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Statement Regarding In the Matter of Toews Corporation

Sept. 20, 2022

We are unable to support this action, which may affect how investment advisers shape their proxy voting policies and procedures. The Commission’s Order finds that Toews Corporation (“Toews”), a registered investment adviser, violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”), and Rule 206(4)-6 thereunder (the “proxy voting rule”), when it caused a third-party service provider to vote client proxies pursuant to a standing instruction without any review by Toews of the proxy materials associated with those votes. In particular, Toews instructed the third-party service provider always to vote all client proxies in favor of the proposals put forth by the issuers’ management and against any shareholder proposals. Importantly, the Order does not make any findings that the adviser’s clients would have been financially better off had the adviser cast any of the votes at issue in an alternative manner. The Order also does not find that any of the votes cast were the product of a conflict of interest.[1]

We are concerned that the Order may be misconstrued regarding an adviser’s fiduciary duties with respect to voting proxies on behalf of its clients, as well as the specific requirements imposed by the proxy voting rule.[2]

In stating that the adviser “has revised its proxy voting policies and procedures to address the issues raised by the facts described,”[3] the Order might be read to imply that the adviser’s prior proxy voting practices were per se improper and violate the Advisers Act and the proxy voting rule.[4] This implication, however, would be at odds with the Commission’s own guidance that “[a] client and its investment adviser may agree that the investment adviser should exercise voting authority pursuant to specific parameters designed to serve the client’s best interest,” such as by voting in accordance with the voting recommendations of management of the issuer.[5]

Consistent with the adviser’s fiduciary duties and in compliance with the proxy voting rule, an adviser and its client can agree that a “standing instruction” approach to proxy voting is in the best interest of the client. For example, the cost of reviewing and analyzing individual matters may outweigh any corresponding increase in the value of the issuers’ securities. The adopting release for the proxy voting rule recognizes that the adviser may take cost into account when determining how to satisfy its fiduciary duties. The release recognizes that, at times, “refraining from voting a proxy [may be] in the client’s best interest, such as when the adviser determines that the cost of voting the proxy exceeds the expected benefit to the client.”[6]

Costs incurred by smaller investment advisers to review and analyze each matter submitted for a shareholder vote likely will be passed on to clients. Toews is not a large adviser with hundreds of employees and trillions under management. According to its most recent Form ADV, Toews reported about $1.25 billion in assets under management and 17 employees who perform investment advisory functions. Given that the majority of investment advisers fall within this category, incorrect implications drawn from the Order potentially could have wide-ranging consequences.[7]

Accordingly, we dissent.

[1] The adopting release for the proxy voting rule states that “[a]n adviser that votes securities based on a pre-determined voting policy could demonstrate that its vote was not a product of a conflict of interest if the application of the policy to the matter presented to shareholders involved little discretion on the part of the adviser.” See Proxy Voting by Investment Advisers, Release No. IA-2106 (Jan. 31, 2003) [68 FR 6585, 6588 (Feb. 7, 2003)], available at

[2] The adopting release for the proxy voting rule states that, while the issue of how an adviser must exercise its proxy voting authority is not specifically addressed in the federal securities laws, “[u]nder the Advisers Act…an adviser is a fiduciary that owes each of its clients duties of care and loyalty with respect to all services undertaken on the client's behalf, including proxy voting.” Id., at 6586.

[3] In the Matter of Toews Corporation, Release No. IA-6139 (Sept. 20, 2022), at paragraph 6, available at

[4] The Order also focuses on discrepancies between the adviser’s disclosures to clients regarding its proxy voting practices and the manner in which the adviser actually voted clients’ proxies. However, the cure for a disclosure-related violation presumably would be to revise the deficient disclosures. Here, the Order highlights revisions to the underlying proxy voting policies and procedures as “addressing the issues” described in the Order.

[5] See Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers, Release No. IA-5325 (Aug. 21, 2019) [84 FR 47420, 47422 (Sept. 10, 2019)], available at Although the guidance states that such an arrangement “could” be subject to conditions, such as a condition that the investment adviser conduct additional analysis where the voting recommendation concerns a matter that may present heightened management conflicts of interest or involve a type of matter of particular interest to the investment adviser’s client, the guidance does not state that such conditions are necessary. Id.

[6] See Release No. IA-2106, supra note 1, at 6587. See also Release No. IA-5325, supra note 5, at 47426.

[7] One recent survey found that over 88% of investment advisers are small businesses employing 50 or fewer people, and two-thirds of investment advisers both employ 50 or fewer people and have less than $1 billion in assets under management. See Investment Adviser Association Industry Snapshot 2022: Evolution Revolution Reimagined, 2nd Edition, available at

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