On September 29, 2010, the Business Roundtable and the US Chamber of Commerce filed a lawsuit challenging the final rules issued by the US Securities and Exchange Commission (SEC) on proxy access. The plaintiffs also requested that the SEC stay the effectiveness of the rules pending determination of the case.
On October 4, 2010, the SEC granted that stay. As a result, even if the US Court of Appeals for the DC Circuit court acts quickly and upholds the rule, the proxy access regime is unlikely to be in effect for the upcoming proxy season. In granting a stay of its rules pending judicial review, the SEC stated that "under all of the circumstances of this matter, a stay of Rule 14a-11 and related rule amendments is consistent with what justice requires [because] a stay avoids 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 challenged rules, adopted on August 25, 2010, afford shareholders of public companies that have held more than a three percent stake for at least three years the right to use the company's proxy materials to nominate their own candidates to the board of directors. The rules were to have become effective on November 15, 2010 and would have impacted the upcoming 2011 proxy season for many public companies. The stay applies to new Rule 14a-11 as well as to the amended Rule 14a-8, which would have allowed investors to submit for inclusion in a company's proxy statement proposals that seek more permissive access procedures "because the amendment to Rule 14a-8 was designed to complement Rule 14a-11 and is intertwined, and there is a potential for confusion if the amendment to Rule 14a-8 were to become effective while Rule 14a-11 is stayed."