Protecting American Investors From Foreign-Owned and Politically-Motivated Proxy Advisors
The order directs the SEC, FTC, and Department of Labor to review, investigate, and consider tightening the rules governing proxy advisory firms — companies that tell institutional investors how to vote their shares — particularly targeting recommendations based on diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) factors.
Establishes a coordinated federal effort to scrutinize a two-firm industry that the order says controls over 90 percent of proxy advisory services and shapes governance decisions at the largest U.S. publicly traded companies, affecting retirement savings for millions of Americans.
What this order does
What it orders
The order directs the SEC Chairman to review all rules, regulations, guidance, and memoranda relating to proxy advisors and shareholder proposals — including Rule 14a-8 — and to consider revising or rescinding those inconsistent with prioritizing investor returns over DEI and ESG factors. The SEC Chairman must also enforce anti-fraud provisions against proxy advisors, assess whether they should register as Registered Investment Advisers, consider requiring greater transparency on methodology and conflicts of interest, and examine whether adviser reliance on proxy recommendations involving non-pecuniary factors violates fiduciary duties. The FTC Chairman, in consultation with the Attorney General, must review state antitrust investigations into proxy advisors and investigate whether these firms engage in unfair competition or deceptive practices harming consumers.
The Secretary of Labor must revise ERISA regulations on fiduciary duties as they apply to proxy advisors advising retirement plan managers, consider classifying qualifying proxy advisors as investment advice fiduciaries, and enhance transparency around DEI and ESG investment practices. The order does not itself rescind any existing rule or regulation; all operative changes depend on future agency rulemaking, assessments, and enforcement actions consistent with the Administrative Procedure Act.
Who it affects
Proxy advisory firms — especially Institutional Shareholder Services Inc. and Glass, Lewis & Co. — mutual fund and ETF managers who rely on proxy voting recommendations, publicly traded U.S. companies whose governance is influenced by proxy votes, and the millions of Americans who hold retirement accounts invested in those funds.
Why it matters
Proxy advisors influence board composition, executive pay, and shareholder proposals at major U.S. companies. If agencies act on this order, proxy firms could face new registration requirements, anti-fraud enforcement, antitrust scrutiny, and ERISA fiduciary obligations — changing how shareholder votes are cast for stocks held in 401(k)s and IRAs.
What must happen and when
How the order is supposed to work
Three agencies work in parallel but independently. The SEC Chairman reviews existing rules and considers APA-compliant rulemaking to tighten proxy advisor oversight; the FTC Chairman investigates potential antitrust and consumer-protection violations in consultation with the Attorney General; and the Secretary of Labor pursues ERISA fiduciary rule revisions. None of the agencies have hard deadlines. All changes require notice-and-comment rulemaking under the APA, meaning concrete regulatory impact will unfold over months or years. The order has no enforcement mechanism to compel agency action by a specific date.
Actions and deadlines
- Review all SEC rules, regulations, guidance, and memoranda relating to proxy advisors and consider revising or rescinding those inconsistent with this order
- Review and consider revising or rescinding rules relating to shareholder proposals, including Rule 14a-8
- Enforce anti-fraud provisions of federal securities laws against material misstatements in proxy voting recommendations
- Assess whether proxy advisors meeting the Investment Advisers Act threshold must register as Registered Investment Advisers
- Direct SEC staff to examine whether adviser reliance on non-pecuniary proxy recommendations violates fiduciary duties
- FTC Chairman to review state antitrust investigations into proxy advisors and assess probable link to federal violations
- FTC Chairman to investigate whether proxy advisors engage in unfair competition or deceptive practices harming consumers
- Secretary of Labor to revise ERISA regulations and guidance on fiduciary duties applicable to proxy advisors
- Secretary of Labor to enhance transparency requirements around proxy advisor use of DEI and ESG factors in ERISA plans