According to people familiar with the matter, top mutual fund manager Vanguard has temporarily suspended meetings with portfolio companies to assess the implications of new guidance on investor activism from the U.S. Securities and Exchange Commission (SEC).
The SEC under the leadership of an appointee of President Donald Trump has reevaluated its interpretations of regulations, potentially requiring firms like Vanguard, relying on the Schedule 13G form for reporting major holdings, to switch to the more intricate Schedule 13D. This change could lead to increased costs for managers who engage in activities such as influencing management decisions on issues like climate concerns or corporate governance structures.
Vanguard's decision to halt meetings stems from the need to comprehend the new guidelines thoroughly to remain categorized as a Schedule 13G filer instead of transitioning to a 13D filer. A source requested anonymity when stating that Vanguard aims to adjust and retain its passive approach to investment stewardship in response to the SEC’s recent directives.
Vanguard refrained from providing comments on the meetings directly. However, a statement issued by a firm representative expressed their commitment to evaluating the SEC's guidance for any necessary adjustments to the Vanguard funds' passive investment stewardship strategies.
The company emphasizes transparency and its ongoing effort to collaborate with policymakers in addressing concerns related to passive investing and proxy voting. Pausing these meetings, according to corporate attorneys, could diminish the influence of shareholder activists concentrating on environmental, social, or governance issues, aligning with the objectives of the current SEC leadership. Nonetheless, it could also reduce the valuable insights top investors typically offer on conventional corporate topics like executive compensation.
Meanwhile, BlackRock, a competing asset manager, has engaged in analogous discussions with its portfolio companies, although a company representative has not yet provided updates on the status of these meetings.