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SEC Delays Implementation Of Proxy Access After Lawsuit Filed Challenging The New Rule

Publication Date: 
October 06, 2010
Corprate Counsel Weekly
Yin Wilczek

The Securities and Exchange Commission Announced Oct. 4 that it would stay the implementation of the new proxy access rules pending the resolution of litigation filed Sept. 29 by the U.S. Chamber of Commerce and the Business Roundtable Charging that the Rules are arbitrary and capricious, and violate the First Amendment (Business Roundtable v. SEC, D.C. Cir., No. 10-1305, 9/29/10).

The Chamber and Roundtable's petition for review, filed in the U.S. Court of Appeals for the District of Columbia Circuit, asked the court to invalidate the rules and to permanently bar the commission from implementing and enforcing their requirements. On the same day, the petitioners filed an administrative motion asking the SEC to stay Rule 14a-11 under the 1934 Securities Exchange Act, pending resolution of the litigation. The new rule--part of the changes approved by the SEC to facilitate proxy access--bears the brunt of industry wrath because it creates a new federal access regime. The motion asked the SEC to respond by Oct. 5 "so that petitioners may promptly proceed to Court for appropriate relief if a stay is not granted.


Stanford University law professor and former SEC Commissioner Joseph Grundfest told BNA Sept. 29 that the lawsuit was "entirely predictable," adding that it was "unfortunate" that the SEC did not address issues raised during the public comment period. "As for the likely outcome of the litigation, history suggests that the SEC has an exceptionally poor batting average before the D.C. Circuit in litigation of this sort," Grundfest said. "By my account, they are zero for six over the last 25 years in these sort of lawsuits. If Vegas made a book here, the commission would almost certainly be the underdog."