SEC Will Not Challenge Court Decision On Proxy Access

The SEC announced last week that it will not seek a rehearing of the recent decision of a U.S. Appeals Court to vacate its new proxy access rule. As we discussed last year, the new rule (Rule 14a-11 under the Securities Exchange Act of 1934) would have required companies to include shareholder nominees for director in the company's proxy materials where the shareholder held shares representing at least 3% of the voting power of the company's stock for the previous three years.

The SEC's final proxy rule amendments released last year also contained changes to Rule 14a-8, which were intended to narrow an exemption that currently permits companies to exclude shareholder proposals that relate to elections. Rule 14a-8a was not subject to court challenge. As we discussed at the time, the amended rules would apply to foreign issuers that were otherwise subject to U.S. proxy rules unless foreign law prohibited shareholders from nominating director candidates.