From: Coleman, Frank [colemanf@cbis-fsc.com] Sent: Tuesday, October 29, 2002 3:53 PM To: 'rule-comments@sec.gov' Subject: File No. S7-38-02 October 29, 2002 Jonathan G. Katz Secretary Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549-0609 Re: Proposed Rule: Proxy Voting by Investment Advisers File No. S7-38-02 Release No. IA-2059 Dear Mr. Katz: Christian Brothers Investment Services, Inc. ("CBIS"), a registered investment adviser under the Investment Advisers Act of 1940, would like to commend the Securities and Exchange Commission ("the Commission") on its Proposed Rule issued September 19, 2002, relative to proxy voting disclosure by investment advisers. The proposed rule, which requires investment advisers to adopt and implement proxy-voting policies and procedures in the best interests of their clients, to disclose those policies and procedures to their clients, and to disclose to clients how they may obtain information regarding the adviser's actual proxy votes, is an important step forward in ensuring that investment advisers are accountable to their clients. We note as well that, on the same day the Commission issued its Proposed Rule relative to investment advisers, it issued an analogous rule applicable to mutual funds, requiring disclosure of proxy-voting policies and proxy-voting records. These twin rules, if adopted, would constitute a tremendous step forward, and the Commission should be commended for undertaking these bold initiatives to promote transparency in corporate governance and financial markets at this critical historic moment - in the aftermath of corporate scandals that have shaken confidence in our financial institutions. CBIS manages approximately $3 billion for Catholic organizations seeking to combine faith and finance through the responsible stewardship of Catholic assets. We strive to integrate faith-based values into the investment process through a disciplined approach to socially responsible investing that includes active engagement with the companies whose shares we own. We have therefore voluntarily disclosed our proxy-voting policies and proxy votes to our client participants since 1989. We consider such disclosure fundamental to the fiduciary duty we owe our client participants to vote their proxies in a manner consistent with their best interests. In fact, we have always thought it an anomaly that the policies and practices of investment advisers in voting their clients' securities did not have to be disclosed to those clients. The Proposed Rule would end this anomaly by making such disclosure mandatory, and we strongly support this change. In addition to our support of the proposed changes, we also would support the following as critical components of the proposed rule changes: * We recommend the same record-keeping requirements for investment advisers as the Commission has proposed for mutual funds. * We also recommend that the Proposed Rule the Commission has issued prescribing the content and format of the required disclosures relative to mutual funds, be required of investment advisers as well. In recommending that reporting requirements for mutual funds and investment advisors be the same, we strongly support the view that requiring investment advisers to disclose their actual proxy votes to clients would not be any more burdensome than requiring mutual funds to disclose theirs to shareholders. In most cases, the best interests of an investment adviser's various clients would not diverge, but would be relatively uniform - as uniform as the best interests of mutual fund investors - so it is doubtful that advisers would be casting proxies differently for different clients except in very rare circumstances. In recommending the same content and format requirements for both investment advisors and mutual funds, we also believe that it makes sense to institute uniform proxy-voting reporting requirements for all investment advisers, whether they be reporting to separate account clients or to mutual fund shareholders. [1] Finally, we believe the financial impact of compliance to be manageable. The available technology and resources make the record-keeping and reporting functions of complying relatively routine. The recent corporate scandals reveal that our system of corporate governance and accountability lacks adequate checks and balances. This has underscored the need for investment advisers, mutual funds and other institutional investors to take their obligations as shareholders and as fiduciaries more seriously, and to play a more active role in corporate governance. Thus, proxy voting is likely to become more important, and more closely watched, as investment advisers and institutional investors begin to assume a more vital role in monitoring the stewardship of the companies they invest in. At the same time, as the Commission has pointed out, the potential for conflicts of interest between investment advisers and their clients (or mutual fund managers and their shareholders) requires that proxy-voting be made transparent. The Proposed Rule simultaneously addresses both of these needs: the need for more vigilant corporate governance by shareowners, and the need for transparency in the discharge of governance activities by those shareowners' fiduciaries. We would again like to commend the Commission for this giant step forward in promoting full disclosure and transparency in financial markets. It could not have come at a more critical time. We believe proxy-voting transparency will have salutary effects upon corporate governance, will better protect America's investors, and will help restore confidence in the integrity of financial markets. We strongly urge adoption of the Proposed Rule, and consideration of the modifications proposed above. Thank you for your attention to these comments. Sincerely, Francis G. Coleman Executive Vice President and Director of Socially Responsible Investing Christian Brothers Investment Services, Inc. 90 Park Avenue 29th Floor New York, NY 10016 (800) 592 - 8890 _____ [1] While we believe the same principles of disclosure ought to apply to investment advisers and registered investment companies, we understand that the mechanics of disclosure will diverge to some degree. We are not recommending that investment advisers be subject to precisely the same filing regime as registered investment companies. We understand that the Statement of Additional Information and Form N-CSR will likely be utilized in the latter case, whereas an amended Form ADV will likely be the disclosure vehicle for registered advisers. We are only suggesting that the same information should be reported for both, in a substantially uniform format, that is equally and easily accessible to adviser clients and mutual fund shareholders.