DealLawyers.com Blog

July 27, 2009

More on “Sleepers in the SEC’s Proposals?”

Recently, I blogged about some “sleepers” the SEC’s recent proxy solicitation proposals. As a follow-up, I note that Gibson Dunn’s memo on these proposals covered more sleepers (including the impact, such as a likely increase in “just-say-no” or withhold vote campaigns). Here is an excerpt from that memo:

— Allow third parties to send out unmarked copies of management’s proxy card to shareholders while communicating their views on matters without having to independently file their own proxy materials;

– Clarify that a person may have a “substantial interest” in a matter, precluding reliance on the Rule 14a-2(b)(1) exemption (discussed below), where the person derives any benefit beyond security ownership in the company;

– Allow soliciting parties to round out their “short slates” either with management’s nominees or those of other soliciting parties;

– Require that any conditions imposed by a soliciting party on the proxy authority granted to it be “objectively determinable;” and

– Mandate that certain information about participants in a solicitation (such as the identity and interests of participants) be available at the commencement of the solicitation.

The most significant of these changes appears to be the proposal to allow third parties to circulate unmarked copies of management’s proxy card while relying on Rule 14a-2(b)(1) – the proxy exemption allowing communications with other security holders so long as the person does not seek, directly or indirectly, proxy authority, is not a nominee for election as director, has not reserved the right to engage in a control transaction or contested election, and does not otherwise have a “substantial interest” in the subject matter of the solicitation. This change could embolden third parties to engage in more soliciting activities (such as “just vote no” campaigns) without companies or other shareholders having the benefit of any public disclosure of that soliciting activity and, particularly if combined with the significant changes reflected in the SEC’s recent proxy access rule proposals, could have a dramatic impact on future proxy solicitations.