Client Alert

The SEC Approves the Elimination of Broker Discretionary Voting in All Director Elections

August 10, 2009

Jeffrey T. Hartlin

On July 1, 2009, the Securities and Exchange Commission (SEC) approved a landmark amendment to New York Stock Exchange (NYSE) Rule 452, Giving Proxies by Member Organizations (Rule 452). The amendment prohibits broker discretionary voting in all director elections, including uncontested elections, at stockholder meetings held on or after January 1, 2010 (other than 2009 annual meetings properly adjourned to 2010). Although companies registered under the Investment Company Act of 1940 are expressly exempted from the amendment, because Rule 452 applies to brokers who are members of the NYSE, it will impact nearly all other public companies. This includes companies listed on the NYSE, the Nasdaq Stock Market LLC and other national securities exchanges, as well as those traded in the over-the-counter market through quotation platforms such as the OTC Bulletin Board™ and the Pink Sheets®. The amendment to Rule 452 has the potential to dramatically impact the convening and outcome of uncontested director elections held by U.S. public companies. Issuers should begin preparing for this impact immediately to be ready for the upcoming 2010 proxy season.

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