U.S. SEC set to rescind Trump-era curbs on shareholder advisers

[July 13, 2022]    By Katanga Johnson

WASHINGTON (Reuters) - The U.S. securities regulator is expected on Wednesday to rescind rules introduced under former U.S. President Donald Trump that critics said impeded the independence of firms that advise investors on how to vote in corporate elections.

People exit the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly

The rule change is the latest installment in a long-running battle over how to regulate "proxy" advisers like Institutional Shareholder Services and Glass Lewis, which advise investors how to cast their ballot on issues including the election of directors, merger transactions and shareholder proposals.

Corporations say these companies have amassed too much sway over corporate elections and should be more tightly regulated.

In 2020, the Securities and Exchange Commission (SEC) introduced rules that increased proxy advisers' legal liability and required them to share recommendations early on with corporate executives. Investor advocates said the changes tilted the scales in favor of corporate bosses over investors.

President Joe Biden's SEC on Wednesday is expected to scrap those two provisions. When first proposing the rule change in November, the SEC said investors had expressed concerns that the conditions created increased compliance costs for proxy advisers and impaired the independence and timeliness of their advice.

It also said the legal liability changes had created confusion and increased proxy advisers' litigation risks, potentially impairing the quality of advice.

ISS and Glass Lewis declined to comment on Tuesday.

The SEC is expected to vote on the matter at 10 a.m. Eastern Time.

(Reporting by Katanga Johnson; Writing by Michelle Price; Editing by Christopher Cushing)

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