The Trump administration plainly has the proxy advisor industry in its crosshairs, but what exactly might it do to squeeze the industry beyond issuing the executive orders the president is reported to be contemplating? Over on The Business Law Prof Blog, Prof. Ann Lipton has some thoughts on that topic.

Ann notes that the SEC could classify proxy advice as investment advice and try to make proxy advisors jump through additional regulatory hoops under the Investment Advisors Act, but she points out that the courts haven’t supported recent efforts by the SEC to add burdensome regulatory obligations under that statute. However, she says that there are other options available:

The SEC (and the Department of Labor, which regulates private pension funds) could come at this from the client side. Institutional investors rely on proxy advisers to satisfy their own fiduciary obligations to vote their shares in their beneficiaries’ best interest, and they are able to do that because of prior guidance by both the SEC and the DoL permitting it.

During Trump I, there were some attempts to burden institutional investors’ ability to rely on proxy voting advice. For one, the SEC withdrew some letters it had issued about how to deal with investment advisers who have conflicts of interest, though, as I blogged at the time, the import of that action was unclear.

Later, the Department of Labor proposed to, essentially, overburden pension plan voting policies to the point of making votes virtually impossible to cast cost effectively – unless the plan developed a blanket policy in favor of voting with management (which, of course, gives away the game about what’s really motivating these attacks on shareholder voting).

That proposal was substantially watered down, but the outlines demonstrate what’s within the realm of the possible today. Both agencies could withdraw prior guidance and interpretations that permit reliance on proxy advisors, or, at the very least, make reliance on proxy voting advice very difficult from an administrative point of view.

I know that the prospect of ISS and Glass Lewis crying tears of unfathomable sadness won’t break the hearts of many of our readers, but everyone should keep in mind my Sideshow Bob quote from earlier this week.  The more the pendulum swings in one direction now, the more it’s going to swing in the other when there’s a change in regimes.

– John Jenkins