Regulatory Whiplash: The SEC’s Proxy Advisor Reversal and a Delaware-Inspired Sliding Scale Framework for Judicial Review

Authors

• Alexandra Pellegrino

First Page

541

Abstract

The Securities and Exchange Commission’s 2020 regulation of proxy advisory firms, and its abrupt 2022 recission, triggered a consequential circuit split that exposes a deeper tension in administrative law: how courts should review agency reversals in regulatory environments where stability and adaptability are both essential. In National Association of Manufacturers v. Securities Exchange Commission, the Fifth Circuit invalidated the recission for failing to adequately address reliance interests and prior factual findings. In contrast, the Sixth Circuit in Chamber of Commerce v. Securities Exchange Commission upheld the agency’s reversal under a more deferential interpretation of Federal Communications Commission v. Fox Television Stations, Inc. These conflicting approaches reflect deeper disagreement over how courts should apply arbitrary and capricious review for agency reversals under the Administrative Procedure Act. This Note argues that neither extreme adequately reconciles the competing demands of regulatory stability and administrative flexibility, particularly in the context of corporate governance, where institutional investors, issuers, and proxy advisors structure their conduct around predictable procedural frameworks. Drawing on Motor Vehicle Manufacturers Association v. State Farm, Fox, Delaware jurisprudence, and comparative EU regulation, this Note proposes a sliding-scale model of arbitrary and capricious review. Under this approach, courts would calibrate scrutiny according to the magnitude of reliance interests and the extent of factual discontinuity underlying an agency’s reversal, a framework that reconciles stability with adaptability and promotes certainty in both administrative law and corporate governance.

Recommended Citation

Alexandra Pellegrino, Regulatory Whiplash: The SEC’s Proxy Advisor Reversal and a Delaware-Inspired Sliding Scale Framework for Judicial Review, 20 Brook. J. Corp. Fin. & Com. L. 541 (2026).
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol20/iss2/10