SEC delays proxy access rule during challenge

By Reuters
Posted Oct. 4, 2010 at 4:53 p.m.

U.S. regulators Monday delayed implementation of their rule giving shareholders more power to influence corporate boards, a win for business groups trying to overturn the rule.

The U.S. Chamber of Commerce and Business Roundtable sued the Securities and Exchange Commission last week, saying its recently adopted rule was arbitrary and capricious.
In filing the suit, the groups asked the SEC to delay implementation pending the outcome of the legal challenge.

The SEC said a stay “avoids potentially unnecessary costs, regulatory uncertainty and disruption that could occur if the rules were to become effective during” the court challenge.

The SEC’s so-called proxy access rule lets shareholders nominate directors if they hold at least 3 percent of the company’s stock for at least three years.

It is unclear when the U.S. Court of Appeals for the District of Columbia Circuit will review the lawsuit. The SEC and the business groups are asking the court to expedite it.

The SEC said questions about its rules “will be resolved as quickly as possible.”

The rule was slated to take effect mid-November so shareholders could make proposals in the spring when many publicly traded companies hold their annual meetings.

Institutional investors oppose the lawsuit and have called it an assault on a fundamental shareholder right.

The case is Business Roundtable et al v. SEC, No. 10-1305, D.C. Circuit Court of Appeals.

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