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SEC Re-Opens Comments on Director Nomination Proposal

The SEC announced yesterday that it would reopen the public comment period for its rule proposal, Facilitating Shareholder Director Nominations, proposed in June.  Comments on the original proposal were due by August 17, 2009, though comments have continued to arrive at the Commission since that date, prompting the SEC to re-open the comment period for another 30-day period, ending in late January 2010.  As we summarized in our July 1, 2009 post:

This proposal would require companies, in certain conditions, to include shareholder nominees for directors in their proxy materials, and is somewhat controversial, only garnering three votes in favor of proposing it out of the five member Commission.

The Release proposes a new rule, Rule 14a-11, that if adopted would require companies to include shareholder nominees for directors in company proxy materials under a set of prescribed circumstances. The Release also proposes to amend the existing Rule 14a-8(i)(8) to allow shareholders to propose amendments to the company’s governing documents to put into effect the shareholder nomination of directors contemplated in the newly proposed Rule 14a-11.

The new rule would apply to all companies filing reports with the SEC under the Securities Exchange Act of 1934 (with a few exceptions) regardless of size, and notably including investment companies.

The Forum submitted a comment letter on this proposal in August stating that the Forum shares the Commission’s desire to ensure that boards of directors are responsive to the needs of shareholders, and agrees that funds should be treated similarly to operating companies with respect to shareholder access to proxy statements.  The letter also lays out some fundamental differences between mutual funds and operating companies the Commission and investors should keep in mind, noting that, given these differences and the resulting efficiencies and benefits to shareholders,
 

“in order to exercise their vote intelligently and responsibly, fund shareholders must weigh the potential costs of effectively altering the structure of their fund’s board against any perceived benefits.”


Comments may be submitted in paper, or electronically via http://sec.gov/cgi-bin/ruling-comments?ruling=s71009&rule_path=/comments/s7-10-09&file_num=S7-10-09&action=Show_Form&title=Facilitating%20Shareholder%20Director%20Nominations

Comments submitted on the proposal are available at:  http://sec.gov/comments/s7-10-09/s71009.shtml

The full text of the rule proposal is available at: http://sec.gov/rules/proposed/2009/33-9046fr.pdf
 

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