HR-8383-119
Referred to the House Committee on Financial Services.
Sponsored by Zachary Nunn (R-IA)
What it does
This bill would amend the Securities Exchange Act of 1934 to do three things: (1) direct the SEC to issue rules prohibiting "robovoting" — the practice of automatically casting shareholder votes in line with a proxy advisory firm's recommendations without independent review; (2) bar institutional investors from outsourcing their voting decisions to any party other than a registered investment adviser or broker-dealer with a fiduciary or best-interest duty to the investor; and (3) clarify that no person can be required to cast proxy votes unless obligated by their fiduciary duty or an existing SEC rule (Rule 206(4)-6).
Who benefits
Public company shareholders broadly, who would have their votes cast with more independent analysis rather than automatically. Individual retail investors whose shares are held by institutional investors (e.g., pension fund beneficiaries, 401(k) participants) who may receive more deliberate representation. Companies whose management proposals are currently voted down in bulk by robovoting. Smaller proxy advisory firms that compete on analysis quality rather than platform automation. Registered investment advisers and broker-dealers, who become the only permissible outsourced voting agents for institutional investors.
Who is hurt
Proxy advisory firms — particularly the two dominant firms, Institutional Shareholder Services (ISS) and Glass Lewis — whose business models rely heavily on institutional clients automatically following their recommendations via electronic voting platforms. Institutional investors (pension funds, mutual funds, index funds) that currently use robovoting for efficiency and cost savings, who would face increased compliance and operational costs to conduct independent vote reviews. Smaller institutional investors with limited staff who may struggle to independently analyze thousands of proxy votes annually. Environmental, social, and governance (ESG) advocacy groups that rely on coordinated proxy voting through advisory firms to advance shareholder resolutions.
Supporters argue
Supporters argue that robovoting has concentrated enormous, unaccountable influence over corporate governance in the hands of just two proxy advisory firms — ISS and Glass Lewis — which together guide votes representing trillions of dollars in assets. They contend that when institutional investors automatically follow advisory firm recommendations without independent review, they effectively abdicate their fiduciary duty to the beneficial owners of those assets, such as pension beneficiaries and retirement savers. Studies, including a 2020 SEC staff report, found that proxy advisory firm recommendations significantly move vote outcomes, raising concerns that corporate governance is being shaped by firms with their own conflicts of interest rather than by investors acting in their clients' best interests.
Opponents argue
Opponents argue that robovoting is a rational, cost-effective response to the reality that large institutional investors must cast votes on thousands of proposals annually across hundreds of companies, and that mandating independent review of each vote would impose prohibitive compliance costs — particularly on smaller funds. They contend that proxy advisory firms provide a valuable, market-driven service that helps institutional investors fulfill, not abandon, their fiduciary duties by providing expert analysis they could not otherwise afford to replicate in-house. Critics also argue that restricting the use of advisory firm platforms could reduce shareholder engagement overall, as some institutions may simply abstain rather than bear the cost of independent review, weakening rather than strengthening corporate accountability.
Constitutional context
Congress has broad authority to regulate securities markets under the Commerce Clause (Art. I, §8, cl. 3), and the Securities Exchange Act of 1934 is a well-established exercise of that power. The bill directs the SEC to issue rules, which raises a post-Loper Bright (2024) consideration: courts will now independently assess whether the SEC's implementing rules stay within the statutory authority Congress grants here, rather than deferring to the agency's own interpretation of its mandate.
Checks and balances
Congress gains authority by writing new statutory requirements directly into the Securities Exchange Act; the SEC is directed to implement rules but is constrained by the bill's specific definitions, and those rules face independent judicial review under Loper Bright (2024).
Historical precedent
The SEC adopted proxy advisory firm rules in 2020 (later partially rescinded in 2022) that imposed disclosure and conflict-of-interest requirements on firms like ISS and Glass Lewis, representing the most recent federal regulatory action in this space, though those rules did not directly prohibit robovoting.