(Article from Registered Funds Regulatory Update, October 2022)
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On September 20, 2022, the SEC settled charges against Toews Company, a registered investment adviser, for failing to determine if proxy votes were cast in its clients’ best interests and implement appropriate proxy voting policies and procedures.
From January 2017 to January 2022, Toews engaged a third-party proxy advisory firm to vote proxies on behalf of its mutual fund clients. At over 200 shareholder meetings, Toews directed the proxy advisory firm to vote against shareholder proposals and in favor of management proposals without determining whether it was in their clients’ best interests. According to the Order, in doing so, Toews violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-6 thereunder, which prevent advisers from exercising voting authority on behalf of clients unless the adviser has implemented written policies and procedures that are reasonably designed to make determinations with regard to clients’ best interests. Noting that Toews maintained its standing instruction without deviation over a five-year period, the Order found that Toews failed to make such determinations.
Without admitting or denying the findings, Toews agreed to a cease-and-desist order, censure and civil monetary penalty of $150,000.
In the Matter of Toews Corporation, SEC Admin. Proc. File No.3-21113 (September 20, 2022), available at: https://www.sec.gov/litigation/admin/2022/ia-6139.pdf