The European Commission’s ongoing review of the Shareholder Rights Directive (SRD) presents a pivotal opportunity to reshape how millions of European investors participate in corporate governance. Georgia Stewart, CEO of Tumelo, a leading provider of pass-through voting technology, has outlined a compelling vision for how targeted regulatory interventions can transform a fragmented landscape of pioneering initiatives into a robust, scalable infrastructure for shareholder democracy. Tumelo’s response to the Commission’s 2026 Call for Evidence on the update of the SRD highlights three key areas where legislative action could unlock the voting rights of pension fund members, retail fund holders, and beneficiaries of insurance products, empowering them to routinely direct the votes attached to the shares their capital ultimately funds.
The current technological capacity and investor demand for direct voting engagement are undeniable. However, a critical gap exists within the regulatory architecture, preventing this potential from being fully realized. Tumelo, which currently supports over £300 billion in assets across six global fund managers and more than twenty-five asset owners, witnesses firsthand the operational challenges that hinder widespread adoption of pass-through voting. Stewart emphasizes that while innovation and appetite are present, specific regulatory adjustments are necessary to scale existing solutions.
The Urgency for Enhanced Shareholder Engagement
The evolution of financial markets and investor expectations has placed a growing emphasis on responsible investment and active ownership. Shareholder voting is a fundamental mechanism through which investors can influence corporate behavior, promote sustainable practices, and hold company management accountable. However, for a significant portion of European investors, this fundamental right remains largely inaccessible due to complex intermediary structures and data silos.
The Shareholder Rights Directive, first introduced in 2007 and later revised by SRD II in 2017, aimed to enhance transparency and facilitate shareholder engagement. SRD II, in particular, sought to improve the exercise of shareholder rights by listed companies and to foster long-term investment. Despite these efforts, the practical implementation of direct investor influence, especially for those investing indirectly through pooled investment vehicles, has encountered significant hurdles. The current call for evidence signifies the European Commission’s commitment to addressing these persistent challenges and ensuring that the SRD remains a relevant and effective framework for the evolving financial landscape.
Tumelo’s Three Pillars for Regulatory Reform
Tumelo’s submission to the European Commission focuses on three critical "unlocks" designed to be narrow, proportionate, and compatible with the existing regulatory framework. Each proposal addresses an operational pain point that currently impedes the efficient and widespread exercise of voting rights by end investors.
1. Enabling Scalable Pass-Through Voting Through Data Accessibility
The core of pass-through voting lies in its ability to distribute a fund’s voting power proportionally among its underlying investors. This mechanism inherently requires fund managers to possess accurate information about who these investors are and their respective holdings. While this is a relatively straightforward process for institutional clients investing directly with a fund manager, it becomes significantly more complex for the vast majority of investors who access funds through distribution platforms, wealth management services, or insurance wrappers.
In these multi-layered structures, distribution platforms often act as the registered holder of fund units. This means that the fund manager typically only sees the platform’s aggregate position, lacking visibility into the individual investors and their specific allocations. Crucially, current regulations, including the SRD, do not mandate that these platforms share their underlying ownership data with fund managers, even when the manager is willing and equipped to facilitate pass-through voting. This has resulted in platforms frequently declining such data-sharing requests, creating a significant operational bottleneck.
The current workaround is a cumbersome and resource-intensive process. Determined asset owners often have to self-identify their fund holdings, negotiate bespoke data feeds with platforms, and provide data that the fund manager cannot independently verify against the platform’s records. This burden disproportionately falls on those most eager to participate. For instance, engineering teams at pension schemes dedicate valuable time to developing intricate point-to-point integrations that would be rendered obsolete if platforms simply shared the necessary data.
For retail investors, the workaround is often non-existent. The practicalities of an individual retail investor negotiating custom data feeds are insurmountable. While some may leverage emerging technologies like Open Banking/Open Finance to connect their accounts, these solutions were not designed with shareholder voting in mind and do not provide the robust infrastructure required for a fund manager to build upon with confidence.
Tumelo proposes a two-pronged duty for platforms:
- Duty to Notify: When a fund manager offers pass-through voting for a particular fund, platforms should be obligated to inform underlying investors about this option. Furthermore, they should be required to facilitate the transmission of voting instructions without imposing additional per-investor charges. This notification duty aligns with existing UCITS obligations where platforms already serve as conduits for regulatory information, such as material fund changes or mergers.
- Duty to Disclose: If an underlying investor expresses a desire to exercise their shareholder rights, including through pass-through voting, the platform must disclose the investor’s identity and holdings in the relevant funds to the fund manager. This duty should apply irrespective of whether the platform is the registered holder and should be coupled with a right for the fund manager to verify this data against the platform’s records, thereby ensuring data integrity.
These proposed duties represent modest extensions of obligations platforms already undertake. The disclosure duty, for example, can be seen as a logical extension of SRD II’s shareholder identification requirements, applied to the platforms situated between the registered holder and the beneficial owner. Implementing these changes would effectively extend the reach of pass-through voting to the vast population of investors currently excluded due to data access restrictions.
2. Establishing Split Voting as a Unified EU-Wide Right
The efficacy of pass-through voting is intrinsically linked to the ability to "split" a fund’s aggregate voting entitlement, allocating portions of votes in alignment with the preferences of individual underlying investors. In the United States, for example, there are no barriers to split voting for U.S. issuers, enabling all U.S. investors to participate in pass-through voting within their domestic markets.
Europe, however, presents a fragmented landscape. While some member states permit split voting without issue, others impose restrictions, allowing it only at specific custody chain levels or subjecting it to procedural requirements that are impractical for the tight timelines of annual general meetings (AGMs). This regulatory patchwork creates significant operational challenges for fund managers aiming to offer pan-European pass-through voting solutions.
Consequently, fund managers have often been forced to launch pass-through voting initiatives on a country-by-country basis, completing extensive legal work in each jurisdiction. Some have limited the offering to clients in specific regions due to the compounded legal and operational complexity of serving cross-border clients under inconsistent rules. The bottleneck is not investor demand or technological capability, but rather the duplicative legal and operational effort required for each new market, transforming each country launch into a distinct project rather than a seamless extension of a unified service.
Tumelo advocates for a straightforward solution: an explicit, EU-wide right for shareholders and their agents to split votes proportionally to the interests of underlying investors. This right should be universally applicable across all member states, with intermediaries mandated to facilitate and transmit split-vote instructions without undue delay. Such a harmonized approach would transform pass-through voting from a jurisdiction-specific negotiation into a standardized, single product deployable across the entire EU.
3. Defaulting to Customization in Proxy Voting
The third critical area for reform concerns the analytical layer that underpins voting infrastructure: the policy frameworks and proxy research that guide investor decisions. The dominant economic model for proxy advisory services inherently links pricing to customization. The more bespoke an investor’s voting policy and the more nuanced the analysis required, the higher the cost. Standard benchmark recommendations, which are identical for numerous clients, represent the most affordable option.
This pricing structure creates an economic incentive that runs counter to the SRD’s policy objective of fostering informed, considered, and individualized shareholder voting. Investors who wish for their voting policies to reflect their unique stewardship priorities are financially penalized. This dynamic has contributed to long-standing concerns about the concentrated influence of the proxy advisor duopoly. Technology, however, offers a means to dismantle this established model.
Tumelo’s ProxyBeacon platform exemplifies this shift. It empowers investors to define their stewardship rules in natural language and generates outputs based on these rules, rather than providing pre-packaged voting recommendations. Customization is presented not as an upsell, but as the fundamental mode of operation, with a low marginal cost for additional rules, clients, or jurisdictions. The innovation lies not in a single product, but in challenging the labor-intensive, one-size-fits-all approach. A revised regulatory framework should reflect this by:
- Promoting Transparency in Proxy Research Methodologies: Mandating greater clarity on how proxy research firms develop their recommendations and the data sources they utilize would allow investors to make more informed choices about the services they engage with.
- Encouraging the Development of Technology-Enabled Customized Voting Solutions: Regulatory support, potentially through sandboxes or pilot programs, could accelerate the adoption of innovative technologies that facilitate personalized voting policies at scale.
- Reviewing Fee Structures in Proxy Advisory Services: While direct price controls may be contentious, the Commission could explore mechanisms to encourage more competitive and accessible pricing models for customized proxy research, thereby reducing the financial barrier to individualized shareholder engagement.
By making customization the default rather than a premium service, the potential for shareholder engagement is qualitatively enhanced. Investors can vote according to their own articulated standards, and the resulting votes provide companies with more granular and actionable feedback. A significant vote against a director, driven by specific governance standards embedded in structured rules, offers a level of insight that aggregated benchmark votes cannot provide. This kind of feedback is invaluable for companies seeking to improve their governance and foster a more productive dialogue between issuers and shareholders, as envisioned by the SRD.
The Cumulative Impact: A Broader Franchise for European Investors
Individually, these three proposed reforms may appear technical and modest. However, collectively, they represent a coherent strategic direction for the SRD review. The overarching goal is to leverage the pass-through voting infrastructure already developed by the market and systematically remove the specific points of friction that prevent it from operating at scale.
This includes opening the platform layer to the data fund managers require, establishing split voting as a portable, pan-European right, and ensuring that customization in proxy research becomes the standard, not the exception. Tumelo’s comprehensive submission to the Commission outlines a wider agenda, addressing crucial aspects such as the legal certainty required for scaling pass-through programs, the cost barriers that currently disenfranchise cross-border retail investors, and the need for AGM timeline reforms to ensure voting infrastructure can function effectively during peak seasons. However, the three points detailed here are considered to hold the greatest potential for increasing investor participation.
Crucially, these proposed changes do not necessitate a radical reimagining of regulatory frameworks or disturb the fundamental allocations of legal ownership and fiduciary responsibility inherent in fund management. Instead, they serve to broaden the franchise of shareholder democracy, extending the right to vote to asset owners and retail investors who are currently excluded due to an architectural lag. The European Commission’s review offers a timely opportunity to bridge this gap, fostering an environment where the architecture fully supports the aspirations of a more engaged and empowered European investor base. The potential for increased transparency, accountability, and sustainable corporate practices, driven by a more active and informed shareholder community, is substantial.
