Paxton sues proxy advisor under Texas consumer law in new ESG dispute
Texas says the proxy advisor misled institutional investors about the basis for its recommendations and used deceptive practices tied to ESG considerations.
Texas Attorney General Ken Paxton has filed a lawsuit in Collin County against a proxy advisor, accusing the firm of misleading clients about the independence and objectivity of its voting recommendations and of putting an ESG agenda ahead of client interests.
The case extends Texas’s dispute with proxy advisors beyond Senate Bill 2337 and into the Texas Deceptive Trade Practices Act. The suit could test whether the state can challenge proxy research firms through consumer-protection law after earlier setbacks tied to SB 2337.
According to the source brief, Texas says the firm told clients it provided independent and objective advice while allegedly pursuing its own environmental, social and governance agenda. The state also accuses the firm of “false, deceptive and misleading practices.”
The brief says the clients at issue are institutional investors, including asset managers, pension funds and other professional fiduciaries. Those clients subscribe to proxy research and still retain discretion to accept, reject or override the advice when voting shares.
The lawsuit comes after prior challenges to SB 2337. The brief says a federal injunction substantially limited Texas’s ability to enforce that law against two unnamed firms that challenged it. It also says federal courts later blocked Kansas’ Proxy Advisory Transparency Act and Indiana’s HB 1273.
The source brief places the new case alongside other recent actions aimed at the sector. It says Paxton filed a separate consumer-protection suit in May against another proxy advisor, and that Nebraska, Iowa and West Virginia launched similar actions the same day. It also says Florida, Missouri and Indiana have taken measures aimed at proxy advisors.
Timothy Smith of the Interfaith Center on Corporate Responsibility said the new suit uses “the same flawed arguments” and is aimed at gaining more legal leverage through a consumer-protection theory. Sarah Wilson, chief executive of Minerva Analytics, said, “The real casualties of laws like SB 2337 are investors.”
The brief also says 18 Republican members of the Texas congressional delegation asked the Federal Trade Commission and the acting US attorney general for updates on investigations into proxy advisors under Executive Order 14366. It further says Minerva Analytics previously filed a Texas Public Information Act request about communications involving the Texas attorney general’s office, the Texas Stock Exchange and related parties.
What happens next is unclear from the source brief. The lawsuit will move through Texas state court, and any response from the proxy advisor is not included in the provided material.
Sources
Editorial note: This article was prepared with AI assistance and includes source attribution for reader review.
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