July 7, 2020

Volume X, Number 189

July 07, 2020

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July 06, 2020

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SEC Proposes Amendments to Shareholder Proposal Rule

On November 5, 2019, the SEC issued a release proposing amendments to Rule 14a-8 under the Securities Exchange Act of 1934, which is the rule that governs the process through which shareholders may submit proposals to be included in a company’s proxy statement. If adopted, the proposal would amend Rule 14a-8 as follows:

  • Share Ownership Requirement. At present, Rule 14a-8 requires that a shareholder must have owned at least $2,000 in market value, or 1 percent, of a company’s securities in order to submit a shareholder proposal for inclusion in the company’s proxy statement. The proposal sets forth a three-tiered ownership requirement structure, under which shareholders who own a smaller dollar amount of securities would be required to own those securities for a longer period of time before submitting a shareholder proposal.

  • Written Statements. The proposal would add requirements that a shareholder provide the company with written statements to the effect that the shareholder intends to continue to hold the requisite amount of securities through the date of the shareholder meeting and that the shareholder will be available to discuss the proposal with the company between 10 and 30 days of submission.

  • One Proposal. Rule 14a-8 currently provides that each shareholder may submit no more than one proposal to a company for a particular shareholder meeting. The current rule would be narrowed so that a single person may submit only one proposal for a particular meeting, whether submitted directly as a shareholder or indirectly as a shareholder representative.

  • Resubmission. The proposal would also raise the levels of shareholder support that a previous proposal must have received in order to be eligible for resubmission at the same company’s future shareholder meeting and would add a new provision that would allow companies to exclude proposals under certain circumstances in which shareholder support for the matter declines year over year.

The SEC requested comments as to whether special provisions should be considered for the amendment to Rule 14a-8 that would require shareholders to reaffirm proposals for open-end funds (which typically do not hold annual shareholder meetings) after some passage of time or, absent reaffirmation, allow the proposals to expire.

Comments on the SEC’s proposal are due 60 days after publication of the proposal in the Federal Register.

The SEC’s release is available here.

© 2020 Vedder PriceNational Law Review, Volume IX, Number 323


About this Author

Legal, Business, John Marten, Investment Attorney, Vedder Price Law FIrm

John S. Marten, a Shareholder in the Chicago office of Vedder Price, has substantial experience representing clients in the investment management industry.

As a member of the firm’s Investment Services group, Mr. Marten counsels clients on a wide variety of matters involving the application of the federal securities laws to investment companies, investment advisers and broker-dealers. He has significant experience counseling investment company clients with respect to new products and was recently involved in the creation of two mutual funds...

(312) 609 7753
Mark Quade Investment Attorney Vedder Price Chicago

Mark Quade is an associate in Vedder Price’s Chicago office and a member of the firm’s Investment Services practice group.

Prior to joining Vedder Price, Mr. Quade served as a 1940 Act attorney and assistant vice president at a mutual fund service provider in Milwaukee, Wisconsin. There, he provided legal support to a registered open-end multiple series trust and its board of trustees, and he also supported proprietary mutual funds. Among other matters, Mr. Quade facilitated investment advisory agreement approval and renewal processes, prepared and reviewed board meeting materials, drafted mutual fund registration statements and responded to SEC comments.

While attending law school, Mr. Quade was a law clerk at a large national bank, a legal intern with the Financial Industry Regulatory Authority, a student attorney at the Business Law Clinic and a research assistant, while also participating in National Moot Court. Prior to law school, he was a senior fund accountant with a Minnesota–based investment advisor.

Mr. Quade earned his J.D. from the University of Minnesota Law School in 2013 with a concentration in Business Law. He graduated cum laude from the University of Wisconsin–River Falls in 2004, where he double majored in Economics and Business Administration.

312 609 7515
Nathaniel Segal, Investment Attorney, Vedder Price Law Firm

Nathaniel Segal is an Associate at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due...

(312) 609 7747
Jacob Tiedt, Vedder Price, investment services attorney

Jacob C. Tiedt is a Shareholder at Vedder Price and a member of the Investment Services group.

Mr. Tiedt’s practice includes the representation of registered mutual funds, closed-end funds and exchange-traded funds; private funds; investment advisers; and other financial institutions on a broad range of regulatory, governance and compliance matters. Mr. Tiedt regularly counsels clients on matters relating to SEC registration, disclosure and compliance; shareholder solicitation; NYSE, Nasdaq and FINRA regulation; corporate governance; and board administration. Mr....