Release No. 34-9784 

Release No. 35-17701

Release No. IC-7375

September 22, 1972

Adoption of Amendments to Rules 14a-5 and 14a-8 under the Exchange Act

ADOPTION OF AMENDMENTS TO PROXY RULES

The Securities and Exchange Commission has adopted certain amendments to Rules 14a-5 and 14a-8 of the Commission's proxy rules pursuant to Sections 14(a) and 23(a) of the Securities Exchange Act of 1934.  These rules are also applicable to the solicitation of proxies under the Public Utility Holding Company Act of 1935 and the Investment Company Act of 1940 by virtue of the authority provided in Sections 12(e) and 20(a) of the 1935 Act and Sections 20(a) and 38(a) of the 1940 Act.  Notice of the proposed amendments was published December 22, 1971 in Securities Exchange Act Release No. 9432.  A number of helpful comments were received and were given careful consideration in connection with the preparation of the final revisions.  A brief description of the changes is set forth below.

Paragraph (b) of Rule 14a-8 has provided that if the management opposes a security holder's proposal, it shall, if requested by the security holder, include in its proxy statements a statement of the security holder not exceeding 100 words in support of the proposal.  This provision has been amended to increase the 100-word limit to 200 words so that a security holder may more fully present the reasons for submitting his proposal to security holders.  In connection with the increase in the word limitation on supporting statements, the Commission has further amended paragraph (b) to provide that any statements in the text of a proposal, such as a preamble or "whereas" clauses, which are in effect arguments in support of the proposal, shall be considered part of the supporting statement and subject to the 200-word limitation thereon.  Although this amendment was previously noticed for adoption in the form of a Note to paragraph (b), the Commission determined to incorporate it into the text of the paragraph itself since it pertains directly to the requirement contained therein that a security holder's supporting statement be limited to 200 words.  The purpose of the change is to curtail the growing tendency of security holders to evade the word limitation on supporting statements by submitting lengthy proposals which contain supporting argumentation within the text of the proposals themselves.

In Securities Exchange Act Release No. 9432 the Commission pointed out that it regards as an abuse of Rule 14a-8 the practice whereby a security holder submits a number of identical proposals to a number of companies and thereafter fails to appear at the meetings of the companies involved to present the proposals for action.  When a security holder submits proposals and then, without good cause, does not appear at the meetings of the respective companies, all security holders have been put to considerable expense to no purpose.  Accordingly, the Commission reiterates that in submitting a proposal, a security holder must in good faith make the statement required by Rule 14a-8(a) that he intends to present his proposal for action at the meeting.

Paragraph (c)(2) of the rule has been revised to replace the subjective terms of the provision with objective standards to the extent feasible and thereby create greater certainty in the application of the rule.  The paragraph as amended provides for the omission of proposals which either are not significantly related to the business of the issuer or not within its control.  Proposals not within an issuer's control are those which are beyond its power to effectuate, and henceforth they may be omitted under this provision.  The revised paragraph will apply to all proposals and will not be limited to those which involve general economic, political, racial, religious, social or similar causes.  Also, the provision is not intended to service as a basis for the omission of traditional shareholder proposals dealing with stockholder relationships with the management, such as cumulative voting, annual meetings and ratification of auditors, since all these matters can be considered significantly related to the issuer's business or within its control.

Paragraph (c)(2) has been further amended to permit the omission of all proposals which relate to the enforcement of a personal claim or the redress of a personal grievance against any person.  Formerly, the rule allowed the omission of such proposals only when the personal claim or grievance was against the issuer or its management.  The Commission, however, believes that any proposal which relates to such matters is inappropriate for shareholder consideration.

The Commission has amended paragraph (d) of the rule to provide that whenever the management asserts that any security holder's proposals may properly be omitted from its proxy statement and form of proxy, it shall furnish the materials specified in that paragraph to the Commission 30 days prior to the filing of the management's preliminary proxy material.  Formerly, the rule required that the materials be filed 20 days in advance of the preliminary proxy material, but experience has shown that this did not allow sufficient time for the Commission's staff to give due consideration to what action, if any, might be appropriate with respect to a management's refusal to include a proposal in its proxy materials.  The Commission believes that the revision will also be beneficial to both managements and shareholders.  Heretofore, managements have occasionally had to disrupt the printing schedules for their proxy material in those instances in which the staff was unable to expedite its letter on the matter due to its workload.  Shareholders who submit proposals will also benefit from the revision because they will have more time, if they so elect, to enforce their rights in court in the event managements decide to omit their proposals.

In connection with the foregoing, the Commission also has determined to amend paragraph (a) of the rule so that a proposal by a security holder must now be received by the management at the issuer's principal executive office not less than 70 days (rather than 60 days, as formerly required) prior to a date corresponding to the date set forth on the management's proxy statement for the previous year's annual meeting.  The comments indicated that since the time period for filing materials under paragraph (d) was being advanced by 10 days, a corresponding change was needed in paragraph (a) in order to provide a management with an amount of time comparable to the former rule for reviewing and evaluating a proposal and, if necessary, to prepare the documents required to be filed with the Commission under Rule 14a-8(d).  In view of the fact that this change is technical in nature, the Commission finds that notice and procedure pursuant to the Administrative Procedure Act with respect to it is not necessary in the public interest or for the protection of investors.

The Commission also has added a Note to paragraph (a) suggesting that security holders submit their proposals by Certified Mail--Return Receipt Requested.  It is believed that the submission of proposals in such a manner will curtail controversies with respect to the date that a security holder's proposal was received by the management.

Rule 14a-5 has been amended to require that the first page of the proxy statement be dated and include the address of the principal executive offices of the issuer.  This amendment will furnish a definite date which the security holder may use in computing the date prior to which his proposal must be received by the management and will give the address where the proposal must be received.

The foregoing amendments have been adopted pursuant to Sections 14(a) and 23(a) of the Securities Exchange Act of 1934, Sections 12(e) and 20(a) of the Public Utility Holding Company Act of 1935, and Sections 20(a) and 38(a) of the Investment Company Act of 1940.  They shall apply to all proxy solicitations commenced on or after January 1, 1973.  In order to avoid any confusion which might result from the changes in Rule 14a-8 announced in this Release, the complete revised text of that rule is attached hereto, along with the text of the new provision added to Rule 14a-5.

By the Commission.

TEXT OF THE AMENDMENTS

[Omitted]