On February 5, the Securities and Exchange Commission’s Division of Corporation Finance rejected a request for no-action relief submitted by Regions Financial Corporation to exclude a shareholder proposal asking for reform of compensation practices and a limit to senior executive compensation in light of its receipt of funds pursuant to the Capital Purchase Program (CPP) under the Troubled Asset Relief Program.  

The proposal, submitted by the Sheet Metal Workers’ National Pension Fund under Rule 14a-8 of the Securities Exchange Act of 1934, stated that given Regions Financial Corporation’s participation under the CPP, the board of directors and the compensation committee were urged to implement executive compensation reforms, including limits on incentive compensation and severance payments for senior executives, a requirement that a majority of long-term compensation be awarded in the form of performance-vested equity instruments, such as performance shares or performance-vested restricted shares and a prohibition on accelerated vesting for all unvested equity awards held by senior executives.  

The SEC rejected Regions Financial Corporation’s arguments to exclude the proposal, including on the grounds that it was vague and indefinite as the proposal appeared to impose no limitation on the duration of the specified reforms. Regions Financial Corporation’s no-action request highlighted that the SEC had granted no-action relief to SunTrust Banks, Inc. in December 2008 on similar grounds for a similar proposal.  

The SEC’s response in Regions Financial Corporation thus appears to represent a change of position, at least applied to participants in the CPP.