SEC Investment Management Director Questions ‘Vote-All’ Proxy Practices and Adviser Reliance on Proxy Advisors

Key Points

• On January 8, 2026, Brian Daly, Director of the SEC’s Division of Investment Management, delivered remarks at the New York City Bar Association addressing proxy voting practices, including whether advisers may have defaulted to automated voting processes that rely heavily on proxy advisory firm recommendations rather than judgments made in their clients’ best interests.
• Director Daly framed his remarks as part of a broader reassessment of proxy voting practices, encouraging advisers to move away from rote, box-checking approaches and to re-evaluate whether their current practices align with their investment mandates and client objectives.
• The remarks come amid heightened focus on proxy voting, including a recent Executive Order by President Trump and public statements by SEC Chairman Paul Atkins indicating increased attention to the role of proxy advisors. More broadly, they also reflect an effort across various divisions of the SEC to re-examine longstanding regulatory practices to assess whether they continue to function as intended.

Regulatory Backdrop: Rule 206(4)-6 and the Current Proxy Voting Landscape

Rule 206(4)-6 under the Investment Advisers Act requires a registered investment adviser with proxy voting authority to adopt policies and procedures reasonably designed to ensure that proxies are voted in clients’ best interests and that material conflicts of interest are addressed.

Director Daly observed that over time, proxy voting has increasingly relied on proxy advisory firms as a scalable and defensible way to manage proxy voting obligations. In his view, this dynamic has allowed proxy advisors—who do not own shares and do not owe fiduciary duties to fund investors—to exert outsized influence over proxy voting outcomes, sometimes reflecting particular social or political philosophies rather than investment-specific considerations.

Must Advisers Vote All Client Proxies?

Short answer: No. Advisers are not necessarily required to vote every proxy in all circumstances.

Director Daly highlighted that advisers may reasonably determine not to vote proxies where voting is unnecessary or inconsistent with the adviser’s investment strategy, or where the costs of voting outweigh the expected benefits to clients, provided such determinations are consistent with client agreements and adequately disclosed.

He pointed to specific examples where routine proxy voting may warrant reconsideration:

• Systematic and quantitative managers, whose model-driven strategies seek exposure to particular factors or sources of alpha, may reasonably conclude that voting on corporate governance matters or precatory social or political proposals is irrelevant to their investment objectives and imposes costs without measurable client benefit.
• Index fund advisers, whose mandate is to replicate the performance of a reference index, may wish to consider whether taking positions on certain corporate or policy matters aligns with a passive investment mandate, particularly where voting decisions are driven by standardized formulas or third-party guidelines.

Director Daly noted that advisers often continue voting in these contexts not because voting advances client objectives, but because abstaining is perceived as a riskier compliance posture.

When Can Reliance on Proxy Advisors Raise Fiduciary Concerns?

Short answer: Concerns could arise where reliance on proxy advisors results in automatic voting without meaningful oversight.

Director Daly acknowledged that proxy advisory firms can play a valuable role in providing research, analysis and logistical support to advisers evaluating proxy matters. However, he cautioned against habitual or mechanical reliance on proxy advisor recommendations—particularly where an adviser’s voting record on non-routine matters closely mirrors a proxy advisor’s standard voting policies.

In Director Daly’s view, such uniformity raises questions about whether advisers are exercising independent fiduciary judgment or are effectively outsourcing voting decisions. He further noted that routine adherence to proxy advisor recommendations may raise potential Section 13(d) “group” concerns, particularly where multiple advisers habitually rely on the same proxy advisor and vote identically on matters affecting corporate control.

This reference to group formation solely due to unwitting overlapping voting is a sharp departure from previous formal guidance as to what constitutes a “group” from the SEC itself. It is unclear how two beneficial owners that are not aware of how the other is voting or even of each other’s existence could be taking the type of “concerted actions” with respect to voting to cause a “group” to be formed.¹ Section 13(d) group issues can be significant, as group status may trigger additional disclosure obligations, disgorgement of profits for trades and prohibition of short selling under Section 16, heightened regulatory scrutiny and complex fiduciary and conflict-of-interest analyses.

Director Daly posed the 13(d) group question as an “issue for consideration” and did not suggest that such outcomes are inevitable. However, his remarks underscore a risk area that advisers may wish to consider when evaluating proxy voting practices and appear to have been prompted by President Trump’s executive order directing the SEC to consider a rule change relating to fiduciaries voting lock-step with proxy advisors’ recommendations.² We suspect that there would be an industry challenge if the SEC were to adopt rules causing clients of proxy advisors to be deemed to form a group.

Broader Reset and Openness to Artificial Intelligence

Director Daly also discussed the potential role of artificial intelligence in proxy voting, suggesting that AI tools could help advisers efficiently review large volumes of proxy materials and generate voting recommendations aligned with an adviser’s stated principles and client preferences while reducing operational burden. His comments followed a January 2026 announcement by at least one prominent financial institution that it would use AI tools, rather than third-party proxy advisors, to support proxy voting for U.S. listed companies.

Director Daly’s discussion of AI reflects an openness to thoughtful and controlled uses of emerging technology, in contrast to the more cautious approach to AI reflected in prior SEC leadership. Indeed, Daly emphasized that any use of AI must be accompanied by appropriate training, human oversight, transparency and auditability and must remain consistent with fiduciary duties. AI, he noted, should enhance—not replace—human judgment.

Practical Considerations for Advisers

• Reassess whether proxy voting is necessary for each strategy. Advisers should consider whether proxy voting is required or appropriate for each investment strategy they manage. This analysis should take into account the adviser’s investment mandate, the relevance of proxy voting to portfolio performance and the costs associated with voting. Advisers that determine proxy voting is unnecessary or inconsistent with a strategy should ensure that this determination is consistent with client agreements and is appropriately documented and disclosed.
• Evaluate whether proxy advisor recommendations function as inputs rather than defaults. Advisers that use proxy advisory firms should assess whether their policies and procedures meaningfully require independent review and judgment, particularly where voting outcomes on non-routine matters rarely diverge from a proxy advisor’s standard policies. Where voting patterns closely mirror proxy advisor recommendations, advisers may wish to consider whether changes to oversight, escalation or review processes are warranted. 

• Ensure meaningful oversight of proxy voting and artificial intelligence use. Advisers should incorporate proxy voting into substantive annual compliance reviews and ensure that any use of AI tools is supported by appropriate controls, human oversight, documentation and consistency with fiduciary duties, transparency and auditability expectations.

^{1 Modernization of Beneficial Ownership Reporting, Exchange Act Release 98704, 88 Fed. Reg. 76896 (Nov. 7, 2023), available at https://www.govinfo.gov/content/pkg/FR-2023-11-07/pdf/2023-22678.pdf.}

^{2 The speech referenced President Trump’s December 11, 2025 Executive Order, which directed SEC Chairman Atkins to “analyze whether, and under what circumstances, a proxy advisor serves as a vehicle for investment advisers to coordinate and augment their voting decisions with respect to a company’s securities and, through such coordination and augmentation, form a group for purposes of sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934….”}