Proxy access of the slate for 2011 as SEC fights legal challenges
Proxy access may be off the table for 2011. In October the SEC announced that it has delayed the implementation of the newly mandated proxy access rules. The commission took the decision in the face of a lawsuit filed in the Federal Court in the District of Columbia by Business Roundtable and the US Chamber of Commerce.
The lawsuit cited First Amendment issues and also argued that states’ rights have been illegally impeded, thus rendering the rules invalid. While the lawsuit was largely anticipated – and is likely to be the first of many – the delay by the SEC comes as something of a surprise.
‘The commission continues to believe that its rules are lawful and in the best interests of investors,’ SEC spokesman John Nester announced. Nester explained that the commission took the decision to delay ‘to avoid potentially unnecessary costs, regulatory uncertainty, and disruption that could occur if the new rules were to become effective during the pendency of a challenge to their validity.’
This is not the first time such an action has taken place – the Federal Court has, in the past, delayed implementation of SEC rules while legal challenges are pending – and it does create problems for companies. Many public issuers have been preparing changes to bylaws to facilitate the rules and the filings that must be made as a result of them. This delay, with no clear indication of if and when the rules will now become applicable, once again places companies and management in a state of limbo
