February 22, 2020
The definition of the term "solicit" and its proposed exemption for unprompted request for advice from a client's investment advisor does not address a very typical arrangement between clients and investment advisors when establishing accounts with a broker-dealer custodian.
Many broker-dealer custodians offer clients the ability to grant their investment advisor authorization to receive issuer communications, including proxies, and act on them on their client's behalf.
The proposed rule is ambiguous about how the Commission would treat communication by an investment advisor to its client in requesting the client authorize the firm to receive all issuer communications and proxies on behalf it the client, without regard to any specific issuer.
The commission makes clear its understanding that advice and communication regarding proxies may be one component of an integrated investment advice service, where such expertise and service is neither marketed nor paid for separately. Additionally, in the exemption for unprompted request for advice from clients, the Commission recognizes that an unprompted request by a client to his or her investment advisor necessarily implies an existing business relationship and does not present the same investor protection and regulatory concerns as a firm that engages in the proxy voting advice business with widespread marketing and sale of such advice based on their specific expertise.
However, in the proposed rule amendment, the Commission only excludes advice provided by someone who does not sell voting advice as a business AND who provides such advice in response to an unprompted request from his or her client. It would also be appropriate to include an additional option to the "unprompted" requirement to exclude investment advisors registered or required to be registered under the Advises Act that solicit clients proxies generally, without regard to a specific issuer and complies with Rule 204-2(c)(2) under the Advisers Act regarding the investment advisers voting of client proxies.
Therefore, it is respectfully requested that the Commission revise the proposed amendment for 240.14a-1(l)(2) to include a new paragraph substantially similar to the following:
(vi) the general solicitation of client proxies, without regard to a specific issuer, by an investment adviser registered under the Advisers Act as an integrated component of the investment advisors advisory services where the investment advisor neither markets a specific expertise in proxy advice nor charges the client a separate and distinct fee for performing such service and such investment adviser complies with Rule 204-2(c)(2) regarding investment advisors voting of proxies on behalf of a client.