April 27, 2004

Business Roundtable and Direct Access

The BRT has been one of the more outspoken opponents of the SEC’s shareholder access proposal – and the BRT recently filed a petition for rulemaking asking the SEC to allow companies to have direct access to beneficial owners. In addition to saving money, this would provide companies with greater opportunities to communicate with their “true” owners in the mini-contested elections that would be part of a shareholder access world.

In its petition, the BRT requests that the SEC “take steps to make the system of shareholder communications more efficient.” Specifically, the petition seeks:

– companies be able to obtain a list of all beneficial owners so that they can communicate directly with beneficial owners rather than through brokers, banks and ADP

– brokers and banks be required to execute proxies in favor of their customers so that beneficial owners can vote directly rather than through “voting instructions”

– companies be permitted to transmit proxy materials directly to beneficial owners, and not have to go through brokers and banks

The petition asks the SEC to begin the process with a concept release to solicit public comment.

FOIA Flap over Shareholder Access Rulemaking

Speaking of the BRT, Gibson Dunn (which has represented the BRT for some time) recently filed a letter as part of the shareholder access rulemaking record regarding a recent denial of a FOIA request. For what I can gather from this letter, the original FOIA request sought data that ADP provided to the SEC staff – this data was prominently noted when the 35% withheld vote trigger was proposed (egs. see footnotes 78 and 84 – and related text – of the proposing release).

It appears that the SEC staff has denied this FOIA request so far. From my dwindling memory of rulemaking, under the Administrative Procedures Act, a federal agency is required to publicly state what it relied upon when proposing a rule because it can’t base its rulemaking on secret evidence.