SEC chairman proposes shifting shareholder proposal power to states

The U.S. Securities and Exchange Commission (SEC) is considering a significant shift in the regulation of shareholder proposals, potentially moving authority from the federal level to individual states. SEC Chairman Paul Atkins has voiced concerns that the current Rule 14a-8, which sets requirements for shareholder proposals in public companies' annual proxy statements, exceeds the commission's authority and infringes upon state laws.

In a regulatory notice, the SEC indicated it would consider rescinding Rule 14a-8 and returning the regulation of shareholder proposals to the states. This move has drawn criticism from investor activists, who argue it would create confusion due to the lack of uniform regulations across different states. For example, a new law in Texas requires investors to hold as much as $1 million worth of shares to file a resolution, a substantial increase from the current SEC requirement of $2,000.

Some experts suggest that if avenues for shareholder expression are narrowed, votes against corporate board members may become more prevalent. In a separate notice, the SEC also proposed to modernize the proxy solicitation process, aiming to align it with current technological advancements in shareholder communications. Activists fear these changes could unfairly restrict the speech of small investors.