Company Name: E*TRADE Financial Corp.
Public Availability Date: February 11, 2008
Document Sections: INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
APPENDIX 5
APPENDIX 6
APPENDIX 7
APPENDIX 8
APPENDIX 9
APPENDIX 10
APPENDIX 11
APPENDIX 12
STAFF REPLY LETTER
[INQUIRY LETTER]
February 6, 2008
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Shareholder Proposal of the American Federation of State, County & Municipal
Employees, Employees Pension Plan for Inclusion in E*TRADE Financial
Corporation's 2008 Proxy Statement
Ladies and Gentlemen:
We are counsel to E*TRADE Financial Corporation, a Delaware corporation
("E*TRADE" or the "Company"). E*TRADE has received a proposed shareholder
resolution (the "Proposal") and supporting statement from the American
Federation of State, County & Municipal Employees, Employees Pension Plan
("AFSCME" or the "Proponent") for inclusion in the proxy statement (the "2008
Proxy Statement") to be distributed to the Company's stockholders in connection
with its 2008 annual meeting of stockholders. The California State Teachers'
Retirement System and the North Carolina Equity Investment Fund Pooled Trust
(the "Cosponsors") have notified the Company of their intent to cosponsor the
Proposal.
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), we request confirmation that the staff of the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") will not recommend any enforcement action if, in reliance on Rule
14a-8(i)(8), E*TRADE excludes the Proposal from its 2008 Proxy Statement.
Pursuant to Rule 14a-8(j), we have enclosed six (6) copies of this letter and
the Proposal. Also in accordance with Rule 14a-8(j), copies of this letter and
the Proposal are being sent on this date to the Proponent and the Cosponsors,
informing the Proponent and the Cosponsors of our intention to exclude the
Proposal from the Company's 2008 Proxy Statement. E*TRADE intends to file its
definitive 2008 Proxy Statement with the Commission no earlier than April 28,
2008. Accordingly, pursuant to Rule 14a-8(j), we submit this letter not less
than 80 days before the Company intends to file its 2008 Proxy Statement.
The Proposal and Supporting Statement
The Proposal and the Proponent's supporting statement are as follows:
The Proposal
RESOLVED, pursuant to Section 7.02 of the Bylaws of E*TRADE Financial
Corporation ("E*Trade") and section 109(a) of the Delaware General Corporation
Law, the stockholders amend the Bylaws to add the following Section 2.15:
"The corporation shall include in its proxy materials for a meeting of
stockholders the name, together with the Disclosure and Statement (as defined
below), of any person nominated for election to the Board of Directors
("Candidate") by a stockholder or group thereof satisfying the requirement of
this section 13 [sic] (the "Nominator"), and shall allow stockholders to vote
with respect to such Candidate on the corporation's proxy card. A Nominator may
nominate up to two Candidates for inclusion in the proxy statement for a
meeting, unless more than one Nominator seeks inclusion of Candidates, in which
case (a) each Nominator may include only one Candidate and (b) Candidates will
be included in the order in which the Nominator satisfies the requirements set
forth below, until the number of Candidates nominated by Nominators equals (i)
50% of the Directors to be elected at the meeting minus (ii) one.
A Nominator must:
(a) beneficially own 3% or more of the corporation's outstanding common stock
for at least two years;
(b) provide written notice received by the Secretary within the time period
specified in Section 1.08 of the Bylaws; such notice shall contain (i) with
respect to each Candidate, (A) the information required by Items 5(b) and 7 of
SEC Schedule 14A and (B) such Candidate's consent to being named in the proxy
statement and to serving as a director if elected; and (ii) with respect to the
Nominator, the information required by Items 4(b) and 5(b) of Schedule 14A (with
separate disclosure for each stockholder in a group) (all disclosure in this
section 13(b) [sic] is the "Disclosure"); and
(c) execute an undertaking that it agrees to (i) assume all liability arising
out of any violation of law or regulation in connection with the Nominator's
communications with stockholders of the corporation, including the Disclosure;
(ii) to the extent that it uses soliciting material other than the corporation's
proxy materials, comply with all laws and regulations relating thereto.
The Nominator may furnish a 500-word statement by [sic] in support of each
Candidate's election (the "Statement"), which the corporation shall include in
the proxy statement. The Board of Directors shall adopt a procedure for timely
resolving disputes over whether the Disclosure and Statement comply with SEC
rules, including Rule 14a-9,"
Supporting Statement
We believe that E*Trade's corporate governance will benefit if stockholders are
empowered to nominate director candidates. We contend that the current board
mismanaged risk in our company's mortgage portfolio and asset-backed securities.
In 2007, E*Trade reported a $58 million loss for the third quarter, and shares
have lost over 80% value. Additionally, the SEC has initiated an inquiry into
E*Trade's loan and securities portfolios.
We urge stockholders to vote for this proposal.
Grounds for Exclusion: Rule 14a-8(i)(8) -- The
Proposal Relates to a Procedure for Nomination or Election for Membership on the
Company's Board of Directors
Rule 14a-8(i)(8) (the "Rule") provides that a proposal may be excluded from a
company's proxy statement if it "relates to a nomination or an election for
membership on the company's board of directors or analogous governing body or a
procedure for such nomination or election..." (emphasis added). The Commission
has stated that the "procedures" that may be excluded from a company's proxy
statement pursuant to Rule 14a-8(i)(8) include those "that would result in a
contested election either in the year in which the proposal is submitted or in
any subsequent year." Shareholder Proposals Relating to the Election of
Directors [Final Rule], Exchange Act Release No. 34-56914, at 17 (Dec. 6, 2007).
The italicized clause, added to Rule 14a-8(i)(8) by vote of the Commission on
November 28, 2007, codifies the Commission's longstanding interpretation of the
Rule, pursuant to which it has permitted companies to exclude from their proxy
statements shareholder proposals that would amend a company's bylaws to provide
for circumstances under which shareholders may nominate director candidates to
appear on a company's proxy ballot as alternatives to the candidates nominated
by the board of directors. This amendment eliminates the uncertainty and
confusion resulting from a decision of the United States Court of Appeals for
the Second Circuit that did not defer to the Commission's longstanding
interpretation of the Rule.1
As the Commission stated when the Rule was proposed in 1976, "the principal
purpose of [Rule 14a-8(i)(8)] is to make clear, with respect to corporate
elections, that Rule 14a-8 is not the proper means for conducting campaigns or
effecting reforms in elections of that nature, since other proxy rules ... are
applicable thereto." Proposed Amendments to Rule 14a-8 Under the Securities
Exchange Act of 1934 Relating to Proposals by Security Holders, Exchange Act
Release No. 34-12598, at 23-24 (July 7, 1976). In its application of Rule
14a-8(i)(8), the Staff has-permitted companies to exclude any shareholder
proposal that may result in a contested election. For purposes of Rule 14a-8,
the Staff has considered that a proposal may result in a contested election "if
it is a means either to campaign for or against a director nominee or to require
a company to include shareholder-nominated candidates in the company's proxy
materials." Shareholder Proposals Relating to the Election of Directors
[Proposed Rule], Exchange Act Release No. 34-56161, at 9 (July 27, 2007). The
Commission's recent amendment to Rule 14a-8(i)(8) is consistent with its
proposal of 1976, and with the Staff's longstanding interpretation of the
election exclusion.
For the past decade, since 1998, the Staff consistently has granted no-action
relief pursuant to Rule 14a-8(i)(8) in connection with a company's exclusion
from its proxy materials of a shareholder proposal seeking to require the
company to establish procedures for the inclusion of shareholder nominees in the
company's proxy materials when such procedures might result in a contested
election. See Exchange Act Release No. 34-56914, at 8. In particular, the Staff
repeatedly has granted no-action relief to companies seeking to exclude
shareholder proposals substantially identical to the Proposal. See, e.g., AOL
Time Warner Inc., SEC No-Action Letter (Feb. 28, 2003); Eastman Kodak Co., SEC
No-Action Letter (Feb. 28, 2003); ExxonMobil Corp., SEC No-Action Letter (Feb.
28, 2003); Sears Roebuck & Co. (Feb. 28, 2003); Citigroup Inc., SEC No-Action
Letter (Jan. 31, 2003) (all providing that the Division of Corporation Finance
would not recommend enforcement action to the Commission if the company were to
omit a shareholder proposal that would amend the bylaws to require the company
to include the name, along with certain disclosure and statements, of any person
nominated for election to the board of directors by a stockholder or group with
beneficial ownership of 3% or more of the company's outstanding stock).2
The Proposal is precisely of a type that may be excluded pursuant to Rule
14a-8(i)(8). It mandates that E*TRADE's Board of Directors (the "Board") include
in its proxy materials the name, together with certain disclosures and a
supporting statement, of any person nominated for election to the Board by a
stockholder or group of stockholders satisfying certain requirements, even
though the Board, in the exercise of its fiduciary duties, may not support the
nominee. Under such circumstances, the Board also would propose its own
qualified nominee for each position to be filled at the meeting.3 This would
result in a contested election for each such seat, which Rule 14a-8(i)(8) and
the long line of no-action letters clearly seek to avoid. Indeed, the Proposal
provides that the Company must include in its proxy materials stockholder
nominees for as many as fifty percent (50%) of the number of directors to be
elected at the meeting, minus one (1). Thus, in any year, the Proposal could
subject nearly half of the positions to be filled at the annual meeting of
stockholders to contested election.
It is important to note that E*TRADE already encourages the Proponent, the
Cosponsors and other stockholders to submit the names of qualified director
candidates to the Company's Corporate Secretary for consideration by the
Company's Nominating and Corporate Governance Committee. Moreover, the
Commission's proxy rules, and in particular Rule 14a-12, provide a means for
stockholders to propose their own nominees separately from the proxy statement
distributed by the Company. These are the appropriate methods for stockholders
to propose board nominees both in the view of the Commission for more than
thirty years since the issuance of Exchange Act Release No. 34-12598 and the
Staff's consistent no-action positions for the past decade.
For the reasons described above, we believe that the Proposal properly is
excludable from E*TRADE's 2008 Proxy Statement pursuant to Rule 14a-8(i)(8)
because it relates to a procedure for nomination or election to the Company's
Board of Directors.
We respectfully request that the Staff confirm that it will not recommend any
enforcement action if the Proposal is excluded for the reasons described above.
E*TRADE anticipates that its 2008 Proxy Statement will be finalized for printing
on or about April 21, 2008. Accordingly, your prompt review of this matter would
be greatly appreciated. Should you have any questions regarding any aspect of
this matter or require any additional information, please call the undersigned
at (650) 752-2001.
Please acknowledge receipt of this letter and its enclosures by date-stamping
the enclosed copy and returning it to the undersigned in the enclosed, stamped
envelope.
Very truly yours,
/s/
Daniel G. Kelly, Jr.
cc: American Federation of State, County & Municipal Employees, Employees
Pension Plan California State Teachers' Retirement System North Carolina Equity
Investment Fund Pooled Trust
-----FOOTNOTES-----
1 American Federation of State, County & Municipal Employees, Employees Pension
Plan v. American International Group, Inc., 462 F.3d 121 (2d Cir. 2006).
2 AFSCME, the shareholder proponent of the 2003 proposal at Citigroup, sought
Commission review of the no-action relief granted to Citigroup by the Division
of Corporation Finance. The Commission declined to review the Staff's no-action
position under Rule 14a-8(i)(8). See letter from Jonathan Katz, Secretary of the
Commission, to Gerald W. McEntee (Apr. 14, 2003).
3 Each of the nominees proposed by the Board must meet the qualifications set
forth in the Company's Corporate Governance Guidelines and be recommended by the
Company's Nominating and Corporate Governance Committee.
[APPENDIX 1]
December 13, 2007
VIA Overnight Mall and Telecopier (212) 826-2803
B*TRADE Firancial Corp.
135 East 57\th/ Street, 31\st/ Floor
New York, New York 10022
Attention: Russell S. Elmer, General Counsel and Corporate Secretary
Dear Mr. Elmer.
On behalf of the AFSCME Employees Pension Plan (the "Plan"), I write to give
notice that pursuant to the 2007 proxy statement of E*TRADE Financial (the
"Company") and Rule 14a-8 under the Securities Exchange Act of 1934, the Plan
intends to present the attached proposal (the "Proponal") at the 2008 annual
meeting of shareholders (the "Anmual Meeting"). The Plan is the beneficial owner
of 2,800 shares of voting common stock (the "Shares") of the Company, and has
held the Shares for over one year. In addition, the Plan intends to hold the
Shares through the date on which the Annual Meeting is held.
The Proposal is attached. I represent that the Plan or is agent intends to
appear in person or by proxy at the Annual Meeting to present the Proposal. I
declare that the Plan has no "material interest" other than that believed to be
shared by stockholders of the Company generally. Please direct all questions or
conespondence regarding the Proposal to Charles Jurgonis at (202) 429-1007.
Sincerely,
/s/
GERALD W. McENTEE Chairman
Enclosure
[APPENDIX 2]
RESOLVED, pursuant to Section 7.02 of the Bylaws of E*Trade Financial
Corporation ("E*Trade") and section 109(a) of the Delaware General Corporation
Law, the stockholders amend the Bylaws to add the following Section 2.15:
"The corporation shall inolude in its proxy materials for a meeting of
stockholders the name, to gether with the Diselosure and Statement (as defined
below), of any person nominated for election to the Board of Directors ("Candidare")
by a stockholder or group thereof satisfying the requirements of this section 13
(the "Nominator"), and shall allow stockholders to vote with respect to such
Candidate on the corporation's proxy card. A Nominator may nominate up to two
Candidates for inclusion in the proxy statement for a meeting, unless more than
one Nominator seeks inclusion of Candidates, in which case (a) each Nominator
may include only one Candidate and (b) Candidates will be included in the order
in which the Nominator satisites the requirements set forth below, until the
number of Candidates nominated by Nominators equals (i) 50% of the Directors to
be elected at the meeting minus (ii) one.
A Nominator must:
(a) beneficially own 3% or more of the corporation's outstanding common stock
for at least two years;
(b) provide written notice received by the Secretary within the time period
specified in Section 1.08 of the Bylaws; such notice shall contain (i) with
respect to each Candidate, (A) the information required by Items 5(b) and 7 of
SEC Schedule 14A and (B) such Candidate's consent to being named in the proxy
statement and to serving as a director if elected; and (ii) with respect to the
Nominator, the information required by Items 4(b) and 5(b) of Schedule 14A (with
separate disclosure for each stockholder in a group) (all disclosure in this
section 13(b) is the "Disclosure"); and
(c) execure an undertaking that it agrees to (i) assurne all liability arising
out of any violation of law or regulation in comection with the Nominator's
communications with stookholders of the corporation, including the Disclosure;
(ii) to the extent it uses soliciting material other than the corporation's
proxy materials, comply with all laws and regulations relating thereto.
The Nominator may furnish a 500-word statement by in support of each Candidate's
election (the "Statement"), which the corporation shall include in the proxy
statement. The Board of Directors shall adopt a procedure for timely resolving
disputes over whether the Disclosure and Statement comply with SEC rules,
including Rule 14a-9."
SUPPORTING STATEMENT
We believe that E*Trade's corporate governance will benefit if stockholders are
empowered to nominate director candidates. We contend that the current board
mismanaged risk in our company's mortgage portfolio and asset-backed securities.
In 2007, E*Trade reported a $58 million loss for the third quarter, and shares
have lost over 80% value. Additionally, the SEC has initiated an inquiry into
E*Trade's loan and securities portfolios.
We urge stockholders to vote for this proposal.
[APPENDIX 3]
December 13, 2007
VIA Overnight Mail and Telecopier (212) 826-2803
E*TRADE Financial Corp.
135 East 57\th/ Street, 31\st/ Floor
New York, New York 10022
Attention: Russell S. Elmer, General Counsel and Corporate Secretary
Dear Mr. Elmer:
On behalf of the AFSCME Employees Pension Plan (the "Plan"), I write to provide
you with verified proof of ownership from the Plan's custodian. If you require
any additional information, please do not besitate to contact me at the address
above.
Sincerely,
/s/
Charles Jurgonis
Plan Secretary
Enclosure
[APPENDIX 4]
December 13, 2007
Lonita Waybright
A.F.S.C.M.E.
Benefits Administrator
1625 L Street, N.W.
Washington, D.C. 20036
Re: Shareholder Proposal Record Letter for E-TRADE (cusip 269246104)
Dear Ms Waybright:
State Street Bank and Trust Company is Trustee for 2,800 shares of E-Trade
common stock held for the benefit of the American Federation of State, County
and Municiple Employees Pansion Plan ("Plan"). The Plan has been a beneficial
owner of at least 1% or $2,000 in market value of the Company's common stock
continuously for at least one year prior to the date of this letter. The Plan
continues to hold the shares of E-Trade stock.
As Trustee for the Plan, State Street holds these shares at its Participant
Account at the Deposltory Trust Company ("DTC"). Code & Co., the nominee name at
DTC, is the record holder of these shares.
If there are any questions concerning this matter, please do not besitate to
contact me directlly.
Sincerely,
/s/
Kevin Yaklmowsky
[APPENDIX 5]
Date: December 13, 2007
To: Russell S. Elmer, General Counsel and Corporate Secretary
From: Richard Ferlauto, Director - Corporatc Governance and Pension Investment
Fax: (212) 826-2803
Number of Pages to Follow: 5
Message: For your information. AFSCME Employee Pension Plan proposal for
presentation at the 2008 Annual Shareholders Meeting.
[APPENDIX 6]
December 20, 2007
mr. Russell S. Elmer
General Counsel and Corporate Secretary
E*TRADE Financial Corp.
135 East 57\th/ Street, 31\st/ Floor
New York, New York 10022
Dear Mr. Elmer:
On behalf of the California State Teachers' Retirement System (CalSTRS), I write
to give notice that pursuant to the 2007 proxy statement of E*TRADE Financial
(the "Company") and Rule 14a-8 under the Securities Exchange Act of 1934,
CalSTRS intends to cosponsor the attached proposal (the "Proposal") submitted to
the Company under separate cover by the AFSCME Employees Pension Plan for
consideration at the 2008 annual meeting of shareholders (the "Annual Meeting").
CalSTRS is the beneficial owner of 1,334,838 shares of voting common stock (the
"Shares") of the Company and has held the Shares continuously for one year from
the date the Proposal was submitted. In addition, CalSTRS intends to hold the
Shares through the date on which the Annual Meeting is held. A copy of our proof
of ownership is enclosed.
I represent that the AFSCME Employees Pension Plan or one of the Proposal's
cosponsors intends to appear at the Annual Meeting to present the Proposal.
Please direct all questions or correspondence regarding the Proposal to Janice
Hester Amey at (916) 229-3710.
Sincerely,
/s/
Christopher Ailman
Chief Investment Officer
[APPENDIX 7]
RESOLVED, pursuant to Section 7.02 of the Bylaws of E*Trade Financial
Corporation ("E*Trade") and section 109(a) of the Delaware General Corporation
Law, the stockholders amend the Bylaws to add the following Section 2.15:
"The corporation shall include in its proxy materials for a meeting of
stockholders the name, together with the Disclosure and Statement (as defined
below), of any person nominated for election to the Board of Directors
("Candidate") by a stockholder or group thereof satisfying the requirements of
this section 13 (the "Nominator"), and shall allow stockholders to vote with
respect to such Candidate on the corporation's proxy card. A Nominator may
nominate up to two Candidates for inclusion in the proxy statement for a
meeting, unless more than one Nominator seeks inclusion of Candidates, in which
case (a) each Nominator may include only one Candidate and (b) Candidates will
be included in the order in which the Nominator satisfies the requirements set
forth below, until the number of Candidates nominated by Nominators equals (i)
50% of the Directors to be elected at the meeting minus (ii) one.
A Nominator must:
(a) beneficially own 3% or more of the corporation's outstanding common stock
for at least two years;
(b) provide written notice received by the Secretary within the time period
specified in Section 1.08 of the Bylaws; such notice shall contain (i) with
respect to each Candidate, (A) the information required by Items 5(b) and 7 of
SEC Schedule 14A and (B) such Candidate's consent to being named in the proxy
statement and to serving as a director if elected; and (ii) with respect to the
Nominator, the information required by Items 4(b) and 5(b) of Schedule 14A (with
separate disclosure for each stockholder in a group) (all disclosure in this
section 13(b) is the "Disclosure"); and
(c) execute an undertaking that it agrees to (i) assume all liability arising
out of any violation of law or regulation in connection with the Nominator's
communications with stockholders of the corporation, including the Disclosure;
(ii) to the extent it uses soliciting material other than the corporation's
proxy materials, comply with all laws and regulations relating thereto.
The Nominator may furnish a 500-word statement by in support of each Candidate's
election (the "Statement"), which the corporation shall include in the proxy
statement. The Board of Directors shall adopt a procedure for timely resolving
disputes over whether the Disclosure and Statement comply with SEC rules,
including Rule 14a-9."
SUPPORTING STATEMENT
We believe that E*Trade's corporate governance will benefit if stockholders are
empowered to nominate director candidates. We contend that the current board
mismanaged risk in our company's mortgage portfolio and asset-backed securities.
In 2007, E*Trade reported a $58 million loss for the third quarter, and shares
have lost over 80% value. Additionally, the SEC has initiated an inquiry into
E*Trade's loan and securities portfolios.
We urge stockholders to vote for this proposal.
[APPENDIX 8]
December 20, 2007
Mr. Christopher Ailman
Chief Investment Officer
California State Teachers' Retirement System
7667 Folsom Blvd., STE 250
Sacramento, CA 95826
Dear Mr. Ailman
As of the date of this letter, California State Teachers' Retirement System ("CalSTRS")
held 1,334,838 shares of E-Trade Financial, in its account with us and has
continuously held such shares for more than one year prior to November 29, 2007.
Sincerely,
/s/
Sylvia Quayle
Operations Manager
[APPENDIX 9]
This graphic not available in DOS
CONFIDENTIALITY NOTICE
This facsimile is legally privileged and confidential information. It is
intended only for the receipt by and use of the individual or entity to whom or
which it is addressed. If you are not the intended recipient, you are hereby
notified that any dissemination, distribution, or copying of this facsimile is
strictly prohibited. If you have received this facsimile transmission in error,
please notify the Department of State Treasurer by telephone, collect. Then
destroy all transmission pages. Thank you for your assistance in this mancer.
If any of the pages are illegible, or you did not receive are proper number of
pages, please contact us leamcdiacty.
[APPENDIX 10]
December 18, 2007
VIA Overnight Mail and Telecopier (212) 826-2803
E*TRADE Financial Corp.
135 East 57\th/ Street, 31\st/ Floor
New York, New York 10022
Attention: Russell S. Elmer, General Counsel and Corporate Secretary
Dear Mr. Elmer:
As Treasurer of the State of North Carolina, I am the sole Trustee for the North
Carolina Equity Investment Fund Pooled Trust (the "Trust"). On behalf of the
Trust, I write to give notice that pursuant to the 2007 proxy statement of
E*TRADE Financial Corp. (the "Company") and Rule 14a-8 under the Securities
Exchange Act of 1934, the Trust intends to cosponsor the attached proposal (the
"Proposal") submitted to the Company under separate cover by the AFSCME
Employees Pension Plan for consideration at the 2008 annual meeting of
shareholders (the "Annual Meeting"). The Trust is the beneficial owner of
627,827 shares of voting common stock (the "Shares") of the Company. In
addition, the Trust intends to hold the Shares through the date on which the
Annual Meeting is held. A copy of our proof of ownership is enclosed.
I represent that the AFSCME Employees Pension Plan or one of the Proposal's
cosponsors intends to appear at the Annual Meeting to present the Proposal.
Please direct all questions or correspondence regarding the Proposal to Lisa
Schneider, Director of Corporate Governance, at 919-508-1040.
Sincerely,
/s/
Richard H. Moore
Enclosure
[APPENDIX 11]
RESOLVED, pursuant to Section 7.02 of the Bylaws of the E*Trade Financial
Corporation ("E*Trade") and section 109(a) of the Delaware General Corporation
Law, the stockholders amend the Bylaws to add the following Section 2.15:
"The corporation shall include in its proxy materials for a meeting of
stockholders the name, together with the Disclosure and Statement (as defined
below), of any person nominated for election to the Board of Directors
("Candidate") by a stockholder or group thereof satisfying the requirements of
this section 13 (the "Nominator"), and shall allow stockholders to vote with
respect to such Candidate on the corporation's proxy card. A Nominator may
nominate up to two Candidates for inclusion in the proxy statement for a
meeting, unless more than one Nominator seeks inclusion of Candidates, in which
case (a) each Nominator may include only one Candidate and (b) Candidates will
be included in the order in which the Nominator satisfies the requirements set
forth below, until the number of Candidates nominated by Nominators equals (i)
50% of the Directors to be elected at the meeting minus (ii) one.
A Nominator must:
(a) beneficially own 3% or more of the corporation's outstanding common stock
for at least two years;
(b) provide written notice received by the Secretary within the time period
specified in Section 1.08 of the Bylaws; such notice shall contain (i) with
respect to each Candidate, (A) the information required by Items 5(b) and 7 of
SEC Schedule 14A and (B) such Candidate's consent to being named in the proxy
statement and to serving as a director if elected; and (ii) with respect to the
Nominator, the information required by Items 4(b) and 5(b) of Schedule 14A (with
separate disclosure for each stockholder in a group) (all disclosure in this
section 13(b) is the "Disclosure"); and
(c) execute an undertaking that it agrees to (i) assume all liability arising
out of any violation of law or regulation in connection with the Nominator's
communications with stockholders of the corporation, including the Disclosure;
(ii) to the extent it uses soliciting material other than the corporation's
proxy materials, comply with all laws and regulations relating thereto.
The Nominator may furnish a 500-word statement by in support of each Candidate's
election (the "Statement"), which the corporation shall include in the proxy
statement. The Board of Directors shall adopt a procedure for timely resolving
disputes over whether the Disclosure and Statement comply with SEC rules,
including Rule 14a-9."
SUPPORTING STATEMENT
We believe that E*Trade's corporate governance will benefit if stockholders are
empowered to nominate director candidates. We contend that the current board
mismanaged risk in our company's mortgage portfolio and asset-backed securities.
In 2007, E*Trade reported a $58 million loss for the third quarter, and shares
have lost over 80% value. Additionally, the SEC has initiated an inquiry into
E*Trade's loan and securities portfolios.
We urge stockholders to vote for this proposal.
[APPENDIX 12]
December 17, 2007
NC Department of State Treasurer
Attn: Lisa Schneider
325 N. Salisbury Street
Raleigh, NC
27603
To Whom It May Coticer
RE: Certification of Ownership for E*TRADE FINANCIAL CORP., CUSIP 269246104
Please be advised that our client (detailed below) beneficially owned 627,827
shares as of the close of business on December 14\th/ 2007. Of the 627,827
shares beneficially owned, 622,730 were out on loan as of close of business on
December 14\th/, 2007.
TREASURER OF THE STATE OF N.C. EQUITY INVESTMENT FUND
325 N. SALISBURY ST
RALEIGH, NC
27603
Please contact me directly if you have any questions. Thank you:
Kind Regards,
/s/
Melissa Tarasovich
AVP, Mellon Trust of New England, N.A.
Phone: (412)234-2475
Email: tarasovich.mk@mellon.com
[STAFF REPLY LETTER]
February 11, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: E*TRADE Financial Corporation Incoming letter dated February 6, 2008
The proposal amends the bylaws to require that
E*TRADE include in its proxy materials the name, along with certain disclosures
and statements, of any person nominated for election to the board by a
stockholder who has beneficially owned 3% or more of E*TRADE's outstanding
common stock for at least two years.
There appears to be some basis for your view that E*TRADE may exclude the
proposal under rule 14a-8(i)(8). Accordingly, we will not recommend enforcement
action to the Commission if E*TRADE omits the proposal from its proxy materials
in reliance on rule 14a-8(i)(8).
Sincerely,
John R. Fieldsend
Attorney-Adviser
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