SALT LAKE CITY, UTAH — On June 27th, Attorney General Sean D. Reyes led a 26-state coalition supporting the U.S. Chamber in U.S. Chamber of Commerce v. SEC. The States filed an amicus brief in the United States Court of Appeals for the Sixth Circuit asking to reverse a lower court decision regarding an SEC rule rescission.
In 2022, the SEC rescinded the 2020 Proxy Voting Advice Rule’s notice-and-awareness provisions. By revoking the proxy rule, the SEC has allowed large proxy voting advice businesses (PVABs) to continue promoting political objectives like environmental sustainability even though companies and clients were not given adequate notice or an opportunity to fully understand these recommendations before voting.
The U.S. Chamber of Commerce, Business Roundtable, and Tennessee Chamber of Commerce & Industry filed a lawsuit in 2022 challenging the SEC’s proxy rule rescission. A federal judge for the U.S. District Court Middle District of Tennessee, Nashville Division, ruled in favor of the SEC in April 2023, leading to the appeal to the federal appeals court.
General Reyes issued the following statement: “These proxy advisory firms have a duopoly of power and overwhelming influence in promoting the ESG movement—voting trillions of shareholder votes each year. The 2020 rule was an important check on that power by educating investors on how proxy firms’ voting recommendations can prioritize ESG objectives over maximizing shareholder value.”
In their brief, the States argued that the 2020 Rule’s notice-and-awareness provisions constrained PVABs’ ability to promote ESG and other political agendas. By requiring PVABs to notify companies about vote recommendations at the same time as clients and alert clients to any written responses companies submit, the provisions increased the likelihood that investors would be made aware of contrary views, particularly regarding politically motivated or controversial vote recommendations.
Joining Utah in this brief were the States of Alabama, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, and Wyoming.