The Securities and Exchange Commission recently announced it is seeking public comment on a wide number of what many people called “proxy plumbing” issues. Mostly mundane changes to the proxy voting infrastructure.

However, buried on the list is a practice favored by some activist hedge funds to boost their voting power in a company without putting up much money. It is called “empty voting.” The regulator wants to determine whether this practice is being used to inappropriately influence corporate voting results.

The regulator notes that “empty voting” occurs, for example, if a holder of shares buys a put option to sell those shares, the holder retains voting rights on all of those shares, even though it has hedged away at least some of its economic interest. Empty voting can also occur if a shareholder sells its shares after the record date of a shareholder meeting, but before the meeting. In that instance, the shareholder retains the right to vote those shares, even though it no longer has an economic interest in those shares.....

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