SEC to avoid enforcement of Trump-era proxy adviser rules

The US Securities and Exchange Commission on Tuesday mentioned it won’t implement Trump-era rules for shareholder advisory companies, dealing a blow to firms similar to ExxonMobil which have argued proxy advisers wield an excessive amount of energy.

In a press release, fee chair Gary Gensler mentioned he has requested the company’s workers to revisit restrictions for proxy advisers that the fee adopted in July 2020. The workers must also rethink steerage geared toward defanging proxy advisers that the company revealed in 2019, he mentioned.

The SEC mentioned “it will not recommend enforcement action” primarily based on the company’s 2019 steerage for proxy advisers and the 2020 rules, now that the fee “is considering further regulatory action in this area”.

Gensler’s determination marks a win for Institutional Shareholder Services and Glass Lewis — the 2 largest proxy adviser companies. Public firms represented by the Business Roundtable and US Chamber of Commerce had lobbied the SEC to impose rules on the proxy advisers.

But traders — who use proxy adviser suggestions to vote on company boardroom issues — cheered the SEC’s motion.

“It’s Christmas in June for investors,” mentioned Amy Borrus, government director of the Council of Institutional Investors. “SEC chair Gensler’s decision today for the agency to consider revisiting its controversial actions on proxy advice is a big win for investors and the proxy advisory firms that would have been shackled by the regulatory regime the commission approved in the previous administration.”

ISS sued the SEC to cease its steerage and the 2020 rules, and that case remains to be pending in courtroom. Oral arguments are scheduled for June 7. The SEC’s proxy adviser rules are anticipated to saddle ISS and Glass Lewis with new authorized prices.

“We welcome the SEC’s announced decision to consider revisiting its proxy adviser rulemaking,” ISS mentioned in a press release.

ISS and Glass Lewis present traders with recommendation on how to vote on company points starting from local weather change disclosures to the election of board members, and their suggestions could be influential.

ISS and Glass Lewis respectively endorsed three and two nominees to the ExxonMobil board put ahead by activist hedge fund Engine No 1 Last week. At least two of the nominees had been confirmed to have received seats.

In a 2020 letter to the SEC, Exxon additionally mentioned it supported the company’s rules for proxy advisers.

Dennis Kelleher, president of the advocacy group Better Markets, mentioned: “The actions by Trump’s SEC were wrong and likely illegal. Given that the SEC exists to protect investors, not incumbent management, today’s actions properly begin the process to restore investors’ rights and re-empower investors.”

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