SEC To Examine Director Nominations By Shareholders

by Glen Shapiro, LawAndTax-News.com, New York

11 September 2006

The US Securities and Exchange Commission last Thursday announced that the Division of Corporation Finance will recommend an amendment to Rule 14a-8 under the Securities Exchange Act of 1934 concerning director nominations by shareholders.

The staff proposal, still to be developed, will address issues raised by a decision of the US Court of Appeals for the Second Circuit on Tuesday, which disagreed with the Commission staff's longstanding interpretation of Rule 14a-8.

The decision by the appeals court is important because of the large number of public companies that are subject to the jurisdiction of that court.

The recommendation will be considered by the Commission at an open meeting to be held on Oct. 18, 2006.

"Rule 14a-8, the shareholder proposal rule, provides shareholders important rights in the proxy process," announced SEC Chairman Christopher Cox last week.

He continued:

"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."

"Following the publication of a proposed amendment and the opportunity for public comment, a final proposal will be considered at an open meeting of the Commission that will be scheduled to allow a final rule to go into effect in time for the 2007 proxy season."

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