SEC lifts the Trump-era rule scolded by activist funds

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    (Bloomberg) – The US Securities and Exchange Commission is taking steps to reverse controversial regulations that were passed last year and placed new restrictions on proxy firms.

    The proposed revision would deprive groups of companies, including the US Chamber of Commerce, of political gain. Executives cheered the GOP-sponsored changes approved in July 2020 that endorsed by restricted firms such as Institutional Shareholder Services Inc. and Glass Lewis & Co. Critics argued that the tweaks made it more difficult for investors to push for changes in corporate strategy.

    The SEC’s new plan, proposed under Chairman Gary Gensler, a Democrat, would remove additional requirements that Republicans say are necessary to address conflicts of interest. Gensler, who joined the agency with the agency’s two other Democrats on Wednesday, said in a statement that “Investors have expressed concerns that terms such as those written would undermine the independence and timeliness of proxy advice “. . ”

    Activist investors like Carl Icahn also opposed the changes introduced last year, arguing that they would make it difficult for shareholders to hold companies accountable for poor performance.

    Read more: Companies win activists in SEC Proxy Adviser Crackdown

    Elad Roisman, a Republican commissioner with the SEC who played a key role in drawing up the rules from the Trump administration, said it was inappropriate to reverse course a year after the rules were passed. He also said the agency’s new plan could result in a “spin-off” from legal proxy liability.

    “The rationale for the proposal is not so well supported and the process by which it was developed raises questions about its thoroughness,” said Roisman in prepared notes. Hester Peirce, the other GOP commissioner at the SEC, also rejected the plan.

    The SEC’s new proposal would:

    • Avoid controversial requirements that proxy advisory firms share their recommendations with corporate executives at the same time as shareholders
    • Remove the language of the consequences of not disclosing certain proxy advice information that critics say has made legal counsel counselors the target
    • Give the public 30 days to comment

    Also on Wednesday, the SEC voted 4 to 1 to force companies to include candidates who are shareholder-backed – as well as those who are backed by management – on the same proxy card for contested elections.

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