Reopening of Comment Period for Universal Proxy, 24364-24368 [2021-08301]
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Federal Register / Vol. 86, No. 86 / Thursday, May 6, 2021 / Proposed Rules
current regulations and processes
provide reasonable assurance of
adequate protection of public health and
safety for both operating and
decommissioning power reactors. The
lack of a safety or security concern
would contribute to the low priority of
this petition, were it to be considered in
rulemaking.
Resources
Based on the complexity of the issue
raised by the petitioner, a rulemaking on
this issue would entail a significant
expenditure of NRC resources. Any such
rulemaking effort would likely address
a wide variety of technical and
regulatory topics including, but not
limited to, decommissioning status,
aging management, quality assurance,
equipment maintenance, personnel,
license expiration, hearing process, and
appropriate licensing basis.
As discussed in the ‘‘Public Meeting
on the Petition and Other Topics’’
section of this document, power reactor
licensees expressed minimal interest in
a rulemaking establishing a new process
for reauthorization of operation for
decommissioning power reactors. Given
this minimal interest from the nuclear
industry, the NRC expects few, if any,
requests for reauthorization. Thus, the
benefits of any such rulemaking would
not be expected to outweigh the costs.
V. Availability of Documents
The documents identified in the
following table are available to
interested persons through one or more
of the following methods, as indicated.
ADAMS accession
No./Federal Register
citation
Document
PRM–50–117—Petition of George Berka to Revise the Criteria to Return Retired Nuclear Power Reactors to Operations,
December 26, 2018.
Federal Register Notice, ‘‘Criteria to Return Retired Nuclear Power Reactors to Operations,’’ July 26, 2019 ....................
NRC Response to Public Comments for PRM–50–117 .........................................................................................................
Public Meeting Notice: Potential Regulatory Frameworks for Power Reactors, February 25, 2020 ......................................
Public Meeting Materials: Potential Regulatory Frameworks for Power Reactors, February 25, 2020 .................................
Public Meeting Transcript: Category 3 Public Meeting Transcript RE: Potential Regulatory Frameworks for Power Reactors, February 25, 2020.
Public Meeting Summary: Category 3 Public Meeting Summary RE: Potential Regulatory Frameworks for Power Reactors, March 25, 2020.
NRC Letter to Mr. David A. Kraft of Nuclear Energy Information Service, August 4, 2016 ...................................................
Letter from Mr. David A. Kraft of Nuclear Energy Information Service, June 16, 2016 .........................................................
NRC Letter to RGA Labs, Inc., October 21, 2014 ..................................................................................................................
Regulatory Analysis for Regulatory Basis for Regulatory Improvements for Power Reactors Transitioning to Decommissioning, January 2018.
VI. Conclusion
For the reasons cited in this
document, the NRC is denying PRM–
50–117. The NRC’s existing regulatory
framework may be used to address the
issue raised by the petitioner, who does
not raise a significant safety or security
concern, and current requirements
continue to provide for the adequate
protection of public health and safety
and to promote the common defense
and security. In addition, the nuclear
industry has not expressed a strong
interest in returning retired plants to
operational status and proceeding with
rulemaking to develop a new regulatory
framework that may not be used is not
a prudent use of resources.
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Dated May 3, 2021.
For the Nuclear Regulatory Commission.
Annette L. Vietti-Cook,
Secretary of the Commission.
[FR Doc. 2021–09607 Filed 5–5–21; 8:45 am]
BILLING CODE 7590–01–P
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SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 240
[Release No. 34–91603; IC–34246; File No.
S7–24–16]
RIN 3235–AL84
Reopening of Comment Period for
Universal Proxy
Securities and Exchange
Commission.
ACTION: Proposed rule; reopening of
comment period.
AGENCY:
The Securities and Exchange
Commission (‘‘Commission’’) is
reopening the comment period for its
proposal to require the use of universal
proxy cards in all non-exempt
solicitations in connection with
contested elections of directors
(‘‘Proposed Rules’’). The Proposed Rules
were set forth in a release published in
the Federal Register on November 10,
2016 (Release No. 34–79164) (‘‘2016
Release’’), and the related comment
period ended on January 9, 2017. The
reopening of this comment period is
intended to allow interested persons
further opportunity to analyze and
comment upon the Proposed Rules in
light of developments since the
SUMMARY:
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publication of the Proposed Rules,
including developments in corporate
governance matters affecting funds.
DATES: The comment period for the
proposed rule published on November
10, 2016 (81 FR 79122), is reopened.
Comments should be received on or
before June 7, 2021.
ADDRESSES: Comments may be
submitted by any of the following
methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/submitcomments.htm).
Paper Comments
• Send paper comments to Vanessa
A. Countryman, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File
Number S7–24–16. This file number
should be included on the subject line
if email is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s internet website
(https://www.sec.gov/rules/
proposed.shtml). Comments are also
available for website viewing and
printing in the Commission’s Public
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Reference Room, 100 F Street NE,
Washington, DC 20549–1090 on official
business days between the hours of 10
a.m. and 3 p.m. Due to pandemic
conditions, however, access to the
Commission’s public reference room is
not permitted at this time. All
comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly.
Studies, memoranda, or other
substantive items may be added by the
Commission or staff to the comment file
during this rulemaking. A notification of
the inclusion in the comment file of any
such materials will be made available
on our website. To ensure direct
electronic receipt of such notifications,
sign up through the ‘‘Stay Connected’’
option at www.sec.gov to receive
notifications by email.
FOR FURTHER INFORMATION CONTACT:
David M. Plattner, Special Counsel,
Christina Chalk, Senior Special Counsel,
or Joshua Shainess, Special Counsel, in
the Office of Mergers and Acquisitions,
at (202) 551–3440, or Steven G. Hearne,
Senior Special Counsel, in the Office of
Rulemaking, at (202) 551–3430, Division
of Corporation Finance, Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549.
SUPPLEMENTARY INFORMATION:
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I. Background
As described more fully in the 2016
Release,1 Section 14 of the Securities
Exchange Act of 1934 2 (‘‘Exchange
Act’’) authorizes the Commission to
establish rules and regulations
governing the solicitation of any proxy
or consent or authorization with respect
to any security registered pursuant to
the Exchange Act. In regulating the
proxy process, the Commission has
sought to facilitate the exercise of voting
rights shareholders have under state
law.3 To allow shareholders to exercise
fully these rights in contested director
elections, the Commission proposed to
amend the proxy rules to permit
shareholders to vote by proxy for any
combination of candidates for the board
of directors, as they could if they
1 See Universal Proxy, Release No. 34–79164 (Oct.
26, 2016) [81 FR 79122 (Nov. 10, 2016)].
2 15 U.S.C. 78a et seq.
3 Registrants only reporting pursuant to Exchange
Act Section 15(d) are not subject to the federal
proxy rules, while foreign private issuers are
exempt from the requirements of Section 14(a). 17
CFR 240.3a12–3(b).
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attended the shareholder meeting in
person and cast a written ballot.4
The Proposed Rules would establish
new procedures for the solicitation of
proxies, the preparation and use of
proxy cards, and the dissemination of
information about all director nominees
in contested elections. Among other
things, the Proposed Rules would:
• Revise the consent requirement for
a bona fide nominee and eliminate the
‘‘short slate rule;’’ 5
• Create new 17 CFR 240.14a–19
(Rule 14a–19) which, if adopted, would
require the use of universal proxy
cards—that is, proxy cards that include
the names of all duly nominated
director candidates for whom proxies
are solicited—in all non-exempt
solicitations for contested elections;
• Establish procedural requirements
for dissidents and registrants to notify
each other of their respective director
nominees; and
• Require dissidents in a contested
election subject to Rule 14a–19 to solicit
the holders of shares representing at
least a majority of the voting power of
shares entitled to vote on the election of
directors.
The Proposed Rules also include
other improvements to the proxy voting
process, such as mandating that proxy
cards include an ‘‘against’’ voting option
when permitted under state laws and
requiring disclosure about the effect of
a ‘‘withhold’’ vote in an election.
Finally, in the 2016 Release, the
Commission declined to propose
extending the Proposed Rules to
registered investment companies and
business development companies
(‘‘BDCs,’’ and together with registered
investment companies, ‘‘funds,’’) at that
time. Instead, the Commission shared
certain observations about the corporate
governance of funds and requested
comment and data on several topics to
determine whether to extend the
proposed universal proxy rules to funds
in the future.
II. Reopening of Comment Period
Since the publication of the Proposed
Rules in 2016, there have been
important developments in proxy
contests, corporate governance, and
shareholder activism. For example,
there have been several contests in the
United States where one or both parties
used a universal proxy card since the
4 As part of this effort, the staff is also considering
recommending that the Commission propose
amendments to the proxy rules to facilitate vote
confirmations for shareholders and improve voting
accuracy in the proxy system.
5 17 CFR 240.14a–4(d)(1) and (4).
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2016 Release.6 During the same time
period, there has been increased
adoption of proxy access bylaws 7 and
use of virtual shareholder meetings.8
Some registrants have adopted advance
notice bylaw provisions that require
dissident nominees to consent to being
named in the registrant’s proxy
statement and on its proxy card.9
In addition, there have been
developments in corporate governance
matters affecting funds, particularly
registered closed-end funds and BDCs.
In the 2016 Release, the Commission
observed that contested elections at
open-end funds 10 are rare, because
open-end funds generally do not hold
annual meetings and their shares can be
redeemed at net asset value (or in the
case of ETFs, traded at or near net asset
value).11 The 2016 Release also noted
that exchange-listed BDCs and
registered closed-end funds, unlike most
open-end funds, typically do hold
annual shareholder meetings, and
contested elections occur more
frequently for these funds.12 Contested
elections of directors for registered
closed-end funds and BDCs have been
more common in recent years, as
6 For example, both the dissident group and the
registrant used universal proxy cards at EQT
Corporation’s 2019 Annual Meeting. See DEFC14A
filed May 20, 2019 by dissidents and DEFC14A
filed May 22, 2019 filed by EQT Corp. The
registrant but not the dissident group used a
universal proxy card at the Sandridge Energy’s 2018
Annual Meeting. See DEFC14A filed May 10, 2018
by Sandridge Energy, Inc. and DEFC14A filed May
11, 2018 by dissidents.
7 Holly J. Gregory, Rebecca Grapsas & Claire
Holland, Proxy Access: A Five-Year Review, Sidley
Austin LLP (Feb. 4, 2020), https://
corpgov.law.harvard.edu/2020/02/04/proxy-accessa-five-year-review/ (noting that proxy access bylaws
have been adopted by 76% of S&P 500 companies
and just over half of the companies in the Russell
1000).
8 See the following report from Broadridge with
statistics on the increasing use of virtual
shareholders meetings from 2016–2020: https://
www.broadridge.com/_assets/pdf/vsm-facts-andfigures-2020-brochure-january-2021.pdf.
9 Tiffany Fobes Campion, Christopher R. Drewry
and Joshua M. Dubofsky, Universal Proxies: What
Companies Need to Know, LATHAM & WATKINS
LLP (Dec. 5, 2018), https://
corpgov.law.harvard.edu/2018/12/05/universalproxies-what-companies-need-to-know/ (stating that
more than 80 companies have adopted such
advance notice bylaw provisions).
10 References to open-end funds include both
mutual funds and exchange-traded funds (‘‘ETFs’’).
11 Based on staff review of DEFC14A and
DFAN14A filings for open-end fund registrants, as
was the case in 2016, we are unaware of any
contested election involving open-end funds since
2000. See also 2016 Release at notes 182, 190, and
accompanying text.
12 Id. The Commission further explained that its
understanding at the time was that when dissident
shareholders initiated a proxy contest for electing
directors, such dissidents normally solicited a
complete slate of nominees for all director positions
up for election, though the Commission noted some
exceptions from that general observation.
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compared to the few years preceding the
2016 Release.13 Other corporate
governance developments relating to
funds since the 2016 Release include,
for example, an increase in interest by
closed-end funds in including
provisions in their governing documents
requiring that directors be elected by a
majority of all shares outstanding, rather
than of shares voted, and funds opting
into a state’s control share acquisition
statute.14
In light of these developments since
the 2016 Release, the Commission is
reopening the comment period for the
Proposed Rules until June 7, 2021 to
provide the public with an additional
opportunity to analyze and comment
upon the Proposed Rules. Commenters
may submit, and the Commission will
consider, comments on any aspect of the
Proposed Rules. Comments are
particularly helpful to us if
accompanied by quantified estimates or
other detailed analysis and supporting
data regarding the issues in those
comments. Where possible, when
providing data and information
regarding funds, please provide distinct
data and information for open-end
13 Based on staff review of PREC14A and
DEFC14A filings, for calendar years 2017 through
2020, we estimate that there have been 46 contested
director elections involving funds, representing
over two times the rate of such contests per year
than that reported in the 2016 Release (for 2014
through 2015). We estimate that there were a total
of 686 registered closed-end funds and 85 BDCs
active in 2020, based on staff review of filings from
July 1, 2019, through June 30, 2020. Excluding
contests where the same dissident targeted
additional funds in the same fund complex in the
same year, we estimate that the rate of contested
director elections involving funds from 2017 to
2020 was about 25% higher than that reported in
the 2016 Release. We are aware of three contests
involving funds in 2017 through 2020 in which the
dissident sought fewer than the total number of
seats up for election (overall or for certain
shareholders voting as a separate class).
Approximately 85% of funds involved in a
contested election had a classified board, based on
FactSet Corporate Governance data. Accordingly,
dissident shareholders often presented a full slate
of nominees for the director seats up for election,
which, if elected, would have constituted a
minority of the board. Along with nominating
directors, such dissidents sometimes also presented
proposals to declassify the board and require that
all directors be elected annually. As the
Commission observed in 2016, along with contested
director elections, dissident shareholders
commonly included proposals consistent with
reducing the discount of the share price to the net
asset value, such as terminating the advisory
contract and commencing a self-tender offer.
14 Control share acquisition statutes provide a
company with the right to prevent or restrict certain
changes in corporate control by altering or
removing voting rights when a person acquires
control shares. In May 2020, the staff withdrew a
prior staff position discussing the intersection of
control share acquisition statutes and Section 18(i)
of the Investment Company Act. Division of
Investment Management Staff Statement, May 27,
2020, avail. at https://www.sec.gov/investment/
control-share-acquisition-statutes.
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funds, registered closed-end funds, and
BDCs. In addition to the requests for
comment included in the 2016 Release,
the Commission specifically seeks
comments on the following:
1. The Proposed Rules would require
dissidents in a contested election
subject to proposed Rule 14a–19 to
solicit the holders of shares representing
at least a majority of the voting power
of shares entitled to vote on the election
of directors. Should we instead require
dissidents to solicit a greater percentage
of the voting power? For example,
should the threshold be 67% or 75% of
the voting power, or some other
percentage? What would be the
incremental effects of a higher
minimum solicitation requirement on
the cost of proxy contests?
2. How should we consider the recent
increase in the number of companies
with dual or multi-class stock structures
in determining a minimum solicitation
requirement?
3. Would a higher minimum
solicitation threshold, such as 67% or
75%, prevent more nominal contests, in
which the dissidents incur little more
than the basic required costs to pursue
a contest, as compared to the proposed
majority solicitation requirement?
Would it be more likely to deter other
contests than the proposed majority
solicitation requirement and, if so, what
are the costs and benefits of that
outcome?
4. Since the 2016 Release, there have
been several high-profile contested
elections at registrants that were
significantly larger than the typical
proxy contest target. To what extent
does this development affect any of the
aspects, including the costs and
benefits, of the Proposed Rules? Should
these contests affect our consideration
of the appropriate minimum solicitation
requirement? If so, how?
5. We request any estimates or data
that would allow us to refine our
characterization of costs and benefits of
nominal contests under the current state
of the proxy process and how such
effects would differ under the
availability of a universal proxy card. In
particular, we request specific estimates
of the costs that are incurred by
registrants in such contests, including
the costs of disclosure, solicitation, and
board and management time; and the
costs and benefits to shareholders.
6. As discussed above, there have
been several contests in the United
States since the 2016 Release in which
one or both parties used a universal
proxy card. Do the experiences of
registrants, shareholders, dissidents,
and other participants in the proxy
process in these situations provide any
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new information about any of the
aspects, including the costs and
benefits, of the Proposed Rules? To what
extent does the experience with advance
notice bylaws that require dissident
nominees to consent to being included
on the registrant’s proxy card (e.g., as
part of the director questionnaire) affect
any aspects of the Proposed Rules?
7. The Proposed Rules would require
a dissident to provide notice to a
registrant of its intent to solicit proxies
in support of director nominees other
than the registrant’s nominees no later
than 60 calendar days prior to the
anniversary of the previous year’s
annual meeting date. Have there been
any developments since the 2016
Release with respect to the frequency
with which contests are settled or
withdrawn after the proposed deadline
for dissidents to provide notice of their
intent to solicit proxies for their own
nominees? We request specific data on
the timing and frequency of such
actions. Would such settlements or
withdrawals of proxy contests and the
related actions of registrants and
dissidents be changed by the proposed
notice requirement and mandatory use
of a universal proxy card and, if so, are
there any modifications we should make
to the Proposed Rules in response?
8. In the 2016 Release, the
Commission noted that the burden of
attending a meeting for the purpose of
voting a split ticket may be lower in the
case of a virtual shareholder meeting,
but that such meetings were relatively
rare and that the Commission was
unaware of any proxy contest that
culminated in a virtual meeting. Virtual
shareholder meetings have increased in
frequency since then, particularly due to
the unique circumstances presented by
COVID–19 in 2020. To what extent
should this development affect our
assessment of the Proposed Rules? Is the
increase likely to continue if concerns
about COVID–19 are reduced or
eliminated? Are increased virtual
meetings likely to affect the cost of splitticket voting in the future, even in the
absence of a universal proxy card? Are
virtual meetings unlikely to be used in
the case of a contest? How are virtual
meetings likely, or not, to affect the
nature of proxy contests, such as their
frequency or targets, in the future?
9. There have been several changes in
the governance, activism, and voting
landscape in recent years, such as an
increase in the adoption of proxy access
bylaws and other changes discussed
above. To what extent do any of these
developments affect any of the aspects,
including the costs and benefits, of the
Proposed Rules?
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10. Are there any other developments
since the 2016 Release that should affect
our consideration of adopting a
universal proxy card requirement? Are
there any other developments that affect
any of the aspects, including the costs
and benefits, of the Proposed Rules? Are
there any changes we should consider
in the analytical methodologies and
estimates presented in the 2016 Release?
Are there any other types of changes we
should consider in light of
developments since the 2016 Release?
11. Would any presentation and
formatting requirements in addition or
as an alternative to those discussed in
the 2016 Release be appropriate or
helpful for universal proxy cards used
in contested elections? For example,
should we consider requiring a uniform
format for the voting options listed next
to the nominees’ names?
12. Is there a need for the Proposed
Rules to facilitate a standardized
presentation of all nominees on voting
instruction forms and electronic proxy
voting platforms in the context of
contested elections?
13. In the 2016 Release, the
Commission proposed to exclude all
funds from the application of the
Proposed Rules at that time, regardless
of whether the fund was structured as
a closed-end fund or an open-end fund.
In light of the differences noted both in
the 2016 Release and by commenters, as
well as the fact there have been no
contests in open-end funds since 2000,
but proxy contests for registered closedend funds have increased in recent
years relative to the years preceding the
2016 Release, we are considering
whether we should differentiate
between open-end funds, registered
closed-end funds, BDCs, and other
registrants. In particular, we are
considering whether we should apply
the proposed universal proxy card
requirements to registered closed-end
funds and BDCs. We request comment
on the extent to which the similarities
or differences among open-end funds,
registered closed-end funds, and BDCs
should result in similar or differential
application of the universal proxy rules.
14. In the 2016 Release, the
Commission discussed the use of cluster
and unitary boards by funds and
whether dissident board members on a
board within such a fund complex
could reduce the efficiencies of such
board structures. Commenters on the
Proposed Rules also discussed these
concerns, particularly for open-end
funds. How commonly do registered
closed-end funds and BDCs utilize a
unitary structure, where a single board
oversees every fund in a fund complex?
How frequently do they use a cluster
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board structure, where two or more
boards each oversee a different set of
funds in the complex? Do the same
concerns noted by commenters about a
dissident director disrupting this cluster
board structure in open-end fund
complexes apply to these registered
closed-end funds and BDCs? To the
extent a universal proxy card
requirement would cause disruptions
for open-end funds, closed-end funds,
or BDCs, are the costs of these
disruptions justified by the benefits to
shareholders of the ability to vote by
proxy as if they were attending the
shareholder meeting in person? To what
extent would disclosure to shareholders
in the proxy materials regarding such
potential losses in efficiency be
sufficient to mitigate the risk of such
disruptive outcomes?
15. We have observed that a large
fraction of the recent contests at closedend funds involve a dissident contesting
elections of multiple funds in the same
fund complex. To what extent is any
potential disruption to unitary or cluster
boards different in situations where a
dissident is seeking election of directors
for multiple funds in a complex? How,
if at all, should such contests affect our
consideration of whether to extend the
mandatory universal proxy card
requirement to some or all funds?
16. In reviewing proxy contests since
2016, we observed that many closed-end
funds subject to a proxy contest utilized
a classified board structure, meaning
that only a minority of the board was up
for election each year. Accordingly,
even when dissidents ran a full slate of
directors, such directors, if elected,
would still only represent a minority of
the board. How common is a classified
board structure for registered closed-end
funds and BDCs? How, if at all, does
such a structure affect contested
elections, or our assessment of whether
the Proposed Rules should apply to
registered closed-end funds or BDCs? In
particular, does a classified board
structure itself increase the chance of
dissident directors disrupting unitary
and cluster boards, regardless of
whether funds with classified boards are
subject to the Proposed Rules?
17. We request any data or examples
that would help us to better ascertain
the degree of interest by shareholders in
funds in splitting their votes in
contested elections.
18. In the 2016 Release, the
Commission noted that the types of
changes pursued by dissidents at
registered closed-end funds and BDCs,
such as converting a closed-end fund to
an open-end fund, have tended to be
binary in nature. Are there other types
of goals or compromise approaches that
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dissidents have pursued at such
registrants in more recent years? To
what extent are mixed board outcomes,
where some but not all of a dissident’s
nominees are elected, an effective
means of achieving dissident goals in
contests at registered closed-end funds
and BDCs?
19. If we extended the Proposed Rules
to some or all funds, would a different
minimum solicitation requirement be
appropriate for these registrants than for
others? If so, what threshold would be
appropriate, and why? How, if at all,
would the appropriate threshold differ
across open-end funds, registered
closed-end funds and BDCs? How does
the concentration of ownership and
types of holders of open-end funds,
registered closed-end funds and BDCs
differ from other registrants that may be
the subject of proxy contests? Does the
solicitation process differ for contests at
open-end funds, registered closed-end
funds or BDCs as compared to other
registrants? How would the costs and
other effects of the minimum
solicitation requirement differ when
applied to contests at these registrants
as opposed to other registrants?
20. As discussed above, we have
observed recent developments in the
area of corporate governance affecting
funds, particularly registered closed-end
funds and BDCs. How, if at all, are such
developments, or other developments,
relevant to our assessment of whether
the Proposed Rules should apply to
registered closed-end funds and BDCs?
Would a universal proxy card facilitate
shareholder voting in registered closedend fund and BDC elections?
21. What would be the costs and
benefits and other economic effects of
applying the Proposed Rules to
registered closed-end funds and BDCs,
or more broadly to other kinds of funds?
To what extent do any developments
since the 2016 Release affect the
anticipated costs and benefits? How, if
at all, have any such developments
changed the differences in the likely
economic effects of applying the
Proposed Rules to some or all funds as
compared to operating companies?
22. As noted above, we have not
observed any proxy contests in openend funds since 2000. Would there be
benefits to applying the Proposed Rules
to all funds, including open-end funds,
to the extent open-end funds do face
proxy contests? What would be the costs
of applying the Proposed Rules to openend funds in the absence of contests?
23. The Commission noted in the
2016 Release that in the absence of the
proposed universal proxy card
requirement applying to funds, the
current rules would continue to apply,
E:\FR\FM\06MYP1.SGM
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khammond on DSKJM1Z7X2PROD with PROPOSALS
24368
Federal Register / Vol. 86, No. 86 / Thursday, May 6, 2021 / Proposed Rules
including the short slate and bona fide
nominee rules. Do commenters believe
that these rules are necessary or
appropriate for any fund not required to
use a universal proxy card? Or does the
lack of proxy contests in open-end
funds indicate that it would be
appropriate to rescind these rules even
if we do not extend the application of
the Proposed Rules to open-end funds?
24. There are registered closed-end
funds and BDCs that, like open-end
funds, do not hold annual meetings to
elect directors because of their state of
incorporation or type of corporate
entity, or because they are not listed on
an exchange. If we were to exclude
open-end funds from the Proposed
Rules because of the lack of annual
meetings, should the exclusion apply to
registered closed-end funds and BDCs
that do not hold annual meetings?
Should such funds continue to be
subject to the short slate and bona fide
nominee rules?
25. Are there any other developments
since 2016 we should consider in our
assessment of whether the Proposed
Rules should apply to open-end funds,
closed-end funds or BDCs? What are the
economic effects of any such
developments?
We request and encourage any
interested person to submit comments
regarding the Proposed Rules, specific
issues discussed in this release or the
2016 Release, and other matters that
may have an effect on the Proposed
Rules. We request comment from the
point of view of registrants,
shareholders, directors, and other
market participants. We note that
comments are of particular assistance to
us if accompanied by supporting data
and analysis of the issues addressed in
those comments, particularly
quantitative information as to the costs
and benefits. If alternatives to the
Proposed Rules are suggested,
supporting data and analysis and
quantitative information as to the costs
and benefits of those alternatives are of
particular assistance. Commenters are
urged to be as specific as possible. All
comments received to date on the
Proposed Rules will be considered and
need not be resubmitted. If any
commenters who have already
submitted a letter wish to provide
supplemental or updated comments, we
encourage them to do so.
By the Commission.
Dated: April 16, 2021.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2021–08301 Filed 5–5–21; 8:45 am]
BILLING CODE 8011–01–P
VerDate Sep<11>2014
16:33 May 05, 2021
Jkt 253001
FOR FURTHER INFORMATION CONTACT:
DEPARTMENT OF LABOR
Employment and Training
Administration
20 CFR Part 655
[DOL Docket No. ETA–2020–0005]
RIN 1205–AB99
Adjudication of Temporary and
Seasonal Need for Herding and
Production of Livestock on the Range
Applications Under the H–2A Program
Employment and Training
Administration (ETA), Labor.
ACTION: Proposed rule; request for
comments.
AGENCY:
The Department of Labor (the
Department) proposes to amend its
regulations regarding the adjudication of
temporary need for employers seeking
herding or production of livestock on
the range job opportunities under the
H–2A program. Consistent with a courtapproved settlement agreement, this
notice of proposed rulemaking (NPRM
or proposed rule) would rescind the
regulation that governs the period of
need for such job opportunities to
ensure the Department’s adjudication of
temporary or seasonal need is
conducted in the same manner for all
applications for temporary agricultural
labor certification.
DATES: Interested persons are invited to
submit written comments on the
proposed rule on or before June 7, 2021.
ADDRESSES: You may submit comments,
identified by Regulatory Information
Number (RIN) 1205–AB99, by the
following method:
Electronic Comments: Comments may
be sent via https://www.regulations.gov,
a Federal E-Government website that
allows the public to find, review, and
submit comments on documents that
agencies have published in the Federal
Register and that are open for comment.
Simply type in ‘1205–AB99’ (in quotes)
in the Comment or Submission search
box, click Go, and follow the
instructions for submitting comments.
Instructions: All submissions must
include the agency’s name and the RIN
1205–AB99. Please be advised that
comments received will become a
matter of public record and will be
posted without change to https://
www.regulations.gov, including any
personal information provided.
Docket: For access to the docket to
read background documents or
comments, go to the Federal eRulemaking Portal at https://
www.regulations.gov.
SUMMARY:
PO 00000
Frm 00007
Fmt 4702
Sfmt 4702
Brian Pasternak, Administrator, Office
of Foreign Labor Certification,
Employment and Training
Administration, Department of Labor,
200 Constitution Avenue NW, Room N–
5311, Washington, DC 20210, telephone:
(202) 693–8200 (this is not a toll-free
number). Individuals with hearing or
speech impairments may access the
telephone number above via TTY/TDD
by calling the toll-free Federal
Information Relay Service at 1 (877)
889–5627.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background on 20 CFR Part 655, Subpart
B
A. Statutory Framework
B. Regulatory Framework
C. The Hispanic Affairs Project Litigation
and Need for Rulemaking
II. Discussion of Proposed Revision to 20 CFR
Part 655, Subpart B
III. Administrative Information
I. Background on 20 CFR Part 655,
Subpart B
A. Statutory Framework
The H–2A nonimmigrant worker visa
program enables U.S. agricultural
employers to employ foreign workers on
a temporary basis to perform temporary
or seasonal agricultural labor or services
where the Secretary of Labor (Secretary)
certifies that (1) there are not sufficient
workers who are able, willing, and
qualified, and who will be available at
the time and place needed to perform
the labor or services involved in the
petition; and (2) the employment of the
aliens in such labor or services will not
adversely affect the wages and working
conditions of workers in the United
States similarly employed. See section
101(a)(15)(H)(ii)(a) of the Immigration
and Nationality Act (INA or the Act), as
amended by the Immigration Reform
and Control Act of 1986 (IRCA), 8 U.S.C.
1101(a)(15)(H)(ii)(a); section 218(a)(1) of
the INA, 8 U.S.C. 1188(a)(1). The
Secretary has delegated the authority to
issue temporary agricultural labor
certifications to the Assistant Secretary
for Employment and Training, who in
turn has delegated that authority to
ETA’s Office of Foreign Labor
Certification (OFLC). Secretary’s Order
06–2010 (Oct. 20, 2010).1 Once OFLC
issues a temporary agricultural labor
certification, employers may then
1 In addition, the Secretary has delegated to the
Department’s Wage and Hour Division the
responsibility under section 218(g)(2) of the INA, 8
U.S.C. 1188(g)(2), to assure employer compliance
with the terms and conditions of employment
under the H–2A program. Secretary’s Order 01–
2014 (Dec. 19, 2014).
E:\FR\FM\06MYP1.SGM
06MYP1
]]>Agencies
[Federal Register Volume 86, Number 86 (Thursday, May 6, 2021)]
[Proposed Rules]
[Pages 24364-24368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08301]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 240
[Release No. 34-91603; IC-34246; File No. S7-24-16]
RIN 3235-AL84
Reopening of Comment Period for Universal Proxy
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule; reopening of comment period.
-----------------------------------------------------------------------
SUMMARY: The Securities and Exchange Commission (``Commission'') is
reopening the comment period for its proposal to require the use of
universal proxy cards in all non-exempt solicitations in connection
with contested elections of directors (``Proposed Rules''). The
Proposed Rules were set forth in a release published in the Federal
Register on November 10, 2016 (Release No. 34-79164) (``2016
Release''), and the related comment period ended on January 9, 2017.
The reopening of this comment period is intended to allow interested
persons further opportunity to analyze and comment upon the Proposed
Rules in light of developments since the publication of the Proposed
Rules, including developments in corporate governance matters affecting
funds.
DATES: The comment period for the proposed rule published on November
10, 2016 (81 FR 79122), is reopened. Comments should be received on or
before June 7, 2021.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm).
Paper Comments
Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number S7-24-16. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
internet website (https://www.sec.gov/rules/proposed.shtml). Comments
are also available for website viewing and printing in the Commission's
Public
[[Page 24365]]
Reference Room, 100 F Street NE, Washington, DC 20549-1090 on official
business days between the hours of 10 a.m. and 3 p.m. Due to pandemic
conditions, however, access to the Commission's public reference room
is not permitted at this time. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly.
Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on our website. To ensure direct electronic
receipt of such notifications, sign up through the ``Stay Connected''
option at www.sec.gov to receive notifications by email.
FOR FURTHER INFORMATION CONTACT: David M. Plattner, Special Counsel,
Christina Chalk, Senior Special Counsel, or Joshua Shainess, Special
Counsel, in the Office of Mergers and Acquisitions, at (202) 551-3440,
or Steven G. Hearne, Senior Special Counsel, in the Office of
Rulemaking, at (202) 551-3430, Division of Corporation Finance,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549.
SUPPLEMENTARY INFORMATION:
I. Background
As described more fully in the 2016 Release,\1\ Section 14 of the
Securities Exchange Act of 1934 \2\ (``Exchange Act'') authorizes the
Commission to establish rules and regulations governing the
solicitation of any proxy or consent or authorization with respect to
any security registered pursuant to the Exchange Act. In regulating the
proxy process, the Commission has sought to facilitate the exercise of
voting rights shareholders have under state law.\3\ To allow
shareholders to exercise fully these rights in contested director
elections, the Commission proposed to amend the proxy rules to permit
shareholders to vote by proxy for any combination of candidates for the
board of directors, as they could if they attended the shareholder
meeting in person and cast a written ballot.\4\
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\1\ See Universal Proxy, Release No. 34-79164 (Oct. 26, 2016)
[81 FR 79122 (Nov. 10, 2016)].
\2\ 15 U.S.C. 78a et seq.
\3\ Registrants only reporting pursuant to Exchange Act Section
15(d) are not subject to the federal proxy rules, while foreign
private issuers are exempt from the requirements of Section 14(a).
17 CFR 240.3a12-3(b).
\4\ As part of this effort, the staff is also considering
recommending that the Commission propose amendments to the proxy
rules to facilitate vote confirmations for shareholders and improve
voting accuracy in the proxy system.
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The Proposed Rules would establish new procedures for the
solicitation of proxies, the preparation and use of proxy cards, and
the dissemination of information about all director nominees in
contested elections. Among other things, the Proposed Rules would:
Revise the consent requirement for a bona fide nominee and
eliminate the ``short slate rule;'' \5\
---------------------------------------------------------------------------
\5\ 17 CFR 240.14a-4(d)(1) and (4).
---------------------------------------------------------------------------
Create new 17 CFR 240.14a-19 (Rule 14a-19) which, if
adopted, would require the use of universal proxy cards--that is, proxy
cards that include the names of all duly nominated director candidates
for whom proxies are solicited--in all non-exempt solicitations for
contested elections;
Establish procedural requirements for dissidents and
registrants to notify each other of their respective director nominees;
and
Require dissidents in a contested election subject to Rule
14a-19 to solicit the holders of shares representing at least a
majority of the voting power of shares entitled to vote on the election
of directors.
The Proposed Rules also include other improvements to the proxy
voting process, such as mandating that proxy cards include an
``against'' voting option when permitted under state laws and requiring
disclosure about the effect of a ``withhold'' vote in an election.
Finally, in the 2016 Release, the Commission declined to propose
extending the Proposed Rules to registered investment companies and
business development companies (``BDCs,'' and together with registered
investment companies, ``funds,'') at that time. Instead, the Commission
shared certain observations about the corporate governance of funds and
requested comment and data on several topics to determine whether to
extend the proposed universal proxy rules to funds in the future.
II. Reopening of Comment Period
Since the publication of the Proposed Rules in 2016, there have
been important developments in proxy contests, corporate governance,
and shareholder activism. For example, there have been several contests
in the United States where one or both parties used a universal proxy
card since the 2016 Release.\6\ During the same time period, there has
been increased adoption of proxy access bylaws \7\ and use of virtual
shareholder meetings.\8\ Some registrants have adopted advance notice
bylaw provisions that require dissident nominees to consent to being
named in the registrant's proxy statement and on its proxy card.\9\
---------------------------------------------------------------------------
\6\ For example, both the dissident group and the registrant
used universal proxy cards at EQT Corporation's 2019 Annual Meeting.
See DEFC14A filed May 20, 2019 by dissidents and DEFC14A filed May
22, 2019 filed by EQT Corp. The registrant but not the dissident
group used a universal proxy card at the Sandridge Energy's 2018
Annual Meeting. See DEFC14A filed May 10, 2018 by Sandridge Energy,
Inc. and DEFC14A filed May 11, 2018 by dissidents.
\7\ Holly J. Gregory, Rebecca Grapsas & Claire Holland, Proxy
Access: A Five-Year Review, Sidley Austin LLP (Feb. 4, 2020),
https://corpgov.law.harvard.edu/2020/02/04/proxy-access-a-five-year-review/ (noting that proxy access bylaws have been adopted by 76% of
S&P 500 companies and just over half of the companies in the Russell
1000).
\8\ See the following report from Broadridge with statistics on
the increasing use of virtual shareholders meetings from 2016-2020:
https://www.broadridge.com/_assets/pdf/vsm-facts-and-figures-2020-brochure-january-2021.pdf.
\9\ Tiffany Fobes Campion, Christopher R. Drewry and Joshua M.
Dubofsky, Universal Proxies: What Companies Need to Know, LATHAM &
WATKINS LLP (Dec. 5, 2018), https://corpgov.law.harvard.edu/2018/12/05/universal-proxies-what-companies-need-to-know/ (stating that more
than 80 companies have adopted such advance notice bylaw
provisions).
---------------------------------------------------------------------------
In addition, there have been developments in corporate governance
matters affecting funds, particularly registered closed-end funds and
BDCs. In the 2016 Release, the Commission observed that contested
elections at open-end funds \10\ are rare, because open-end funds
generally do not hold annual meetings and their shares can be redeemed
at net asset value (or in the case of ETFs, traded at or near net asset
value).\11\ The 2016 Release also noted that exchange-listed BDCs and
registered closed-end funds, unlike most open-end funds, typically do
hold annual shareholder meetings, and contested elections occur more
frequently for these funds.\12\ Contested elections of directors for
registered closed-end funds and BDCs have been more common in recent
years, as
[[Page 24366]]
compared to the few years preceding the 2016 Release.\13\ Other
corporate governance developments relating to funds since the 2016
Release include, for example, an increase in interest by closed-end
funds in including provisions in their governing documents requiring
that directors be elected by a majority of all shares outstanding,
rather than of shares voted, and funds opting into a state's control
share acquisition statute.\14\
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\10\ References to open-end funds include both mutual funds and
exchange-traded funds (``ETFs'').
\11\ Based on staff review of DEFC14A and DFAN14A filings for
open-end fund registrants, as was the case in 2016, we are unaware
of any contested election involving open-end funds since 2000. See
also 2016 Release at notes 182, 190, and accompanying text.
\12\ Id. The Commission further explained that its understanding
at the time was that when dissident shareholders initiated a proxy
contest for electing directors, such dissidents normally solicited a
complete slate of nominees for all director positions up for
election, though the Commission noted some exceptions from that
general observation.
\13\ Based on staff review of PREC14A and DEFC14A filings, for
calendar years 2017 through 2020, we estimate that there have been
46 contested director elections involving funds, representing over
two times the rate of such contests per year than that reported in
the 2016 Release (for 2014 through 2015). We estimate that there
were a total of 686 registered closed-end funds and 85 BDCs active
in 2020, based on staff review of filings from July 1, 2019, through
June 30, 2020. Excluding contests where the same dissident targeted
additional funds in the same fund complex in the same year, we
estimate that the rate of contested director elections involving
funds from 2017 to 2020 was about 25% higher than that reported in
the 2016 Release. We are aware of three contests involving funds in
2017 through 2020 in which the dissident sought fewer than the total
number of seats up for election (overall or for certain shareholders
voting as a separate class). Approximately 85% of funds involved in
a contested election had a classified board, based on FactSet
Corporate Governance data. Accordingly, dissident shareholders often
presented a full slate of nominees for the director seats up for
election, which, if elected, would have constituted a minority of
the board. Along with nominating directors, such dissidents
sometimes also presented proposals to declassify the board and
require that all directors be elected annually. As the Commission
observed in 2016, along with contested director elections, dissident
shareholders commonly included proposals consistent with reducing
the discount of the share price to the net asset value, such as
terminating the advisory contract and commencing a self-tender
offer.
\14\ Control share acquisition statutes provide a company with
the right to prevent or restrict certain changes in corporate
control by altering or removing voting rights when a person acquires
control shares. In May 2020, the staff withdrew a prior staff
position discussing the intersection of control share acquisition
statutes and Section 18(i) of the Investment Company Act. Division
of Investment Management Staff Statement, May 27, 2020, avail. at
https://www.sec.gov/investment/control-share-acquisition-statutes.
---------------------------------------------------------------------------
In light of these developments since the 2016 Release, the
Commission is reopening the comment period for the Proposed Rules until
June 7, 2021 to provide the public with an additional opportunity to
analyze and comment upon the Proposed Rules. Commenters may submit, and
the Commission will consider, comments on any aspect of the Proposed
Rules. Comments are particularly helpful to us if accompanied by
quantified estimates or other detailed analysis and supporting data
regarding the issues in those comments. Where possible, when providing
data and information regarding funds, please provide distinct data and
information for open-end funds, registered closed-end funds, and BDCs.
In addition to the requests for comment included in the 2016 Release,
the Commission specifically seeks comments on the following:
1. The Proposed Rules would require dissidents in a contested
election subject to proposed Rule 14a-19 to solicit the holders of
shares representing at least a majority of the voting power of shares
entitled to vote on the election of directors. Should we instead
require dissidents to solicit a greater percentage of the voting power?
For example, should the threshold be 67% or 75% of the voting power, or
some other percentage? What would be the incremental effects of a
higher minimum solicitation requirement on the cost of proxy contests?
2. How should we consider the recent increase in the number of
companies with dual or multi-class stock structures in determining a
minimum solicitation requirement?
3. Would a higher minimum solicitation threshold, such as 67% or
75%, prevent more nominal contests, in which the dissidents incur
little more than the basic required costs to pursue a contest, as
compared to the proposed majority solicitation requirement? Would it be
more likely to deter other contests than the proposed majority
solicitation requirement and, if so, what are the costs and benefits of
that outcome?
4. Since the 2016 Release, there have been several high-profile
contested elections at registrants that were significantly larger than
the typical proxy contest target. To what extent does this development
affect any of the aspects, including the costs and benefits, of the
Proposed Rules? Should these contests affect our consideration of the
appropriate minimum solicitation requirement? If so, how?
5. We request any estimates or data that would allow us to refine
our characterization of costs and benefits of nominal contests under
the current state of the proxy process and how such effects would
differ under the availability of a universal proxy card. In particular,
we request specific estimates of the costs that are incurred by
registrants in such contests, including the costs of disclosure,
solicitation, and board and management time; and the costs and benefits
to shareholders.
6. As discussed above, there have been several contests in the
United States since the 2016 Release in which one or both parties used
a universal proxy card. Do the experiences of registrants,
shareholders, dissidents, and other participants in the proxy process
in these situations provide any new information about any of the
aspects, including the costs and benefits, of the Proposed Rules? To
what extent does the experience with advance notice bylaws that require
dissident nominees to consent to being included on the registrant's
proxy card (e.g., as part of the director questionnaire) affect any
aspects of the Proposed Rules?
7. The Proposed Rules would require a dissident to provide notice
to a registrant of its intent to solicit proxies in support of director
nominees other than the registrant's nominees no later than 60 calendar
days prior to the anniversary of the previous year's annual meeting
date. Have there been any developments since the 2016 Release with
respect to the frequency with which contests are settled or withdrawn
after the proposed deadline for dissidents to provide notice of their
intent to solicit proxies for their own nominees? We request specific
data on the timing and frequency of such actions. Would such
settlements or withdrawals of proxy contests and the related actions of
registrants and dissidents be changed by the proposed notice
requirement and mandatory use of a universal proxy card and, if so, are
there any modifications we should make to the Proposed Rules in
response?
8. In the 2016 Release, the Commission noted that the burden of
attending a meeting for the purpose of voting a split ticket may be
lower in the case of a virtual shareholder meeting, but that such
meetings were relatively rare and that the Commission was unaware of
any proxy contest that culminated in a virtual meeting. Virtual
shareholder meetings have increased in frequency since then,
particularly due to the unique circumstances presented by COVID-19 in
2020. To what extent should this development affect our assessment of
the Proposed Rules? Is the increase likely to continue if concerns
about COVID-19 are reduced or eliminated? Are increased virtual
meetings likely to affect the cost of split-ticket voting in the
future, even in the absence of a universal proxy card? Are virtual
meetings unlikely to be used in the case of a contest? How are virtual
meetings likely, or not, to affect the nature of proxy contests, such
as their frequency or targets, in the future?
9. There have been several changes in the governance, activism, and
voting landscape in recent years, such as an increase in the adoption
of proxy access bylaws and other changes discussed above. To what
extent do any of these developments affect any of the aspects,
including the costs and benefits, of the Proposed Rules?
[[Page 24367]]
10. Are there any other developments since the 2016 Release that
should affect our consideration of adopting a universal proxy card
requirement? Are there any other developments that affect any of the
aspects, including the costs and benefits, of the Proposed Rules? Are
there any changes we should consider in the analytical methodologies
and estimates presented in the 2016 Release? Are there any other types
of changes we should consider in light of developments since the 2016
Release?
11. Would any presentation and formatting requirements in addition
or as an alternative to those discussed in the 2016 Release be
appropriate or helpful for universal proxy cards used in contested
elections? For example, should we consider requiring a uniform format
for the voting options listed next to the nominees' names?
12. Is there a need for the Proposed Rules to facilitate a
standardized presentation of all nominees on voting instruction forms
and electronic proxy voting platforms in the context of contested
elections?
13. In the 2016 Release, the Commission proposed to exclude all
funds from the application of the Proposed Rules at that time,
regardless of whether the fund was structured as a closed-end fund or
an open-end fund. In light of the differences noted both in the 2016
Release and by commenters, as well as the fact there have been no
contests in open-end funds since 2000, but proxy contests for
registered closed-end funds have increased in recent years relative to
the years preceding the 2016 Release, we are considering whether we
should differentiate between open-end funds, registered closed-end
funds, BDCs, and other registrants. In particular, we are considering
whether we should apply the proposed universal proxy card requirements
to registered closed-end funds and BDCs. We request comment on the
extent to which the similarities or differences among open-end funds,
registered closed-end funds, and BDCs should result in similar or
differential application of the universal proxy rules.
14. In the 2016 Release, the Commission discussed the use of
cluster and unitary boards by funds and whether dissident board members
on a board within such a fund complex could reduce the efficiencies of
such board structures. Commenters on the Proposed Rules also discussed
these concerns, particularly for open-end funds. How commonly do
registered closed-end funds and BDCs utilize a unitary structure, where
a single board oversees every fund in a fund complex? How frequently do
they use a cluster board structure, where two or more boards each
oversee a different set of funds in the complex? Do the same concerns
noted by commenters about a dissident director disrupting this cluster
board structure in open-end fund complexes apply to these registered
closed-end funds and BDCs? To the extent a universal proxy card
requirement would cause disruptions for open-end funds, closed-end
funds, or BDCs, are the costs of these disruptions justified by the
benefits to shareholders of the ability to vote by proxy as if they
were attending the shareholder meeting in person? To what extent would
disclosure to shareholders in the proxy materials regarding such
potential losses in efficiency be sufficient to mitigate the risk of
such disruptive outcomes?
15. We have observed that a large fraction of the recent contests
at closed-end funds involve a dissident contesting elections of
multiple funds in the same fund complex. To what extent is any
potential disruption to unitary or cluster boards different in
situations where a dissident is seeking election of directors for
multiple funds in a complex? How, if at all, should such contests
affect our consideration of whether to extend the mandatory universal
proxy card requirement to some or all funds?
16. In reviewing proxy contests since 2016, we observed that many
closed-end funds subject to a proxy contest utilized a classified board
structure, meaning that only a minority of the board was up for
election each year. Accordingly, even when dissidents ran a full slate
of directors, such directors, if elected, would still only represent a
minority of the board. How common is a classified board structure for
registered closed-end funds and BDCs? How, if at all, does such a
structure affect contested elections, or our assessment of whether the
Proposed Rules should apply to registered closed-end funds or BDCs? In
particular, does a classified board structure itself increase the
chance of dissident directors disrupting unitary and cluster boards,
regardless of whether funds with classified boards are subject to the
Proposed Rules?
17. We request any data or examples that would help us to better
ascertain the degree of interest by shareholders in funds in splitting
their votes in contested elections.
18. In the 2016 Release, the Commission noted that the types of
changes pursued by dissidents at registered closed-end funds and BDCs,
such as converting a closed-end fund to an open-end fund, have tended
to be binary in nature. Are there other types of goals or compromise
approaches that dissidents have pursued at such registrants in more
recent years? To what extent are mixed board outcomes, where some but
not all of a dissident's nominees are elected, an effective means of
achieving dissident goals in contests at registered closed-end funds
and BDCs?
19. If we extended the Proposed Rules to some or all funds, would a
different minimum solicitation requirement be appropriate for these
registrants than for others? If so, what threshold would be
appropriate, and why? How, if at all, would the appropriate threshold
differ across open-end funds, registered closed-end funds and BDCs? How
does the concentration of ownership and types of holders of open-end
funds, registered closed-end funds and BDCs differ from other
registrants that may be the subject of proxy contests? Does the
solicitation process differ for contests at open-end funds, registered
closed-end funds or BDCs as compared to other registrants? How would
the costs and other effects of the minimum solicitation requirement
differ when applied to contests at these registrants as opposed to
other registrants?
20. As discussed above, we have observed recent developments in the
area of corporate governance affecting funds, particularly registered
closed-end funds and BDCs. How, if at all, are such developments, or
other developments, relevant to our assessment of whether the Proposed
Rules should apply to registered closed-end funds and BDCs? Would a
universal proxy card facilitate shareholder voting in registered
closed-end fund and BDC elections?
21. What would be the costs and benefits and other economic effects
of applying the Proposed Rules to registered closed-end funds and BDCs,
or more broadly to other kinds of funds? To what extent do any
developments since the 2016 Release affect the anticipated costs and
benefits? How, if at all, have any such developments changed the
differences in the likely economic effects of applying the Proposed
Rules to some or all funds as compared to operating companies?
22. As noted above, we have not observed any proxy contests in
open-end funds since 2000. Would there be benefits to applying the
Proposed Rules to all funds, including open-end funds, to the extent
open-end funds do face proxy contests? What would be the costs of
applying the Proposed Rules to open-end funds in the absence of
contests?
23. The Commission noted in the 2016 Release that in the absence of
the proposed universal proxy card requirement applying to funds, the
current rules would continue to apply,
[[Page 24368]]
including the short slate and bona fide nominee rules. Do commenters
believe that these rules are necessary or appropriate for any fund not
required to use a universal proxy card? Or does the lack of proxy
contests in open-end funds indicate that it would be appropriate to
rescind these rules even if we do not extend the application of the
Proposed Rules to open-end funds?
24. There are registered closed-end funds and BDCs that, like open-
end funds, do not hold annual meetings to elect directors because of
their state of incorporation or type of corporate entity, or because
they are not listed on an exchange. If we were to exclude open-end
funds from the Proposed Rules because of the lack of annual meetings,
should the exclusion apply to registered closed-end funds and BDCs that
do not hold annual meetings? Should such funds continue to be subject
to the short slate and bona fide nominee rules?
25. Are there any other developments since 2016 we should consider
in our assessment of whether the Proposed Rules should apply to open-
end funds, closed-end funds or BDCs? What are the economic effects of
any such developments?
We request and encourage any interested person to submit comments
regarding the Proposed Rules, specific issues discussed in this release
or the 2016 Release, and other matters that may have an effect on the
Proposed Rules. We request comment from the point of view of
registrants, shareholders, directors, and other market participants. We
note that comments are of particular assistance to us if accompanied by
supporting data and analysis of the issues addressed in those comments,
particularly quantitative information as to the costs and benefits. If
alternatives to the Proposed Rules are suggested, supporting data and
analysis and quantitative information as to the costs and benefits of
those alternatives are of particular assistance. Commenters are urged
to be as specific as possible. All comments received to date on the
Proposed Rules will be considered and need not be resubmitted. If any
commenters who have already submitted a letter wish to provide
supplemental or updated comments, we encourage them to do so.
By the Commission.
Dated: April 16, 2021.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2021-08301 Filed 5-5-21; 8:45 am]
BILLING CODE 8011-01-P
