Dive Brief:
- A Securities and Exchange Commission division director suggested last week that artificial intelligence could provide an answer for investment advisers looking for an alternative to traditional third-party advisory services.
- “As advisers grapple with the scale and complexity of proxy voting — especially across large portfolios — AI tools like large language models and agentic AI, offer a compelling opportunity,” SEC Division of Investment Management Director Brian Daly told the New York City Bar Association Thursday.
- Daly said proxy voting has been a focus of the SEC’s regulatory agenda since last year, but called a December executive order targeting proxy advisors a “seismic shift.” The order requires the SEC to review whether proxy advisors should be required to register as investment advisers, among other directives.
Dive Insight:
Daly’s Jan. 8 speech came a day after JPMorgan Chase’s asset and wealth management arm announced it would use AI instead of third-party proxy advisers for U.S. listed companies.
Daly said that any investment advisers who decide to use AI for proxy voting need to ensure it aligns with their fiduciary responsibilities of transparency, auditability and consistency and that such AI agents would need to be trained with oversight of their output.
“Imagine an AI agent that can review dozens or hundreds of proxy statements, assess them against your expressed values, and efficiently generate a large quantity of principled voting recommendations. And, pretty much, for free,” Daly said. “This isn’t science fiction — it’s a near-term reality. Of course, with great power comes great responsibility.”
Daly, who became director of the Investment Management Division in July 2025, made his speech before the NYC Bar Association in his official capacity, though he noted his views do not necessarily reflect the agency’s.
The SEC director said the current proxy voting landscape has allowed third-party advisory firms to acquire “the ability to influence corporate policy and public company management, without having to buy a single share of stock.”
“Proxy advisors scaled their product offerings from limited-scope, non-discretionary research to today’s end-to-end proxy voting ‘solutions,’ which not only handle the mechanics of the voting process, but provide substantive ‘recommendations’ on corporate policy matters that can effectively become industry-wide fiats,” Daly said.
“This evolution gave rise to a small oligopoly of proxy advisory firms with de facto power to impose their views on social and political matters upon a large portion of the American capital markets,” he added.
President Donald Trump’s December executive order targeting proxy advisors also directed SEC Chair Paul Atkins to determine whether proxy advisors should be classified as a “group” under SEC guidelines; if they should “provide increased transparency” on their recommendations and methodologies, particularly on ESG and diversity, equity and inclusion; and examine whether it’s inconsistent with fiduciary duties for investment advisers who seek proxy advisory advice on things like ESG and DEI.
Atkins has previously said the agency must “de-politicize shareholder meetings,” and the SEC Division of Corporation finance said in November it won’t respond to most no-action requests this proxy season, other than those implicating state laws.
