On October 18, 2011, the SEC's Division of Corporation Finance (DCF) issued Staff Legal Bulletin No. 14F (SLB 14F) offering guidance on shareholder proposal issues arising under Rule 14a-8 under the Exchange Act.

The DCF provided guidance on which brokers and banks constitute record holders under Rule 14a-8(b)(2)(i). It is no longer following The Hain Celestial Group, Inc., SEC No-action Letter (October 1, 2008), where it had taken the position that an introducing broker could be considered a record holder for purposes of Rule 14a-8(b)(2)(i). Going forward, only Depository Trust Company (DTC) participants will be viewed as record holders of securities deposited at the DTC.

In circumstances where a shareholder's broker or bank is not a DTC participant, a shareholder can satisfy Rule 14a-8(b)(2)(i) by obtaining and submitting two proof of ownership statements:

The two statements must verify that, at the time the proposal was submitted, the shareholder had continuously held the required amount of securities for at least one year.

In addition, the DCF offered guidance on how shareholders can avoid errors when submitting proof of ownership. The DCF noted two common errors made by shareholders when submitting their proof of ownership statements:

To avoid these two errors, the DCF recommends that shareholders arrange for the written statement of ownership to use the following language: "As of [date the proposal is submitted], [name of shareholder] held, and has held continuously for at least one year, [number of securities] shares of [company name] [class of securities]." This format is acceptable for Rule 14a-8(b) purposes, but is not mandatory or exclusive.

The DCF also offered guidance on:

For more information on shareholder proposals, see Practice Notes, What's Market: Stockholder Proposals 2011 and What's Market: Excluding Stockholder Proposals.