The Court of Appeals for the Fifth Circuit has dealt another blow to the SEC in its legal battle with the National Association of Manufacturers. Under Gary Gensler’s leadership, the SEC attempted to suspend a 2020 rule that targeted proxy advisory firms, but the court deemed this a violation of federal regulatory guidelines.
Since becoming the new head of the SEC, Gary Gensler has engaged in numerous legal battles with private companies, experiencing both wins and losses. However, he has recently faced a string of losses, many of which have been high-profile. The most recent defeat comes in his attempt to revoke a 2020 rule that expanded the SEC’s jurisdiction to proxy advisory firms.
The saga began in July 2020 when the SEC, under the leadership of former chair Jay Clayton, increased its oversight of proxy advisory firms. These firms play a crucial role in the capital market by gathering information about board proposals and guiding shareholders in the voting process. Recognizing their influence, the SEC believed it was necessary to regulate these firms to prevent manipulation, and in 2020, it obtained the federal authority to do so.
Then came Gary Gensler. Shortly after assuming his position, he instructed his staff to review the 2020 rule and sought to rescind it. This sparked legal battles, with the National Association of Manufacturers leading the charge to prevent the SEC from relinquishing its oversight of the sector.
The legal battle between NAM and the SEC reached the US Court of Appeals for the Fifth Circuit. This week, the court ruled against the SEC, marking another significant defeat for Gary Gensler.
The court found fault with the SEC for unlawfully rescinding the rule without following the Administrative Procedure Act. It specifically pointed out that Gensler himself directed this illegal action. The ruling was welcomed by NAM Chief Legal Officer Linda Kelly, who emphasized the importance of federal agencies adhering to the rule of law, regardless of changes in administration.
This is not the first loss Gensler has suffered regarding the proxy rule. In February of this year, the US District Court for the District of Columbia declared his attempt to rescind the rule as “contrary to law and in excess of statutory authority.”
Gensler has also faced setbacks in the crypto space, where he has lost high-profile cases and has had to adjust his aggressive tactics in other cases. Recently, he decided not to pursue legal action against ConsenSys, the Ethereum incubator, in a lawsuit that could have had significant implications for the classification of ETH as a security.
However, the biggest case Gensler is currently pursuing is against Ripple and the question of whether XRP is a security. Even in this case, he has faced setbacks, leading him to dismiss cases against Ripple’s CEO and founder. The conclusion of the Ripple lawsuit is approaching, and there is anticipation that the SEC will lose its most significant case yet. Gensler has gradually scaled down his expectations, initially seeking $2 billion from Ripple but now pursuing a much smaller penalty.
The outcome of the Ripple case could define Gensler’s legacy, and he is already facing opposition from legislators who view him as a liability in an important election year. However, the XRP community has remained resilient, and while it has not reached the heights of this year’s bull market, XRP remains one of the largest projects in the cryptocurrency space.
As of now, XRP is trading at $0.479, with a market cap of $26.67 billion and a 1.77% gain in the past day.
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