SEC Considering Proxy Rule Amendment for Director Nominations

September 7, 2006

FEI Summary

On Sept. 7, 2006, the U.S. Securities and Exchange Commission (SEC) announced it will consider a proposed rule amending Rule 14a-8 of the proxy rules - concerning director nominations by shareholders – at an open commission meeting on October 18. 

The rule proposal/amendment to Rule 14a-8 of the proxy rules is in response to the September 5 decision by the U.S. Court of Appeals for the Second Circuit, which disagreed with the SEC staff’s longstanding interpretation of Rule 14a-8.

 “A large number of public companies” are subject to the above court’s jurisdiction, according to the SEC’s announcement.

SEC Chairman Christopher Cox stated, "Rule 14a-8, the shareholder proposal rule, provides shareholders important rights in the proxy process.  These rights are best secured under consistent national application of Rule 14a-8 to shareholder proposals. Therefore, to provide certainty with regard to shareholder proposals in every judicial circuit, I have directed the staff to prepare recommendations for revisions to Rule 14a-8 that will assure its consistent nationwide application.”

According to the announcement, the SEC anticipates that, following publication of the proposed amendment to Rule 14a-8 and the public comment period, a final rule proposal will be considered at an open commission meeting in time to allow a final rule to go into effect in time for the 2007 proxy season.

Prepared Sept. 6, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.org), Director, Technical Policy Analysis, Financial Executives International (FEI).. This summary does not represent FEI opinion, unless specifically noted above