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MONTH-IN-BRIEF (Jun 2021)

Securities Regulation

Statement on the Application of the Proxy Rules to Proxy Voting Advice

By Dan S. Cohen, K&L Gates LLP 

On June 1, 2021, SEC Chairman Gary Gensler announced that he has directed the SEC Staff to evaluate whether to recommend that the SEC “revisit” the 2020 changes to Rules 14a-1(l), 14a-2(b), and 14a-9 (85 Fed. Reg. 55,082 (Sept. 3, 2020)) — including the definition of “solicitation” as it now includes proxy voting advice, and the exemptions and filing requirements for solicitations — and the July 2019 SEC interpretation (84 Fed. Reg. 47,416 (Sept. 10, 2019)) of the application of the proxy rules to proxy voting advice. He has not announced a timeline for when recommendations will be received and when the SEC may act on any such advice.

Also on June 1, 2021, the Division of Corporation Finance (Corp. Fin.) announced that in light of the Chairman’s directive, it will not recommend enforcement action to the Commission based on the 2019 interpretation or the 2020 rule changes “during the period in which the Commission is considering further regulatory action in this area.”  In the event that the SEC does not modify the amendments to Rule 14‑2(b)(9), the Division will not recommend an enforcement action based on those amendments “for a reasonable period of time” after the pending litigation of ISS v. SEC, 1:19-cv-3275 (D.D.C.) continues (if applicable). The changes to Rule 14a-2(b)(9) will go into effect on December 1, 2021, unless the Commission initiates a rulemaking process to amend them.

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