Securities Regulation and Corporate Governance


Securities Regulation and Corporate Governance > Posts > SEC Ceases To Issue No-Action Letters on Conflicting Shareholder Proposals
SEC Ceases To Issue No-Action Letters on Conflicting Shareholder Proposals

Today the Securities and Exchange Commission (“SEC”) staff announced that it will no longer express views on the application of Rule 14a-8(i)(9), one of the bases for excluding shareholder proposals from company proxy materials, during the current proxy season.  The staff’s announcement is a result of today’s announcement by SEC Chair Mary Jo White that she has directed the staff of Division of Corporation Finance to review the rule and report to the Commission on its review. 

Today’s announcements arise from an appeal of the SEC staff’s decision on December 1, 2014 to grant a no-action letter to Whole Foods, permitting it to exclude a proxy access shareholder proposal from its 2015 proxy materials because it would conflict with a company-sponsored proxy access bylaw amendment to be voted on at the same meeting.  Chair White’s announcement cited recent “questions that have arisen about the proper scope and application of Rule 14a-8(i)(9).” For example, last week the Council of Institutional Investors sent a letter to the SEC staff asking that it “alter” its interpretation of Rule 14a-8(i)(9), which it argued is “overly broad and inconsistent with the purpose of the Rule.”

SEC Rule 14a-8(i)(9) states that one basis for a company to exclude a shareholder proposal is if the shareholder proposal “directly conflicts with one of the company's own proposals to be submitted to shareholders at the same meeting.”  As a result of today’s announcements, the SEC staff today issued a letter to Whole Foods indicating that it has reconsidered its position and will “express no view concerning whether Whole Foods may exclude the proposal under rule 14a-8(i)(9).”  There are currently approximately 49 shareholder proposal no-action requests pending before the SEC staff that raise Rule 14a-8(i)(9) as a basis for excluding the proposal from the company’s proxy materials, 41 of which assert Rule 14a-8(i)(9) as the only basis for exclusion.

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