The Independent Steering Committee of Broadridge Newsletter Volume 12, December 2017 The matters discussed in this newsletter were ABOUT THE INDEPENDENT STEERING COMMITTEE: The Independent Steering Committee of Broadridge addressed during a meeting of the members of the (Committee) was formed in 1993 to serve as an independent Independent Steering Committee of Broadridge oversight body charged with monitoring the performance, (Committee) and a meeting of the Committee with voting accuracy and readiness of Broadridge and its predecessor firm in conducting the U.S. street name proxy the staff of the Securities and Exchange Commission system on behalf of the nation’s banks and brokers. (SEC) held on November 2, 2017 in Washington D.C. The Committee, organized from within the securities industry with the encouragement of the SEC, consists exclusively of persons who are neither current nor former employees of Table of Contents Broadridge. The members represent the four industry groups involved in the proxy process: issuers, institutional investors, Regulatory Overview 2 brokers and custodian banks. Technology Update and Cybersecurity 2 The purpose of this newsletter is to share with a wider Blockchain Strategy Discussion 2 audience the developments that are shaping the U.S. proxy system and to encourage broad participation in promoting the Enhanced Broker Internet Platforms (“EBIPs”) – efficiency and integrity of that system. A Three-Year Look Back 2 Vote Instruction Form (VIF) Guidelines 2 Stephen P. Norman President, S.P. Norman and Company LLC Telephone Voting 3 Committee Chair and Editor Steering Committee Members 3 Comments or suggestions may be sent to: [email protected]. REGULATORY OVERVIEW BLOCKCHAIN STRATEGY DISCUSSION The Committee received a report from the law firm of Broadridge’s SVP IT stated that Broadridge continued its Covington and Burling on the themes to watch and the project to test the viability of using distributed ledger changing priorities of the SEC under Chairman Jay Clayton. technology (DLT) in conducting shareholder voting. The findings indicated that the use of DLT – commonly The Commission’s regulatory agenda was expected to called blockchain – in the proxy process could enhance further a three-part mission: transparency, safety and certainty across the voting process, from verifying voting entitlement and casting the • Protect investors vote to tabulation and communication of the results. For • Maintain fair and orderly markets the next phase of its DLT testing, Broadridge is seeking a • Facilitate capital formation small number of corporate issuers to participate in a pilot in which the blockchain proxy process will be tested alongside Chairman Clayton is thought to represent an apolitical, the current method of voting. pragmatic approach to regulatory issues with an awareness that regulatory change can have lasting effects, costs and ENHANCED BROKER INTERNET PLATFORMS (EBIPs) – compliance burdens that must be considered during the A THREE-YEAR LOOK BACK adoption process. Coordination with other regulatory The Committee shared with the SEC staff the results of the agencies will be promoted and the Regulatory Flexibility NYSE rules and the $0.99 incentive fee implemented in Act Agenda will be re-emphasized. Disclosure effectiveness 2014 to promote the development and implementation of will be stressed while modernization and simplification EBIPs, sometimes called investor mailboxes, which enable of Regulations S-K and S-X will be pursued. Other areas shareholders to vote their proxies on their brokers’ websites likely to receive attention will be disclosure effectiveness, without having to separately log in. As of June 30, 2017, 24 cybersecurity, climate change and the pay ratio rules. of the nation’s broker-dealers offered EBIPs to their clients. As a group, the 24 brokers represent 55% of all accounts TECHNOLOGY UPDATE AND CYBERSECURITY held in street name. Voting via EBIPs represents 16% of all Broadridge’s Senior Vice President of Information retail positions, up from 7% in 2015. In addition to offering Technology (SVP IT) mentioned the fundamentals that convenience to shareholders, EBIPs tend to encourage Broadridge had established to promote information shareholders to adopt e-delivery, resulting in lower printing security in every facet of its proxy processing operations. and postage costs for issuers. He also described management’s initiatives and testing accomplished to assure 2018 proxy season readiness. VOTE INSTRUCTION FORM (VIF) GUIDELINES The Committee reported to the SEC staff on the protocols The SVP IT stated that recent high profile data based established by the Committee in 2014 to guide issuers threats and thefts of customer data from corporations and in editing or abbreviating proposed proxy language that regulatory bodies had underscored the need for heightened exceeds the dimensions of the standard VIF. The protocols vigilance in shielding client data while also protecting call for Broadridge to contact issuers who submit excessive Broadridge’s systems from interruption. proxy language within 24 hours of receipt and offer three suggested alternatives for reducing the issuer’s proxy language to fit within the dimensions of the standard VIF. 2 The SEC staff noted that some issuers were responding by Steering Committee Members stating “see proxy statement for a description of the proposal,” Thomas Broderick – State Street Corporation, Custodial Bank an extra step that many shareholders would fail to take. The Committee agreed to review the protocols to discourage Lawrence Conover – National Financial Services LLC Broker-Dealer this practice. Steven Dapcic – Pershing, LLC Broker-Dealer TELEPHONE VOTING Michael Garland – The New York City Comptrollers’ Office, The Committee noted that the use of the telephone voting Institutional Investor option in proxy voting had continued to decline. For the Stacey K. Geer – Primerica, Inc. Corporate Issuer season ending June 30, 2017, telephone voting represented only 1.1% of the total shares voted as retail voters increasingly Philip Larrieu – California State Teachers’ Retirement System, turn to other electronic voting platforms. Institutional Investor Gloria Lio – Bank of New York Mellon, Custodial Bank While a small segment of the total vote, the telephone vote represented approximately 4.09% of the retail vote. As the Mark S. Lyon – Synchrony Financial, Corporate Issuer telephone voting segment could prove crucial in close proxy Michael Marino – Credit Suisse, Custodial Bank contests, the Committee agreed to further monitor telephone voting rather than recommending its elimination at this time. James Monahan – Morgan Stanley & Co, Inc. Broker-Dealer Stephen Norman – S.P. Norman & Company LLC Committee Chair William J. O’Shaughnessy – Quest Diagnostics, Inc. Corporate Issuer Valiere Simpson – TD Ameritrade, Broker-Dealer Chad Spitler – CamberView Partners, Corporate Issuer Joseph C. Swanson – The Northern Trust Corporation, Custodial Ban 3 Broadridge, a global fintech leader with over $9 billion* in market capitalization, provides communications, technology, data and analytics solutions. We help drive business transformation for our clients with solutions for enriching client engagement, navigating risk, optimizing efficiency and generating revenue growth. Communications *As of November 2017 Technology broadridge.com Data and Analytics © 2017 Broadridge Financial Solutions, Inc., Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc. MKT_9040_17