SEC chief cites fishy letters in support of policy change

When Securities and Exchange Commission chairman Jay Clayton handed a policy win to corporate executives this month, he pointed to a surprising source of support: A mailbag full of encouragement from ordinary Americans.
To hear Clayton tell it, these folks are really focused on the intricacies of the corporate shareholder-voting process. “Some of the letters that struck me the most,” he said at a commission meeting in Washington, “came from long-term Main Street investors, including an Army veteran and a Marine veteran, a police officer, a retired teacher, a public servant, a single mom, a couple of retirees who saved for retirement.” Each bolstered Clayton’s case for limiting the power of dissenting shareholders.
But a close look at the seven letters Clayton highlighted, and about two dozen others submitted to the SEC by supposedly regular people, shows they are the product of a misleading – and laughably clumsy – public relations campaign by corporate interests.
That retired teacher? Pauline Yee said she never wrote a letter, although the signature was hers. Those military vets? It turns out they’re the brother and cousin of the chairman of 60 Plus Association, a Virginia-based advocacy group paid by corporate supporters of the SEC initiative. That single mom? Data embedded in the electronically submitted letter says someone at 60 Plus wrote it. That retired couple? Their son-in-law runs 60 Plus.
“I never wrote a letter,” said one of the retirees, Vytautas Alksninis, reached by phone at his home in Connecticut. “What’s this all about?” Then there’s the public servant Clayton mentioned. Marie Reed’s letter has sharp words for proxy advisers, firms that counsel fund companies on how to vote at shareholder meetings. But when reached by phone in California, the retired state worker said she wasn’t familiar with the term. She said the letter originated with a public-affairs firm that contacted her out of the blue.
“They wrote it, and I allowed them to use my name after I read it,” she said. “I didn’t go digging into all of this.” The SEC declined to comment on any irregularities with the letters. The proposal was “informed by a variety of inputs,” it said in a statement to Bloomberg News. “The various letters we received on the proxy process highlighted the importance of these issues.
We welcome all interested parties, particularly our Main Street investors, to comment on our proposals.” Even a casual reading of the letters shows something amiss. Four of the seven bear the same unusual error – an out-of-context phrase inserted into the SEC’s mailing address.
The same mistake turns up in at least 20 other letters submitted by supposedly ordinary Americans in support of the change. It’s an inadvertent digital fingerprint revealing the scope of the campaign.
More than two dozen ostensibly unrelated letters contained the same unusual error.
At issue is the proxy process, the rules for how Corps conduct shareholder votes, such as when directors stand for re-election at annual meetings. Most of the time, management wins in a landslide. But shareholders occasionally revolt over excessive pay or mismanagement, or a small investor forces a vote on an issue that management doesn’t endorse.
In recent years, more small shareholders have been proposing resolutions about social or environmental issues such as climate change. And investment managers that control large numbers of votes, such as BlackRock Inc, have begun prioritising these topics as well, arguing that they’re relevant to the long-term sustainability of business models. That’s an unwelcome change for some corporate boards, especially in the fossil-fuel industry.
Last year, the National Association of Manufacturers helped form the Main Street Investors Coalition to oppose what it calls the “politicisation” of the investment process and to argue that fund managers and boards should focus on maximising profits. One of its priorities is changing shareholder voting rules.
Although the coalition has other members, NAM provided most of its initial funding, according to a person with knowledge of the arrangement who spoke on condition of anonymity. The manufacturers’ association represents corporate giants such as Exxon Mobil Corp and Chevron Corp. NAM said in a statement that it didn’t fund 60 Plus or direct any advocacy efforts on the SEC issue. Chevron wouldn’t comment on the coalition but acknowledged in a statement that it sometimes works with trade associations to “help inform their understanding of issues.” Exxon Mobil said it had no immediate comment.
Last year, Clayton signalled he was considering changes to the rules and issued a call for public comments. Letters poured in.
Most were from investment firms, Corps, trade groups and other interested parties that openly identified themselves. Many fund managers wrote to say some of the changes under consideration would be counterproductive.
The National Association of Manufacturers, Exxon Mobil and Chevron all called for new limits on shareholders’ proposals. So did two ordinary citizens who identified themselves as members of Main Street Investors.
Other letters were ostensibly written by regular folks.
But more than two dozen of them appear to have ties to 60 Plus, a member of the Main Street Investors Coalition. While the nonprofit group calls itself an advocate for senior citizens’ issues, it routinely takes money from Corps and advocates for their causes on issues as varied as sugar subsidies and Alabama utility commissioners.
The group didn’t cast a wide net in recruiting letter-writers. Names included those of a woman who used to work at 60 Plus’s accounting firm; a former secretary at 60 Plus; and various friends and relatives of Saul Anuzis, the 60 Plus president. None mentioned a connection to the organisation.
One letter bore the name of Chad Connelly. In an e-mail, Connelly acknowledged being friends with Anuzis but disavowed the letter. “Someone apparently used my name,” he wrote. “That’s not a letter I’ve ever even seen.”
Even Scott Hogenson, a contractor for 60 Plus who has appeared in the press as its spokesman, submitted a comment.
The letter gives his name as S. Alan Hogenson and doesn’t mention his relationship to the group. In an interview, Hogenson said he wrote the letter and stands by it.
Anuzis, the 60 Plus president, acknowledged that his group recruited submitters, provided drafts and, in two cases, sent letters on members’ behalf. He also acknowledged getting money from members of the coalition. “We don’t get paid for specific projects,” he said in an interview. “We get contributions from members who are part of the coalition. We’re not getting paid for a specific letter.”
Anuzis said the project aligns with 60 Plus’s policy goals and that no names were used without permission. Those who said they hadn’t agreed, such as his in-laws, were mistaken. “They are 80-some-years old,” he said. “This happened months ago. I’m sure it’s not top of their minds.” Two letters point to another source of clandestine aid for the coalition.
Reed, the retired state worker from California whose letter was cited by Clayton, said the man who provided her with a letter worked at FSB Core Strategies, a California public-affairs shop, and said he was working on behalf of a group called Protect Our Pensions.