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SEC Hurt FedEx, Virtu on Proxy Firm Rule Cuts, Chamber Says (1)

Nov. 23, 2022, 5:31 PMUpdated: Nov. 23, 2022, 6:36 PM

FedEx and Virtu were harmed by an SEC rollback of Trump-era restrictions on proxy advisory firms, according to a new court filing from the US Chamber of Commerce.

The companies were among the many Chamber members opposed to the Securities and Exchange Commission’s decision this year to scuttle 2020 requirements aimed at curbing Institutional Shareholder Services Inc., Glass, Lewis & Co., and other advisory firms that recommend how investors should vote at companies’ annual meetings, the business association said Tuesday in a court challenge to the agency’s changes.

The Chamber’s case in the US District Court for the Middle District of Tennessee is among several active lawsuits concerning the commission’s rule updates under Democratic Chair Gary Gensler. The inclusion of FedEx and Virtu in a declaration from Thomas Quaadman, the executive vice president for the Chamber’s Center for Capital Markets Competitiveness, was the first time the group identified the companies by name in a court document about its concerns about increased compliance costs and fewer safeguards for proxy voting advice.

“The 2020 Rule, if allowed to fully take effect without amendment, would have substantially decreased the costs to and increased the effectiveness of U.S. Chamber members attempting to correct inaccurate information in proxy recommendations,” Quaadman said in the declaration.

The agency and FedEx Corp. representatives didn’t immediately respond to requests for comment. A Virtu Financial Inc. spokesman directed Bloomberg Law to a letter the firm sent to the commission advising it to abandon any changes to the 2020 rules. It said the commission needs more time to study whether updates are needed.

‘Improving’ Proxy Advice

The Chamber has long had concerns over voting recommendations from ISS and Glass Lewis, which are the two biggest proxy firms. The firms’ customers often follow their advice, allowing them to greatly influence votes on directors and environmental, social and governance issues, among other matters.

The SEC under Trump appointee Jay Clayton in 2020 directed proxy firms to give their voting advice to their clients and companies at the same time. The rules also required the firms to give their customers access to what companies said about the recommendations.

Gensler’s SEC dropped the requirements two years later, leading to the Chamber’s case and a related lawsuit from the National Association of Manufacturers. Both groups have said the SEC overstepped its authority and violated rulemaking procedures by easing the 2020 rules.

ISS also is fighting the SEC over the rules in court, saying the agency improperly kept it in a more restrictive regulatory regime for shareholder activists.

The 2020 rules provide a “reasonable and necessary method of improving the quality of proxy voting advice,” Quaadman said in his declaration.

“Proxy voting recommendations can be market-moving and accordingly can dictate the outcome of key corporate governance decisions for companies,” he said.

The case is Chamber of Commerce of the United States of America v. SEC, M.D. Tenn., No. 3:22-cv-00561, declaration filed 11/22/22.

(Updates with additional background)

To contact the reporter on this story: Andrew Ramonas in Washington at

To contact the editors responsible for this story: Jeff Harrington at; Kimberly Wayne at