SEC Changes Process of Choosing Members of the IAC
Commentary by Steven Lofchie
The SEC outlined an updated nomination process for appointment to the Investor Advisory Committee ("IAC").
According to the SEC, a nominating committee, composed of one member from each of the SEC's divisions and offices, will identify potential replacement candidates in the event of a vacancy on the IAC. Among other factors, the nominating committee will choose potential candidates based on the outgoing member's "functional category." The SEC also noted that individuals interested in becoming a member of the IAC may submit a letter of interest via email.
SEC Chair Jay Clayton and Commissioners Elad L. Roisman and Hester M. Peirce commended the updated procedures for providing a broader pool of candidates for the nomination committee to choose from and bringing a "diversity of experiences" to the IAC.
SEC Commissioner Allison Herren Lee criticized the procedures set forth for potentially undermining the effectiveness of the IAC. She stated that the new procedures (i) single out the IAC by subjecting it to procedural requirements that are "unlike that for any other committee" and (ii) restrict the Office of the Investor Advocate's involvement in the nomination process.
Commentary
This is a real inside-baseball dispute and likely a good example of how process can affect policy. In her statement, Commissioner Lee expresses her belief that the change in the nominating process may result in reduced SEC attention to "ESG [economic, social and governance] investing, climate change expertise, proxy, shareholder rights, or even corporate governance broadly."
It is notable that the descriptions of the changes to the nominating process by the Commissioners who voted for it and by Commissioner Lee are so different. For example, Chair Clayton describes the new process as "based on experience with many of our other advisory committees. . . ." By contrast, Commissioner Lee describes the new process as being "[not] consistent with the way we treat other advisory committees."