The Division of Corporation Finance released Staff Legal Bulletin 14G on October 16, 2012, providing additional guidance for excluding shareholder proposals under Rule 14a-8 based on proof of ownership and references to websites:
- The SEC clarified that for purposes of verifying whether a beneficial owner is eligible to submit a proposal under Rule 14a-8, a proof of ownership letter from an affiliate of a DTC participant satisfies the requirement to provide a proof of ownership letter from a DTC participant.
- A shareholder who holds securities through a securities intermediary that is not a broker or bank can satisfy Rule 14a-8’s documentation requirement by submitting a proof of ownership letter from that securities intermediary. If the securities intermediary is not a DTC participant or an affiliate of a DTC participant, then the shareholder will also need to obtain a proof of ownership letter from the DTC participant or an affiliate of a DTC participant that can verify the holdings of the securities intermediary.
- The SEC said that it will not concur in the exclusion of a proposal under Rules 14a-8(b) and 14a-8(f) on the basis that a proponent’s proof of ownership does not cover the one-year period preceding and including the date the proposal is submitted unless the company provides a notice of defect that identifies the specific date on which the proposal was submitted and explains that the proponent must obtain a new proof of ownership letter verifying continuous ownership of the requisite amount of securities for the one-year period preceding and including such date to cure the defect. The SEC views the proposal’s date of submission as the date the proposal is postmarked or transmitted electronically. In addition, companies should include copies of the postmark or evidence of electronic transmission with their no-action requests.
- If a shareholder proposal or supporting statement refers to a website that provides information necessary for shareholders and the company to understand with reasonable certainty exactly what actions or measures the proposal requires, and such information is not also contained in the proposal or in the supporting statement, the SEC believes the proposal would raise concerns under Rule 14a-9 and would be subject to exclusion under Rule 14a-8(i)(3) as vague and indefinite. However, if shareholders and the company can understand with reasonable certainty exactly what actions or measures the proposal requires without reviewing the information provided on the website, then the SEC believes that the proposal would not be subject to exclusion under Rule 14a-8(i)(3) on the basis of the reference to the website address.
- The SEC will not concur that a reference to a website may be excluded as irrelevant under Rule 14a-8(i)(3) on the basis that it is not yet operational if the proponent, at the time the proposal is submitted, provides the company with the materials that are intended for publication on the website and a representation that the website will become operational at, or prior to, the time the company files its definitive proxy materials.
- If information on a website changes after submission of a proposal and the company believes the revised information renders the website reference excludable under Rule 14a-8, the SEC may concur that the changes to the referenced website constitute “good cause” for the company to file its reasons for excluding the website reference after the 80-day deadline under Rule 14a-8(j) and grant the company’s request that the 80-day requirement be waived.