Hill, Huizenga, Barr tell SEC it lacks authority to issue guidance on shareholder process

U.S. Reps. French Hill (R-AR), Bill Huizenga (R-MI), and Andy Barr (R-KY) recently called on the U.S. Securities and Exchange Commission (SEC) to rescind new staff guidance on shareholder proposals submitted to publicly traded companies.

“It is inappropriate for the SEC to use staff guidance to go around the statutory rulemaking process under the Administrative Procedures Act while making major changes to the shareholder proposal process,” the lawmakers wrote in a Dec. 13 letter sent to SEC Chairman Gary Gensler.

The SEC’s Division of Corporate Finance on Nov. 3 revoked several staff legal bulletins (SLBs) replacing them with SLB 14L, which the members said falls outside of the commission’s statutory authority, according to their letter, which was also signed by U.S. Rep. Barry Loudermilk (R-GA).

“This is yet another example of the commission pushing a progressive agenda on the shareholder process,” the representatives wrote. “The unelected staff of the SEC should not be the arbiters of social policy in our financial markets. The SEC has neither the statutory authority nor the expertise to make determinations about the issues of broad societal impact.”

Reps. Hill, Huizenga, Barr, and Loudermilk said that another major flaw in the new SLB is that it provides no objective process for how SEC staff will evaluate if a proposal is or is not socially significant, according to their letter.

“How will staff decide whether an issue has a broad societal impact, what criteria will be considered, and what proof is necessary to support such a finding?” they wrote. “This opaque process will give staff enormous power to force companies to engage on social issues that have nothing to do with their business.”

Therefore, they wrote, the SEC division should “immediately” repeal SLB 14L and reinstate SLBs 14I, 14J, and 14K.