The SEC's Access Proposal: Some Observations (The Need for Proxy Rule Reform)

The access proposal does more than provide access.  It fixes a gaping hole in the securities laws that the prior administration left in place in its rush to eliminate shareholder access.

The prior administration prohibited access bylaws.  It did not, however, resolve the disclosure requirements that needed to be met whenever a shareholder included a nominee in the company's proxy statement.  This might occur because of a mandatory bylaw enacted not through the access process or it might have occurred because the company voluntarily agreed to include the nominee in the proxy statement.  Under the prior regime, there were no express disclosure requirements in these circumstances.  Disclosure for insurgent nominees was regulated by Rule 14a-11, which was triggered by the use of a separate, insurgent, proxy statement.  They did not apply where the nominee was inserted in the company's proxy statement.

This problem is being addressed in proposed rule 14a-19 which would apply to the inclusion of an insurgent nominee in the company's proxy statement pursuant to state law or the company's governing documents.

The failure to address and fix this problem the last time around (and the suggestions that Rule 14a-9 would not apply to these submissions) was a serious administrative flaw.  It reflected the view that it was better to deny shareholders their rights than to fix the regulatory scheme for the proxy process.