SEC Staff Clarifies Dissident Shareholder Board Nominee Requirements

The SEC Division of Corporation Finance updated its Compliance and Disclosure Interpretations related to proxy rules and Schedule 14A/C.

The updates clarify that:

• Firms do not need to include the names of a dissident shareholder's nominees to a fund's board of directors if the firm determines that the nomination was not made in compliance with its advance notice bylaw requirements;

• In the event that a dissident shareholder initiates litigation challenging a firm's determination regarding the validity of the director nominations, the firm must disclose in its proxy statement (i) its determination that the dissident shareholder's director nominations are invalid and reason for that determination, (ii) that the dissident shareholder is challenging the determination and (iii) potential implications if the nominations are determined to be valid; and

• Dissident shareholders conducting a non-exempt solicitation for its own director nominees are required to submit a universal proxy card that includes the names of all director candidates, including those nominated by other soliciting parties and proxy access nominees.

The Division of Corporation Finance said it will continue to update other previously-published interpretations relating to the proxy rules and publish any other revised or new interpretations.