The US Securities and Exchange Commission (SEC) Division of Examinations has identified a perceived reliance by investment advisors on proxy advisory firms as a specific focus in its fiscal year 2027 examination priorities, marking the latest development in sustained political and regulatory pressure on proxy advisory firms.

The priorities indicate that SEC scrutiny is increasingly extending beyond proxy advisors themselves to how investors assess, challenge and rely on external voting recommendations. While directed at investment advisors, the examination agenda effectively widens the regulatory lens across the proxy voting chain, placing greater focus on the governance and oversight processes supporting shareholder voting decisions.

SEC expands scrutiny of proxy advisor use and oversight

The SEC's reference to proxy advisory firms appears within its review of advisors' fiduciary obligations and third-party service providers. According to the annually published examination priorities, the Division will assess how advisors evaluate proxy advisor recommendations, examine their basis, identify potential conflicts and determine whether reliance on them satisfies applicable legal obligations. However, the Commission has not indicated that existing oversight arrangements are deficient.

The development comes amid sustained political and regulatory pressure on proxy advisory firms in the US. As noted previously by Minerva, the SEC under Chair Paul Atkins has taken an increasingly critical approach to proxy advisors and their influence on shareholder voting, as well as suing individual proxy advisors. That pressure intensified following an executive order issued by Donald Trump directing the SEC to review rules, guidance and other materials relating to proxy advisors, while instructing other federal agencies to examine issues connected to their activities.

Scrutiny has also extended beyond federal regulators. Republican-led states including Indiana, Kansas, Oklahoma and Texas have introduced measures targeting aspects of proxy advisor activity, several of which are being challenged in court. Earlier this year, the US Department of Justice also withdrew a long-standing business review letter that had effectively recognised the legality of proxy advisory services for decades.

The examination priorities look set to extend regulatory scrutiny beyond proxy advisors themselves and increase focus on how investors use, assess and oversee proxy advice in 2027. It is worth highlighting that proxy advisors do not directly control how shareholders vote. Minerva Analytics does not provide voting advice or seek to influence how clients vote. Instead, we support clients in developing fully customised voting policies that reflect their own principles and priorities. Our approach is policy-agnostic: we do not prescribe a particular voting position or impose a house view. Clients retain full control over their voting decisions, with the freedom to determine how they vote on each resolution.

For investors, the priorities may increase due diligence, documentation and oversight requirements around external voting recommendations. Proxy advisors may also need to devote additional resources to documenting voting rationales, policy frameworks and methodologies so clients can satisfy evolving SEC expectations. Investors, in turn, may face pressure to demonstrate how research is assessed, conflicts of interest are managed and recommendations are applied across meetings and markets.

The priorities are also notable given recent changes to the SEC's governance arrangements. Earlier this month, the Commission amended its quorum requirements to permit rulemaking when only one or two commissioners are serving, after the agency's membership fell to two. The change could give the SEC greater flexibility to pursue further action affecting proxy advisors and shareholder voting during 2027.

SEC 2027 priorities increase scrutiny of Schedules 13D and 13G

The broader agenda also covers advisors with activist engagement practices and their compliance with disclosure and filing obligations.

The Division said it will review whether firms are making timely and accurate filings on Schedules 13D and 13G, alongside Forms 13F, 13H, 3, 4, 5 and N-PX where applicable. Minerva Analytics' 2026 US Proxy Season Review noted that SEC guidance on Schedule 13G and 13D introduced in September increased scrutiny of when engagement by large shareholders could be viewed as evidence of an intent to influence control.

In February 2025, the SEC clarified that shareholders could lose Schedule 13G eligibility and have to switch to the more cumbersome Schedule 13D if their engagement exerted pressure on management. BlackRock and Vanguard subsequently paused ESG-related company engagement temporarily.

The disclosure focus reflects the Commission's interest in when beneficial ownership or coordinated shareholder activity triggers additional reporting obligations.

The SEC's recently concluded Climate Action 100+ investigation highlighted questions around when coordinated investor engagement could constitute the formation of a shareholder "group" for beneficial ownership purposes, adding to scrutiny of how advisors conduct both individual and collaborative engagement.

Alongside scrutiny of proxy advisor reliance, these priorities underline the SEC's focus on governance processes supporting voting, engagement and disclosures.

AI and cybersecurity oversight move up SEC agenda

The SEC's 2027 priorities emphasise artificial intelligence, termed "super intelligence" throughout the document, alongside information security and operational resilience. Examinations will cover policies and procedures governing SI use in investment analysis, compliance and trading.

Examiners will assess whether AI disclosures are accurate and whether algorithm-driven recommendations align with investors' objectives and strategies, adding scrutiny for investors, research providers and other proxy market participants incorporating AI into decision-making.

Cybersecurity examinations will cover governance, access controls, incident response and oversight of third-party service providers. The Division also warned that threat actors are increasingly using AI in cyberattacks, including phishing campaigns and deepfake-enabled social engineering, and will assess whether firms' controls address these evolving risks.

Together, the priorities suggest the SEC is increasingly focused on whether firms can maintain effective governance, cybersecurity and compliance frameworks as technological risks evolve. However, the emphasis remains on firms' use of these technologies rather than the governance standards applied by AI developers themselves. As Minerva has previously highlighted, governance practices continue to face challenges keeping pace with the rapid development of increasingly powerful AI systems.

What SEC 2027 priorities mean for proxy advisors

The SEC's 2027 examination priorities do not introduce new requirements for proxy advisors. However, by making advisors' reliance on proxy advisory recommendations an explicit examination focus, the Commission has widened the regulatory lens applied to proxy voting. Attention increasingly extends beyond research producers to how investors use research, evidence decisions and oversee voting. Whether this leads to further rulemaking remains unclear. For investors and proxy advisors alike, demonstrating robust research, conflicts management and voting processes is likely to remain a key focus throughout 2027.