The U.S. Securities and Exchange Commission said Tuesday it will not enforce Trump-era rules for stock advisory firms, striking a blow to companies like ExxonMobil that claim proxy advisers have too much power.
In a statement, commission chairman Gary Gensler he said asked the agency staff to review the restrictions for proxies on the commission adopted in July 2020. Staff should also review guidelines aimed at defining a proxy advisor who would agency published in 2019, he said.
SEC he said “Will not recommend enforcement action” based on the Agency’s 2019 guidelines for deputy advisers and the 2020 rules, now that the Commission is “considering further regulatory measures in this area”.
Gensler’s decision marks a victory for Institutional Shareholder Services and Glass Lewis – the two largest proxy consulting firms. Public companies representing the Business Roundtable and the American Chamber of Commerce lobbied the SEC to impose proxy regulations.
But investors – who use the advisers’ recommendations for proxies to vote on issues in the corporate hall – cheered the SEC’s action.
“Christmas is in June for investors,” said Amy Borrus, executive director of the Institutional Investors Council. “Today’s decision by SEC Chairman Gensler to have the agency reconsider revising its controversial actions on intermediary advice represents a major win for investors and proxy advisory firms that would be hampered by a regulatory regime approved by the commission in the previous administration.”
The ISS has sued the SEC to halt its 2020 guidelines and rules, and the case is still in court. Oral arguments are scheduled for June 7. Regulations on SEC proxies are advising ISS and Glass Lewis on new legal costs.
“We welcome the announced decision of the SEC to consider a re-visit to the rulemaking through proxy advisors,” ISS he said in a statement.
ISS and Glass Lewis provide investors with advice on how to vote on corporate issues, from climate change detection to the election of board members, and their recommendations can have an impact.
ISS and Glass Lewis approved three and two ExxonMobil board candidates put forward by activist hedge fund Engine No. 1 last week. It was confirmed that at least two nominated candidates won seats.
In a letter to the SEC for 2020, Exxon also said it supports the agency’s regulations for deputy advisers.
Dennis Kelleher, president of the advocacy group Better Markets, said: “The actions of Trump’s SEC were wrong and probably illegal. Given that the SEC exists to protect investors, not the existing management, today’s actions properly begin the process of restoring investor rights and re-empowering investors. “