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SEC’s proposed new rules could stymie shareholder engagement

New proposals by the SEC have shaken the investor community, threatening the ability of smaller shareholders to file resolutions and potentially preventing ESG issues from being heard.


SEC chairman Jay Clayton

The power of the shareholder to hold accountable the companies in which they invest is under threat in the US.

On Tuesday, the SEC’s commissioners voted three-to-two in favour of a 179-page book of proposals to revise its rules around shareholder resolutions.

The SEC maintains that the new proposals will make the shareholder resolution process more efficient.

“Today’s proposed amendments follow from the staff’s extensive experience with shareholder proposals and recognize the significant changes that have taken place in our markets in the decades since these regulatory requirements were last revised, including, in particular, the types and use of communications, the types and frequency of shareholder-company engagement and the substantial shift to investing through mutual funds and ETFs, rather than directly by Main Street investors,” says SEC chairman Jay Clayton.

However, the revisions have mystified many investors, who say that they didn’t ask for any changes and that the rules have been working well for years.

The proposals are particularly unsettling, say shareholder groups, as they seem to be aimed at excluding smaller investors from making shareholder resolutions.

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