The new policy of the top US securities regulators provides more strength to investors in a way that can reduce the reform efforts initiated by investors in everything ranging from climate policies to director contests, experts said.
Since last month when US President Donald Trump named Mark Uyeda Acting Chairperson of Securities and Exchange Commission, the agency has made it easier for the council to block shareholder resolution, place more stringent archiving requirements on passive funds, and limit investor communication capabilities.
Changes to give director more space for Nix’s efforts to limit emissions or report details of labor diversity, while traditional activists who run their own director’s blackboard can also find it more difficult to challenge the council, the lawyer said.
“This is a relatively dramatic reality of power from large shareholders back to company management, not only to make company policies but to protect themselves against activists,” said Professor of Business Law at Tulane Ann Lipton University.
Uyeda and other Republican officials – including Paul Atkins, Pick Trump to run SEC – have explained their skepticism of environmental, social and governance (ESG) investment considerations. “Shareholders’ meetings are not intended based on the law of state companies to become a field of political battle or debating people,” Uyeda said in a speech 2023.
A SEC spokesman refused to comment when contacted by Reuters. Atkins did not respond to questions sent through his current company.
Fewer polling items
Changes are in line with other Trump administrative efforts such as dismantling diversity programs and withdrawing from the Paris climate agreement.
ESG resolution received significant support in 2021 and 2022, but less than that. In the Legal Bulletin February 11, SEC makes it easy for companies to miss votes on resolutions such as by claiming the proposal “managing micro” their business.
The change can complicate ESG -thinking activists even to start the conversation with the company’s executive.
“If it is more difficult to get your resolution in SEC, it will be more difficult to do such work,” said Rick Alexander, CEO of the Shareholders of the Commons, who tracked and wrote resolution.
On February 11, SEC also revised the interpretation of “Reporting of Profitable Ownership” to expand requirements on companies such as the BLK Blackrock and Vanguard Asset Manager, who often rely on the 13G SEC schedule form to report the main ownership.
Going forward, the agency is tightened when managers can use forms rather than a more complex 13D schedule, which will increase their costs. The new SEC test is if a company “puts pressure on management” such as binding the director to vote whether the company has a staggered council or defense of the poison pill.
Proxice policy both Blackrock and Vanguard suggested that the situation could lead to critical sounds.
Blackrock and Vanguard refused to comment.
Caroline Censhaw, currently the only member of Democrats from SEC, through email said that the change could cool the outreach of large funds.
“Interpretation ruffles -waters of waters for institutional investors, with an unnamed goal to prevent them from being involved with the company. Basically, this policy is bad for capital formation, “Censhaw said.
Communication damage
The third change involves a new guide about when investors can use the SEC electronic note system to distribute what is called “excluded submission,” or communication with other shareholders.
After being intended as a tool to reveal a closed discussion between larger institutional holders, smaller investors begin to submit an excluded request as a cheap way to make their argument about the problem of whether it will oppose certain director or support the resolution of shareholders.
In January 27th update, SEC narrowed permitted use. The documents “are not intended to be a means that through which someone spreads material written to security holders,” said SEC, but only to inform the public about written material sent to security holders in other means.
For Tom Quaadman, senior vice president for the US Chamber of Commerce, Top Business Lobbying Group, SEC change is invited.
“You see the Balancing of the SEC policies and rules designed to issue special interest activism and bring everything back to focus on returning investors,” he said.
Source: Reuters
