On November 21, 2019, the Division of Corporation Finance (the “Division" or “Staff") of the Securities and Exchange Commission (“SEC") provided additional detail on how it will process responses to shareholder proposal no-action requests under Rule 14a-8. As discussed in our prior posts, available here and here, in September 2019 the Division announced that, starting with the 2019-2020 shareholder proposal season, it may respond orally instead of in writing to some no-action requests, and in some cases its response may indicate that it is declining to state a view on whether a proposal satisfies the requirements of Rule 14a-8 or is properly excludable.
On November 21, the Division updated its Rule 14a-8 landing page, providing additional clarity around the first aspect of the September announcement; namely, the Staff's process for responding to no-action requests.[1] The updated landing page, available here,[2] now links to a new document entitled the 2019-2020 Shareholder Proposal No-Action Response chart (the “Response Chart")[3], which will list the no-action requests to which the Division has responded, in reverse chronological order (with the most recent responses listed first). The Response Chart presents:
(i) the name of the company that submitted the no-action request,
(ii) the name of the shareholder proponent,
(iii) the date the company initially submitted the no-action request, which will include a hyperlink to all correspondence submitted by the company and the proponent,
(iv) the regulatory bases asserted by the company to exclude the proposal,
(v) whether or not the Staff concurred that the shareholder proposal may be excluded and, if applicable, the basis on which the Staff concurred, or whether the Staff declined to state a view on the no-action request,
(vi) the date of the Staff's response, and
(vii) whether or not the Staff has set forth its view in a written response (in which case, the response will be linked).[4]
The Response Chart does much to alleviate concerns over the Division's new approach for responding to no-action requests, and in many ways actually enhances visibility around the Staff's responses. Moreover, it appears that the Division has modified the process that was previewed as part of its September announcement and will not, as originally stated, provide responses orally. Instead, it has been reported that the Division will notify both the proponent and the company by email when it is issuing its response, and direct them to the Response Chart.[5] Through the Response Chart, interested parties as well as the public will be able to determine how the Staff responded to every no-action request, and whether the Staff issued a traditional written response letter or provided a “summary" response.[6] By reflecting Staff decisions in “real time" on the SEC's website, the Response Chart is an encouraging development that should mitigate uncertainty for proponents and companies looking for transparency around the Staff's responses to no-action requests.
[1] The Division has not provided any additional information on the other aspect of the September announcement, relating to the Division's statement that in some cases its response may state that it is declining to state a view on whether a proposal satisfies the requirements of Rule 14a-8 or is properly excludable.
[2] https://www.sec.gov/corpfin/shareholder-proposals-no-action
[3] https://www.sec.gov/divisions/corpfin/shareholder-proposals-2019-2020.pdf
[4] Notably, when the Chart was first posted, it indicated that the Staff had responded to two no-action request, in each case concurring that a proposal could be excluded, but noting that the Staff had issued a letter in only one of the two responses. Although the Staff's response letter was not linked initially, the chart indicates that the Staff's response and hyperlink will be available within a few days.
[5] As in the past, if a proponent has not provided an email address, the Staff will need to contact the proponent through a different means.
[6] Although we understand the Staff has referred to responses that are not accompanied by a traditional Staff response letter as “informal" responses, we believe it more appropriate to refer to them as “summary" responses, since they have the same authority as the traditional written responses, all of which are only informal, non-binding views of the Division.