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December 20, 2019

Better Markets Demands Industry Corruption & Fraud in SEC Rulemaking Be Investigated & Prosecuted

Hard to believe, but the SEC recently proposed a rule to gag independent proxy firms from providing their unbiased opinion to investors who hire them. In fact, the SEC is proposing that proxy firms provide their opinions on corporations to the management of those corporations for review and editing before they are allowed to provide their opinions to their own investor-clients who are paying them for their independent views. Given that incumbent management already controls almost all the information investors receive about their corporations, the last thing investors need is management influence over one of the very few independent voices for investors.

Per usual, this anti-investor proposal is packaged and spun as pro-investor (even though it is a top priority for the Chamber of Commerce and Corporate America). To drive home this point, the Chairman of the SEC read – at the public SEC meeting that discussed and adopted the proposal — from letters he received from ordinary Main Street investors who were demanding the SEC rein in the proxy firms, including he said from “an Army veteran and a Marine veteran, a police officer, a retired teacher, a public servant, a single mom, [and] a couple of retirees who saved for retirement.” What a perfect cross section of appealing Americans to support your policy proposal!  

As many suspected when they heard the Chairman speak at this meeting, this perfect cross section of so-called “ordinary Main Street investors” sitting at home thinking about proxy firms and writing to the Chairman of the SEC to rein them in was too good to be true. Turns out, these letters were fake and part of what appears to be a corporate campaign to fraudulently induce the SEC to enact this anti-investor rule, as reported by Bloomberg news: “SEC Chairman Cites Fishy Letters in Support of Policy Change.”

It is not “fishy” – it is fraud and fraud of the most pernicious kind: intentionally designed to induce a financial regulator to enact an anti-investor rule Corporate America wants to control if not silence those who might disagree with management. That is, in our opinion, a violation of the federal laws against mail and wire fraud, among other laws. It is a brazen attempt to corrupt the policy making process at a key financial regulatory agency and it must be punished severely to deter anyone else from engaging in such egregious conduct. That’s why we have demanded that the Department of Justice and others open investigations and prosecute those who perpetrated this fraud. Read our letter to DOJ here.



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