J. & W. Seligman & Co.
December 6, 2002
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609
Re: Comments on Proposed Disclosure of Proxy Voting Policies and
Votes by Registered Investment Companies (File No. S7-36-02)
Dear Mr. Katz:
I am writing on behalf of J. & W. Seligman & Co. Incorporated and the Seligman Funds to provide comments on the Commission's proposed rules requiring registered investment companies to disclose their proxy voting policies and voting records. As discussed below, we support certain of the proposed rules and disagree with others.
The Seligman Organization takes its responsibility for proxy voting very seriously. The Seligman Funds include 61 separate series and have total assets on November 30, 2002 of approximately $12.2 billion, a large part of which is invested in equity securities. Our proxy voting is coordinated through Seligman's Law & Regulation Department pursuant to written policies. To address specific issues, Seligman also has a proxy voting committee comprised of Seligman's Vice Chairman, Chief Investment Officer and General Counsel. A report of proxy voting results and a copy of our proxy voting policies are presented annually to the Funds' Boards of Directors.
We believe that the Seligman Organization has satisfied its fiduciary responsibilities with respect to proxy voting based on its policy and procedures. However, in order to ensure a level of consistency in our industry and to provide for proper guidance and oversight, we support certain portions of the Commission's proposal (or variations thereof) that we believe would be in the best interest of the fund industry and shareholders. These include:
- requiring investment advisers to funds to adopt written policies and procedures to ensure that proxies are voted in the interest of fund shareholders;
- requiring each fund to disclose in its statement of additional information, a summary of its policies and procedures, and file as an exhibit to its registration statement, its complete policies and procedures;
- requiring advisers to funds to maintain records of their proxy voting activities; and
- requiring each fund to report to its Board of Directors on an annual basis any changes to its policies and procedures and any significant events or trends in its proxy voting experience during the prior year.
We believe these measures would satisfy the Commission's objectives by providing appropriate oversight by the Board of Directors, providing suitable disclosure to shareholders, providing the Commission's examination staff with a written record of proxy voting activities, affording funds the necessary flexibility to vote all proxies in the best interest of shareholders, and avoiding unnecessary costs or administrative burdens.
However, we disagree with those portions of the Commission's proposal that would require a fund to disclose publicly information regarding how the fund voted each of its individual proxies, and to disclose publicly those specific instances in which an actual vote differs from the fund's policies and the reason thereof. These proposals, in our opinion, reflect an attempt to solve a problem which does not exist. We are not aware of any specific requests from our shareholders for this type of information, and we understand that this experience is similar to that of other fund groups. Rather, we believe these proposal are being supported by special interest groups more focused on pursuing their own agendas rather than promoting good corporate governance and shareholder interest.
The Commission, in its proposal, offers no evidence of any actual conflicts of interest, no evidence of any concerns raised on inspections of the Commission's examination staff, no evidence that funds are not currently voting proxies in the interest of shareholders and no evidence that the proposed disclosures would actually benefit shareholders.
We are concerned about the added burden of responding to individual shareholders or other parties who request explanations of the voting on individual proposals (or specific types of proposals) or want to discuss, debate, or influence the outcome of such voting. Not only would the proposed proxy voting disclosure invite this type of response and require tremendous resources, it would greatly facilitate the ability of special interest groups to put pressure on fund groups to vote proxies in a specific manner, either directly or indirectly through the media.
Making the proposed proxy voting disclosures will require implementation costs, as well as recurring expenses including those relating to increased staff, on-going legal advice in drafting disclosure and additional printing and mailing costs for annual and semi-annual reports. It would also increase the length of disclosure in these reports and potentially distract investors from information that is actually relevant to the performance of the fund as a whole.
We also believe these proposals are inconsistent with the concept of a mutual fund whereby individual investors pool their investments into a common vehicle and delegate investment management and administration to the fund's investment manager and corporate oversight to the fund's Board of Directors. The mutual fund vehicle was not intended to be a substitute for, or operate as, a separately managed account for each investor. In the latter case, the investor receives individual advice on a portfolio of securities and has beneficial ownership in each of those securities. As a result, the investor also has the right to direct the voting of the proxies of each company held in that portfolio.
These proposals are also inconsistent with the precept that a fund's Board of Directors should provide oversight of a fund's operations. For example, Boards address issues of personnel trading matters pursuant to Rule 17j-1, affiliated transactions pursuant to Rule 17a-7, amounts expended under Rule 12b-1, review brokerage transactions and receive reports on investment activity. Shareholders do not have a role in these types of ongoing issues, all of which are as important as proxy voting. The Commission's approach here ignores the function of the Board with regard to proxy voting.
We respectfully request that the Commission reconsider its proposal with a view towards striking a balance between adopting reasonable measures to address the concerns it has expressed without exposing funds and their advisers to unnecessary costs and burdens.
Very truly yours,
/s/ Brian T. Zino
Brian T. Zino