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Public interest groups press for probes of proxy comment letters

This article first appeared on Politico on December 9, 2019.


Public interest groups on Monday called for an investigation into a number of comment letters that were sent to the SEC in support of proxy rule changes that the commission proposed last month over the objections of investor advocates.


Watchdog group Public Citizen sent a letter to the SEC inspector general asking officials to look into why SEC Chairman Jay Clayton referred specifically to the letters at the beginning of a meeting called to consider the proposal, citing them to show that ordinary investors backed the changes.


Bloomberg later reported that some of those letters were signed by people who didn't recall writing them. Several others were signed by relatives of a lobbyist for 60 Plus, an affiliate of the Main Street Investors Coalition, which is funded in part by the National Association of Manufacturers, according to the report.


The manufacturers' group has vocally backed the SEC’s initiative to crank up oversight of proxy advisory firms, which make recommendations to shareholders on how to vote on controversial issues such as climate change and executive compensation.


The SEC is moving to make it harder for investors to submit shareholder proposals, including raising the bar for resubmitting those that are rejected and allowing companies to review the proposals before they are submitted. The commission agreed to propose the changes in a Nov. 5 vote along partisan lines.


That vote set in motion a new, 60-day comment period, which ends in February.


"With the agency now receiving public comments on these proposals that could have wide-ranging effects on corporate accountability, Public Citizen believes the Inspector General of the SEC must undertake necessary steps to protect the public trust in the nature of how our regulatory leaders establish financial policy,” the group wrote in its letter. “Given the Chair’s reliance on fabricated comment letters, we ask the SEC IG to explore the nature [of] this circumstance.”


The nonprofit group Better Markets, which advocates for tougher Wall Street regulation, also sent letters to Clayton and to the Department of Justice calling for investigations.


"The clear purpose of those comment letters was to convey the impression that the proposals were supported by everyday investors, not only by large corporate interests, their boards, and their trade association allies. And it seems to have worked, since SEC Chairman Clayton himself highlighted seven of the letters as persuasive when he voted in favor of the proposals," said Stephen Hall, legal director and securities specialist for Better Markets in a statement accompanying the letters on Monday.


The SEC declined to comment on the letters from the two groups.


The public docket already contains numerous requests for the SEC to extend the comment period that began last week for the proposed changes to proxy rules.


Clayton didn’t say whether the SEC would consider extending the comment period when asked by POLITICO at an event on Monday.


“it’s early," he said. "People should get their comments in."

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