By: Cydney Posner

The SEC has just issued a new series of no-action letters that permit companies to omit shareholder proposals based on proposed rule 14a-11, the proxy access proposal. Inquiring minds wonder if these letters portend the end of the SEC's proxy access proposal?

As you may recall, in October 2003, the SEC proposed rules that would have set up a mechanism for the inclusion in company proxy statements of nominees by long-term significant shareholders. Only companies that met certain criteria at a given time were to be subject to the rules. One of the triggering events for becoming subject to the new rules was the approval by majority shareholder vote of a shareholder proposal, submitted pursuant to Rule 14a-8, providing that the company become subject to the nomination procedure in proposed Rule 14a-11. To date, the SEC has permitted companies to omit proposals on the basis that they did not follow 14a-11 to the letter (and danced around a proposal at Disney, ultimately allowing the company to omit the proposal).

In a letter to Halliburton, dated February 7, 2005 ( WSB # 0207200529, with comparable letters to Qwest, WSB # 0207200528 and Verizon, WSB # 0207200530), Alan Beller, Corp Fin director, permitted omission of proxy access shareholder proposals complying with the rule. In effect, Beller rescinds the staff position indicated in the proposing release that a rule 14a-8 proposal providing that the company become subject to the security holder nomination procedure in proposed rule 14a-11 would not be excludable under rule 14a-8(i)(8). Beller states that "the intended staff position...represented a change... that the staff believed was necessary in light of the operation and expected timing of proposed rule 14a-11.

"Given the passage of time since the proposal of rule 14a-11 in Release No. 34-48626 without Commission action on that proposal, we have concluded that the position that the staff intended to take, as referred to in that release, regarding the application of rule 14a-8 to proposals providing that the company become subject to the security holder nomination procedure in proposed rule 14a-11 is no longer necessary or appropriate. In light of that conclusion, there appears to be some basis for your view that Halliburton may exclude the proposal under rule 14a-8(i)(8)...."

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