Updated Feb. 9, 2011
A group of law professors filed a brief with the U.S. Court of Appeals in Washington opposing a joint effort by Business Roundtable and the U.S. Chamber of Commerce to overturn SEC rules that will require shareholder access to corporate proxy materials to nominate corporate board directors.
The 37 professors — from such law schools as Harvard, Columbia, Duke and Indiana universities, Boston College and UCLA — state in their brief that the SEC rule requiring shareholders access to corporate proxy materials to nominate directors “does not violate the First Amendment” of the U.S. Constitution.
“Courts have long held that federal securities regulations that compel corporate disclosures are not prohibited by the First Amendment,” the brief states. “For over 70 years, the federal government has regulated securities primarily through regulating the speech of corporations, management and shareholders. Subjecting these laws to strict First Amendment scrutiny would eviscerate the government's ability to enact and enforce regulations that promote market integrity, capital formation and investor protection.”
Business Roundtable and the U.S. Chamber jointly filed suit in the appellate court Sept. 29 to block the SEC rule, arguing in part it violated corporations' rights under the First and Fifth amendments. The appellate court has jurisdiction for reviewing final SEC rules.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law July 21 by President Barack Obama, authorized the SEC to adopt proxy access rules.
The rules, adopted by the SEC on Aug. 25, were to have gone into effect Nov. 15 but were suspended by the SEC on Oct. 4 after the Business Roundtable and U.S. Chamber filed their lawsuit.
Michael J. Barry, partner with the law firm of Grant & Eisenhofer, who prepared the professors' brief, said the court approved admitting the professors' brief in support of the SEC. Oral arguments in the lawsuit are scheduled to begin April 7.
Dave Natonski, Chamber spokesman, said Chamber officials declined to comment.