The SEC is investigating letters used to support controversial rules that would impose new requirements on proxy advisory firms and higher thresholds for shareholder proposals, SEC Chairman Jay Clayton said Tuesday during a Senate Banking Committee oversight hearing.
Several Democrats on the committee pressed Mr. Clayton, who had voted for the new rule proposals at a Nov. 5 SEC meeting where he cited letters of support for the changes from Main Street investors. Several of those letters have been traced back to people affiliated with an advocacy group, 60 Plus Association, whose members include large corporations.
"You got duped. ... The letters you cited were orchestrated by a dark money group that is funded by many of the corporations that stand to benefit from your proposals," said Sen. Chris Van Hollen, D-Md. "You became the vehicle for that as you tried to roll out this revision with the patina that it was looking out for Main Street investors."
"If you are basing decisions about what to do on comments that end up being fueled by corporate advocacy groups, I think that's a problem," Sen. Tina Smith, D-Minn., told Mr. Clayton.
Declining to comment on the letters or the SEC inspector general's investigation, Mr. Clayton said, "I still we believe we are looking out for Main Street investors."
Mr. Clayton added that he was "very open" to discussion on the proposed proxy advisory reforms aimed at ensuring better accuracy. "If people think what we are proposing is too onerous, but there's a better way to get where were going, I'm open," Mr. Clayton said.
If the rules are finalized, proxy advisory firms would have to disclose more about their process and potential conflicts of interest, and give companies the opportunity to make revisions before making final recommendations to clients. The changes to the shareholder process raise the thresholds for submitting proposals, and more importantly, resubmitting them. The proposed updates were approved by a divided 3-2 vote along partisan lines, and put on a fast track, with comments due by Feb. 3.
