On September 29, 2010, the Business Roundtable and the U.S. Chamber of Commerce (the “petitioners”) filed a petition with the U.S Court of Appeals for the D.C. Circuit for review of the recently-amended final SEC rules requiring issuers of securities subject to the SEC’s proxy rules to include in their proxy materials certain director nominees put forward by certain shareholders or groups of shareholders (the “Proxy Access Rules”), which were scheduled to become effective on November 15, 2010. On the same date, the petitioners requested the SEC stay the new rules, including the effective date, pending resolution of the litigation in the Court of Appeals. On October 4, 2010, the SEC, without addressing the merits of the petitioners’ challenge, issued an order granting the stay with respect to the Proxy Access Rules. The SEC stated that it granted the stay because, among other things, a stay would avoid the 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.
The petitioners alleged in their petition that the Proxy Access Rules: (i) are arbitrary and capricious; (ii) do not promote efficiency, competition and capital formation; (iii) exceed the SEC’s authority; and (iv) violate issuers’ rights under the First and Fifth Amendments to the U.S. Constitution. Petitioners also argued in their brief in support of the motion to stay that the SEC erred in covering investment companies under the Proxy Access Rules because investment companies are subject to a range of different statutory requirements than operating companies, and that the SEC gave insufficient attention to the differences in the operation of investment companies and other public companies, including the significant costs that a director elected under the rules would impose on investment companies’ unitary and cluster boards.