Staff Legal Bulletin No. 14G (“SLB 14G”)7 provides further guidance on a number of process issues that have caused significant confusion, and thus been the subject of past Staff Legal Bulletins and no-action requests, relating to Rule 14a-8 shareholder proposals.


Rule 14a-8(b) provides that, to be eligible to submit a shareholder proposal for inclusion in the company’s proxy materials, a shareholder must provide documentation proving that the shareholder has continuously held at least $2,000 in market value or 1% of the company’s securities entitled to vote at the shareholder meeting for at least one year as of the date the shareholder submits the proposal. If the shareholder is a beneficial owner of the securities, Rule 14a-8(b)(2)(i) provides that this documentation can be in the form of a written statement from the “record holder” of the securities. In October 2011, the SEC’s Division of Corporation Finance published Staff Legal Bulletin No. 14F, which provided guidance on the definition of “record holder” for purposes of the proof of ownership requirement, stating that only securities intermediaries that are participants in The Depository Trust Company (“DTC”) system should be viewed as record holders of securities that are deposited at DTC.8

This year, in SLB 14G, the Division noted that, during the 2012 proxy season, some companies questioned the sufficiency of proof of ownership letters from entities that were affiliates of DTC participants, but were not themselves DTC participants. The Division formalized the position it took in several no-action letter responses during the 2012 proxy season, stating that a proof of ownership letter from an affiliate of a DTC participant9 will satisfy the requirement to provide proof of ownership for purposes of Rule 14a-8(b)(2)(i).

The Division also indicated that it will require greater specificity from issuers in their deficiency letters to shareholders before allowing the exclusion of a proposal for failure to provide proof of ownership for the specific one-year period required. In submitting proof of ownership, shareholders must verify that they own the requisite amount of shares for the one-year period preceding and including the date on which the shareholder submits the proposal. If an ownership letter refers to a date before the proposal is submitted, or if it refers to a date after the proposal was submitted but covers a period of only one year, then the letter fails to provide proof of beneficial ownership over the full one-year period. In either case, under Rule 14a-8(f), the company may exclude the proposal only if the company notifies the shareholder of the defect and the shareholder fails to correct it.

In SLB 14G, the Division takes the position that it will not allow a proposal to be excluded under Rules 14a-8(b) and 14a-8(f) unless the company’s deficiency letter “identifies the specific date on which the proposal was submitted and explains that the proponent must obtain a new proof of ownership letter” covering the full one-year period to cure the defect. According to the Division, identifying the specific submission date in the deficiency letter will aid shareholders in instances when it is difficult for them to determine the submission date on their own, such as when the proposal is postmarked with a different date than when the shareholder placed it in the mail. Additionally, the Division states that companies “should include copies of the postmark or evidence of electronic transmission with their no-action requests.”


The Division also formalized its no-action position that shareholders may include references to websites within a proposal or supporting statement, and that the website will continue to count as only one word for purposes of the 500-word limitation, subject to the following three qualifications:

  • First, under Rule 14a-8(i)(3), a company may exclude a proposal as vague and indefinite if neither the shareholders voting on the proposal, nor the company in implementing it (if adopted), would be able to determine with reasonable certainty exactly what actions or measures the proposal requires. Where the shareholder proposal or supporting statement refers to a website, the Division takes the position that the proposal and supporting statements themselves nevertheless still must contain the information necessary to satisfy this definiteness requirement. That is, even if information available on the website supplements the proposal, shareholders and the company must be able to discern exactly what the proposal requires without reviewing the information provided on the website.
  • Second, a proposal cannot be excluded solely because the referenced website is not yet operational. To benefit from this position, however, the shareholder must provide the company, at the time when the proposal is submitted, with the materials intended for publication on the website and a representation that the website will be operational when the company files its definitive proxy.
  • Third, because a shareholder easily may change website content after submission of a proposal, the Division takes the position that a company may seek SEC staff approval to exclude a website reference if later revisions to the website render it excludable for any reason. Furthermore, although Rule 14a-8(j) requires a company to submit reasons for exclusion no later than 80 days before filing its definitive proxy materials, the Division indicated that “we may concur that the changes to the referenced website constitute ‘good cause’” for a company to request and receive a waiver of the 80-day deadline.