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SEC Adopts Final Rules on Proxy Access

At yesterday's open meeting, the SEC adopted changes to the federal proxy and other rules to facilitate the rights of shareholders to nominate directors to a company's board.  The changes to the federal "proxy access" rules are intended to facilitate the ability of shareholders to exercise their traditional rights under state law to nominate and elect members to company boards of directors.   These new rules require companies to include the nominees of significant, long-term shareholders in their proxy materials, alongside the nominees of management.  In addition, under the newly adopted rules, shareholders will be eligible to have their nominees included in the proxy materials if they own at least 3 percent of the company's shares continuously for at least the prior three years.

According to the final rule release:

We are adopting changes to the federal proxy rules to facilitate the effective exercise of shareholders' traditional state law rights to nominate and elect directors to company boards of directors. The new rules will require, under certain circumstances, a company's proxy materials to provide shareholders with information about, and the ability to vote for, a shareholder's, or group of shareholders', nominees for director. We believe that these rules will benefit shareholders by improving corporate suffrage, the disclosure provided in connection with corporate proxy solicitations, and communication between shareholders in the proxy process. The new rules apply only where, among other things, relevant state or foreign law does not prohibit shareholders from nominating directors. The new rules will require that specified disclosures be made concerning nominating shareholders or groups and their nominees. In addition, the new rules provide that companies must include in their proxy materials, under certain circumstances, shareholder proposals that seek to establish a procedure in the company's governing documents for the inclusion of one or more shareholder director nominees in the company's proxy materials. We also are adopting related changes to certain of our other rules and regulations, including the existing solicitation exemptions from our proxy rules and the beneficial ownership reporting requirements.

These rules are not uncontroversial.  The Commission adopted the rules in a split vote, 3 in favor, 2 opposed.  The new proxy access rules will become effective sixty days after publication in the Federal Register, roughly, the beginning of November 2010. 

The fact sheet summarizing the rules is available at:

The full text of the final rule release is available at: