Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, September 30, 2010

Business Groups Challenge SEC Proxy Access Rule

As expected, the U.S. Chamber of Commerce and the Business Roundtable yesterday filed a complaint (Download ChamberProxyAccessComplaint) in the D.C. Circuit, challenging the SEC's recent adoption of the Proxy Access Rule.  Petitioners ask the Court to hold the rule unlawful under the Investment Company Act, the Securities Exchange Act, and the Administrative Procedure Act.  The petitioners state they have asked the SEC to stay the rule, scheduled to go into effect on November 15, 2010, and if the SEC does not grant the stay, then it will file a motion for stay with the Court.

Petitioners' principal argument is that the SEC failed to adequately assess the rule's impact on "efficiency, competition, and capital formation," an argument that has found a receptive ear at the D.C. Circuit in recent years.  The Court has previously struck down several SEC rules for these same inadequacies.  In particular, the petitioners argue that the SEC did not give sufficient weight to the costs on corporations of election contests and to the motives and intensity of shareholders pursuing special interests, such as unions.  The petitioners also assert the rule violates the First Amendment and is a taking of corporate property because it forces companies to fund and carry election-related speech that is opposed by the board of directors.

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