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SEC Rejection of Management Arguments to Block Vote on Shareholder Proposal for Investment Company Compliance (November 15, 2002) Copied below is the text of a November 15, 2002 response received from the Securities and Exchange Commission ("SEC") to an August 26, 2002 letter from a law firm engaged to represent Farmer Bros.,* after considering a September 26, 2002 reply letter from Franklin Mutual Advisers, LLC. As indicated, the SEC staff has rejected all of management's arguments as a basis for excluding the Franklin Mutual shareholder proposal for investment company controls and disclosures from the company's proxy statement for voting at the annual meeting. The SEC staff refers to Rule 14a-8(i), which permits excluding a shareholder proposal if it is defective or inappropriate. The lack of an explanation is consistent with normal SEC practice for responses to "no action" letters. In this case, since the staff states that they do not believe the rule permits excluding the proposal, management may expect the SEC to initiate an enforcement action if they omit the proposal from the company's proxy statement. Management's arguments had been that (1) the provisions of the proposal were too vague; (2) the provisions were too specific; and (3) implementing the proposal would subject the company to enforcement of regulations which it was violating. It should be assumed that management will now proceed with the scheduling of the 2002 meeting of shareholders, and that the company's proxy statement will present the Franklin Mutual proposal for voting at the meeting. ------------------- * The August 26, 2002 letter of the Farmer Bros. attorney has not yet been made available in electronic form. Requests for fax copies may be sent to farm@shareholderforum.com.
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