Van Hollen Presses Clayton, SEC on Fraudulent Comment Letters

U.S. Senator Chris Van Hollen (D-Md.) has sent a letter to U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton pressing him to report on the status of the SEC’s investigation into apparently fraudulent comment letters that Clayton cited as showing public support for the Commission’s proposed rule on proxy voting advice. Proxy Advisory firms provide services to institutional shareholders, like pension funds, so that they can make informed decisions on behalf of their investors with regard to the companies they invest in.  Van Hollen questioned Clayton about the fraudulent letters in a Senate Banking hearing in December 2019, noting that Clayton had been “duped” by those who submitted the letters. 

“In my questions to you, I noted that several of the letters you had cited in your public statement about the proposed rule as coming from ‘Main Street’ investors, and used to justify these new proxy regulations, had in fact been orchestrated by a dark money group known as ‘60 Plus.’  I also pointed out that many of the signatories had not actually written the letters, and that several were related to 60 Plus personnel,” the Senator begins.

The Senator continued, “During the hearing, you did not specifically acknowledge that the letters, first reported by Bloomberg News, were in fact fraudulent. You stated that there was an investigation underway, that both the SEC’s General Counsel and Inspector General had been notified following the Bloomberg reports, and that you would wait to see what happened with the investigations.”

Senator Van Hollen notes that more than six months later, no results from the investigation Clayton mentioned have been reported. He urges Clayton to report on the status of these investigations, writing, “Please provide my office with any and all reports or findings of the General Counsel and the Inspector General, and whether there have been any referrals for criminal prosecution for the false representations made.” 

“I would also like to know how the SEC intends to account for the fact that the changes it is seeking in the regulation of proxy advisors do not appear to be based on concerns of ‘Main Street’ investors, as the revelations around the public comments clearly show, but instead emanate from corporate heads and boards that oppose investor oversight or review of their actions and proposals. Until the investigation of this orchestrated campaign of fraudulent comment letters is resolved, I urge that the SEC refrain from finalizing the SEC’s proposed rule on Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8,” the Senator concludes.

The full text of the letter is available here and below.

Dear Chairman Clayton,

On December 10, 2019 you testified at the Committee on Banking, Housing, and Urban Affairs oversight hearing on the Securities and Exchange Commission.  During that hearing I asked you about fraudulent comment letters that were submitted on the SEC’s proposed rule on Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8 – an issue also raised by some of my colleagues on the Committee. 

In my questions to you, I noted that several of the letters you had cited in your public statement about the proposed rule as coming from “Main Street” investors, and used to justify these new proxy regulations, had in fact been orchestrated by a dark money group known as “60 Plus.”  I also pointed out that many of the signatories had not actually written the letters, and that several were related to 60 Plus personnel. 

During the hearing, you did not specifically acknowledge that the letters, first reported by Bloomberg News, were in fact fraudulent.  You stated that there was an investigation underway, that both the SEC’s General Counsel and Inspector General had been notified following the Bloomberg reports, and that you would wait to see what happened with the investigations.

Today, with more than six months having passed since that hearing, I ask that you report on the status of these investigations.  Please provide my office with any and all reports or findings of the General Counsel and the Inspector General, and whether there have been any referrals for criminal prosecution for the false representations made. If the investigations have not yet concluded, please provide my office with an estimated timetable for their completion.  

I would also like to know how the SEC intends to account for the fact that the changes it is seeking in the regulation of proxy advisors do not appear to be based on concerns of “Main Street” investors, as the revelations around the public comments clearly show, but instead emanate from corporate heads and boards that oppose investor oversight or review of their actions and proposals.  Until the investigation of this orchestrated campaign of fraudulent comment letters is resolved, I urge that the SEC refrain from finalizing the SEC’s proposed rule on Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8.

Sincerely,