No Rehearing on Proxy Access Litigation, SEC Says

Jack Humphrey, Regulatory journalist
September 07, 2011 /

The Securities and Exchange Commission (SEC) has confirmed its resolve not to seek rehearing of the decision by the U.S. Court of Appeals in Washington, D.C. that vacated a Commission rule (Rule 14a-11) which would have required companies to include shareholders’ director nominees in company proxy materials in certain circumstances.

Chairman Mary Schapiro said she believed it is in the “best interest” of investors and the market to provide a “meaningful opportunity for shareholders to exercise their right to nominate directors at their companies.”

Accordingly, it will help make boards more accountable for the risks undertaken by the companies they manage.

Schapiro added: “I remain committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards.

“At the same time, I want to be sure that we carefully consider and learn from the Court’s objections as we determine the best path forward. I have asked the staff to continue reviewing the decision as well as the comments that we previously received from interested parties.”

The SEC amended Rule 14a-8 last year when it adopted Rule 14a-11 at the same time.

Under the amendments, eligible shareholders are permitted to require companies to include shareholder proposals regarding proxy access procedures in company proxy materials.

The procedure gives shareholders and companies an opportunity to establish proxy access standards on a company-by-company basis – rather than a specified standard like that contained in Rule 14a-11.

Although the amendments to Rule 14a-8 were not challenged in the litigation, the SEC voluntarily stayed the effective date of those amendments at the time it did so for the effective date of Rule 14a-11.

The SEC’s stay order sets the expiration of the effective date of the amendments to Rule 14a-8 and related rules without further SEC action when the court’s decision is finalized, which is expected to be issued on September 13.

Accordingly, Rule 14a-8 will come into force and a notice of the effective date of the amendments will be published, absent further SEC action.

The SEC added that it will not seek Supreme Court review.

 

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