Bloomberg Law
April 25, 2023, 4:08 PMUpdated: April 25, 2023, 8:20 PM

SEC Rollback of Proxy Firm Curbs Withstands Second Court Battle (2)

Andrew Ramonas
Andrew Ramonas
Senior Corporate Disclosure Reporter

SEC proxy advice regulations have survived another business group’s court challenge after a federal judge ruled the agency had the power to relax Trump-era restrictions on firms aiding investor voting at companies’ annual meetings.

The Securities and Exchange Commission under Chair Gary Gensler, a Biden appointee, was allowed to reconsider the rules and reach a different decision on a “debatable question” when it adopted the regulations last year, Judge Aleta Trauger of the US District Court Middle District of Tennessee said in an opinion released Monday.

The US Chamber of Commerce sued the SEC last July, saying the agency engaged in unreasoned rulemaking when it rolled back the curbs on Institutional Shareholder Services Inc., Glass, Lewis & Co. and other proxy advisory firms. The National Association of Manufacturers filed a similar lawsuit. That case now is pending in the US Court of Appeals for the Fifth Circuit after a judge in Texas also ruled in favor of the SEC in December.

“The court’s review remains narrow and deferential,” Trauger said in her opinion. “The SEC was not obligated to thoroughly debunk its earlier reasoning or persuade the court that its second course of action was the better of the two.”

A Chamber spokesman declined to say whether the group will appeal the decision. But the organization plans to “exhaust all legal options to challenge the SEC’s illegal rollback,” said Thomas Quaadman, executive vice president for the Chamber’s Center for Capital Markets Competitiveness.

“The SEC chose activists over investors and entrepreneurs when it decided to stop oversight of the proxy advisory firm duopoly,” Quaadman said in a statement to Bloomberg Law.

An SEC spokesperson declined to comment.

Long Battles

ISS and Glass Lewis have long drawn the ire of businesses over the voting guidance they give to pension funds and other large investors. The firms have significant sway over votes on company directors and environmental, social and governance issues, among other matters.

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

The agency under Gensler then ditched the requirements, with the chair saying in 2022 that the changes were critical to investors seeking timely and independent advice. ISS also is fighting over the rules in court, saying the SEC improperly kept it in a more restrictive regulatory regime for shareholder activists.

The Chamber’s case is Chamber of Commerce of the United States of America v. SEC, M.D. Tenn., No. 3:22-cv-00561, opinion filed 4/24/23.

(Updates with Chamber's response in fifth and sixth paragraphs)

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

To contact the editors responsible for this story: Jeff Harrington at; Michael Ferullo at

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