Federal Proxy Access Rule Vacated by D.C. Circuit Court

Corporate Attorney Jonathan CallaBy Jonathan Calla

On July 22, 2011, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously struck down Securities and Exchange Commission Rule 14a-11, also known as the Proxy Access Rule. The court vacated the Proxy Access Rule holding that the SEC failed to adequately consider the rule’s effect on efficiency, competition and capital formation as required by both the Securities Exchange Act of 1934 and the Investment Company Act of 1940.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (enacted July 2010), the SEC was authorized but not required to establish rules governing access to proxy statements. On August 25, 2010 the Proxy Access Rule was adopted by the SEC. The proposed Proxy Access Rule would have required a company, subject to proxy rules under the Securities Exchange Act of 1934, to include in its proxy materials, the name of a person or persons nominated by a qualifying shareholder or group of shareholders for election to the board of directors.

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