SEC Grants Stay of Proxy Access Rules

On October 4, 2010, the SEC issued an order staying effectiveness of the proxy access rules that were expected to take effect on November 15. The stay applies to new Rule 14a-11, the mandatory rule that would allow shareholders, subject to conditions, to have director candidates included in company proxy materials, and also to amendments to Rule 14a-8, which would permit shareholder proposals to amend a company’s governing documents to provide additional procedures for proxy access.

The SEC’s action was taken in response to a legal challenge by the U.S. Chamber of Commerce and the Business Roundtable. On September 29, the Chamber of Commerce and BRT filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit, seeking to invalidate the newly adopted proxy access rules. The petitioners also submitted to the SEC a motion to stay Rule 14a-11 pending resolution of the petition for review, and today’s order is in response to that motion. Although no stay was sought with respect to the amendments to Rule 14a-8, the SEC determined that doing so was appropriate in light of its decision to stay Rule 14a-11.

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