Tag: Administrative Procedure Act

Executive CompensationLitigationSecurities

Fifth Circuit grants Chamber’s petition for review of buyback rule—will the Court ultimately vacate the rule?

In May this year, the SEC adopted final rules intended to modernize and improve disclosure regarding company stock repurchases. The rule requires quarterly reporting of detailed quantitative information on daily repurchase activity and revises and expands the narrative requirements, including disclosure regarding the rationale for the buyback. (See this PubCo post.) It didn’t take long for the Chamber to object.  Just over a week following adoption, the U.S. Chamber of Commerce, along with two Texas co-plaintiffs, submitted a petition to the Fifth Circuit for review of the final rule. Petitioners made three arguments: that “(1) the rationale-disclosure requirement violates the First Amendment by impermissibly compelling their speech; (2) the SEC acted arbitrarily and capriciously in adopting the final rule by not considering their comments or conducting a proper cost benefit analysis; and (3) the SEC did not provide the public with a meaningful opportunity to comment.”   On Halloween, the three-judge panel issued its opinion. The Court granted the petition, holding that the SEC violated the Administrative Procedure Act. But the Court did not vacate the rule—not yet anyway. Instead, the Court remanded the rule back to the SEC for 30 days to attempt to repair the analytical defects. Will the SEC adequately repair the defects? Will the Court ultimately vacate the rule? That all remains to be seen.

/ November 2, 2023
LitigationSecurities

NAM celebrates victory over SEC on non-enforcement of proxy advisory firm rules—what did it really win?

Last week, in an action by the National Association of Manufacturers against the SEC and Chair Gary Gensler, the U.S. District Court for the Western District of Texas held that the SEC violated the Administrative Procedure Act when, in June 2021, Corp Fin stated that it would not recommend enforcement of the 2020 proxy advisory firm rules while those rules were under reconsideration. In 2022, however, the SEC formally adopted new amendments to the 2020 rules reversing some of the key provisions and, at the same time, rescinding Corp Fin’s non-enforcement statement. You might think that the adoption of the new 2022 rules and rescission of the non-enforcement statement would make NAM’s suit moot?  At least, that’s what the SEC seemed to think when it moved to dismiss NAM’s complaint in August 2022, contending that the relief NAM sought would now be “meaningless.” But, in mid-September, the Court denied the SEC’s motion—citing West Virginia v. EPA—and late last week, the same Court granted NAM’s summary judgment motion for declaratory and injunctive relief: the SEC’s “suspension” of the rules was vacated because it violated the APA, and the SEC was enjoined from refusing to acknowledge or recognize the 2020 rule’s compliance date.  NAM declared victory.  But was it a hollow victory? Not according to NAM.

/ October 3, 2022
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