NA of Mftr v. SECNA of Mftr v. SEC
Case Information
United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit ____________ FILED June 26, 2024 Lyle W. Cayce ____________ Clerk National Association of Manufacturers; Natural Gas Services Group, Incorporated,
Plaintiffs—Appellants , versus
United States Securities and Exchange Commission; Gary Gensler, in his official capacity as Chair of the SEC ,
Defendants—Appellees . ______________________________ Appeal from the United States District Court for the Western District of Texas USDC No. 7:22-CV-163 ______________________________ Before Richman, Chief Judge , and Jones and Ho, Circuit Judges .
Edith H. Jones , Circuit Judge :
In 2020, after ten years’ consideration, the Securities and Exchange Commission adopted a new rule regulating businesses that provide proxy voting advice to institutional shareholders of public corporations. Two years later, the SEC rescinded this rule. The two Appellants challenged the rescission in district court, arguing, inter alia, that the SEC arbitrarily and capriciously failed to provide an adequate explanation for its abrupt change in policy. The district court rejected Appellants’ contentions and granted summary judgment in favor of the SEC. Concluding that the explanation provided by the SEC was arbitrary and capricious and therefore unlawful, we REVERSE the district court’s judgment, VACATE the 2022 rescission in part, and REMAND to the agency.
I. Background A. The Role of Proxy Firms Under state law, shareholders of public companies generally have the right to vote on issues of corporate governance during annual and special shareholder meetings. See, e.g. , Del. Code tit. 8, §§ 211, 212. Shareholders exercise their rights at these meetings by, for instance, electing directors and voting on proposals from shareholders or management that require shareholder approval. Most shareholders—including institutional investors like hedge funds and mutual funds—do not attend shareholder meetings in person. They instead vote by proxy. See Exemption from the Proxy Rules for Proxy Voting Advice, 85 Fed. Reg. 55,082, 55,082 (September 3, 2020) [hereinafter 2020 Rule ].
Institutional investors and investment advisers are highly active in today’s financial markets. These entities own, in the case of institutional investors, or are given authority to vote, in the case of investment advisers, a significant number of shares in public companies (known in this context as “registrants”). As the SEC explained in 2020, institutional investors and investment advisers are accountable for “voting in potentially hundreds, if not thousands, of shareholder meetings and on thousands of proposals that are presented at these meetings each year, with the significant portion of those voting decisions concentrated in a period of a few months.” at 55,083. During this period, they often need assistance managing the voting process, which otherwise might be unmanageable.
Proxy voting advice businesses, or proxy firms, provide such assistance. Proxy firms research matters subject to vote and advise clients how to vote on these matters, with the advice they provide often serving as “an important factor in their clients’ proxy voting decisions.” Id. Proxy firms may also provide clients administrative assistance in voting by, for example, enabling clients to vote through an electronic platform or by executing votes directly on their clients’ behalf. Id.
With institutional investors and investment advisers relying so extensively on them, proxy firms “have become uniquely situated in today’s market to influence, and in many cases directly execute, [their clients’] voting decisions.” As these firms have continued to grow in influence, however, certain concerns have emerged about their practices. Notably, the proxy advice market is effectively a duopoly, because two firms, Institutional Shareholders Services (ISS) and Glass Lewis, control roughly 97% of the market. Investors, registrants, and others have questioned the accuracy of the information and the soundness of the advice that proxy firms provide in this duopolistic market, and they complain about the proxy firms’ unwillingness to engage with issuers to correct errors. Attention has also been drawn to potential conflicts of interest arising from proxy firms’ provision of consulting services to the same registrants about which they provide voting advice. See id. at 55,085.
B. Regulatory History In 2010, the SEC undertook to address these concerns and increase transparency and accuracy in proxy voting advice. See Chairman Mary L. Schapiro, Opening Statement at the SEC Open Meeting , SEC (July 14, 2010), https://www.sec.gov/news/speech/2010/spch071410mls.htm. The SEC’s first formal regulatory proposal was published in 2019, the result of nearly ten years of study and collaboration with all interested parties spanning two presidential administrations. See Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice, 85 Fed. Reg. 55,082 (December 4, 2019) [hereinafter 2019 Proposed Rule ].
The SEC’s proposed 2019 rule was promulgated under a statutory
and regulatory framework that makes it unlawful to “solicit” proxy votes “in
contravention of such rules and regulations as the [SEC] may prescribe as
necessary or appropriate in the public interest or for the protection of
investors.” 15 U.S.C. § 78n(a)(1). The applicable rules and regulations,
among other things, prohibit persons who solicit proxies from making
misstatements or omissions of material fact in their solicitations, and require
such persons to furnish the targets of their solicitations with proxy statements
containing certain disclosures.
See
17 C.F.R. §§ 240.14a-3, .14a-9, .14a-15,
.14a-19. On the SEC’s interpretation, providing proxy voting advice is a form
of solicitation and, therefore, subject to these rules.
See
Concept Release on
the U.S. Proxy System, 75 Fed. Reg. 42,982, 43,009–10 (July 22, 2010);
Commission Interpretation and Guidance Regarding the Applicability of the
Proxy Rules to Proxy Voting Advice, 84 Fed. Reg. 47,416, 47,417–19 (Sept.
10, 2019).
[1]
But proxy firms are also eligible for exemptions from these rules
if they comply with certain conditions.
See
17 C.F.R. § 240.14a-2(b)(1),
(b)(3). The business models of proxy firms rely on the availability of such
exemptions.
See
2020 Rule,
The 2019 Proposed Rule would have imposed additional conditions on the availability of exemptions for proxy firms. The most important of these would have required proxy firms to “provide registrants and certain other soliciting persons covered by its proxy voting advice a limited amount
_____________________
[1] As discussed below, the 2020 Rule formally classified proxy voting advice as a
form a solicitation.
See
2020 Rule,
of time to review and provide feedback on the advice before it is disseminated to the [proxy firm’s] clients.” 2019 Proposed Rule, 84 Fed Reg. at 66,531 (emphasis added). This aspect of the proposed rule was intended to increase the reliability and accuracy of proxy advice by allowing registrants to identify and address inaccuracies in the advice before it was disseminated. Id. But it was criticized during the comment period, with commenters arguing that the pre-dissemination requirement would prevent proxy firms from providing timely advice to their clients and would also undermine the independence of the advice provided. 2020 Rule, 85 Fed Reg. at 55,112.
The SEC took note of these criticisms and, following a sixty-day comment period, adopted the 2020 Rule in place of the 2019 Proposed Rule. The 2020 Rule was more modest than the 2019 Proposed Rule but was still intended to address the accuracy and transparency problems by giving registrants (the subjects of any shareholder vote) the opportunity to point out inaccuracies in voting advice in advance of shareholder meetings. The goal, in other words, was to ensure that proxy firms’ clients had a full and accurate understanding of the issues subject to vote and did not exclusively rely on proxy firms’ presentation of the issues.
As with the 2019 Proposed Rule, this goal was to be achieved through conditions on the availability of exemptions. The 2020 Rule contained two such conditions, which together will be referred to as the “notice-and- awareness conditions.” The first (the notice condition) required proxy firms to make their proxy advice available to registrants “ at or prior to the time when such advice is disseminated to” proxy firms’ clients—a departure from the 2019 Proposed Rule’s requirement that the advice be disseminated beforehand. at 55,154 (emphasis added). The second (the awareness condition) required proxy firms to provide “clients with a mechanism by which they can reasonably be expected to become aware of any written statements regarding . . . proxy voting advice by registrants who are the subject of such advice, in a timely manner before the security holder meeting.” Id. ; see also 17 C.F.R. § 240.14a-2(b)(9)(ii) (2020) (rescinded codification of conditions). In adopting the 2020 Rule, the SEC stated that the notice-and-awareness conditions “will substantially address, if not eliminate altogether,” the risks to timeliness and independence associated with the 2019 Proposed Rule. 2020 Rule, 85 Fed. Reg. at 55,138. It explained:
[B]ecause [the 2020 Rule] does not require proxy voting advice businesses to adopt policies that would provide registrants with the opportunity to review and provide feedback on their proxy voting advice before such advice is disseminated to clients, the rule does not create the risk that such advice would be delayed or that the independence thereof would be tainted as a result of a registrant’s predissemination involvement. at 55,112.
Beyond adopting the notice-and-awareness conditions, the 2020 Rule (1) codified the SEC’s interpretation that proxy voting advice qualifies as proxy solicitation [2] and (2) confirmed that proxy voting advice is subject to the anti-fraud regulations governing proxy solicitations by adding an explanatory note to 17 C.F.R. § 240.14a-9, which provided that the “failure to disclose material information regarding proxy voting advice, ‘such as the proxy [firm’s] methodology, sources of information, or conflicts of interest’” may constitute a material misstatement. See 2020 Rule, 85 Fed. Reg. at 55,091, 55,121. The same day it issued the 2020 Rule, the SEC adopted
_____________________
[2] A district court recently held that that “the SEC acted contrary to law and in
excess of statutory authority when it amended the proxy rules’ definition of ‘solicit’ and
‘solicitation’ to include proxy voting advice for a fee.”
Inst. S’holder Servs. Inc. v. SEC
,
No. 19-CV-3275 (APM),
supplemental proxy voting guidance for the benefit of investment advisers as
they adjusted to the new rule. Supplement to Commission Guidance
Regarding Proxy Voting Responsibilities of Investment Advisers, 85 Fed.
Reg. 55,155 (Sept. 3, 2020). The 2020 Rule was intended to become effective
on December 1, 2021. 2020 Rule,
The 2020 Rule never went into effect. The SEC rescinded it in November 2021, a month before proxy firms were required to comply with the notice-and-awareness conditions. 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. Chair Gary Gensler , Statement on the Application of the Proxy Rules to Proxy Voting Advice , SEC (June 1, 2021), https://www.sec.gov/news/public-statement/gensler-proxy-2021-0 6-01; SEC Division of Corporation Finance, Statement on Compliance , SEC (June 1, 2021), https://www.sec.gov/news/public-statement/corp-fin-pro xy-rules-2021-06-01.
Appellants challenged this suspension in a previous case before the
same district court. The district court held that the suspension was unlawful
because it was done without notice and comment.
Nat’l Ass’n of
Manufacturers v. SEC
,
The agency’s proposal to rescind the 2020 Rule was published in November 2021, following a closed-door meeting between Chairman Gensler and opponents of the 2020 Rule. Proxy Voting Advice, 86 Fed. Reg. 67,383, 67,385 n.24 (November 26, 2021). The comment period for the proposal was thirty-one days and encompassed portions of the Thanksgiving, Hanukkah, and Christmas holidays. See id. at 67,383 (identifying December 27, 2021, as the deadline for comments). Unsurprisingly, far fewer comments were filed during this highly truncated period than had addressed the 2019 Proposed Rule. After the comment period closed, the SEC adopted the proposed rescission over the dissent of two commissioners. Proxy Voting Advice, 87 Fed. Reg. 43,168 (July 19, 2022) [hereinafter 2022 Rescission ].
To justify rescission, the agency cited the same timeliness and
independence concerns that the 2020 Rule had, according to the 2020 SEC,
“substantially address[ed], if not eliminate[d] altogether.”
See
2020 Rule,
the continued, strong opposition to the [2020 Rule’s notice- and-awareness] conditions from many institutional investors and other [proxy firm] clients, as well as many of the commenters on the 2021 Proposed Amendments, who have continued to raise concerns that the 2020 Final Rules would have adverse effects on the cost, timeliness, and independence of proxy voting advice.
2022 Rescission, 85 Fed. Reg. at 43,170. In the agency’s view, these concerns were “sufficiently significant” to justify rescinding the 2020 Rule’s notice-and-awareness conditions. at 43,175.
But the 2022 Rescission did not only rescind the notice-and-
awareness conditions. It also deleted the explanatory note the 2020 Rule had
added to the anti-fraud regulation and rescinded the supplemental proxy
voting guidance that had been adopted simultaneously with the 2020 Rule.
See
2022 Recission,
_____________________
[3] The 2022 Rescission left certain aspects of the 2020 Rule in place. For instance, it did not disturb the formal classification of proxy voting advice as a form of solicitation.
C. Procedural History Shortly after the 2022 Rescission was finalized, Appellants National Association of Manufacturers and Natural Gas Services Group, Inc., filed suit against the SEC, bringing claims under the Administrative Procedure Act (“APA”). They argued that the 2022 Rescission was arbitrary and capricious for two reasons: (1) the agency failed to provide an adequate justification for contradicting its prior factual finding that the 2020 Rule did not threaten the timeliness and independence of proxy voting advice, and (2) the agency failed to justify the 2022 Rescission on its own terms. They also contended that the thirty-one-day comment period did not provide interested parties a meaningful opportunity to comment on the proposal. [4] And they made substantive arguments (which they have abandoned on appeal) that challenged the portions of the 2022 Rescission concerning the explanatory note and the supplemental guidance.
The district court rejected each of these arguments and granted summary judgment in favor of the SEC. This appeal followed.
II. Discussion This court reviews the district court’s grant of summary de novo , applying the same standard of review as the district court. Baylor Cnty. Hosp. Dist. v. Price , 850 F.3d 257, 261 (5th Cir. 2017). The APA supplies the
_____________________ Id. at 43,169. Nor did it disturb certain conflicts of interest disclosure requirements that the 2020 Rule adopted. ; see 17 C.F.R. 204.14a-2(b)(9)(i).
[4] Appellants raise this argument again on appeal. The condensed comment period—which coincided with the holiday season and end of year reporting requirements for registrants—seems to have been designed to elicit as few comments as possible. And it certainly accomplished that purpose. But in light of our conclusion that the 2022 Rescission was arbitrary and capricious, we need not address the agency’s truncated procedure.
standard here, directing courts to “hold unlawful and set aside agency
action” that is “arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” 5 U.S.C. § 706(2). “The APA’s arbitrary-and-
capricious standard requires that agency action be reasonable and reasonably
explained.”
FCC v. Prometheus Radio Project
,
An administrative agency may alter or rescind its policies, including
when a new administration enters office. Appellants do not dispute the
SEC’s authority to do so. Moreover, when an agency makes such a change,
it “need not always provide a more detailed justification than what would
suffice for a new policy created on a blank slate.”
FCC v. Fox Television
Stations, Inc.
,
By rescinding the 2020 Rule, the SEC acted arbitrarily and capriciously in two ways. First, the agency failed adequately to explain its decision to disregard its prior factual finding that the notice-and-awareness conditions posed little or no risk to the timeliness and independence of proxy voting advice. Second, the agency failed to provide a reasonable explanation why these risks were so significant under the 2020 Rule as to justify its rescission. These shortcomings require vacatur of the 2022 Rescission, but only to the extent it rescinded the notice-and-awareness conditions.
A. Failure to Explain Decision to Disregard Prior Findings
In 2020, the SEC found that the risks to timeliness and independence
had been “substantially address[ed], if not eliminate[d] altogether,” by the
modifications to the 2019 Proposed Rule. 2020 Rule,
The SEC argues that the Fox detailed-explanation requirement is inapplicable here because the 2022 Rescission “did not reject any prior factual findings.” It characterizes the decision to rescind the 2020 Rule as a mere “policy judgment” arising from a reassessment of the magnitude of risks to timeliness and independence. The agency also asserts that, in adopting the 2020 Rule, it did not determine that the notice-and-awareness provisions posed no risk to timeliness and independence—and thus did not contradict any such finding in the 2022 Rescission.
The SEC’s reassessment of the risk level posed by the 2020 Rule was
not a policy judgment but rather a new factual finding that contradicted an
earlier one. Case law supports evaluating the quantum of risk assessed by an
agency as a factual finding.
See Organized Vill. of Kake v. U.S. Dep’t of Agric.
,
795 F.3d 956, 968 (9th Cir. 2015) (Department of Agriculture’s
determination that an environmental plan regulating an Alaskan forest
“pose[d] only minor risks to roadless values” (a benchmark for ecological
and other benefits) was a factual finding that directly contradicted the
agency’s earlier determination that the plan “posed a high risk to ‘the
extraordinary ecological values’” of the forest). In other contexts, this court
has also treated risk assessments as findings of fact.
See, e.g.
,
Ball v. LeBlanc
,
As the above cases recognize, risk is measured on a continuum, and
the determination whether a risk is high or low, substantial or insubstantial,
is a factual finding drawn from the record available to an agency or court. The
SEC’s argument that it never determined that the 2020 Rule posed
no
risks
to timeliness and independence is therefore unavailing. It makes no
difference whether the 2020 Rule found
zero
risk to timeliness and
independence or minimal risk. The 2020 Rule to some extent supports either
conclusion.
See, e.g.
, 2020 Rule,
Because of this contradiction, the agency was required, under Fox , to give “a more detailed explanation” as to why it was abandoning its prior factual finding that the 2020 Rule posed minimal, if any, risks to timeliness and independence. Instead, the agency acknowledged only that while it believed in 2020 that it had mitigated the concerns about timeliness and independence, on reappraisal, the 2022 SEC believed that those risks were too high to justify keeping the 2020 Rule. at 43,174–75 (“We weigh these competing concerns differently today . . . .”). This was the agency equivalent of saying, “That was then—this is now.” The agency did not engage in any analysis of its prior finding regarding the level of risk or explain why it had changed its mind. To be sure, it pointed to various comments complaining that risks to timeliness and independence existed under the 2020 Rule. It did not do so, however, as part of a “detailed explanation,” and certainly not one offered to justify the agency’s about-face. Indeed, the SEC does not argue on appeal that the 2022 Rescission provided the sort of explanation Fox requires; it argues only that Fox does not apply—which, as noted above, is wrong. Fox applies, and the 2022 Rescission was arbitrary and capricious because it failed to explain its about-face on the interpretation of prior factual findings.
B. Failure to Justify 2022 Rescission on Its Own Terms
Even apart from its insufficiency under
Fox
, the SEC’s justification
for the 2022 Rescission was arbitrary and capricious on its own terms. The
2022 Rescission was allegedly based on concerns about the timeliness and
independence of proxy voting advice. But, as Appellants argue, neither of
these concerns was “reasonable [or] reasonably explained” in the rulemaking
process.
Prometheus Radio
,
1. Timeliness Timeliness was raised as a concern in 2019, when the proposed rule would have required proxy firms to set aside time for registrants to review and provide feedback on advice before the advice was distributed to clients. 2019 Proposed Rule, 84 Fed Reg. at 66,531. This requirement plausibly threatened proxy firms’ capacity to deliver timely advice to clients by requiring firms to take action and interact with registrants before the firms had delivered their advice to clients. But the 2020 Rule did away with the pre-dissemination requirement, instead requiring proxy firms to share their advice with registrants at the same time they shared it with clients. It is thus wholly implausible that the 2020 Rule’s contemporaneous-disclosure requirement would pose a threat to timely delivery of proxy voting advice. The advice could be delivered at the usual time; it simply had to be delivered to registrants as well.
Even so, commenters on the 2022 Rescission continued to raise timeliness concerns, which were largely recycled from comments on the 2019 Proposed Rule. See Commissioner Hester M. Peirce, U-Turn: Comments on Proxy Voting Advice , SEC (July 13, 2022), https://www.sec. gov/news/statement/peirce-statement-proxy-voting-advice-071322 (“The Commission received letters in support of the Redo Proposal as well. These letters did not include new information to justify the Commission’s U-Turn. Instead, they reiterated concerns that commenters had raised during the prior rulemaking process.”). The SEC apparently recognizes that it cannot, now, rely on timing concerns related to the abandoned pre-dissemination requirement.
It has therefore shifted focus on appeal, and now attempts to locate
remaining timeliness concerns in the aggregate compliance burdens on proxy
firms arising from the 2020 Rule’s notice-and-awareness conditions. But the
2022 Rescission hardly discusses this idea. Only one sentence mentions
“additional compliance burdens,” and it is a quotation of a comment in the
agency’s summary of the comments received on the proposed rescission.
2022 Rescission, 87 Fed. Reg. at 43,171. A review of the 2022 Rescission
otherwise indicates that the agency relied, unquestioningly, on commenters’
purported concerns about timeliness, without actually linking the
requirements of the 2020 Rule to those concerns.
See Motor Vehicle Mfrs.
Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.
,
In sum, not only is timeliness in delivering proxy recommendations a facially irrational concern of proxy firms under the 2020 Rule, but the SEC’s failure either to explain the reasons why it was motivated by that concern or to address commenters’ disagreements are clear indicators of arbitrary and capricious rulemaking.
2. Independence
The independence concern has more potential than the timeliness
concern to be reasonably explained, but the SEC failed to provide a
reasonable explanation in the 2022 Rescission itself. To show that it
adequately identified independence as a justification for rescinding the 2020
Rule, the SEC relies primarily on one passage in the 2022 Rescission. It is a
quotation (in a footnote) of a comment contending that the 2020 Rule “could
jeopardize the independence of proxy advice as proxy advisory firms may feel
pressure to tilt voting recommendations in favor of management more often,
to avoid critical comments from companies that could draw out the voting
process and expose the firms to costly threats of litigation.” 2022 Rescission,
In the 2022 Rescission, the SEC nowhere explains how a drawn-out voting process would affect the independence of proxy voting advice. But the proxy firms have no interest in whether the voting process becomes drawn out as to registrants. To the contrary, a major purpose of the 2020 Rule was to enlighten shareholders when registrants choose to respond to proxy firm advice. The impact on the shareholder voting process does not affect proxy firms.
Nor does the SEC explain how the notice-and-comment conditions
would expose firms to costly threats of litigation any more than would be the
case in their absence. In fact, the SEC adopts a commenter’s statement that
ISS and Glass Lewis voluntarily provide some registrants with their proxy
advice at the time of its dissemination to clients; if so, there is no change in
the potential threats of litigation. On appeal, however, the SEC modifies its
position to aver that the 2020 Rule would have exposed proxy firms “to
potential ‘threats of litigation’ over the adequacy of the mechanism used to
make their clients aware of” registrants’ responses. But this concern is not
mentioned in the 2022 Rescission. And “[i]n reviewing an agency’s action,
we may consider only the reasoning ‘articulated by the agency itself’; we
cannot consider
post hoc
rationalizations.”
Data Mktg. P’ship, LP v. United
States Dep’t of Lab.
,
The two other independence-related justifications that the SEC offers
on appeal are also
post hoc
rationalizations. First, the agency argues that the
2020 Rule threatened “the independent role” of proxy firms because the
awareness condition would have required firms to become “a conduit for
disseminating registrants’ (and only registrants’) views to their clients.”
This notion is not discussed in the 2022 Rescission, which in considering the
threat to independence focused on the threat to the “independence of proxy
voting
advice
,” not on some generalized threat to the independent role of
proxy firms.
See
2022 Rescission,
Second, the SEC contends that “adding new compliance burdens
triggered only when a registrant responds to a [proxy firm’s] advice creates
an
incentive for” proxy firms to favor management
in voting
recommendations. This theory—that the increased cost of opposing
management would have discouraged proxy firms from doing so—is not
advanced in the 2022 Rescission. The only support for it comes from a
summary of a comment in the
2020
Rule, the reasoning of which the agency
did not adopt.
See
2020 Rule,
Because the SEC did not offer reasonable or reasonably explained justifications for the decision to rescind the 2020 Rule, its action was arbitrary and capricious for this additional reason.
C. Vacatur and Severance Appellants seek to vacate the entire 2022 Rescission, including the portions that deleted the explanatory note to the anti-fraud provision and rescinded the supplemental proxy voting guidance. The SEC advocates either remand without vacatur or, if this court were to vacate and remand, severance of the portions of the 2022 Rescission that do not concern the notice-and-awareness conditions.
As an initial matter, vacatur with remand is the appropriate remedy
for the SEC’s APA violation. “Under section 706 of the APA, when a court
holds that an agency rule violates the APA, it ‘“shall”—not may—“hold
unlawful and set aside” [the] agency action.’”
Nat’l Ass’n of Private Fund
Managers v. SEC
, No. 23-60471,
That leaves the question whether the entire 2022 Rescission should be vacated, or just the portion concerning the notice-and-awareness conditions. Appellants argue that the entire 2022 Rescission should be vacated because the portions concerning the explanatory comment and the supplemental guidance (neither of which Appellants challenge substantively on appeal) are inseparable from the portion concerning the notice-and- awareness conditions. We disagree.
The SEC included a severability clause in the 2022 Rescission: If any of the provisions of these amendments, or the application thereof . . . is held to be invalid, such invalidity shall not affect other provisions or the application of such provisions . . . that can be given effect without the invalid provision or application. In particular, the amendments to Rule 14a–2(b)(9) [pertaining to the notice-and-awareness conditions] operate independently from the amendments to Rule 14a–9 [pertaining to the explanatory comment].
2022 Rescission,
Nor is severability warranted under the two factors that the D.C.
Circuit considers when resolving severability issues in the agency rulemaking
context. One factor is whether there is “substantial doubt” that “the agency
would have adopted the same disposition regarding the unchallenged portion
[of the rule] if the challenged portion were subtracted.”
Nasdaq Stock Mkt.
LLC v. Sec. & Exch. Comm’n
,
III. Conclusion We REVERSE the district court’s judgment, VACATE the 2022 Rescission to the extent it rescinded the 2020 Rule’s notice-and-awareness conditions, and REMAND to the SEC.