The House on July 29, 2021, voted 219 to 208 to pass a minibus package of seven appropriations bills that would give the SEC $1.99 billion in funding for the coming fiscal year, a total that matches the Biden administration’s request for the commission. The SEC plans to use the funding to add 65 new positions, including 12 in the Division of Corporation Finance (CorpFin), according to its budget justification document.
The SEC funding is part of a $29.1 billion Financial Services and General Government (FSGG) appropriations bill, which was rolled up into the minibus package and also funds the Treasury Department, IRS, Judiciary, and other agencies.
Absent from the legislation is a perennial budget rider, supported by the business lobby, that had barred the SEC from issuing rules requiring companies to disclose their political spending. In a July 27 floor statement, Rep. Mike Quigley, an Illinois Democrat who chairs the House Appropriations Committee’s FSGG subcommittee, praised the spending package for removing “several longstanding policy riders that I consider to be harmful,” including the provision limiting political spending transparency.
Congress has for years slipped the riders into FSGG appropriations bills that fund the SEC, to the protest of political spending transparency activists. They say the rule is sorely needed following the Supreme Court’s 5-4 decision in Citizens United v. Federal Election Commission in 2010, which lifted restrictions on independent political expenditures by corporations and unions. In 2011, a group of academics, including now-former Commissioner Robert Jackson, filed a petition asking for the disclosure rule, which has since garnered some 1.2 million public comments.
The U.S. Chamber of Commerce, in a late June letter, had urged lawmakers to preserve the ban on the SEC political spending rulemaking, arguing that “electioneering activities that are the subject of such a rulemaking petition are already disclosed under election law, and such a petition is outside the jurisdiction of the SEC.” (See Chamber Fruitlessly Asks House to Keep SEC Political Spending Disclosure Ban in Budget in the July 2, 2021, edition of Accounting & Compliance Alert.)
The $1.99 billion funding total for the commission would apply to the 12-month period beginning in October. The commission, in its budget justification document, said it wants that extra CorpFin staff to cover the increased workload and rulemaking priorities from a “once-in-a-generation wave” of traditional initial public offerings (IPOs), as well as a rush of filings by special purpose acquisition companies (SPACs). (See SEC Budget Boost Would Bolster CorpFin in the June 1, 2021, edition of ACA.)
The FSGG budget includes language that would block the commission from implementing July 2020 rules in Release No. 34-89372, Exemptions from the Proxy Rules for Proxy Voting Advice that imposed a new regulatory framework on proxy firms.
Proxy firms such as Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co. provide recommendations on how institutional investors should vote on a range of topics, including director elections, executive compensation, and environmental, social, and governance (ESG) issues such as climate risk disclosure.
Industry groups aligned with corporate management have long sought a regulatory crackdown on the firms, arguing they suffer from conflicts and errors and are opaque in their process for making recommendations. Those groups had supported the SEC’s rules in Release No. 34-89372.
Proxy firms, institutional investors, financial reform advocates, and Democratic lawmakers broadly opposed the changes. SEC Chair Gary Gensler in June announced plans to revisit the rules, while CorpFin issued a statement declaring a non-enforcement policy. (See SEC Seeks Pause in Proxy Firm Suit as it Revisits 2020 Rules in the June 3, 2021, edition of ACA.)
This article originally appeared in the July 30, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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