Bill Overview
Title: INDEX Act
Description: This bill establishes guidelines for passively managed funds (e.g., index funds) that vote shares on behalf of fund investors in proxy shareholder votes. Under the bill, these funds generally must vote shares on a proportional basis according to instructions from fund investors. The bill establishes an exemption for routine matters and matters requiring approval of a majority of outstanding securities. Additionally, the bill establishes a safe harbor from these requirements for investment advisers.
Sponsors: Sen. Sullivan, Dan [R-AK]
Target Audience
Population: Investors with holdings in passively managed funds
Estimated Size: 100000000
- The bill impacts investors involved in passively managed funds such as index funds.
- It specifically affects shareholder voting processes, which means any individual who is an investor and partakes in such funds would be impacted.
- The bill also involves entities and organizations that manage index funds, requiring them to change how they execute proxy votes.
- Shareholder votes often influence major decisions within companies, so the implications of this bill may indirectly affect employees, customers, and other stakeholders within those companies, but primarily at an indirect level.
Reasoning
- The beneficiaries of this policy are individuals who have invested in index funds and passively managed funds. This population tends to be middle to upper class individuals who have some level of investment in the stock market.
- There are major financial institutions and corporations that will be secondarily impacted as they will have to alter their existing policies on shareholder voting for these index funds.
- Given the significant overlap between mutual fund investors and those in passively managed funds, a large portion of investors could be impacted.
- The direct impact on shareholders might not lead to a drastic change in personal wellbeing but could give them more control over their investments, potentially leading to a greater sense of financial security and involvement.
- There is a large indirect population of employees within these institutions, but their experience of the policy will likely vary based on their role and proximity to shareholder meetings and policies.
Simulated Interviews
Software Developer (New York, NY)
Age: 45 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- I'm happy about the increased control over my votes this bill gives me.
- I've always wanted to ensure my investments align with my values.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
Financial Analyst (San Francisco, CA)
Age: 32 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 15/20
Statement of Opinion:
- This policy might cause logistical challenges, but more voting power is a positive change.
- I see this as potentially complicating the index fund process.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 6 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Retired Teacher (Miami, FL)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- I appreciate having a say in how companies use my money.
- I hope this policy leads to more responsible corporate actions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 6 | 4 |
| Year 20 | 6 | 4 |
Marketing Manager (Chicago, IL)
Age: 29 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 7.0 years
Commonness: 14/20
Statement of Opinion:
- Having a say in my investments is empowering.
- I like knowing my investments can align with my personal values.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
Entrepreneur (Austin, TX)
Age: 38 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 13/20
Statement of Opinion:
- I feel this gives more control but could make things more complicated.
- The added steps might deter casual investors.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Nurse (Seattle, WA)
Age: 55 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 6.0 years
Commonness: 11/20
Statement of Opinion:
- Feeling empowered by having more say in how my money is used.
- Hopeful that this leads to better ethical business practices.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Graphic Designer (Los Angeles, CA)
Age: 27 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 18/20
Statement of Opinion:
- I'm interested in learning more about my rights as an investor.
- Seems beneficial, but I'm unsure how this will affect me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 4 | 4 |
| Year 20 | 5 | 5 |
Corporate Executive (Atlanta, GA)
Age: 42 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 9/20
Statement of Opinion:
- This could change board dynamics for some companies.
- I support more investor control, but it may increase the administrative burden.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Automobile Engineer (Phoenix, AZ)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 16/20
Statement of Opinion:
- More control is good, but I'm wary of possible changes in returns.
- I hope this doesn't complicate investments too much.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 4 |
Public School Teacher (Denver, CO)
Age: 48 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 8.0 years
Commonness: 14/20
Statement of Opinion:
- This will help me ensure my investments reflect my values.
- Improved transparency can only lead to better outcomes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Cost Estimates
Year 1: $60000000 (Low: $50000000, High: $70000000)
Year 2: $58000000 (Low: $48000000, High: $68000000)
Year 3: $56000000 (Low: $46000000, High: $66000000)
Year 5: $54000000 (Low: $44000000, High: $64000000)
Year 10: $50000000 (Low: $40000000, High: $60000000)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- Impact on fund management costs and fees for investors as costs may be transferred to them or absorbed by the funds.
- Expectations of transparency and increased investor participation in governance could influence fund marketing strategies.
- Legal compliance costs for investment advisers to adhere to the safe harbor provisions and documentation requirements.