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US Securities and Exchange Commission

House Republicans Demand Details on SEC Comment Glitch

Bill Flook  Editor, Accounting and Compliance Alert

Bill Flook  Editor, Accounting and Compliance Alert

Republican members of the House Financial Services Committee on Oct. 16, 2022, sought answers from the SEC around the scope of a technological glitch affecting certain comment letters and the commission’s process for responding to it.

The SEC earlier this month issued Release No. 33-11117Resubmission of Comments and Reopening of Comment Periods for Certain Rulemaking Releases, reopening comment on nearly a dozen rulemaking releases, as well as one request for comment, as a result of the error. The commission said some comments filed through its Internet comment form – mostly in August – were not received, while the problem started as far back as June 2021. (See SEC Provides Extra Time to Comment on 12 Rulemaking Releases Because of Technical Glitches In Receiving Letters in the Oct. 10, 2022, edition of Accounting & Compliance Alert.)

In the letter to SEC Chair Gary Gensler, Representative Patrick McHenry of North Carolina, the committee’s ranking member, and nine other lawmakers wrote that “given the scope and magnitude of this technical error” they are concerned that comments for the SEC’s July proxy advice rules and other rulemakings may have been affected.

The SEC did not immediately respond to a request for comment.

This summer, the SEC finalized rules in Release No. 34-95266Proxy Voting Advice, walking back core elements of requirements on proxy advisory firms put in place under Gensler’s predecessor, Jay Clayton.

Those original 2020 rules in Release No. 34-89372Exemptions from the Proxy Rules for Proxy Voting Advice, had been supported by Republicans and the U.S. Chamber of Commerce who had for years sought a crackdown on proxy firms. The rules set new conditions for proxy firms to remain exempt from the information and filing requirements of the proxy rules that included making new conflict-of-interest disclosures; making their recommendations available to the companies either before or the same time they provide them to clients; and providing a way for clients to access any response that the company provides to the voting advice in a timely manner before the vote. (See SEC Issues Rule Increasing Regulation of Proxy Advisers in the July 23, 2020, edition of ACA.)

The Gensler-led revisions in Release No. 34-95266 scrapped the latter two conditions and amended a provision related to liability for failing to disclose material information in proxy voting advice.

The Republican letter to Gensler included a salvo of questions, including how the SEC determined whether a rulemaking was impacted by the glitch; whether the entire commission was involved in that process; whether all comments for the proxy advice rule were received by the commission; and whether the SEC would rescind the final rule and reopen the comment file.

The SEC’s Oct. 7 announcement of the glitch did not contain any mention of the final rules in Release No. 34-95266.

The proposals for which the SEC is reopening comment until Nov. 1 include Release No. 33-11042The Enhancement and Standardization of Climate-Related Disclosures for InvestorsRelease No. 33-11038Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure; and Release Nos. 34-93783Share Repurchase Disclosure Modernization.

 

This article originally appeared in the October 19, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.

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