SEC Proposes to Rescind Shareholder Proposal Rule, Proposes Changes to Proxy Solicitation Process

On September 16 the Securities and Exchange Commission (SEC) proposed rescinding Rule 14a-8 under the Securities Exchange Act of 1934 and proposed a rule enacting reforms to the proxy solicitation process. In the first proposal, the Commission proposes to rescind Rule 14a-8 and amend Rule 14a-4(c). The recission of Rule 14a-8 would leave shareholder proposal determinations to state law and company governing documents. According to an SEC fact sheet, changes to Rule 14a-4(c) would provide companies with greater flexibility to obtain discretionary voting authority regarding shareholder proposals submitted outside of Rule 14a-8.

The second proxy proposal would “modernize the proxy solicitation process” under Regulation 14A of the Securities Exchange Act of 1934. The proposal would eliminate, for companies that have a Form 10-K on file for the recent fiscal year, the delivery of annual reports to security holders; the elimination of the delivery deadline if documents are incorporated by reference in the proxy statement; elimination of the requirement to submit notice of exempt solicitation; and require contact information on Schedule 14A and Schedule 14C, among other changes.

In a statement, SEC Chair Paul Atkins stated, “Today’s proposals demonstrate my focus on ensuring that the Commission’s rules are within the agency’s statutory authority and reflect policy positions grounded in current and anticipated market practice and modern technologies.” The comment periods for both proposals will remain open for 60 days.

Click here to view the Commission’s press release covering the rule proposal and access the Commission’s fact sheets.

Click here to read the Commission’ proposed rule on the recission of Rule 14a-8 shareholder proposals.

Click here to read the Commission’s proposed rule on the proxy solicitation process.