In a scathing public statement today, Ripple Chief Legal Officer (CLO) Stuart Alderoty criticized SEC Chairman Gary Gensler following a recent court decision, which Alderoty highlighted as indicative of regulatory overreach. As highlighted by Alderoty, the US Securities and Exchange Commission (SEC) unlawfully rescinded a rule concerning proxy advisory firms, an action directed by Gensler that did not comply with the Administrative Procedure Act.

Alderoty’s statement was released via X, where he commented, “Another court slams the SEC. This time for unlawfully rescinding a rule on proxy advisory firms without adhering to the Administrative Procedure Act. The court explains that Gensler personally directed this illegal move. National Association of Manufacturers v. SEC.”

Ripple’s CLO also shared a screenshot from the ruling detailing the sequence of events that led to the rule’s rescission. The ruling states, “The SEC rescinded it in November 2021,[…]. The rescission process began shortly after a new SEC chairman, Defendant Gary Gensler, took office. In June 2021, Chairman Gensler directed his staff to reconsider the 2020 Rule and suspended its enforcement in the meantime.”

The cited court ruling, a decision from the 5th US Circuit Court of Appeals, struck down the SEC’s rollback of the 2020 rules, which were initially established during the Trump administration to ensure transparency and accountability in proxy voting advice. The court unanimously found the SEC’s process for rescinding these rules as “arbitrary and capricious and therefore unlawful,” particularly criticizing the agency for not adequately justifying its decision.

This court decision focuses on rules that required proxy firms like Institutional Shareholder Services and Glass Lewis to notify companies about their voting advice simultaneously as their clients, and to provide a mechanism for companies to respond. These requirements were intended to enhance the transparency and fairness of proxy voting, a critical component in corporate governance.

In his June 2021 statement, Chairman Gensler defended the rollback, stating it was meant to promote “the timeliness and independence of proxy voting advice, which would help to protect investors and facilitate shareholder democracy.” However, the court’s decision casts doubts on the SEC’s handling of the rule change, particularly regarding procedural adherence and rational justification.

The SEC is currently reviewing the court’s decision, with an agency spokeswoman stating that the regulator is determining its next steps in response to the judicial rebuke. The ruling is yet another case of regulatory overreach by the SEC under Chairman Gensler being overturned. The US crypto industry and Ripple can tell a thing or two about it.

Just yesterday, the Ripple CLO slammed Gensler via X after the SEC chairman made some new remarks in an interview about the latest court rulings. Alderoty remarked, “Note to Gary Gensler: The courts aren’t “adjusting”…they are finding that you are breaking the law by exceeding your statutory authority.”

At press time, XRP traded at $0.47244.

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