Proxy contests uncertain after court vacated SEC rule

Author: | Published: 4 Aug 2011

The frequency of proxy contests has become uncertain following the US Court of Appeal’s strike down of a Securities and Exchange Commission (SEC) proxy access rule.

The rule aimed to make corporate boards more accountable by allowing shareholder nominees to be included on corporate proxy sheets. The SEC was authorised to write the rule under Dodd-Frank.

Specifically, the rule allowed shareholders who retained a holding of at least 3% for three years to nominate directors to be included on the sheets.

But a July 22 ruling by the DC circuit court stated the SEC was “arbitrary and capricious in promulgating Rule 14a-11,” and vacated the proxy access rule.

The rule was adopted in August 2010 after receiving much attention during the Commission’s comment period. “There was...