H.R. 3402 — To amend the Securities Exchange Act of 1934 to require certain disclosures by institutional investment managers in connection with proxy advisory firms, and for other purposes.

This section requires institutional investment managers that engage proxy advisory firms (i.e., firms providing proxy voting advice, research, or recommendations) and exercise voting power over certain equity securities to file an annual report with the SEC disclosing (1) how the manager voted on each shareholder proposal; (2) the percentage of votes consistent with each retained proxy advisory firm's recommendations; (3) the manager's consideration of those recommendations, voting consistency rate, reconciliation with fiduciary duties to shareholders' best economic interests (i.e., maximizing returns consistent with fund objectives and risk profile), frequency of vote changes due to errors or issuer information, and investment professionals' involvement in voting; and (4) a certification that votes were based solely on shareholders' best economic interests. Additionally, managers with at least $100 billion in assets under management must (1) clarify in customer voting materials that shareholders need not vote every proposal; (2) conduct an economic analysis—confirming the vote's alignment with shareholders' best economic interests—for each shareholder proposal voted against a majority-independent board's recommendation; and (3) include those analyses in the annual report. (Institutional investment managers, as defined under SEC rules, are large entities such as mutual funds and asset managers that hold and vote public company shares on behalf of clients; these requirements increase SEC oversight of proxy voting practices previously governed only by general fiduciary standards under Section 13(f).)