WASHINGTON, D.C.—Dennis Kelleher, Cofounder, President, and CEO of Better Markets, issued the following statement on the Circuit Court for the District of Columbia’s recent decision in Institutional Shareholder Services, Inc. v. SEC, No. 24-CV-5105 (D.C. Cir.), a lawsuit challenging a rule from the Trump administration’s first term that made it harder for proxy advisory firms to provide independent advice to shareholders and hinging on the SEC’s interpretation of the word “solicit” in Section 14(a) of the Exchange Act of 1934:
“The unanimous and well-reasoned decision by the Circuit Court affirming the District Court’s opinion is a big victory for investors because it rejects the SEC’s and financial industry’s attempt to prevent proxy advisory firms from providing investors with objective, expert recommendations on proxy issues related to important matters of company governance. Investors are supposed to be the owners of corporations and management is supposed to work for them and act in their best interests. The proxy is a key mechanism for investors to exercise their rights, and management influence over the proxy process or attempts to bias otherwise independent advice improperly interferes with those rights.
“That’s why independent proxy advice is so important. Given the volume and complexity of those key issues, investors need and must be able to obtain advice independent from management’s recommendations, which are inherently conflicted recommendations to always support management’s views. Proxy advisory firms research issues and do an enormous amount of work that many investors simply do not have the time or tools to do. Investors must have the ability to purchase such information and recommendations without the influence of management tainting that advice.
“The SEC during the first Trump administration ignored and undermined its duty to protect investors and sided with corporate interests to limit investors’ rights. Its rule equated proxy advice with proxy solicitation, imposing additional and inappropriate requirements on proxy advisory firms. Although the SEC later revised the rule, it left that provision intact, subjecting proxy advisory firms to requirements intended for those who solicit proxies not to those providing disinterested guidance. The Court was right to agree that this valuable investor resource cannot be reconciled with the statutory language and to reject the attempt to contort advice into ‘solicitation’ and impose needless burdens intended to impair investors’ rights.”
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Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
