Registered Closed-End Funds May Exclude Investor’s Advisory Proposal to Declassify Board

In February, the Securities and Exchange Commission (SEC) granted relief to three Nuveen closed-end funds to exclude a shareholder proposal by Saba Capital Management from the funds’ proxy materials. Saba’s proposal would have allowed shareholders to vote to declassify the board so all directors would have to be elected annually. In granting relief, the Commission and Nuveen relied on Rule 14a-8(b)(1) under the Securities Exchange Act of 1934 which governs who is eligible to submit a shareholder proposal, mandating that they be a shareholder of “securities entitled to vote” on any given proposal. The Commission also relied on precedent, including a 2020 First Trust letter that stated, “a declaration of trust of a closed-end fund organized as a Massachusetts business trust granted shareholders the right to vote only on enumerated matters and, therefore, the fund could exclude a board declassification shareholder proposal in reliance on Rule 14a-8(b)(1).” Additionally, a Ropes & Gray client alert covering the no-action letter further stated, “the staff has reaffirmed the long-recognized flexibility of funds – especially those organized as Massachusetts business trusts – to craft the terms of the relationship with its shareholders with respect to voting matters.”

Click here to read the SEC’s Nuveen no-action letter.
Click here to read a Ropes & Gray client alert covering the no-action letter.