The SEC, on October 4, 2010, granted an order to stay recently approved revisions to its rules which would make it easier for shareholders to nominate directors of public companies, including mutual funds. The SEC action came in response to the U.S. Chamber of Commerce’s motion to stay and its related petition filed with the U.S. Court of Appeals for the District of Columbia. The Chamber has taken the position that the revisions give activist investors too much power and will allow them to promote narrow interests.
Under the current rules, shareholders must mail a separate ballot to other investors at their own expense and persuade those investors to vote with them. The rule changes would make it easier for shareholders to nominate directors by allowing investor groups who have owned at least three percent of a company’s stock for at least three years to nominate board members on the annual proxy ballot sent by the company to its shareholders. The Chamber claims that the changes “will give small groups of specialinterest activist investors significant leverage over a business’s activities.”