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The Staff’s latest announcement that it is completely getting out of the business of serving as the Rule 14a-8 referee sparked both admiration and jealousy on my part, because I can distinctly remember sitting in a room late at night at the SEC, poring over a stack of memos from the Rule 14a-8 task force, and saying to whoever was sitting there with me: “How can we get out of this nightmare?” Apparently, all that we had to do was issue an announcement saying “We are out!” Sometimes, the most obvious solution is the best one.

While Rule 14a-8 no-action letters were our favorite task to complain about in the Corp Fin Chief Counsel’s office back in those days, at the same time they were also kind of fun. My old friend Marty Dunn would often lament that shareholder proposals got too “corporate” in more recent years – back in the day, the realm of shareholder proposals was populated by some particularly colorful characters that made things very interesting, such as Evelyn Y. Davis, with whom I had some of the weirdest conversations of my professional life.

Further, the shareholder proposal task force that was hastily assembled each year to tackle all of the incoming Rule 14a-8 no-action requests was comprised of an elite group of up-and-coming talent in the Division, and they were always energized by the time-constrained season and the epic Lucy-in-the-Chocolate-Factory amount of work that was necessary to consider the incoming requests. Getting selected for the shareholder proposal task force was a professional honor, and it often served as a pipeline for talented lawyers to end up in the Chief Counsel’s office or one of the Division’s other “support” offices.

What I think we all enjoyed most about working on the Rule 14a-8 no-action letters was that it was the closest thing in the work of the Division to what “real” lawyers do, in that you would have to research precedent, consider the application of that precedent to the particular fact pattern, and write a cogent, persuasive memo supporting the outcome that you proposed, which were all tasks that were very different from writing comments on disclosure in the branches. There was certainly the interesting legal aspect of it all, but there was also the more exciting policy and political elements that needed to be carefully weighed.

In my time in Corp Fin, everyone involved in the process zealously guarded the ramparts of stare decisis when it came to considering each Rule 14a-8 no-action request in the context of what the Commission and the Staff had decided on important policy and legal questions. Bill Morley and Marty Dunn would not have had it in any other way, because they recognized that both the companies and the proponents involved in the process deserved fairness and certainty in the outcomes, otherwise the whole process would lack credibility and the parties would just move to the courts to resolve their differences. In recent years, this ethos was most certainly lost in the Rule 14a-8 realm, as the Staff positions articulated in successive Staff Legal Bulletins shifted wildly with the political winds, erasing any sense of credibility and demonstrating little mooring to the previously articulated Commission and Staff positions that we all worked so hard to protect.

I think the greatest takeaway from those days of working on Rule 14a-8 no-action requests was the camaraderie and teamwork that came with trying to do an impossible task within a very tight timeframe. I thoroughly enjoyed hearing the constant give-and-take between members of the shareholder proposal task force, the wise words from Bill Morley and Marty Dunn, the griping about the deadlines and avalanche of requests, and – perhaps most importantly – the end of year wrap parties, which were epic. Following one of the wrap parties at which I may have been overserved, I ended up sleeping through my train stop in Baltimore and was then summarily thrown off the train in Wilmington, Delaware in the middle of the night, with no trains heading back the other way – I am sure Odysseus could relate to my off-course experience.

But I do not intend this story of my shareholder proposal odyssey as an ode to the Staff’s now cast-aside no-action letter process – rather, it is dirge to an old friend that had outlived its usefulness. Some things just don’t make sense anymore in the face of the relentless passage of time and changing norms. The constantly shifting Staff positions on key issues corrupted the process, calling into question the utility of the Staff’s no-action positions when the Staff’s approach could radically change following the next election cycle. The Staff’s resources are significantly constrained, and it is certainly valid to question whether responding to Rule 14a-8 no-action requests is the Staff’s highest and best use. And there is some merit to the argument that we have plenty to go on thanks to all of the Staff’s hard work over the course of decades of answering Rule 14a-8 no-action requests and drafting Staff Legal Bulletins, so maybe it is our turn as outside practitioners to make the hard calls without the Staff as our crutch. I tend to think that we are up for it, but maybe we should start organizing our own wrap parties for the end of the season – at least that would give us something to look forward to!

– Dave Lynn