In battle over proxy rules, appeals courts rule in favor of US SEC By Reuters

By Douglas Gillison

(Reuters) – In a split decision, a federal appeals court ruled in favor of Wall Street’s main regulator on Tuesday, finding that the agency has the right to strike down parts of Trump-era regulations on proxy advisers.

The ruling by the US Court of Appeals for the Sixth Circuit marked a defeat for the Chamber of Commerce, the Business Roundtable and the Tennessee Chamber of Commerce and Industry, which had filed suit in 2022.

The legal battle underscored long-standing tensions between corporations and proxy advisers, who help guide investors’ voting decisions in corporate elections and who the companies say have amassed too much power.

An SEC spokesman said the agency welcomed the news.

“We are still reviewing the decision, but the Commission is pleased that the Sixth Circuit has confirmed that the Commission’s settlement was consistent with its legal obligations,” the spokesperson said.

However, the US Chamber of Commerce said it was considering next steps.

“We continue to weigh all legal options to challenge the SEC’s illegal withdrawal” of the proxy rule, a spokesman said.

In 2022, the SEC rescinded exemptions that former President Donald Trump’s administration enacted to require proxy firms to give companies a first look at the advice they intended to give investors and let clients know about any response from companies.

Critics said the requirements would have undermined the independence of proxy firms, and President Joe Biden’s administration blocked them from taking effect.

Writing for the majority on Tuesday, U.S. Circuit Judge Julia Gibbons upheld a lower court decision from April 2023 that found that in striking down the requirements, the SEC acted within the bounds of the Administrative Procedure Act.

The agency gave its reasons for reversing the policy, and “the careful and thorough explanation of these considerations was in no way arbitrary and capricious,” she wrote.

In a dissent, US Circuit Judge John Bush said that instead the SEC was legally required to allow more time for public comment and “failed to adequately estimate the costs and benefits of its dramatic policy change “.

Representatives for the Business Roundtable and the Tennessee Chamber of Commerce and Industry did not immediately respond to requests for comment.