The SEC’s attempt to impose new regulations on proxy advisory firms has triggered some “pretty harsh” feedback, a top official said.
Ted Yu, chief of the Securities and Exchange Commission’s mergers and acquisitions office, said Thursday that the agency’s proxy firm proposal is the most controversial of its recent rulemaking. The rule would place more restrictions on Institutional Shareholder Services Inc. and Glass, Lewis & Co., which the business community has said have too much power over companies’ corporate governance.
The commission has received thousands of letters in connection with its proposal and a roundtable discussion on proxy firms. Opposition has come from Amazon.com Inc. workers, activist investor Carl Icahn, and others.
“Folks have pretty strong views on this,” Yu said while video conferencing into a panel discussion at a corporate law conference in New Orleans. “It takes a thick skin to read all these letters sometimes.”
Not All Bad
The comments aren’t all negative, however.
The U.S Chamber of Commerce, General Motors Co., and Garmin Ltd. have voiced at least some approval. Praise has even come from individual investors, though some of their support has raised questions.
SEC Chairman Jay Clayton said in December he was looking into claims that the 60 Plus Association senior advocacy group helped write and send questionable letters supporting new rules for proxy firms.
He mentioned some of the comments when announcing the proposal in November, but some people whose names were on the letters said they didn’t submit them, Bloomberg News reported.
The agency also has received dozens of letters backing its proxy firm plan after a YouTube video from conservative activists encouraged “real Americans” to show Clayton their support.
From the opponents, one of the most prevalent concerns the commission has heard about the proposal so far is that allowing public companies to review reports from advisory firms before release could cut into the time investors get to review them and vote.
“We’re aware of that and we will definitely take it into consideration,” Yu said.
According to Yu, there were a couple of “misconceptions” reflected in the written comments.
Some commenters argued that the rulemaking would generate a new source of liability for proxy advisers, causing them to be sued more regularly.
The SEC would say this isn’t correct, Yu said, adding that the agency doesn’t view this as adding additional liability. Comment letters also laid out concerns that the rule would impair the independence of the advisers and their reports.
But “independence is not impaired here,” Yu said. “We’re working hard on this rulemaking,” and are looking to complete it within the year, he added. “So stay tuned.