SEC Will Not Consider No-Action Requests To Omit Shareholder Proposals Under Rule 14a-8(i)(9) The SEC recently announced that, pending a staff review of the scope and application of Exchange Act Rule 14a-8(i)(9), it will “express no views on the application of [that rule] during the current proxy season.” Rule 14a-8(i)(9) allows a company to exclude a shareholder proposal that directly conflicts with a management proposal in the same proxy. The rule is the basis for the controversial exclusion of a proxy access shareholder proposal by Whole Foods for its annual meeting to be held in 2015. Lack of staff guidance in this area may present a predicament for companies hoping to exclude a proposal due to a management counterproposal. Read More


Shareholder Activism Over Proxy Access Expected to Continue The campaign by institutional investors to give shareholders the ability to nominate directors of U.S. public companies using the company’s ballot shows no signs of slowing and continues to evolve. Recently, Vanguard updated its proxy voting guidelines to indicate a preference for proxy access by a shareholder or group holding five percent of the stock for three years. And the Council of Institutional Investors (CII) has endorsed a lower threshold at three percent for two years. These institutional investor preferences are at odds with management proposals at companies such as Whole Foods that (1) require nominating shareholders to meet an ownership threshold of five to eight percent for a period of three to five years and (2) specify ownership by a single shareholder and not a group. This gap between what institutional investors are demanding and what management is offering caused CII to ask the SEC to “alter its interpretation of the ‘counterproposals’ basis for exclusion under Rule 14a-8(i)(9)” as overly broad in application in Whole Foods. As noted above, the SEC is currently undertaking just such a review.  Read More


NYSE Proposes Related Party Approval Exemption for Early Stage Companies

The NYSE has proposed amending its listing standards to exempt early stage companies from the requirement to obtain shareholder approval before issuing shares to related parties and affiliates. The NYSE noted that early stage companies are hampered in their ability to obtain financing and “frequently need to raise capital via private placement share issuances to their founders or other significant existing shareholders or their executive officers or directors.” According to the NYSE, this proposed change follows from its recent amendment to allow initial listing by early stage companies with a total global market cap of at least $200 million that do not otherwise meet the NYSE’s assets and equity test. Read More


Second Circuit Says Failure to Meet MD&A Requirements Can Lead to 10b-5 Liability In Stratte-McClure v. Morgan Stanley, the Second Circuit held that the MD&A disclosure rules set forth in Item 303 of Regulation S-K can give rise to a Rule 10b-5 claim. According to the court, a violation of Item 303’s disclosure requirements can only sustain a claim under Rule 10b‐5 if the allegedly omitted information would also satisfy the Basic v. Levinson test for a fraud claim, including the need to establish materiality and scienter. This ruling departs from the Ninth Circuit’s ruling in In re NVIDIA Corp. that declined to find that the disclosure duty created by Item 303 can form the basis for an actionable securities fraud claim. Read More


A Call for Relevant Proxy Redesign The approaching proxy season presents an opportunity to update and refresh the proxy statement to meet evolving investor needs and expectations. The trend among companies of every size is to enhance user-friendly features to transform disclosures that are merely responsive to SEC rules into proactive messages for investors. Disclosure updates may be driven by say-on-pay votes, investor activism on a particular topic or revisions by peer companies. In addition, proxy statements have become a tool to enhance shareholder engagement, improve corporate branding, advocate management’s position on past performance and introduce management’s strategic vision for the future. Read More

The Ticker shares recent developments in SEC compliance, capital markets, corporate governance, executive compensation and other matters important to public companies and their officers and directors. It is published by Fredrikson & Byron’s Public Companies Group.