Vote Disclosures Will Hurt, Cost Investors: ICI, Fidelity

December 9, 2002 ( - The nation's largest mutual fund complex and a group representing the industry both say they oppose a government proposal to reveal how mutual funds vote on corporate governance issues.

In September the Securities and Exchange Commission (SEC) voted unanimously in support of a new rule that would require mutual funds to disclose their fund proxy policies and voting records – if requested (see  SEC OKs Additional Mutual Fund Disclosures ).   The rule was then put out for public comment by December 6.

Needless Politicization?

Mutual fund trade group the Investment Company Institute, while supporting the notion of posting proxy voting policies and procedures, “strenuously opposes” the SEC’s proposal to disclose specific votes, however, saying the proposed rule would “needlessly politicize mutual fund portfolio management,” making the portfolios vulnerable to lobbying from special interest groups (see  the ICI comment letter ).

Proponents of the SEC plan, including the AFL-CIO, worry of potential conflicts of interests at fund companies such as Fidelity Investments, which manage retirement plans for the same corporations in which they invest – and claim the fund companies might be reluctant to cast a vote that could cost it business.   None other than Vanguard founder John Bogle has echoed the latter sentiment.  

Ill Conceived

But both the ICI and Fidelity are concerned that special interest groups will use the information for their purposes, with no value served to investors, who will likely bear the additional costs of such disclosures, according to Reuters.

Fidelity Investments described the plan as “ill conceived” in a letter to the SEC on Friday, according to Reuters.   Fidelity also said that by publicizing a particular vote against a corporation, a portfolio could alienate management, and its analysts could lose access to information, with potential adverse impact on both the fund and its shareholders.

Vanguard publishes its proxy-voting policy on its Web site. In August, Fidelity for the first time posted its proxy-voting policies on its site.