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iasparliament
August 09, 2018
5 days
227
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What is a proxy firm or institutional advisory firm? Discuss its significance and why regulating them is essential? (200 words)

Refer – The Indian Express

Enrich the answer from other sources, if the question demands.

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IAS Parliament 1 day

KEY POINTS

Proxy firms (or) Institutional advisory firms

·         Market regulator SEBI has defined a proxy adviser as any person who provides advice, through any means, to institutional investors or a shareholder of a company, in relation to the exercise of their rights in the company, including recommendations on public offer or voting recommendation on agenda items.

Significance

·         Proxy advisory firms research and dig out information about the company, its directors, and promoters, and advise institutional investors — who may have invested in hundreds of companies, and don’t have detailed information on all of them — to vote on resolutions put to vote by managements in AGMs.

Why its regulation is essential?

·         Increase in voting through proxy advisory services will lead to concentration of voting power in the hands of a few proxy agencies.

·         Domestic proxy advisory firms are regulated by SEBI, which says the proxy adviser should disclose the extent of research involved in a particular recommendation, and the extent and/or effectiveness of its controls and procedures in ensuring the accuracy of the issuer data. 

·         But, foreign proxy advisory firms are not regulated in India and in most other jurisdictions.

·         This had led to a situation where voting power concentrates in the hands of a few global agencies and questions the very basis of well-run, widely held companies and diversified ownership.

·         The Indian proxy advisory firms are regulated by SEBI, then why not foreign firms should be brought under regulation, too. There should be a level playing field. 

Shankaranand 5 days

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Thank You

IAS Parliament 1 day

Good attempt. Keep writing.

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