By Cydney Posner

In response to a motion filed by the U.S. Chamber of Commerce and the Business Roundtable to stay the effect of newly adopted proxy access rules (see the article posted on September 30, 2010), the SEC has today issued an order to stay the effectiveness of Rule 14a-11 and related amendments, including the amendment to Rule 14a-8, pending resolution by the D.C. Circuit of the petition for review filed by the two trade organizations.  In the order, the SEC stated that "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." (Thanks to Nancy Wojtas, Partner at Cooley LLP, for the tip). The SEC also stayed the effectiveness of an amendment to Rule 14a-8, even though the petitioners did not request a stay of the amendment's effectiveness, because that amendment "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." The SEC and the petitioner will seek expedited review of the trade groups' challenge.

Assuming that the court wants full briefing by the parties, Lori Mason, Partner at Cooley LLP, has advised that, even in highly expedited cases, in most of the courts of appeals, each party will have about three weeks for their principal briefs and a week or more for the reply. She also thinks that, in a case like this, there is likely to be argument heard. As a result, she estimates that it may take a few months to resolve, which means that the potential application of proxy access for this proxy season will likely be in limbo for many issuers until more is known about the schedule. Lori said that they have not yet set a briefing schedule, nor is there anything on the Court's docket showing that it has received a motion to expedite the briefing schedule.

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