07 Mar 2024 FEP’s Day in Court Against the Weaponized SEC
Over the last few years our Free Enterprise Project (FEP) has waged an uphill battle against the U.S. Securities and Exchange Commission (SEC), which has been doing the bidding of SEC Chairman Gary Gensler to discriminate against free-market organizations and any proposals seeking to push woke corporations back to neutral.
Under the weaponized SEC, many of our shareholder proposals have been turned down for biased, partisan reasons, making it clear to any reasonable person that viewpoint discrimination controls the process. And because of this, we’ve had to sue the SEC in order to demand accountability.
Recent days have seen significant developments. Oral arguments were heard Wednesday in our suit challenging the SEC’s review process on the grounds that it is impermissibly biased, conducted in illegally sloppy and opaque ways, and violates the First Amendment. The National Association of Manufacturers, an intervening party, claimed that the whole process is beyond the SEC’s authority and should be ended entirely. FEP agrees with this sentiment and would approve a decision on those grounds as well.
Recent decisions by the SEC staff demonstrated some additional tactical care while our suit is pending, but also showed that it just can’t shake its bias.
Scott Shepard
Here’s an update from FEP Director Scott Shepard:
First, the SEC Staff slapped down a monumentally stupid and groundless argument that Gibson Dunn’s Ronald Mueller made on behalf of about a dozen companies (at heaven-knows-what expense to each), claiming that as we’d changed brokerages we still had to provide proof-of-ownership letters from the brokerage we’d left because it would not reliably supply those letters even when we were its clients, and even though the governing regulation, not amenable to Staff manipulation, explicitly requires only a single letter from the current record holder.
The second ground for victory is of more general interest. We submitted there pretty much exactly the same charitable giving proposal that one of our allies did last year and lost at the SEC, except for the fact that we made our supporting statement even more clearly based in concerns about giving to pro-trans/anti-parental-knowledge charities (GLSEN, et al.). In the past the SEC Staff has found that sort of focus dispositive for omission — if the proposals came from our side — as an “improper focus/referendum” on giving to certain groups/causes.
We did this on purpose to put the Staff in a no-win situation. These were both grounds that it had used or ignored in a demonstrably biased way before, so that we gave it the choice to (1) keep up the bias, including in last year’s case, or (2) drop the bias in light of the lawsuit, but thereby implicitly admit that the past decisions had been based in bias.
We’re pleased that they chose the second, as we’ll get a significant additional set of proposals through this year while still making the implicit admission.
Yet the SEC staff is still discriminating by viewpoint. In a decision the next day it excluded our proposal at Bank of America, one that asked it to review the political bias of its employees when interfering with clients’ businesses, as by forcing Intuit to stop doing business with lawful gun-industry firms. This exclusion fits a long pattern: proposals that push companies to take actions that intrude on gun owners’ rights and the gun industry’s ability to perform receive staff blessing, while those like ours trying to stop discrimination against them are excluded.
As the season develops, we hope that the staff will avoid the worst of previous years’ excesses. It’s clear, though, that only a court order will return the SEC and its staff to lawful behavior.