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Democrats Propose Repeal of SEC Rules Curbing Shareholder Votes (1)

March 26, 2021, 7:07 PMUpdated: March 26, 2021, 8:57 PM

Democrats introduced legislation to reverse Trump-era SEC regulations that limited small stockholders’ ability to offer proposals on environmental, social, and governance issues, such as executive pay or climate change risks.

Senate Banking Committee Chairman Sherrod Brown’s Congressional Review Act resolution, unveiled Thursday, seeks to repeal proxy rules that the Securities and Exchange Commission completed in September under former Chairman Jay Clayton. The rules raised the criteria—such as the value of stock holdings—that shareholders must meet in order to submit or resubmit proposals that investors vote on at companies’ annual meetings.

“By raising eligibility and resubmission thresholds for shareholder proposals, the rules take away an important tool to push for better corporate governance, increase transparency, and address the gender pay gap,” Brown (D-Ohio) said in a statement. “Congress must repeal the rule, and we need to find ways to increase shareholder participation and to make executives more accountable.”

Companies pushed for the Trump-era changes as a way to curb dissident stockholders, arguing that such proposals abused the system. But investor advocates opposed the regulations, saying they would unfairly silence shareholders.

Acting SEC Chair Allison Lee, a Democrat, voted against issuing the rules when Republicans-leaning commissioners controlled the agency. The regulations helped “put a thumb on the scale for management in the balance of power between companies and their owners,” Lee said at the time.

A representative for Lee declined to comment.

The 1996 Congressional Review Act allows Congress to repeal a regulation within 60 legislative days of its enactment with simple majorities in both houses and the president’s signature.

Brown also offered a CRA resolution to undo the Trump administration’s “true lender” rule from the Office of the Comptroller of the Currency on Thursday. Democrats have claimed the OCC regulation permits predatory lending through “rent-a-bank” schemes.

(Updates with Brown statement in the third paragraph)

To contact the reporter on this story: Andrew Ramonas in Washington at aramonas@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com

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