Ripple’s Chief Legal Officer, 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 As highlighted by Alderoty, the US Securities and Exchange Commission (SEC) unlawfully rescinded a rule concerning proxy advisory firms, an action directed by Gensler that did not comply with the Administrative Procedure Act.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 The ruling states, “The SEC rescinded it in November 2021,…].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. Ripple chief legal officer Stuart Alderoty has expressed reservations about the recent string of legal defeats suffered by the United States Securities and Exchange Commission during Gary Gensler’s tenure. These remarks follow another setback for the SEC in the Fifth Circuit Court after Ripple’s victory in the XRP lawsuit in July 2023.

Alderoty characterized this sequence of events as a “deeply concerning trend” in which the SEC, under the leadership of Chair Gary Gensler, appears to be straying from its commitment to upholding the law. Alderoty expressed concern about the SEC’s repeated arbitrary and capricious actions in court cases, suggesting a troubling pattern under Gensler’s leadership. Another day and another Court finds that the SEC again acted arbitrarily and capriciously. Is anyone else concerned about this very troubling pattern of the SEC flouting any faithful allegiance to law under Mr. Gensler?

The Fifth Circuit Court of Appeals in the U.S. [deemed the SEC’s stock buyback disclosure rule as arbitrary and lacking reasonable explanation on Oct. 31. The court has provided an opportunity for the SEC to demonstrate a thorough consideration of pertinent matters and provide a good basis for its decision. This development follows the SEC’s recent defeats in the XRP lawsuit and the Grayscale filing, which could hold significance for the crypto industry’s regulatory future. The legal action, initiated by multiple U.S. business and trade associations, revolves around an SEC regulation mandating issuers to report daily information on share repurchases every quarter and to provide the rationale behind repurchasing their own stock.