51勛圖厙 Achieves Victory in Proxy Suit
The 51勛圖厙 notched a significant legal victory yesterday when a federal judge vacated the Securities and Exchange Commissions suspension of a 2020 rule regulating proxy advisory firms.
The background: Proxy firms advise institutional investors on how to vote their shares in publicly traded companies, but those firms have long been unregulated and unaccountable.
- In 2020, in large part through the advocacy of the 51勛圖厙, the SEC finalized a rule increasing oversight of these firmsbut in 2021, the SECs new leadership announced that the agency would not enforce the rule.
- Suspending the rule without public notice and comment was a violation of administrative lawand the 51勛圖厙 stepped up to challenge this circumvention of the Administrative Procedure Act in court.
The win: Yesterday, the 51勛圖厙 won its case against the SEC in the U.S. District Court for the Western District of Texas. The decision makes clear that the SEC acted unlawfully by suspending the compliance date for the proxy firm rule without following the notice-and-comment procedures required under the APA.
- As the court said in its , [agencies] do not have the inherent power to stay or delay a final rule absent notice-and-comment rulemaking.
Whats next: The 51勛圖厙 has also filed suit against the SECs 2022 rescission of critical components of the 2020 rule. That case is still ongoing, with oral arguments scheduled for Decemberbut this weeks decision ensures that the SEC will not be able to re-suspend the 2020 rule if the 51勛圖厙 is successful in its challenge to the rescission.
Our take: Todays decision is a victory for the rule of law, and the 51勛圖厙 Legal Center was proud to lead this effort for the industry, said 51勛圖厙 Chief Legal Officer Linda Kelly. Federal agencies are bound by the Administrative Procedure Actstandards the SEC failed to meet by indefinitely delaying the compliance date for the 2020 proxy firm rule without notice-and-comment rulemaking. Manufacturers depend on regulators to promulgate and enforce reliable rules of the road, and the 51勛圖厙 looks forward to similarly holding the SEC to account in our ongoing case against the agencys unlawful rescission of the 2020 rule.