Company Name: BKF Capital Group, Inc
Public Availability Date: February 27, 2004Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
January 14, 2004 Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: BKF Capital Group, Inc. Statement of Reasons for Omission of Shareholder
Proposal Pursuant to Rule 14a-8(i) Dear Ladies and Gentlemen:
We are writing on behalf of our client, BKF Capital Group, Inc. ("BKF" or the
"Company"), with regard to a shareholder proposal dated October 14, 2003 (the
"Proposal") submitted by Opportunity Partners L.P. (the "Proponent") in
connection with the 2004 annual meeting of stockholders of the Company. On
behalf of the Company, we hereby notify the Securities and Exchange Commission
(the "Commission") that the Company intends to omit the Proposal and the
Proponent's supporting statement from its proxy statement and form of proxy for
its 2004 annual meeting (the "2004 Proxy Statement"). The Company hereby
requests that the Staff of the Division of Corporation Finance of the Commission
(the "Staff") not recommend to the Commission that any enforcement action be
taken if the Company excludes the Proposal from its 2004 Proxy Statement for the
reasons set forth below. In accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), six copies of this letter and its attachments are
enclosed. We are forwarding a copy of this letter to the Proponent as notice of
the Company's intention to omit the Proposal from the 2004 Proxy Statement.
Although the Company has not yet finalized its schedule for the mailing of
definitive proxy statements and other materials to its stockholders and the
filing of such materials with the Commission, the Company will not mail and file
such definitive materials before April 5, 2004. The Proposal
On October 24, 2003, the Company received a letter dated October 14, 2003 from
the Proponent setting forth the Proposal (the "October 14, 2003 Letter"). A copy
of the October 14, 2003 Letter is attached as Exhibit A. The Proposal included
in the October 14, 2003 Letter reads as follows: RESOLVED: The stockholders request that an investment banking firm be engaged to
evaluate alternatives to maximize stockholder value including a sale of the
Company. On November 3, 2003, within 14 calendar days of receiving the October 14, 2003
Letter, the Company, pursuant to Rule 14a-8(f) under the Exchange Act, sent to
the Proponent via first-class mail a letter (the "Company Letter"), a copy of
which is attached hereto as Exhibit B. The Company Letter informed the Proponent
that the October 14, 2003 Letter did not comply with the relevant requirements
of the Exchange Act and specified the basis for noncompliance. In particular,
the Company Letter informed the Proponent that the October 14, 2003 Letter did
not adequately establish the Proponent's eligibility under Rule 14a-8(b)(2)(i)
under the Exchange Act. The Company Letter also informed the Proponent that it
could cure the identified deficiency by means of a response to the Company that
must be postmarked, or transmitted electronically, no later than 14 days from
the date it received such letter. On November 17, 2003, the Proponent filed a Schedule 13D with respect to the
Company ("Proponent Schedule 13D"), which is attached as Exhibit C. In the
Proponent Schedule 13D, the Proponent referred to the Proposal and attached as
an exhibit its October 14, 2003 Letter. It is unclear on what basis under Rule
13d-1(a) of the Exchange Act the Proponent was eligible to file a report on
Schedule 13D, since the Proponent stated in such filing that it beneficially
owned less than 5% of the shares of common stock of the Company and did not
disclose that it had in the past held an amount of such shares in excess of 5%.
The Company has received no subsequent communications from the Proponent other
than a copy of the Proponent Schedule 13D as filed with the Commission.
Grounds for Exclusion: The Proponent Has Not Provided Proof of Stock Ownership (Rule 14a-8(b))
Under Rule 14a-8(b) of the Exchange Act, in order to be eligible to submit a
proposal, a proponent must have continuously held at least $2,000 in market
value, or 1%, of the Company's securities entitled to vote on the proposal for
at least one year and continue to hold these securities through the date of the
shareholders meeting. If a proponent is not a registered holder of the company
securities entitled to vote on the proposal and has not filed a Schedule 13D,
Schedule 13G, Form 3, Form 4 or Form 5 reflecting ownership of the company's
securities as of or before the date on which the one-year eligibility period
begins, a proponent may prove eligibility by submitting a written statement from
the record holder of the securities verifying that at the time the proponent
submitted the proposal that the proponent had held the securities for at least
one year. The statement from Samuels Chase & Co., Inc. enclosed with the Proponent's
October 14, 2003 Letter was dated October 15, 2003 and included a statement that
the Proponent had held Company shares for one year. In Staff Legal Bulletin No.
14, dated July 13, 2001 ("Staff Legal Bulletin No. 14"), the Staff expressly
stated that a statement from a record holder that verified continuous ownership
for one year but was dated one day before the shareholder proposal request does
not demonstrate sufficiently continuous ownership for the purposes of Rule
14a-8(b). See Staff Legal Bulletin No. 14, at C.1.c.(3). Similarly, a statement
from the record holder dated one day after shareholder proposal request does not
sufficiently prove continuous ownership, as it does not show that the Proponent
held the requisite amount of Company shares on the date one year before the
shareholder proposal request. In either case continuous ownership for one year
from the date of the shareholder proposal request has not been established.
After the Company notified the Proponent of this deficiency within the required
notification period, the Proponent did not respond directly to the Company.
Instead, the Proponent filed the Proponent Schedule 13D. It is unclear on what
basis under Rule 13d-1(a) of the Exchange Act the Proponent was eligible to file
a report on Schedule 13D, since the Proponent stated in such filing that it
beneficially owned less than 5% of the shares of common stock of the Company and
did not disclose that it had in the past held an amount of such shares in excess
of 5%. Furthermore, Rule 14a-8(b)(2)(ii) permits a person to establish
eligibility if such person "has filed a Schedule 13D ... reflecting [such
person's] ownership of the shares as of or before the date on which the one-year
eligibility period begins" (emphasis added). The Proponent has not previously
filed any Schedule 13D or other applicable form disclosing its Company
shareholdings as of or before October 14, 2002. The Proponent Schedule 13D does
not disclose share amounts even now. The Proponent simply includes, in Item 4
entitled "Purpose of Transaction," the same statement it had made in the October
14, 2003 Letter: that it had continuously held shares valued at more than $2,000
for more than one year before the date of submission of the Proposal. Neither
the Proponent Schedule 13D or any other filing by the Proponent reflects its
ownership as of or before the date on which the one-year eligibility period
begins to establish its claimed ownership. The Staff has asserted that a shareholder who is not the record holder is
responsible for proving its eligibility to submit a proposal to a company. See
Staff Legal Bulletin No. 14, at C.1.c. Simply filing the same unsubstantiated
proposal on an Exchange Act form that a shareholder proponent is not eligible to
use under the terms of that form should not satisfy such proponent's burden of
proving its eligibility to submit a proposal, when neither the Schedule 13D nor
any other filing with the Commission by such proponent regarding the Company
states or discloses such proponent's ownership as of or before the date on which
the one-year eligibility period begins. Indeed, this should especially be the
case when there was a viable alternative to establishing ownership open to such
proponent and disclosed in the company's response letter to the proposal: the
proponent could have simply procured a properly dated statement from the record
holder regarding its ownership of the shares, assuming it satisfied the
applicable ownership requirements on that date. The Staff has on numerous occasions permitted the omission of a shareholder
proposal from proxy materials where the proponent failed to provide documentary
support indicating that the proponent has satisfied the minimum ownership
requirement for the one year period. See, e.g., Motorola, Inc. (August 12, 2003)
(noting that proponent had not responded to company's request for documentary
support that indicated that it satisfied the minimum ownership requirement for
the one-year period); and JDS Uniphase Corporation (July 18, 2003) (noting that
proponent had not responded within 14 day period to company's request for
documentary support indicating that it satisfied the minimum ownership
requirement for the one-year period). The Company believes that the Proposal can be omitted pursuant to Rule 14a-8(b),
because the Proponent has failed to provide documentary support indicating that
it satisfies the minimum ownership requirement for the one year period required
by Rule 14a-8(b) within the statutory 14-day time frame set by Rule 14a-8(f).
The Company advised the Proponent on a timely basis of the need for him to
establish that proof and specifically informed him of the 14-day time period in
which he had to respond. The Proposal Deals With a Matter Relating to the Ordinary Business Operations of
the Company (Rule 14a-8(i)(7)) Rule 14a-8(i)(7) of the Exchange Act allows a registrant to omit from its proxy
materials a shareholder proposal and any statement in support thereof "if the
proposal deals with a matter relating to the company's ordinary business
operations." Under this rule, shareholder proposals may be excluded if they
involve business matters that are mundane and the proposal does not implicate
any substantial policy or other considerations. See Release No. 34-12999
(November 22, 1976). As the Commission recently explained, "[t]he general
underlying policy of this [rule] is consistent with the policy of most state
corporate laws: to confine the resolution of ordinary business problems to
management and the board of directors, since it is impracticable for
shareholders to decide how to solve such problems at an annual shareholders
meeting." Release No. 34-40018 (May 21, 1998). Accordingly, the ordinary
business rule operates to exclude shareholder proposals that "deal with ordinary
business matters of a complex nature that [stockholders], as a group, would not
be qualified to make an informed judgment on, due to their lack of business
expertise and their lack of intimate knowledge of the issuer's business."
Release No. 34-12999 (November 22, 1976). The Proposal, if adopted, would require that the Company engage an investment
banking firm to explore alternatives to maximize stockholder value including a
sale. While the Proposal refers to a sale of the Company as one possible
alternative, it does not limit the scope of the Proposal to a sale of the whole
Company or another extraordinary corporate transaction involving all, or
substantially all, of the Company's assets. The text of the Proposal on its face
would cover ordinary business matters as well as extraordinary corporate
transactions. The board of directors and management of the Company could
maximize shareholder value through any number of actions short of an
extraordinary corporate transaction, such as reorganizing management,
restructuring business operations or rationalizing cost structures. Such a broad
mandate intrudes upon ordinary business matters that are reserved for management
and the board of directors under applicable corporate law. The Company is a
Delaware corporation, and under the Delaware General Corporation Law ("DGCL"),
the board of directors has the authority to conduct the ordinary business of the
corporation. The DGCL states that "the business and affairs of every corporation
organized under this chapter shall be managed by or under the direction of a
board of directors, except as may be otherwise provided in this chapter or in
its certificate of incorporation." Section 141(a) of the DGCL. The Company's
certificate of incorporation does not contain any limitation on the board's
authority to so manage the Company. And the Proposal on its face is not limited
to extraordinary corporate transactions that are reserved for stockholder
approval under the DGCL, such as a merger or sale of all or substantially all of
the assets of the corporation. It is precisely the role of the board of
directors of a Delaware corporation to oversee the management and operation of a
company in these ordinary business areas. Moreover, when the Proposal and supporting statement are read together, it
becomes even more apparent that the sole or primary focus of the Proposal is not
an extraordinary corporate transaction. The supporting statement focuses on the
Proponent's primary concerngeneral expense levels at the Company. The
supporting statement reads in relevant part: We think the primary reason for BKF's low multiple [of market capitalization to
assets] is its excessive expenses. In 2002, compensation expenses consumed
approximately 69% of BKF's revenues vs. 25% for [Franklin Resources], 30% for [Janus
Capital] and 13% for [Waddell and Reed]. BKF's total operating expenses for 2002
consumed approximately 92% of revenues, leaving very little for stockholders.
Accordingly, the Proponent calls on the Company to retain an investment banking
firm to evaluate alternatives to maximize stockholder value. The supporting
statement mentions one way to cut expenses, namely, if a large financial
management company were to do so after acquiring the Company. However, such an
extraordinary corporate transaction is not the object or primary focus of the
Proposal and supporting statement. The supporting statement focuses on expenses
as the "primary reason" for the alleged underperformance of the Company's stock
price, and it and the Proposal leave open numerous ways for the Company to
maximize stockholder value short of a sale or other extraordinary corporate
transaction. For example, to cut expenses the board of directors could revise
the Company's general compensation policies, selectively reduce employee
headcount, reduce spending on employee-related services or benefits (such as
healthcare or insurance benefits), switch or renegotiate arrangements with
suppliers and service providers or sell or shut down underperforming or
high-expense business units. None of these alternatives would require a
stockholder vote under the DGCL or involve any extraordinary corporate
transaction, and all would impact expenses and thereby potentially shareholder
value. Moreover, determining which, if any, of these actions would be the
optimal means of cutting expenses for the purpose of maximizing shareholder
value at the Company would require an intimate knowledge of the Company's
business and operations. This determination is exactly the kind of complex
ordinary business problem that management and boards of directors are better
positioned to address than stockholders and that the ordinary business rule is
intended to exclude from stockholder action. The Staff has consistently granted no-action relief pursuant to Rule 14a-8(i)(7)
when the shareholder proposal appears to relate in part to non-extraordinary
matters that constituted part of the company's ordinary business operations,
even though, in some cases, the proposals suggested both ordinary and
extraordinary courses of action. See, e.g., Telular Corporation (December 5,
2003) (stating that proposal to appoint a board committee to explore strategic
alternatives to maximize shareholder value appeared to relate in part to
non-extraordinary transactions and was excludable); Archon Corporation (March
10, 2003) (stating that proposal to appoint board committee to explore strategic
alternatives to maximize shareholder value appeared to relate to
non-extraordinary transactions and was excludable); Lancer Corporation (March
13, 2002) (finding that proposal to retain investment bank to develop valuation
of the company's shares and to explore strategic alternatives to maximize
shareholder value appeared to relate to non-extraordinary transactions and was
excludable); E*Trade Group, Inc. (October 31, 2000) (stating that proposal
relating to establishing a committee to advise the board on ways to enhance
shareholder value appeared to relate in part to non-extraordinary transactions
and was excludable); and NACCO Industries (March 29, 2000) (stating that
proposal to retain investment banker to explore all alternatives to enhance the
value of the company, including a possible sale, merger or other transaction for
any or all assets of the company, appeared to relate in part to
non-extraordinary transactions and was excludable). As the Lancer Corporation
and NACCO Industries no-action letters illustrate, this has been the case even
when proposals involve hiring an investment banker to explore ways to maximize
stockholder value. See also Sears, Roebuck & Co. (February 7, 2000) (finding
that proposal to retain investment bank to prepare for a sale of all or parts of
the company appeared to relate in part to non-extraordinary transactions and was
excludable). Moreover, the Staff has stated in a recent legal bulletin and has concluded in
prior letters that decisions regarding general compensation are matters within
the conduct of ordinary business operations. In Staff Legal Bulletin No. 14A,
the Staff stated that as a general rule companies may exclude proposals that
relate to general employee compensation matters in reliance on Rule 14a-8(i)(7),
unless they focus on sufficiently significant social policy issues. See Division
of Corporation Finance: Staff Legal Bulletin No. 14A (July 12, 2002) (discussing
application of ordinary business rule to shareholder proposals regarding
shareholder approval of equity compensation plans). Further, in no-action
letters, the Staff has consistently taken the position that proposals that are
not limited to matters of executive compensation relate to the conduct of a
company's ordinary business and are excludable. See, e.g., Lucent Technologies
Inc. (November 26, 2003) (stating that proposal regarding pay increases, stock
options and other forms of compensation to management was related to general
compensation matters and was excludable); and Lucent Technologies Inc. (November
6, 2001) (stating that proposal to decrease salaries, remuneration, expenses and
other compensation of all officers and directors by 50% was related to general
compensation matters and was therefore excludable). In the supporting statement,
the Proponent focused on expenses, and in particular general compensation
expense, as the primary reason for the allegedly low market valuation of the
Company. General expense levels, and general compensation expenses, are ordinary
business matters, absent some significant social policy issue. It seems odd
that, if the Proposal were not excludable on ordinary business grounds, the
Proponent could achieve what he would be unable to do directly (i.e., submitting
a proposal on lowering general compensation expense) simply by proposing it
indirectly through the supporting statement to a general proposal to hire an
investment banker to maximize shareholder value. We are aware of related no-action letters where the Staff has found that
proposals are not excludable as ordinary business matters when the object or
primary focus of a proposal is an extraordinary corporate transaction. See,
e.g., Allegheny Valley Bancorp, Inc. (January 3, 2001) (stating that proposal to
retain investment bank to solicit offers for the purchase of the company's stock
or assets and present highest cash offer to shareholders was not excludable as
it related to sale of the company to the highest bidder); The Student Loan
Corporation (March 18, 1999) (stating that unable to concur that a proposal to
hire investment banker to explore all alternatives to enhance the value of the
company including a sale, merger or premium tender offer share repurchases was
not excludable); Temple-Inland Inc. (February 24, 1998) (stating that proposal
to retain investment bank to explore all alternatives to enhance stockholder
value, including a sale, merger, or other transaction for any or all assets of
the company, when read together with supporting statement, was not excludable as
it appeared to focus on possible extraordinary business transactions); and The
Quaker Oats Company (December 28, 1995) (stating that the object of a proposal
to retain an investment bank to explore all alternatives to enhance the value of
the company including a plan to separate the company's food and beverages
business into two separate and independent publicly owned corporations or a sale
or merger with another company was not excludable as it related to a decision
concerning extraordinary corporate transactions (i.e., the separation of the
company's businesses) rather than matters involving the operation of the
company's ordinary business). However, unlike the proposals in these no-action
letters, the Proposal does not focus primarily on or have as its object an
extraordinary corporate transaction. The Proposal would have the investment bank
explore alternatives to maximizing stockholder value, not a specific
extraordinary corporate transaction. Moreover, as the Proponent states, the
"primary reason" for the Company's market value being depressed is the Company's
"excessive expenses," which would not require an extraordinary corporate
transaction to address within the scope of the Proposal. Extraordinary corporate
transactions normally involve all, or substantially all, of a company's assets
through a spin-off, asset sale, merger, liquidation, etc. The Proposal itself is
not in any manner limited to these extraordinary corporate transactions, but
rather focuses on general expense levels, which could be addressed predominately
through non-extraordinary means such as adjusting compensation policies.
Based on the above, the Proposal and its supporting statement intrude upon the
board's statutory authority to manage the business and affairs of the Company
under applicable law and focus on and relate to ordinary business matters. As a
consequence, we believe that the Proposal and its supporting statement may
properly be excluded from the 2004 Proxy Statement pursuant to Rule 14a-8(i)(7).
Conclusion As discussed above, we believe that the Proponent has not provided sufficient
evidence of its eligibility to submit a shareholder proposal. Accordingly, we
respectfully request that the Staff not recommend enforcement action if the
Proposal is omitted from the 2004 Proxy Statement. In the event that the Staff
disagrees with the Company's conclusion that it may exclude the Proposal on
eligibility grounds, we also believe that failure to allow the Company to
exclude the Proposal would cut against the long-standing policy of the Staff
concerning ordinary business matters, and respectfully request that the Staff
not recommend enforcement action if the Proposal is omitted from the 2004 Proxy
Statement on that basis. Should the Staff disagree with the Company's positions, we would appreciate an
opportunity to confer with a member of the Staff before the issuance of its
response. If the Staff requires additional information, please call me at (212)
403-1395. Sincerely, /s/
Benjamin D. Fackler Attachments
cc: Opportunity Partners L.P. [APPENDIX]
EXHIBIT A October 14, 2003 Norris Nissim
Secretary
BKF Capital Group, Inc.
One Rockefeller Plaza
New York, NY 10020
Dear Mr. Nissim: We have beneficially owned shares of BKF Capital Group, Inc. valued at more than
$2,000 for more than one year and we intend to continue our ownership through
the date of the next annual meeting. We are hereby submitting the following
proposal and supporting statement pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934 for inclusion in management's proxy statement for the next
annual meeting of stockholders or any earlier meeting. Please contact us if you
would like to discuss this proposal. RESOLVED: The stockholders request that an investment banking firm be engaged to
evaluate alternatives to maximize stockholder value including a sale of the
Company. Supporting Statement BKF's ratio of market capitalization (market price of equity plus debt) to
assets under management is just 1.3%. That is significantly lower than the ratio
for other investment management companies. For example, Franklin Resources
("BEN") shares trade at a ratio of 4.4%, Janus Capital ("JNS") at 2.9% and
Waddell and Reed ("WDR") at 7%. We think the primary reason for BKF's low multiple is its excessive expenses. In
2002, compensation expenses consumed approximately 69% of BKF's revenues vs. 25%
for BEN, 30% for JNS and 13% for WDR. BKF's total operating expenses for 2002
consumed approximately 92% of revenues, leaving very little for stockholders.
On the other hand, BKF could be an attractive acquisition candidate for a larger
financial management company that could cut expenses. In short, we think the
surest way to enhance stockholder value is to immediately engage an investment
banking firm to evaluate alternatives to maximize shareholder value including a
sale of the Company. Very truly yours,
/s/ Phillip Goldstein
President
Kimball & Winthrop, Inc.
General Partner [INQUIRY LETTER]
January 19, 2004 U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 BKF Capital Group, Inc. (the "Company")Rule 14a-8 Proposal
Ladies and Gentlemen: We received a copy of a letter dated January 14, 2004 from Benjamin D. Fackler
of Wachtell, Lipton, Rosen & Katz, counsel to the Company to you seeking no
action assurance if the Company excludes from its proxy materials our rule 14a-8
proposal requesting "that an investment banking firm be engaged to evaluate
alternatives to maximize stockholder value including a sale of the Company." Mr.
Fackler proposes two bases for omitting our proposal: (1) "The proponent has not
provided proof of stock ownership;" and (2) "The proposal deals with a matter
relating to the ordinary business operations of the Company." Neither contention
has any merit. As Mr. Fackler stated, the Company notified us in a letter dated November 3,
2003 that it did not consider a letter dated October 15, 2003 from our broker
stating that we had held more than $2,000 worth of the Company's stock
continuously for 12 months to be proof that we had owned it for more than one
year on October 14, 2003, the date of our letter to the Company which contained
our shareholder proposal. Assuming the truthfulness of our broker's letter, the
Company apparently wanted proof that we did not purchase our shares on October
15, 2002, which was the only possible way that we would not have owned more than
$2,000 worth of the Company's stock continuously for more than one year as of
October 14, 2003.1 For the record, we hereby state that we have continuously owned far more than
$2,000 worth of the Company's stock for several years. To erase all doubts about
our eligibility, we filed a Schedule 13D on November 17, 2003 in which we
stated: "As required by Rule 14a-8 of the Securities and Exchange Act of 1934,
at the time of submission of the shareholder resolution, Opportunity Partners
L.P. had continuously owned shares of BKF valued at more then $2,000 for more
than one year and intends to continue to hold these shares through the date of
the next annual meeting." Contrary to Mr. Fackler's misleading statement that
"The Company has received no subsequent communications from the Proponent other
than a copy of the Proponent Schedule 13D as filed with the Commission," we
faxed a both a cover note and copy of our Schedule 13D to the Company's
secretary on November 17th. In the cover note (which was included in Mr.
Fackler's submission package to you but conspicuously not mentioned in his
letter), we stated: "I expect you have seen this already. Please call me if you
have any questions." (emphasis added) Rule 14a-8(b)(2)(ii) permits us to demonstrate eligibility "only if you have
filed a Schedule 13D ... reflecting your ownership of the shares as of or before
the date on which the one-year eligibility period begins ... and by submitting
to the company a copy of the schedule...." 2 We filed Schedule 13D and submitted
it to the Company along with our cover note as a good faith effort to comply
with Rule 14a-8(b)(2)(ii). Yet, the Company did not call us or otherwise inform
us that it did not deem our Schedule 13D filing to be adequate. Thus, we
reasonably assumed that it was satisfied that we had cured the perceived
procedural deficiency it set forth in its November 3, 2003 letter. Instead, it
bided its time, waiting almost two months (and well past its December 17, 2003
deadline for submitting a stockholder proposal) to request a no action letter
from you if it excludes our proposal from its proxy materials.
Mr. Fackler incorrectly asserts that our filing and delivery to the Company of a
Schedule 13D in which we stated that "Opportunity Partners L.P. had continuously
owned shares of BKF valued at more then $2,000 for more than one year and
intends to continue to hold these shares through the date of the next annual
meeting," does not change anything. The instructions for Schedule 13D state:
"Intentional misstatements or omissions of fact [in Schedule 13D] constitute
Federal criminal violations." (emphasis added). On the other hand, a false
statement of fact contained in a rule 14a-8 submission to a company would not
lead to criminal penalties. That is a very big difference.
In any event, the Company's request for no action relief should be denied
because the staff should not encourage the sort of gamesmanship the Company is
using. Section G.5 of Legal Bulletin No. 14 (July 13, 2001) dealing with
eligibility and procedural issues states: "Rather than waiting until the
deadline for submitting a no-action request, a company should submit a no-action
request as soon as possible after it receives a proposal and determines that it
will seek a no-action response." Rather than picking up the telephone and trying
to resolve any question about our eligibility directly with us in a timely
manner, the Company blatantly ignored the staff's policy about timely
submissions of a no action request and chose to make a belated (at best)
hypertechnical argument to you laced with red herrings about whether we were
"eligible" to file Schedule 13D. As explained in Section G.6. of Legal Bulletin
No. 14, "[The Commission's staff receives] the heaviest volume of no-action
requests between December and February of each year." Even if the its argument
had any merit, granting the Company no action relief will only encourage other
companies to use similar delaying tactics instead of making a good faith effort
to resolve their differences with shareholder proponents. With respect to Mr. Fackler's disingenuous attempt to portray our proposal as
one involving "business matters that are mundane," we see no need to respond
other than to say that (1) if he had a conscience, he would return the fees his
law firm received from the Company for producing such drivel, and (2) if the
staff does grant no action relief on the basis that our proposal deals with a
matter relating to the Company's ordinary business operations, we would
seriously consider litigating to have our proposal included in the Company's
proxy materials. In conclusion, based upon our extensive experience with shareholder activism,
the Company's efforts to prevent our proposal from coming to a vote at the
annual meeting, like those of many companies faced with proposals opposed by
management, are in bad faith. There is little doubt that the Company does not
really care whether we have continuously owned more than $2,000 worth of stock
for more than one year and little doubt that it knows we have. All it wants to
do is to derail a stockholder vote on our proposal by any means necessary,
ethical or unethical. The larger question is whether the staff should permit
this sort of legal gamesmanship which is costly not only to the Commission but
to shareholders of affected companies. In this regard, we present below an
excerpt from our comment letter of June 13, 2003 regarding Release S7-10-03
("Possible Changes to Proxy Rules"). The staff spends far too much time responding to no action requests from
companies seeking to exclude shareholder proposals submitted pursuant to rule
14a-8. Furthermore, its responses have sometimes been inconsistent and not
infrequently are based on shaky legal reasoning. I propose eliminating rule
14a-8 [and substituting an alternative scheme described in my comment letter for
voting on shareholder proposals but] if rule 14a-8 is retained in substantially
the same form, then to limit frivolous or abusive no action requests to exclude
proposals, each request should be accompanied by an affidavit from the company
certifying that: (1) management has made a reasonable effort to resolve its
differences with the proponent and failed, and (2) the board has determined that
(a) it is in the best interests of shareholders that the proposal in question be
excluded from management's proxy card and (b) the cost of seeking no action
relief is reasonable for the benefit to be gained. Very truly yours,
/s/ Phillip Goldstein
Portfolio Manager cc: Benjamin D. Fackler
-----FOOTNOTES----- 1 If we had purchased our shares on October 15, 2003, we could have easily
defused the Company's "concern" about our stock ownership by simply resubmitting
our proposal in a letter dated October 15, 2003 and ask that it supersede our
October 14thletter (since the deadline for submissions was not until December
17, 2003). 2 Mr. Fackler implies that this language requires us to have filed a Schedule
13D on or before the date we submit our proposal to the Company rather than
simply that the Schedule 13D itself, whenever it is filed, must reflect our
ownership of the shares as of or before the date on which the one-year
eligibility period begins. The latter reading is more reasonable in light of (a)
the serious consequences of making a false statement of fact in a Schedule 13D,
(b) the intent of rule 14a-8(b)(2)(ii) to provide an alternative method to
demonstrate one's eligibility to submit a stockholder proposal, and (c) the
intent of Section 14 itself, i.e., to promulgate rules that advance the public
interest or protect investors in matters relating to proxy solicitations. [INQUIRY LETTER]
February 11, 2004 Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: BKF Capital Group, Inc. Statement of Reasons for Omission of Shareholder
Proposal Pursuant to Rule 14a-8(i) Dear Ladies and Gentlemen:
We are writing on behalf of our client, BKF Capital Group, Inc. ("BKF" or the
"Company"), in response to the January 19, 2004 letter from Opportunity Partners
L.P. (the "Proponent") to the Securities and Exchange Commission (the
"Commission") regarding a shareholder proposal and supporting statement (the
"Proposal") submitted by the Proponent for inclusion in the Company's proxy
material for its 2004 Annual Meeting of Stockholders. A copy of the letter is
attached hereto as Exhibit A (the "Proponent Response Letter"). On February 9,
2004, the Proponent filed the Proponent Response Letter with the Commission as
an attachment to an amended Schedule 13D filing, which is attached hereto as
Exhibit B. On January 14, 2003, we submitted a letter (the "No-Action Letter Request") on
behalf of the Company to request confirmation from the Staff of the Division of
Corporation Finance (the "Staff") that it would not recommend to the Commission
that any enforcement action be taken if the Company excludes the Proposal from
its proxy material for its 2004 Annual Meeting of Stockholders. The Proponent
Response Letter is the Proponent's response to the No-Action Letter Request.
For the reasons set forth below, we respectfully disagree with a number of the
assertions in the Proponent Response Letter, and we again request the relief
specified in the No-Action Letter Request. In accordance with Rule 14a-8(j)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), six
copies of this letter and its attachments are enclosed and a copy of this letter
is being forwarded to the Proponent. Discussion
The Proponent Response Letter sets forth no substantive responses to the bases
for exclusion raised in the Company's No-Action Letter Request. Rather, the
Proponent uses the Proponent Response Letter as a forum to make allegations of
bad faith, legal gamesmanship and implied unethical conduct on the part of the
Company and its counsel and to advance Proponent's personal agenda of
eliminating or amending Rule 14a-8 under the Exchange Act. Whatever one may
think of the Proponent's efforts to rewrite the shareholder proposal rules under
the Exchange Act, Rule 14a-8 is still applicable law and the Company believes
that, for the reasons stated in the No-Action Letter Request, the Proposal fails
to comply with that Rule. Proponent's Response Regarding First Ground for Exclusion: Failure to Provide
Proof of Stock Ownership (Rule 14a-8(b)) The Proponent Response Letter fails to explain on what grounds the Proponent was
eligible to file a Schedule 13D, and how that filing establishes ownership for
the purposes of Rule 14a-8. In the Proponent Response Letter, the Proponent
makes clear that its Schedule 13D filing was simply an attempt to satisfy the
eligibility requirements of Rule 14a-8. As discussed in the No-Action Letter
Request, simply filing an unsubstantiated proposal on Schedule 13D that a
shareholder proponent is not eligible to use under the terms of that form should
not satisfy such proponent's burden of proving its eligibility to submit a
proposal under Rule 14a-8(b). As stated on the cover page of the form itself,
Schedule 13D is a statement of beneficial ownership filed pursuant to Rule
13d-1(a), specifically for certain holders of more than five percent of the
Company's securities. The fact that Proponent could face criminal penalties for
misstatements in a Schedule 13D does not change the fact that the Proponent's
filing was not a statement filed pursuant to Rule 13d-1(a). Permitting any
stockholder to establish eligibility under Rule 14a-8 by simply filing its
proposal on a Schedule 13D could dilute the importance of Schedule 13D filings
to the investing public, which expects such filings to relate to material
developments with respect to significant stockholders as provided in that form.
Moreover, the Proponent had other, clearly established alternatives to
satisfying the eligibility requirements of Rule 14a-8(b). As footnote 1 to the
Proponent Response Letter shows, the Proponent was aware of these alternatives
but for some reason failed to follow them. In regards to the allegation that the Company purposely waited to respond in
order to pass the Company deadline for submissions of shareholder proposals, we
wish to highlight three points. First, the Company complied with the notice and
timing requirements of Rule 14a-8(f) and Rule 14a-8(j). Second, we are at a loss
to understand the Proponent's allegation that the Company's filing of a
no-action letter after the deadline for shareholder proposal submissions (but
within the time frame mandated by Rule 14a-8(j)) was a "delaying tactic." The
Company fails to see how the Proponent was prejudiced or harmed by this. The
Proponent is entitled to submit one shareholder proposal per year (i.e., the
Proposal), and any additional shareholder proposals from Proponent would have
been excludable under Rule 14a-8(c). While we are mindful that the Staff
receives most no-action requests with respect to shareholder proposals during
the buildup to the regular annual meeting season, the Proponent offers no
support for its implicit assertion that filing a no-action request at this time
harms the Proponent more than the Company. Third, under Rule 14a-8(f) and
related interpretations, the Company is not obligated to continually point out
procedural flaws with the Proposal. The Company previously notified the
Proponent of the eligibility defect in the Proposal and how to remedy it in
accordance with Rule 14a-8(f). The Company believes the Proponent's attempt to
remedy the defect was not adequate, and accordingly noted that in its No-Action
Letter Request submitted pursuant to Rule 14a-8(f) and Rule 14a-8(j). Despite
the Proponent's stated desire to change how the shareholder proposal rules work
under the Exchange Act, there is no obligation to "pick up the phone and talk"
about the Proposal, or to continue to point out to the Proponent how to comply
with the shareholder proposal rules beyond what the Company did. We note in this
regard that the Company received no call from the Proponent to discuss the
Proposal. Judging by the tone of the Proponent Response Letter, one must
seriously doubt whether discussions with the Proponent would bear any fruit.
Proponent's Response Regarding Second Ground for Exclusion: Ordinary Business
Operations of the Company (Rule 14a-8(a)(i)(7)) The Proponent Response Letter offers no substantive response to this ground for
exclusion. Clearly, the Proponent feels that the Proposal is important, but that
does not make it a proper subject for shareholder action. As discussed in detail
in the No-Action Letter Request, the Proposal is substantially similar to
shareholder proposals that in previous no-action letters the Staff determined it
would not recommend enforcement action if such proposals were excluded, as such
proposals related to ordinary business matters. The Proponent offers no
substantive counterargument or response to this fact. Presumably this line of
no-action relief falls into the category of no-action letters that the Proponent
has previously termed as "inconsistent" and "based on shaky legal reasoning," as
quoted in the Proponent Response Letter. Moreover, given the Proponent's cited
concern about how much time the Staff spends processing no-action letters
regarding shareholder proposals, we find it odd that the Proponent would in the
same letter threaten potentially frivolous and time-consuming litigation
presumably against the Staff and the Company should the Proposal be excluded as
an ordinary business matter. This seems just the sort of legal gamesmanship that
the Proponent professes to decry so much. Conclusion
As discussed above, we reassert our belief that the Proponent has not provided
sufficient evidence of its eligibility to submit a shareholder proposal.
Accordingly, we respectfully request that the Staff not recommend enforcement
action if the Proposal is omitted from the Company's proxy materials for its
2004 Annual Meeting of Stockholders. We also reassert our belief that failure to
allow the Company to exclude the Proposal would cut against the long-standing
policy of the Staff concerning ordinary business matters, and respectfully
request that the Staff not recommend enforcement action if the Proposal is
omitted from the Company's proxy materials for its 2004 Annual Meeting of
Stockholders on that basis. Should the Staff disagree with the Company's positions, we would appreciate an
opportunity to confer with a member of the Staff before the issuance of its
response. If the Staff requires additional information, please call me at (212)
403-1395. Sincerely, /s/
Benjamin D. Fackler Attachment
cc: Opportunity Partners L.P.
[STAFF REPLY LETTER]
February 27, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: BKF Capital Group, Inc. Incoming letter dated January 14, 2004
The proposal requests that BKF engage an investment banking firm to evaluate
alternatives to maximize shareholder value, including a sale of the company.
There appears to be some basis for your view that BKF may exclude the proposal
under rule 14a-8(i)(7), as relating to its ordinary business operations. We note
that the proposal appears to relate to both extraordinary transactions and
non-extraordinary transactions. Accordingly, we will not recommend enforcement
action to the Commission if BKF omits the proposal from its proxy materials in
reliance on rule 14a-8(i)(7). In reaching this position, we have not found it
necessary to address the alternative basis for omission upon which BKF relies.
Sincerely, /s/
John J. Mahon
Attorney-Adviser
|
