Required Disclosures/Proxy Advisory Services.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 2
SENATE BILL 1057
Finance Committee Substitute Adopted 6/16/26

Short Title: Required Disclosures/Proxy Advisory Services. (Public)
Sponsors:
Referred to:
May 4, 2026
*S1057-v-2*
A BILL TO BE ENTITLED 1
AN ACT TO REQUIRE PR OXY ADVISORY SERVICE S TO MAKE CERTAIN 2
DISCLOSURES. 3
The General Assembly of North Carolina enacts: 4
SECTION 1. Legislative Findings. – The General Assembly finds the following: 5
(1) When shareholders hire professionals to manage investments, they reasonably 6
expect those professionals to perform services in the financial interest of the 7
shareholders and to make recommendations that will enhance investment 8
value based on financial analyses. 9
(2) There is a particular need to require disclosures from proxy advisors because 10
their advice is provided for hundreds of thousands of shareholder votes each 11
year. Few investors have the resources to independently research every 12
shareholder vote. Institutional investors often use proxy advisors for guidance 13
on how to exercise their shareholder voting rights in a manner consistent with 14
their fiduciary duties. 15
(3) Directors of publicly held companies also have fiduciary duties to their 16
shareholders and make recommendations in line with those fiduciary duties. 17
(4) Proxy advisors have recommended votes against company directors' guidance 18
and in favor of shareholder proposals based on environmental, social, or 19
governance (ESG) issues; diversity, equity, or inclusion (DEI) issues; and 20
social credit and sustainability scores but have not disclosed to investors that 21
the recommendations were made without conducting a financial analysis to 22
determine how the recommended votes would affect shareholder value. 23
(5) The chief operating offic er of Glass Lewis, a major proxy advisor, stated 24
under penalty of perjury that Glass Lewis does not conduct a "written financial 25
analysis," as defined by this act, before recommending votes on shareholder 26
proposals, and that other proxy advisors do not do so either. Yet proxy 27
advisors have advertised that the purpose of their recommendations is 28
maximizing, increasing, or protecting shareholder value. 29
(6) These findings raise concern that proxy advisors are engaged in fraudulent or 30
deceptive practices. They are not disclosing material information to their 31
clients, who reasonably believe that they are choosing between 32
recommendations of company directors and a proxy advisor that are based on 33
dueling financial analyses. 34
(7) Investors purchasing proxy advisory s ervices should be informed when 35
recommendations against company management are or are not based on 36
General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 1057-Second Edition
financial analyses that consider the recommended vote's effect on the financial 1
value of the investment. Investors also should be able to access those analyses 2
upon request, in order to assess whether the analyses are sufficient to uphold 3
fiduciary standards. 4
(8) Requiring proxy advisors to provide clear, factual disclosures under these 5
circumstances helps investors evaluate whether a proxy advisor's 6
recommendations uphold institutional investors' fiduciary duties of prudence 7
and loyalty. 8
(9) Requiring proxy advisors to inform company directors of their 9
recommendations also promotes disclosures in line with fiduciary duties. For 10
example, company directors consi dering a shareholder proposal often have 11
additional information regarding the costs of the proposal and whether it is in 12
shareholders' financial interests. Notice of a proxy advisor's recommended 13
vote on the proposal allows directors seeking to uphold thei r fiduciary duties 14
to provide additional responsive information to their shareholders. 15
SECTION 2. Chapter 78C of the General Statutes is amended by adding a new 16
Article to read: 17
"Article 10. 18
"Proxy Advisor Transparency Act. 19
"§ 78C-110. Definitions. 20
The following definitions apply in this Article: 21
(1) Company. – A publicly traded for -profit corporation, limited liability 22
company, partnership, or other business entity. 23
(2) Company proposal. – Any proposal made by a company to its shareholders 24
that is included in the company's proxy statement, including , but not limited 25
to, any proposal relating to director nominations or elections, executive 26
compensation, corporate transactions, corporate structure, auditor selection, 27
or company policy on any subject. 28
(3) Default recommendation or policy . – A system or set of rules, principles, or 29
guidelines designed to assist with voting decisions on any company proposal 30
or proxy proposal. 31
(4) Person. – An individual, corporation, limited liability company, partnership , 32
association, or other legal or business entity. 33
(5) Proxy advisor. – A person who, for compensation, provides a proxy advisory 34
service to shareholders of a company or to other persons with authority to vote 35
on behalf of shareholders of a company. The term does not include a bank or 36
bank holding company or trust company, or a broker-dealer, or an investment 37
advisor. 38
(6) Proxy advisory service. – Any of the services provided for in this subdivision 39
that are in connection with a company headquartered or incorporated in this 40
State or to a person in this State by a proxy advisor. This term does not include 41
(i) services carried out as part of in -house securities brokerage, investment 42
advisory, trust, or estate administrative services; or (ii) a charitable 43
organization if the organization's gross annual revenue from proxy advisors is 44
less than two hundred fifty thousand dollars ( $250,000) and, if applicable, 45
each affiliated group of the organization has combined gross annual r evenue 46
from proxy advisory services that is less than two hundred fifty thousand 47
dollars ($250,000). The services are as follows: 48
a. Advice or a recommendation on how to vote on a company proposal 49
or proxy proposal. 50
General Assembly Of North Carolina Session 2025
Senate Bill 1057-Second Edition Page 3
b. Proxy statement research and analysis regarding a company proposal 1
or proxy proposal. 2
c. Development of proxy voting recommendations or policies, including 3
establishing default recommendations or policies. 4
(7) Proxy proposal. – Any proposal made by a shareholder of a company that is 5
included in the company's proxy statement or has been submitted for inclusion 6
in the company 's proxy statement , including, but not limited to , a proposal 7
relating to any of the subjects that could be covered by a company proposal. 8
(8) Shareholder. – A shareholder, unitholder, limited partner, member, or other 9
equity owner of a company. 10
(9) Written financial analysis. – A written document that does all of the following: 11
a. Analyzes the expected short-term and long-term financial benefits and 12
costs to a company of implementing a company proposal or proxy 13
proposal. 14
b. Concludes what vote or course of action is most likely to positively 15
affect shareholder financial value. 16
c. Explains the methods and processes used to prepare the analysis, 17
including the experience and geographic location of the personnel who 18
formed the recommendation. 19
"§ 78C-111. Disclosure of lack of financial analysis to prevent fraud or deceit. 20
(a) If a proxy advisor makes a recommendation against company management on a 21
company proposal or proxy proposal, or makes a default recommendation or policy involving 22
votes against company management on company proposals or proxy proposals, and the proxy 23
advisor does not do so based on a written financial analysis, the proxy advisor shall do all of the 24
following: 25
(1) Concurrently with providing the proxy advisory service, include a clear and 26
conspicuous disclosure to each shareholder or other person acting on behalf 27
of a shareholder receiving the proxy advisory service , that does all o f the 28
following: 29
a. Identifies the service being provided. 30
b. Identifies the recommendation or policy at issue. 31
c. States that the proxy advisory service has not based its 32
recommendation or policy on a written financial analysis of the impact 33
of that recommended action on investors. 34
(2) For a proxy advisory service under G.S. 78C-110(6)a. or b., concurrently with 35
providing the proxy advisory service, provide the disclosure under subdivision 36
(1) of this subsection to the board of directors of each company that is the 37
subject of the service. 38
(3) While any proxy advisory services described under this subsection are being 39
provided, publicly and conspicuously disclose on the homepage or front page 40
of the proxy advisor 's website a statement that the proxy advisory services 41
include one or more recommendations or policies against company 42
management on company proposals or proxy proposals that are not based on 43
a written financial analysis, regarding the impact of the recommendations or 44
policies on investors. 45
(b) If a proxy advisor makes a recommendation against company management on a 46
company proposal or proxy proposal, or makes a default recommendation or policy involving 47
votes against company management on company proposals or proxy proposals, and the proxy 48
advisor does so based on a written financial analysis, the proxy advisor shall do all of the 49
following: 50
General Assembly Of North Carolina Session 2025
Page 4 Senate Bill 1057-Second Edition
(1) Concurrently with providing the proxy advisory service, include a clear and 1
conspicuous disclosure to ea ch shareholder or other person acting on behalf 2
of a shareholder receiving the proxy advisory service that does all of the 3
following: 4
a. Identifies the service being provided. 5
b. Identifies the recommendation or policy at issue. 6
c. States that the proxy ad visory service has made the recommendation 7
or policy based on a written financial analysis. 8
d. States that the analysis is available upon request. 9
(2) Make the analysis available within a reasonable time to any client of the proxy 10
advisory service upon request. 11
(3) For a proxy advisory service covered under G.S. 78C-110(6)a. or b. , 12
concurrently with providing the proxy advisory service, provide a copy of the 13
analysis to the board of directors of each company that is the subject of the 14
service. 15
"§ 78C-112. Enforcement. 16
(a) A proxy advisor that provides proxy advisory service shall register annually with the 17
Secretary of State in the manner provided by the Secretary. The proxy advisor shall submit a fee 18
of one hundred dollars ($100.00) with each annual registration. 19
(b) A violation of this Article is an unfair and deceptive trade practice under Chapter 75 20
of the General Statutes and is actionable under the enforcement provisions of that Chapter. The 21
Attorney General may exercise all investigative powers under Chapter 75 of the General Statutes 22
if the Attorney General has reason to believe a violation has occurred, is occurring, or is about to 23
occur. 24
(c) In addition to enforcement under subsection (a) of this section, any person aggrieved 25
by a violation of this Article may bring an action seeking a declaratory judgment or injunctive 26
relief against a proxy advisor. Not later than the seventh day after the date on which an action is 27
brought under this Article, the plaintiff shall provide written notice to the Attorney General, who 28
may intervene in the action. For purposes of this subsection, an aggrieved person includes all of 29
the following: 30
(1) A recipient of proxy advisory services provided by a proxy advisor. 31
(2) A company that is the subject of proxy advisory services under 32
G.S. 78C-110(6)a. or b. 33
(3) Any shareholder of a company described in subdivision (2) of this 34
subsection." 35
SECTION 3. If any provision of this act or its application is held invalid, the 36
invalidity does not affect other provisions or applications of this act that can be given effect 37
without the invalid provisions or application and, to this end, t he provisions of this act are 38
severable. 39
SECTION 4. This act becomes effective October 1, 2026, and applies to proxy 40
advisory services provided on or after that date. Nothing in this act eliminates any claim under 41
Chapter 75 of the General Statutes, regardless of whether that claim accrues before, on, or after 42
the effective date of this act. 43