SEC Staff Publishes New Guidance on Shareholder Proposals


On October 16 the Securities and Exchange Commission’s Division of Corporation Finance issued Staff Legal Bulletin No. 14G (SLB 14G) providing guidance with respect to three issues in connection with shareholder proxy proposals that arose during the 2012 proxy season.

The first issue addresses the requirement in Rule 14a-8 under the Securities Exchange Act of 1934 that a shareholder must provide documentation evidencing that the shareholder has continuously held at least $2,000 in market value (or 1%) of the company’s voting securities for at least one year as of the date the shareholder submits the proposal. If the shareholder is not a record owner, the shareholder must submit a written statement as to his beneficial ownership from the record holder of the securities. In an earlier Staff Legal Bulletin (SLB 14F), the Division of Corporation Finance stated that only securities intermediaries that are participants in the Depositary Trust Company (DTC) could be viewed as “record holders” and therefore a beneficial owner must obtain a proof of ownership letter from the DTC participant through which the securities are held. SLB 14G expands this interpretation to provide that proof of ownership letters from entities that are affiliates of DTC participants can also meet the requisite proof of ownership standard.

SLB 14G also addresses the manner in which a company must notify a shareholder proponent if it views that the proponent failed to follow one of the eligibility or procedural requirements under Rule 14a-8. It provides that the company seeking to exclude a proposal on duration of ownership grounds must specify the deficiencies it has identified, including the specific date on which the proposal was submitted, and must explain that what is required is a letter verifying continuous ownership of the requisite amount of securities for the one-year period preceding and including such date. SLB 14G specifies that the proponent’s date of submission is the date the proposal is postmarked or transmitted electronically.

Finally, SLB 14G clarifies the circumstances under which a website address referencing the contents of a proponent’s website may be properly excluded. While noting that a website address will be “counted” as one word for purposes of the Rule 14a-8(d) 500 word limitation, SLB 14G also sets forth circumstances under which a proposal that links to information on the proponent’s website may be excluded under Rule 14a-8(i)(3) as vague and indefinite.

Read more.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Katten Muchin Rosenman LLP | Attorney Advertising

Written by:


Katten Muchin Rosenman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.