 in section #bjc 7#ae ,u4,s4,c4 #hj;b-#c71 by adding at the end the following3 7o7 ,rule of construction ,nothing in subsections 7b7 through 7n7 may be construed to exempt a proxy advisory firm from the application of the provisions of subsection 7a74 2 7#c7 in section #bjc;,a7a77#a7 7#ae ,u4,s4,c4 #hj;b-#c;a7a77#a77-- 7,a7 in subparagraph 7,a71 by striking or at the end2 7,b7 in subparagraph 7,b71 by striking the period at the end and inserting 2 or2 and 7,c7 by adding at the end the following3 7,c7 is a proxy advisory firm4 2 7#d7 in section #bjd 7#ae ,u4,s4,c4 #hj;b-#d71 by adding at the end the following3 7g7 ,examination of records of proxy advisory firms 7#a7 ,periodic and special examinations ,the ,commission-- 7,a7 shall-- 7i7 beginning not later than #a year after the date of enactment of this subsection1 conduct periodic inspections of the records of proxy advisory firms in accordance with a schedule established by the ,commission2 and 7ii7 when conducting each inspection under clause 7i71 review-- 7,i7 whether any proxy advisory firm1 with respect to any statement made by the firm to a client of the proxy advisory firm1 knowingly-- 7aa7 made any false statement to the client2 or 7bb7 omitted to state a material fact that would be necessary to make the statement to the client not misleading2 and 7,,ii7 policies and programs regarding conflicts of interest at proxy advisory firms2 and 7,b7 may conduct1 in addition to the inspections conducted under subparagraph 7,a71 at any time and from time to time1 such additional1 special1 and other examinations of proxy advisory firms and the records of proxy advisory firms as the ,commission may prescribe as necessary and appropriate in the public interest and for the protection of investors4 7#b7 ,availability of records ,a proxy advisory firm shall make available to the ,commission any copies or extracts from the records described in subparagraph 7,a77i7 or 7,b7 of paragraph 7#a71 as applicable1 as may be prepared without undue effort1 expense1 or delay1 as the ,commission or the representatives of the ,commission may reasonably request4 2 and 7#e7 in section #baa7;h7 7#ae ,u4,s4,c4 #hj;b-#aa7;h77-- 7,a7 by redesignating paragraphs 7#a7 and 7#b7 as subparagraphs 7,a7 and 7,b71 respectively1 and adjusting the margins accordingly2 7,b7 in the matter preceding subparagraph 7,a71 as so redesignated1 by striking ,the ,commission and inserting the following3 7#a7 ,in general ,the ,commission 2 7,c7 in paragraph 7#a71 as so redesignated-- 7i7 in subparagraph 7,a71 as so redesignated1 by striking and at the end2 7ii7 in subparagraph 7,b71 as so redesignated1 by striking the period at the end and inserting 2 and2 and 7iii7 by adding at the end the following3 7,c7 not later than #b years after the date of enactment of the ,corporate ,governance ,fairness ,act1 and after consulting with all relevant stakeholders1 submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives a report that-- 7i7 evaluates existing1 as of the date on which the report is submitted-- 7,i7 policies and programs regarding conflicts of interest at proxy advisory firms2 and 7,,ii7 policies and procedures at proxy advisory firms that are designed to avoid knowingly making any false statement1 or omitting to state a material fact1 that would be necessary to make a statement to a client of the proxy advisory firm not misleading2 and 7ii7 examines whether any additional protection to investors under subparagraph 7,b7 would be helpful to those investors1 including policies and procedures that allow investors to consider1 in a reasonably timely manner1 material information that is necessary for the investors to-- 7,i7 make informed investment decisions2 and 7,,ii7 exercise any of the rights of the investors that are conferred by securities held by the investors4 2 and 7,d7 by adding at the end the following3 7#b7 ,updates of proxy advisory firms report ,not less frequently than once every #e years1 beginning on the date on which the ,commission submits the report required under paragraph 7#a77;,c71 the ,commission shall submit to the congressional committees described in that paragraph an updated version of that report1 which shall evaluate whether the existing rules of the ,commission1 as of the date on which the applicable updated report is submitted1 sufficiently protect investors1 including the ability of investors to consider1 in a reasonably timely manner1 material information that is necessary for the investors to-- 7,a7 make informed investment decisions2 and 7,b7 exercise any of the rights of the investors that are conferred by securities held by the investors4 4