In two compliance and disclosure interpretations (Proxy Rules and Schedules 14A/14C 139.08 and 139.09) the SEC clarified the limits of the discretionary authority that proxy holders have in connection with voting at a stockholder meeting.

In CD&I 139.08, the SEC clarified that, in connection with the election of directors, if a stockholder voted for certain directors, but fewer than the maximum number of directors that the stockholder could vote for, the proxy holder could not use its discretionary authority to make additional votes up to the maximum number. For example, if 5 directors were up for election, but the stockholder only voted for 4, the proxy holder could not use its discretionary authority to vote for the fifth person on the theory that the stockholder made a determination to vote for less than the maximum number.

In CD&I 139.09, the SEC confirmed that a proxy holder could use its discretionary authority to vote in situations where the stockholder returned a proxy without specifying how to vote. For example, if a stockholder returned a signed a proxy but did not mark how the stockholder wished to vote in connection with the election of directors, the proxy holder could vote for the maximum number of candidates on behalf of the stockholder.

The relevant take-away is that if a stockholder makes any decision of how to vote on an item included on a proxy card, it takes away the proxy holder's discretion to vote on that matter.

Because the shareholder has specified its choice(s) for the election of directors with an undervoted proxy card, a soliciting party cannot rely on discretionary authority pursuant to Rule 14a-4(b)(1) to vote the shares represented by an undervoted proxy card for the remaining director seats up for election.

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