In July 2022, the SEC issued a final rule to rescind the 2020 critical reforms subjecting proxy advisory firms--unregulated third parties with outsized influence on shareholder votes and manufacturers’ corporate governance policies--to reasonable SEC oversight just like every other participant in the securities markets. The 2020 rule contained notice-and-awareness provisions which required proxy firms to (1) make their proxy advice avaliable to registrants "at or prior to the time when such advice is disseminated to" proxy firms' clients; and (2) provide "clients with a mechanism by which they can reasonably be expected to become aware of any written statements regarding . . . Proxy voting advice by registrants who are the subject of such advice, in a timely manner before the security holder meeting."
The NAM sued the SEC in the Western District of Texas arguing that the 2022 recission is arbitrary and capricious as well as procedurally defective. We asked the court to vacate the 2022 recission in its entirety and declare that the recession is unlawful and void. Unfortunately, on December 4, 2022, the court denied the NAM’s motion for summary judgment and granted the SEC's cross-motion. The NAM appealed that decision to the 5th Circuit.
The 5th Circuit reversed the district court's decision and vacated the SEC's rescission of the notice-and-awareness provisions of the 2020 rule, concluding that the SEC failed to provide an adequate explanation for its abrupt change in policy.