SEC Adopts Final Rule Governing Proxy Voting Advice
Commentary by Steven Lofchie
The SEC adopted amendments to SEA Rule 14a-2 ("Solicitations to which § 240.14a-3 to § 240.14a-15 apply") and Rule 14a-9 ("False or misleading statements") governing proxy voting advice and the standards of liability that apply. As previously covered, the amendments:
- rescind two portions of the rules applicable to proxy voting advice businesses that the SEC adopted in July 2020 (see previous coverage);
- provide guidance regarding statements of opinion in proxy voting advice under Rule 14a-9 ("False or Misleading Statements"); and
- affirm that Rule 14a-9 still applies to "material misstatements of facts contained in proxy voting advice."
The amendments will also rescind July 2020 guidance issued to investment advisers regarding their proxy voting obligations.
The effective date of the final rule and rescission of the guidance will be 60 days following publication in the Federal Register.
Commissioner Statements
SEC Chair Gary Gensler stated that the amendments "address issues concerning the timeliness and independence of proxy voting advice, which would help to protect investors and facilitate shareholder democracy." He added that after receiving extensive feedback on the July 2020 proposed changes, the SEC decided to revisit certain conditions out of concern that the 2020 rule might restrain independent proxy voting advice. SEC Commissioners Allison Herren Lee and Caroline A. Crenshaw also expressed their support for adopting the final rules.
SEC Commissioners Hester M. Peirce and Mark T. Uyeda dissented, arguing that it was inappropriate to rescind recently adopted rules in the absence of any change in market conditions. Ms. Peirce asserted that the SEC could have dedicated its resources to other, more pressing projects, calling the decision to revisit the proxy voting rules "a difficult and pointless one." Mr. Uyeda expressed concern that "this regulatory seesaw does not reflect administrative best practices that promote long-term reliance and confidence by market participants in the stability of important areas of securities regulation."
Commentary
By deciding to rescind two recently adopted rules, Chair Gensler has established a significant precedent of conduct, even if not of law. Assuming Mr. Gensler proceeds with his ambitious regulatory plans, a new administration would likely follow his precedent and undo any new regulations that were adopted. Consider the implications, for example, as to Mr. Gensler's proposed climate disclosure regulations.
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