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The NAM continues to lead the fight to restore the proxy advisory firm rule recently rescinded by the Securities and Exchange Commission. In its most recent move in a years-long legal effort, the NAM has appealed a lower court ruling in NAM v. SEC that upheld the SEC’s unlawful rescission.

The background: Proxy advisory firms, which have significant influence over how shareholders vote in proxy ballot contests at public companies, have historically lacked appropriate oversight from the SEC.

• In 2020, the NAM led a successful effort to develop a new rule that would increase oversight of these firms—but in 2021, new leadership at the SEC announced that the rule would not be enforced, and in 2022, the SEC rescinded many of its critical provisions.

NAM leadership: The NAM was a strong advocate for the 2020 rule, which NAM President and CEO Jay Timmons called “a long-sought, major win for the industry and millions of manufacturing workers.” Since the rule was finalized, the NAM has been the leader in protecting the rule in court:

• In 2020, proxy firm Institutional Shareholder Services filed suit to overturn the 2020 rule. The NAM joined ISS v. SEC as an intervenor-defendant, supporting the SEC’s authority to regulate proxy firms.
• When the SEC announced it would not enforce the rule in 2021, the NAM filed suit to challenge this unlawful suspension. The U.S. District Court for the Western District of Texas ruled in favor of the NAM in fall 2022, overturning the suspension.
• The SEC finalized its rescission rule in July 2022, and the NAM quickly filed suit. In December 2022, a district court ruled in favor of the SEC, bringing the NAM to its current appeal.

What we’re saying: “As we said in district court, the SEC engaged in arbitrary and capricious rulemaking in rescinding this commonsense rule,” said NAM Chief Legal Officer Linda Kelly.

• “The Administrative Procedure Act requires federal agencies to explain the basis for significant policy reversals, rely on logical reasoning and allow interested parties a meaningful opportunity to provide comment—standards the SEC clearly failed to meet.”
• “The NAM Legal Center will continue to fight to preserve the 2020 rule in full and protect manufacturers from the SEC’s dramatic about-face.” 

NAM in the news: Bloomberg Law (subscription) covered the NAM’s legal action.