SEC votes to undo Trump-era curbs on shareholder advisers
(Reuters) — The U.S. Securities and Exchange Commission voted Wednesday to rescind rules introduced under former President Donald Trump that critics said impeded the independence of firms that advise investors on how to vote in corporate elections.
The move is the latest installment in a long-running battle over how to regulate proxy advisers like Institutional Shareholder Services and Glass Lewis, which advise investors how to cast their ballot on issues including the election of directors, merger transactions and shareholder proposals.
The SEC’s five-member panel voted 3-2 to adopt the rule changes.
Corporations say the advisory companies have amassed too much sway over corporate elections and should be more tightly regulated.
In 2020, the SEC introduced rules that increased proxy advisers' legal liability and required them to share recommendations early on with corporate executives. Investor advocates said the changes tilted the scales in favor of corporate bosses over investors.
Wednesday's rules specifically rescind two exemptions, including a requirement that proxy advisers provide a first look to corporations of the advice to be placed on the agenda. It also removes a requirement that allowed clients of proxy firms to be notified of any written responses to their advice from companies.
The SEC, whose composition has changed under President Joe Biden, first proposed these rule changes in November and said investors had expressed concerns that the conditions created increased compliance costs for proxy advisers and impaired the independence and timeliness of their advice.
“It is critical that investors who are the clients of these proxy advisory firms are able to receive independent and timely advice,” SEC Chair Gary Gensler said.
