SEC Chair Gensler issued a statement today announcing his direction to staff to consider recommending that the SEC revisit its recently adopted proxy advisory firm rule and related interpretation and guidance. The Division of Corporation Finance subsequently issued a statement reiterating Chair Gensler’s directive and staying any enforcement activity based on the rule or the interpretation and guidance pending the Commission’s evaluation of next steps.
Commissioners Peirce and Roisman issued a joint response indicating a willingness to consider and to work with staff on any recommendations but calling the directive into question, as reflected in this excerpt:
We are open to seeing what, if any, changes to our rules the staff recommends and to working with our colleagues to consider such recommendations. We find it difficult, however, to imagine what has changed in the roughly ten months since the Commission last considered this issue that would call into question such recently adopted requirements. Indeed, the compliance date for the exemption conditions is still months away, which makes it challenging, if not impossible, for us to know how these requirements will work in practice. How can we evaluate the appropriateness of further changes without considering such new data or experience? We find it even harder to understand how the Commission would justify a departure from its longstanding legal interpretation about proxy solicitation.
While it is true that certain groups expressed displeasure with various policy outcomes over the course of the rulemaking (a circumstance that occurs in every rulemaking), the Commission’s process in adopting these amendments was beyond reproach. During the years-long rulemaking process, the Commission considered all policy arguments, including those in opposition to the proposed amendments. The rule’s adopting release discusses the Commission’s analysis of these points in the context of the rule’s entire administrative record. The rule we adopted reflected the broad range of input we received on the proposal.
Not surprisingly, ISS welcomed the SEC’s announcement.
Any suggested changes to the prior rule would require a new notice and comment rulemaking under the APA following the staff’s evaluation.
See this Pensions & Investments article; our prior reports: “SEC Proxy Advisor-Related Interpretation & Guidance: Color & Context,” “SEC Moves on Proxy Advisor Reform,” and “ISS vs. SEC Litigation re: Proxy Advisor Rulemaking”; and additional information and resources on our Proxy Advisors page.