November18,2010 Ms.ElizabethMurphy Secretary U.S.SecuritiesandExchangeCommission 100FStreet,N.E. Washington,D.C.

205491090 Re: ReportingofProxyVotesonExecutiveCompensationandOtherMatters (FileNo.S73010) DearMs.Murphy: TheInvestmentCompanyInstitute1appreciatestheopportunitytocommentontheSecurities andExchangeCommissionsproposedruleandformamendmentstofacilitatethedisclosureofcertain shareholderadvisoryvotesonexecutivecompensation.2Thepublicdisclosureoftheseadvisoryvotesby institutionalinvestmentmanagers,asrequiredbySection951oftheDoddFrankWallStreetReform andConsumerProtectionAct,isastepintherightdirection.Westronglysupportthepurposeand intentofthisprovision,andindeedbelievethattheSECshouldrequireallinstitutionalinvestorsto discloseeveryproxyvotetheycast,asfundscurrentlydo.3
1

TheInvestmentCompanyInstituteisthenationalassociationofU.S.investmentcompanies,includingmutualfunds, closedendfunds,exchangetradedfunds(ETFs),andunitinvestmenttrusts(UITs).ICIseekstoencourageadherenceto highethicalstandards,publicpromoteunderstanding,andotherwiseadvancetheinterestsoffunds,theirshareholders, directors,andadvisers.MembersofICImanagetotalassetsof$12.05trillionandserveover90millionshareholders.

ReportingofProxyVotesonExecutiveCompensationandOtherMatters,ReleaseNo.3463123(Oct.18,2010)(the Release),availableathttp://www.sec.gov/rules/proposed/2010/3463123.pdf.SomeoftheissuesraisedinthisRelease, suchasthedesirabilityofdatataggingproxyvotedisclosure,werealsoraisedintheSECsconceptreleaseearlierthisyear. SeeConceptReleaseontheU.S.ProxySystem,SECReleaseNo.3462495(July14,2010)(ProxyConceptRelease).We reiterateourearliercommentsthattheSECshouldnotimposedatataggingrequirementsonproxystatementorvoting informationformsunlessitcanestablishthatexpectedbenefitstoinvestorswouldjustifytheassociatedcosts.Seeletter fromKarrieMcMillan,GeneralCounsel,ICI,toElizabethM.Murphy,Secretary,SEC,datedOct.20,2010(ICIProxy ConceptReleaseLetter). WesupportedtheproxyvotedisclosureprovisioninSection951duringthelegislativeprocess.Indeed,wehave consistentlyandstronglysupportedrequiringinstitutionalinvestorstodiscloseeveryproxyvotetheycast.SeeStatementof theInvestmentCompanyInstituteonCorporateGovernanceandShareholderEmpowermentbeforetheSubcommittee onCapitalMarkets,Insurance,andGovernmentSponsoredEnterprises,CommitteeonFinancialServices,UnitedStates HouseofRepresentatives(April21,2010),availableat http://www.ici.org/policy/ici_testimony/10_house_corp_gov_tmny.SeealsoICIProxyConceptReleaseLetter.
3

Ms.ElizabethMurphy November18,2010 Page2of5 Forreasonsexplainedbelow,however,weareopposedtocertainaspectsoftheproposal. Specifically,weopposeexpandingthetypesofdisclosurethatfundsarerequiredtoprovideonForm NPXtoincludetheprecisenumberofsharestheywereentitledtovoteandtheprecisenumberof sharesthatwereactuallyvoted.ThisdataisnotrequiredbySection951,wouldbedifficulttocompile (andinfact,maybeimpossibletoproducewiththedegreeofprecisionrequired),isofnovaluetomost fundinvestors,andisgenerallyunnecessarytoachievethepurposesofproxyvotedisclosure. Discussion ThisproposalimplementsSection14A(d)4oftheSecuritiesExchangeActof1934(the ExchangeAct),whichrequirescertaininstitutionalinvestmentmanagerstoannuallyreporthowthey votedonthreenewtypesofshareholderadvisoryvotes:sayonpayvotes;sayonfrequencyvotes;and goldenparachutevotes(collectively,theSection14AVotes).5Toavoidduplicativereporting,Section 14A(d)hasanexpressexceptionforvotesotherwiserequiredtobereportedpubliclybySECruleor regulation. Fundsfitcleanlywithinthisexception,becausetheyarerequiredtodiscloseeachandevery proxyvote,andwouldhavehadtodiscloseSection14AVotesregardlessofwhetherSection14A(d) wasaddedtotheExchangeAct.6ThisfactsuggeststhatthepurposeofSection14A(d)isveryclearit isintendedtoextendproxyvotedisclosuretoinstitutionalinvestorsotherthanfunds.Thestatutedoes notmakeproxyvotedisclosureanymoreburdensomeforfunds,andtheexpressexceptionstrongly suggeststhatitwasnotintendedtodoso. Byproposingtofundamentallyalterthetypeofinformationfundsarerequiredtoincludeon FormNPX,theSEChasgonebeyondthemandateinSection951andneedlesslycomplicatedthis rulemaking.Fundsarecurrentlyrequiredtodisclose,amongotherthings,whetherandhowtheycast theirvote.Theproposalwouldgreatlyexpandthisobligationbyrequiringfundstodisclosetheprecise numberofsharestheywereentitledtovoteandtheprecisenumberofsharesthatwereactuallyvoted.7 Fundsalonewouldberequiredtoprovidethisinformationoneachandeveryproxyvotetheycast. OtherinstitutionalinvestorswouldberequiredtoprovideitonlywithrespecttoSection14Avotes. WebelievetheSECseriouslyunderestimatesthepracticaldifficultiesinprovidingthis
4 5

Section14A(d)wasaddedbySection951oftheDoddFrankAct.

Sayonpayvotesareshareholderadvisoryvotestoapprovethecompensationofexecutives,asdisclosedpursuanttoItem 402ofRegulationSK.Sayonfrequencyvotesareshareholderadvisoryvotestodeterminehowoftenanissuerwill conductasayonpayvote.Goldenparachutevotesareshareholderadvisoryvotesoncertaincompensationarrangements inconnectionwithamergerorsimilartransaction. SeeRule30b14undertheInvestmentCompanyAct. Proposeditems1(g)and1(h)ofFormNPX.

6 7

Ms.ElizabethMurphy November18,2010 Page3of5 information.Thenewdisclosureobligationswouldentailtwoadditionalfieldsofprecisenumerical informationonFormNPX,requiringthetypesofqualityassurancechecksandreconciliationsthatgo alongwithanynumericaldisclosure.Asnotedabove,forfunds,thisinformationwouldbeincluded notjustwithSection14AVotes,butwitheachandeveryvote.Sotheadditionalvolumeofnumerical disclosurewouldequatetotwotimesthenumberofproposalsthatfundsdealwitheachyear,whichcan easilyrangeintothethousands.8TheSECscostbenefitanalysissuggeststhatallofthatcouldbedone for$405perfund,comprisedentirelyof1.5hoursofreviewbyasinglecomplianceattorney.We believetheactualcostswouldbefargreater,notonlybecauseofthesheervolumeofdatainvolved,but alsobecausetherearenumerousactivitiesotherthanacomplianceattorneysreviewinvolvedinthe preparation,filing,andrecordkeepingforFormNPX. Moreover,fundssimplymaynotbeabletoprovidethedisclosurewiththedegreeofprecision required.Althoughfundscouldprovideinformationonthenumberofvotesinstructedtobecast,funds (andinstitutionalinvestmentmanagers)wouldnotbeabletodeterminetheexactnumberofshares actuallyvoted.AstheSECisaware,issuersdonotprovideconfirmationofhowshareholdersproxies werevotedorthenumberoftheshareholderssharescountedtowardthevote,andvoteconfirmationis furthercomplicatedbyomnibuscustodianaccounts,DTCovervotingissues,andthepresenceoftwo ormorelayers(proxyvendors,tabulators,andcustodian/subcustodianbanks)betweentheshareholder andthecorporatesecretaryresponsibleforcountingthevotes.9Intheabsenceofanyreliablewayto confirmvotes,thefundormanagerhasnowaytoensurethatthevoteswerecastasinstructed. TheSECsprimaryjustificationforthenewrequirementisthatthenumberofsharesentitled tovoteandthenumberofvotescastarenecessarytoaccommodatethepossibilityofsplitvotes(i.e., whenaninstitutionalinvestmentmanagervotesforamatteronbehalfofoneclient,andagainstthe samematteronbehalfofadifferentclient).Weagreethatsimplyreportingsplitdoesnotprovide muchmeaningfulinformationaboutthewaythereportingentityvoted,andadditionalinformation maybeusefultoputthesplitvoteincontext. Withrespecttofunds,theReleasejustifiestheadditionalreportingbyfurthersuggestingthat thenumberofsharesentitledtovoteandthenumberofvotescastarenecessarytocompletethe disclosuresmadebyotherinstitutionalmanagersandtobenefitshareholders.10Neitherreasonis persuasive.Totheextentthatanotherinstitutionalmanagersdisclosuresarerenderedincompleteby
8

Forexample,indiscussingthisproposalwithICImembers,onelargefundcomplexsuggestedthatithadmorethan30,000 pagesofFormNPXdisclosurein2010,becausethefundsinthecomplexinvestedinnearly9,000portfoliocompanies. SeeSectionIIIoftheProxyConceptRelease,entitledAccuracy,Transparency,andEfficiencyoftheVotingProcess.

10

SeeReleaseat33([U]nlesswerequirefundstoreportthisinformation,therecordofinstitutionalinvestmentmanagers willbeincomplete.Inaddition,informationaboutthemagnitudeofafundsvotingpowerandthenumberofvotescast contributetothetransparencyofproxyvoting.Forthatreason,wearealsoproposingtoextendthenewrequirementsto thecompleteproxyvotingrecordsoffunds.Thisisintendedtoimprovetransparencyoffundproxyvotingrecordsand enablefundshareholderstobettermonitortheirfundsinvolvementinthegovernanceactivitiesofportfoliocompanies.)

Ms.ElizabethMurphy November18,2010 Page4of5 asplitvote,theobviouscureistorequirethatinstitutionalmanagertomakeadditionaldisclosure,not toimposeanewburdenonallfunds.Andweseriouslyquestionthebenefitsofthisdisclosureforfund investors.Althoughoccasionallyaninvestormaybeinterestedinknowingwhetherafundvotedin favoroforagainstaparticularissue,theprecisenumberofvotescastislikelytobeofinterestmainlyto academicsstudyingproxyissues,vendorsseekingtoprofitfrompackagingthedata,andcompetitors lookingforinformationaboutfundholdings.Wealsoareconcernedthatinvestorscouldbeconfused ormisledbydisclosurethatshowsadifferencebetweenthenumberofvotesentitledtobecastandthe numberofvotesactuallycast.Anysuchdifferencemightimplythatafundabdicateditsvoting responsibilities,eventhoughtherearegoodreasonswhyfundsdonotalwaysvotealloftheir securities.11 Forallofthesereasons,westronglyopposeexpandingthetypesofdisclosurethatfundsare requiredtoprovideonFormNPXtoincludetheprecisenumberofsharesentitledtovoteandnumber ofvotescast.Totheextentthat,despiteouropposition,theSECmovesforwardwiththispartofthe proposal,weurgeittolimittherequirementtodisclosethenumberofvotestoinstanceswherethereis asplitvoteonaSection14AVote.Andinthoseinstances,forreasonsdiscussedabove,therequired disclosureshouldrelatetothenumberofvotesinstructedtobecast.Thiswouldremainconsistent withSection951smandatetoaddressSection14AVotes,achievetheSECsgoalofprovidingmore detailonsplitvotes,andminimizecomplianceburdensandneedlessexpensesinthemanycaseswhere itisclearhowareportingentityvoted.12 *****

11

Forexample,proxyvotingincertaincountriesrequiresshareblocking,meaningthatshareholderswishingtovotetheir proxiesmustdeposittheirsharesbeforethedateofthemeetingwithadesignateddepositary.Sharesthatwillbevoted cannotbesolduntilthemeetinghastakenplaceandthesharesarereturnedtotheshareholderscustodianbank.Afund mightconcludethatthebenefitsofvotinginsuchacaseareoutweighedbythecost(i.e.,thelostliquidityintheshares).

Asnotedabove,iftheSECultimatelyadoptsthespecificnumericaldisclosureasproposed,fundswouldrequireadditional timetoproducethedata,reprogramsystems,andpreparethefilings.Giventhatthisnumericalinformationisunnecessary forcompliancewithSection14A(d),theSECshoulddelaythisparticularrequirementforayeartogivefundsandtheir proxyvotingserviceproviderssufficienttimetoimplementtheprocessesnecessarytobeabletoproduceandreportthedata.

12

 Ms.ElizabethMurphy November18,2010 Page5of5 Ifyouhaveanyquestionsorneedadditionalinformation,pleasecontactmeat(202)3265815 orBobGrohowskiat(202)3715430. Sincerely, /s/ KarrieMcMillan GeneralCounsel cc: AndrewJ.Donohue,Director SusanNash,AssociateDirector DivisionofInvestmentManagement MeredithCross,Director
ScottHodgdon,AttorneyAdviser
DivisionofCorporationFinance
U.S.SecuritiesandExchangeCommission