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Chapter 13 Identification of Proponents





§ 13.01 Background of the Exclusion

§ 13.02 Application of the Exclusion

Chapter 13 Identification Of Proponents

Rule 14a-8(l) — former Rule 14a-8(b)(2)

Question 12: If the company includes my shareholder proposal in its proxy materials, what information about me must it include along with the proposal itself?

 (1) The company's proxy statement must include your name and address, as well as the number of the company's voting securities that you hold. However, instead of providing that information, the company may instead include a statement that it will provide the information to shareholders promptly upon receiving an oral or written request.

§ 13.01 Background of the Exclusion

In the proxy statement, companies may either disclose the name and address of the proponent (as well as the number of shares held and other contact information offered by the proponent) or include a statement that such information will be furnished by the company to any person promptly upon the receipt of an oral or written request.

§ 13.01[A] History of the Exclusion

In 1967, the SEC first allowed companies to omit a proponent's name and address from its proxy statement as long as companies provided that information to shareholders upon request. Shareholders had the option of contacting the SEC staff or the company to ascertain the identity of a proponent.[fn1] In 1983, the SEC decided to remove its staff from the process of providing information about a proponent's identity since the information was not readily available to the staff and because it was an administrative burden for the staff to collect and provide the information expeditiously.[fn2] As the SEC stated in connection with this rulemaking:

The staff has not been able in all cases to respond in a timely fashion to security holders' requests for the name and address of any particular proponent. When proxy materials containing uncontested proposals have not been reviewed by the staff in accordance with the Commission's selective review procedures, such materials have been forwarded to the files before the request arrives. Reordering these materials for the purpose of ascertaining the names and addresses of proponents has in some instances proved to be time consuming. The Commission believes it would be more efficient and a better use of its limited resources to require that this information be included in the proposal or provided by the issuer upon request.[fn3]

[fn1] Exchange Act Release No. 8206, 1967 SEC LEXIS 116 (Dec. 14, 1967).

[fn2] Exchange Act Release No. 20,091, 1983 SEC LEXIS 1011 (Aug. 16, 1983).

[fn3] Exchange Act Release No. 19,135, 1982 SEC LEXIS 691 (Oct. 14, 1982).

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§ 13.01[B] Purpose of the Exclusion

The provision is designed to provide a balance between two important principles that are in tension with one another. On the one hand, it is important that shareholders be able to learn the identity of a proponent to ensure that they can learn more about a proposal. On the other hand, the company's proxy statement is not intended to be a forum for the proponent to promote itself. Giving companies the option to include identifying information in their proxy materials satisfies a shareholder's right to learn who is sponsoring a proposal but does not force companies to give prominent mention to the proponent in the proxy statement.

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§ 13.02 Application of the Exclusion

§ 13.02[A] Identifying the Key Issues

The application of the provision is straightforward. Either a company includes the required information in the introduction to a proposal or represents that such information will be provided upon request. Companies may make that determination without consultation with the staff.

In Staff Legal Bulletin No. 14C, the SEC clarified that Rule 14a-8(l) permits exclusion of a proponent's name, address and share ownership without the need for a no-action request, as long as the company includes a statement that it will provide this information to shareholders promptly upon request.[fn3.1]

[fn3.1] See Division of Corporation Finance, Staff Legal Bulletin No. 14C (June 28, 2005) (available at http://www.sec.gov/interps/legal/cfslb14c.htm).

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§ 13.02[B] Providing Identifying Information Upon Request

Companies' approaches to the inclusion of identifying information vary, with some uniformly including the data and others routinely omitting it. A company has discretion to provide the identifying information orally or in writing to interested parties. Since the rule does not specify to whom the request should be made, a request probably can be made to anyone within the company. As a practical matter, however, the contact person for receiving shareholder proposals — whose identity must be disclosed in the company's proxy statement pursuant to Rule 14a-5(f) — normally handles these requests. One need not be a shareholder in a company to request the identifying information.

Although a proponent may request that a company not disclose her name in the proxy statement, the company has the discretion not to honor the request.[fn4] If the company chooses to include the proponent's name in the proxy statement, Rule 14a-8(l)(1) requires that the company also include that proponent's address and the number of the company's voting securities the proponent holds.

[fn4] See Division of Corporation Finance, Staff Legal Bulletin No. 14 (July 13, 2001) Item D2.

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§ 13.02[C] Inclusion of Identifying Information in Proposal or Supporting Statement

A proponent cannot attempt to avoid omission of its identifying information by including such information in the body of its proposal or the text of its supporting statement. If a proponent submits a proposal or supporting statement that contains information identifying the proponent and a company seeks to invoke this exclusion, it must request no-action relief from the SEC staff.

EXAMPLE:

In Citizens Holding Company,[fn5] the SEC staff stated that the company could exclude the proponent's name from the supporting statement. The proponent had introduced himself in the beginning of his supporting statement.

[fn5] 2001 SEC No-Act. LEXIS 101 (Jan. 22, 2001).

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§ 13.02[D] Rule Applies to All Types of Identifying Information

Although the provision explicitly permits omission of a proponent's name and address, the SEC staff has interpreted it to allow companies to exclude all identifying information from proposals and supporting statements, including the amount of stock owned by the proponent, the name of the proponent's employer and any e-mail address.[fn6] If a company objects, a proponent also may not identify its representative or affiliate in its proposal or supporting statement.

EXAMPLE:

In Keystone Financial, Inc.,[fn7] the SEC staff allowed omission from the supporting statement of the proponent's name and address and the number of securities the proponent owned. The proponent had sought to include her name and how many shares she beneficially owned in her proposal.

[fn6] Staff Legal Bulletin, supra note 5, Item D3.

[fn7] 1999 SEC No-Act. LEXIS 338 (Mar. 16, 1999).

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§ 13.02[E] Applies to Co-Proponents or Representatives

Even if shareholders agree to be co-proponents, companies still have the discretion to omit the names of any co-proponent from the proxy materials. Omission of co-proponents may eliminate one advantage of co-sponsorship, the ability to convey that the subject of the proposal is of interest to more than one shareholder.

EXAMPLE:

In Baker Hughes Incorporated,[fn8] the SEC staff allowed two shareholders to co-sponsor a proposal but added that "of course, as provided by rule 14a-8(l)(1), Baker Hughes need not identify the proponents in its proxy material."

[fn8] 2001 SEC No-Act. LEXIS 63 (Jan. 16, 2001).

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§ 13.02[F] Need to Provide More than Name and Address upon Request

If the information is not disclosed in a company's proxy statement, the company must provide the proponent's name and address to shareholders upon request. If a proponent asks the company to provide additional contact information such as telephone numbers, Web site addresses and e-mail addresses to interested parties, it appears that the staff of the Division of Investment Management will require companies to provide it. It is not known whether the Division of Corporation Finance would follow this position.

EXAMPLE:

In Strategic Global Income Fund, Inc.,[fn9] the SEC staff stated that the company could exclude the proponent's name, e-mail address and telephone number from the supporting statement. The first sentence of the supporting statement identified the proponent and stated that he had been a fund shareholder for some time. The last sentence stated, "however, if you disagree, I would appreciate it if you would call me at (314) 747-8262 or e-mail me at OSP@worldnet.att.net and tell me why you think it is a bad idea." The staff stated that it assumed that the fund would include a statement in its proxy statement that the name and address, including the proponent's e-mail address and telephone number, would be furnished to any person, promptly upon request.

[fn9] 2000 SEC No-Act. LEXIS 524 (Mar. 24, 2000).

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