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News December 20, 2004 Issue

U.S. Chamber of Commerce Again Asks SEC For Stay, Citing Bill Language

The U.S. Chamber of Commerce quickly seized on language in the recent omnibus appropriations bill requiring the SEC to provide a "justification" for its independent chair requirement as an opportunity to ask the SEC, once again, for a stay.

In a December 10 letter, the Chamber argued that in light of Congressís request that the SEC deliver a report justifying the independent chair requirement, the "responsible course" for the SEC would be to extend the January 16, 2006 compliance date for the independent chair "by at least one year." The group also asked the SEC to stay the 75 percent independent directors requirement, noting that it is closely-related to the independent chair provision.

Congressís request, said the Chamber, equates to a "legislative nullification of the independent chair provision" and a "congressional determination that the [SEC] failed its obligation under the Administrative Procedure Act to articulate a satisfactory explanation for its action." By directing the SEC to analyze the relative performance of management- and independent-chaired funds, they said, "Congress has ratified the position of the dissenting Commissioners, the Chamber, and others who maintained that such an empirical analysis was indeed necessary to any legally-sufficient rule."

Although only the five SEC commissioners have the authority to stay the rule, the letter was addressed to SEC general counsel Giovanni Prezioso. At one point, it appealed to him directly: "Mr. Prezioso, [by granting the stay], the Commission can assure that in the coming year, millions of Americans do not suffer diminished returns" due to the cost of complying with rules that the SEC "may ultimately rescind."

The Chamber first asked the SEC to stay the independent chair and 75 percent independent provisions of the fund governance rules in September. The Commissioners denied that request by a 3-2 vote, but indicated that if circumstances changed, the Chamber could submit subsequent requests for a stay "without prejudice." The language in the appropriations legislation, said the Chamber in its recent request, was a "material change in circumstances" warranting reconsideration of the stay.

To date, the SEC has not released a public response to the Chamberís December 10 request. An SEC spokesperson declined to comment on the matter.