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SEC Stays Proxy Access Rule Effective Date

As a result of the Chamber of Commerce's legal challenge to the Commission's recently adopted proxy access rules, the SEC has issued an order staying the effective date of those rules.  Absent this stay, the rules would have taken effect November 15, 2010.  

The changes to the federal proxy rules are intended to facilitate the effective exercise of shareholders' traditional state law rights to nominate and elect directors to company boards of directors. The new rules would require:

  • Under certain circumstances, a company's proxy materials to provide shareholders with information about, and the ability to vote for, a shareholder's, or group of shareholders', nominees for director.
  • That specified disclosures be made concerning nominating shareholders or groups and their nominees.
  • That companies must include in their proxy materials, under certain circumstances, shareholder proposals that seek to establish a procedure in the company's governing documents for the inclusion of one or more shareholder director nominees in the company's proxy materials. 

The new nomination rules would apply only where, among other things, relevant state or foreign law does not prohibit shareholders from nominating directors.  At the same time, the Commission adopted related changes to the existing solicitation exemptions from the SEC's proxy rules and the beneficial ownership reporting requirements.

The Commission has discretion to grant a stay of its rules pending judicial review if it finds that “justice so requires.”  Given the pendency of the Chamber of Commerce's challenge to these rules in the U.S. Court of Appeals for the DC Circuit, the SEC opted to stay the effective date for these rules:

The Commission finds that, under all of the circumstances of this matter, a stay of Rule 14a-11 and related rule amendments is consistent with what justice requires. Among other things, a stay avoids potentially unnecessary costs, regulatory uncertainty, and disruption that could occur if the rules were to become effective during the pendency of a challenge to their validity. Because the Commission and petitioners will seek expedited review of petitioners' challenge, questions about the rules' validity will be resolved as quickly as possible.


The Commission further finds that, under all of the circumstances of this matter, it is consistent with what justice requires to stay the effectiveness of the amendment to Rule 14a-8 adopted contemporaneously with Rule 14a-11 because the amendment to Rule 14a8 was designed to complement Rule 14a-11 and is intertwined, and there is a potential for confusion if the amendment to Rule 14a-8 were to become effective while Rule 14a-11 is stayed.

The full text of the Commissions stay order is available at:  http://sec.gov/rules/other/2010/33-9149.pdf

The full text of the final proxy access rule release is available at:  http://sec.gov/rules/final/2010/33-9136fr.pdf