Hedge fund managers want the Securities and Exchange Commission to offer guidance clarifying when they can disclose they will not vote proxies. The SEC should convey an understanding that sometimes it may be a waste of time and resources for hedge funds to vote proxies, said the chief compliance officer of a New York-based hedge fund firm. "[It] would make life easier for the funds,” he said. Hedge funds whose strategies rely on statistical arbitrage and algorithmic trading generally do not vote proxies.
By the time the vote occurs, the hedge funds may no longer have a position in the security, said the CCO. Those hedge funds do not want to go out and spend $50,000 on a proxy voting service, he said. But they fear SEC examiners bringing actions against them for failing to vote proxies. “You do it at your own peril,” he said. “The SEC has said nothing one way or another.”
The SEC did not provide clarity about proxy voting when the question was put forth by the American Bar Association‘s subcommittee on private investment entities in a letter to the SEC. Jennifer Sawin, assistant director of the SEC’s Division of Investment Management, told a conference in January that the answer would depend on facts and circumstances. Robert Plaze, associate director of the Division, said the SEC is not considering further guidance at this time.