Shareholder Director Nominations Rule Amendments on Hold

October 4, 2010

The SEC took the unusual act of “staying” its recently adopted amendments to Rule 14a-8 and new Rule 14a-11 under the Securities Exchange Act of 1934 that would have made it easier for shareholders to nominate director candidates.


The stay effectively suspends the new amendments and rule until the SEC lifts it.  The new proxy access rule and rule amendments require companies subject to the SEC's proxy rules to include certain shareholder nominees for directors in their proxy statements provided the shareholders meet certain conditions.

The SEC stayed the amendments in response to a petition filed by the Business Roundtable and the Chamber of Commerce of the United States (Business Roundtable) in the United States Court of Appeals for the District of Columbia, which claims that the SEC exceeded its authority when it adopted the rule and rule amendments.  See Business Roundtable, et al. v. SEC, No. 10-1305 (D.C. Cir., filed Sept. 29, 2010).  In addition, the Business Roundtable argued that that the rule and rule amendments are arbitrary and capricious and otherwise not in accordance with law; do not promote efficiency, competition, and capital formation; and violate issuers' rights under the First and Fifth Amendments to the U.S. Constitution.

The SEC stayed the rule and rule amendments on its own initiative.  It stated that the stay will avoid potentially unnecessary costs, regulatory uncertainty, and disruption that could occur if the rule and rule amendments were to become effective during the pendency of a challenge to their validity.  The SEC will seek expedited review of the challenge before the U.S. Court of Appeals.

Click here to access the stay.

Click here to access information about the petitioner’s challenge to the rule.


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