In battle over proxy rules, appeals court sides with US SEC

By Douglas Gillison

(Reuters) - In a split decision, a federal appeals court on Tuesday ruled in favor of Wall Street's top regulator, finding the agency was within its rights to rescind parts of Trump-era regulations on proxy advisers.

The ruling from the U.S. Court of Appeals for the Sixth Circuit marked a defeat for the U.S. Chamber of Commerce, Business Roundtable and Tennessee Chamber of Commerce & Industry, which brought a suit in 2022.

The legal battle underscored the long-standing tensions between corporations and proxy advisers, who help guide investor voting decisions in corporate elections and who companies say have amassed too much power.

In 2022, the SEC rescinded exemptions the administration of former President Donald Trump had adopted to require that proxy firms give companies a first look at the advice they planned to give investors and allow their clients to learn of any response from the companies.

Critics had said the requirements would have undermined the proxy firms' independence and the administration of President Joe Biden prevented them from taking effect.

A SEC spokesperson said the agency welcomed the appeals court's decision.

"We are still reviewing the decision but the Commission is pleased that the Sixth Circuit confirmed that the Commission's rulemaking was consistent with its legal obligations," the spokesperson said.

The U.S. Chamber of Commerce said it was considering its next steps.

"We continue to weigh all legal options to challenge the SEC's illegal rollback" of the proxy rule, a spokesperson said.

The Business Roundtable said it was disappointed with the decision and would continue pushing for measures to "protect the integrity" of shareholder voting.

Writing for the majority on Tuesday, U.S. Circuit Judge Julia Gibbons upheld an April 2023 lower court decision.

The agency had given its reasons for the policy reversal and the "thoughtful and thorough explanation of these considerations was hardly arbitrary and capricious," she wrote.



U.S. Circuit Judge John Bush said that the SEC was legally required to allow more time for public comment and had "failed to adequately estimate the costs and benefits of its dramatic policy shift."

Representatives for the Tennessee Chamber of Commerce and Industry did not respond to requests for comment.

Source: Investing.com