SEC Announces It Will Not Enforce Amended Rules Governing Proxy Advisors
On June 1, 2021, SEC Chair Gary Gensler and the SEC Division of Corporation Finance issued statements making it clear that the SEC would not be enforcing the 2020 amendments to certain rules governing proxy advisory firms or the SEC guidance on the new rules.
In particular, in July 2020 the SEC adopted amendments to change the definition of “solicitation” in Exchange Act Rule 14a-1(l) to specifically include proxy advice subject to certain exceptions, provide additional examples for compliance with the anti-fraud provisions in Rule 14a-9 and amended Rule 14a-2(b) to specifically exempt proxy voting advice businesses from the filing and information requirements of the federal proxy rules. On the same day, the SEC issued updated guidance on the new rules. See HERE for a discussion on the new rules and related guidance.
Like all rules and guidance related to the proxy process, the amendments were controversial with views generally falling along partisan lines. On June 1, 2021, Chair
SEC Amendments To Rules Governing Proxy Advisory Firms
In a year of numerous regulatory amendments and proposals, Covid, newsworthy capital markets events, and endless related topics, and with only one blog a week, this one is a little behind, but with proxy season looming, it is timely nonetheless. In July 2020, the SEC adopted controversial final amendments to the rules governing proxy advisory firms. The proposed rules were published in November 2019 (see HERE). The final rules modified the proposed rules quite a bit to add more flexibility for proxy advisory businesses in complying with the underlying objectives of the rules.
The final rules, together with the amendments to Rule 14a-8 governing shareholder proposals in the proxy process, which were adopted in September 2020 (see HERE), will see a change in the landscape of this year’s proxy season for the first time in decades. However, certain aspects of the new rules are not required to be complied with until December 1, 2021.
The SEC has
SEC Issues Guidance On Proxy Advisory Firms
On August 29, 2019, the SEC issued anticipated guidance related to the application of the proxy rules to proxy advisory firms. Market participants have been very vocal over the years regarding the need for SEC intervention and guidance to rein in the astonishing power proxy advisor firms have over shareholder votes, and therefore public companies in general. The new SEC interpretation clarifies that advice provided by proxy advisory firms generally constitutes a “solicitation” under the proxy rules including the necessity to comply with such rules and the related anti-fraud provisions. On the same day, the SEC issued guidance on the proxy voting responsibilities of investment advisors, including when they use proxy advisory firms. This blog focuses on the guidance directly related to proxy advisory firms.
The SEC has been considering the role of proxy advisors for years. In 2010 it issued a concept release seeking public comment on the role and legal status of proxy advisory firms within the
