On December 11, 2025, a significant development emerged in the realm of corporate governance as President Trump issued an executive order titled “Protecting American Investors from Foreign-Owned and Politically Motivated Proxy Advisors.” This order signals a potential shift in the regulatory landscape for proxy advisory firms, directing the SEC Chair to undertake a review of existing rules and regulations. The focus is on identifying and potentially revising or rescinding any SEC rules that may conflict with the order’s core objectives. 

A key area of concern highlighted in the executive order pertains to proxy advisory firm recommendations concerning diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) issues. The order suggests a scrutiny of the influence and potential biases embedded within these recommendations. 

Furthermore, the executive order calls for increased transparency surrounding the methodologies employed by proxy advisors and potential conflicts of interest that may arise. It also raises the question of whether proxy advisors should be mandated to register as investment advisers under the Advisers Act, a move that would subject them to a higher level of regulatory oversight. 

The order extends its purview to explore whether the activities of proxy advisory firms could inadvertently facilitate coordination among investment advisers, potentially triggering implications under Sections 13(d) and 13(g) of the Exchange Act. This aspect underscores concerns about potential undue influence and concerted actions within the investment community. 

Finally, the executive order mandates a review of whether the recommendations and related activities of proxy advisors align with the fiduciary duties of registered investment advisers. This seeks to ensure that investment decisions remain grounded in the best interests of investors and are not unduly swayed by external influences. 

Implications for Investment Advisers and Broker-Dealers 

This executive order carries significant implications for investment advisers and broker-dealers. It is crucial for these entities to closely monitor potential SEC rulemaking and enforcement developments that may affect proxy advisory firms. Particular attention should be paid to developments concerning ESG/DEI voting recommendations, transparency obligations, and potential conflicts of interest. 

Looking ahead, investment advisers may need to reassess their proxy voting policies, disclosure practices, and compliance controls. This reassessment will be particularly critical if the SEC pursues new oversight or registration requirements for proxy advisors. The evolving regulatory environment necessitates a proactive approach to ensure continued compliance and alignment with best practices in corporate governance.