- Broker non-votes: A “broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer with respect to shares held in a fiduciary capacity (generally referred to as being held in “street name”) that are not voted on a particular matter because voting instructions have not been received by the broker from the customer.
- Broker non-votes significant for quorum purposes in Delaware: A broker non-vote is present for quorum purposes if there is at least 1 “routine” matter. Otherwise, the brokers simply with the “non-voted” shares are not considered present at the meeting such that the “non-voted” shares are not tabulated as present for any matter even for the quorum purposes. Think of it as the difference between showing up and voting on one (routine) item and then walking out on the non-routine matters versus not showing up at all. Make sure your annual meeting contains a routine item - i.e., ratification of independent auditor. In sum, brokers hold legal title to the shares, as the owner of record, and therefore they have the legal authority to vote the shares in person or by proxy. If they do not receive instructions from the beneficial or “street” owner for a “non-routine” matter, the proxy is considered to be a “limited” proxy and the broker does not have authority to vote on that particular matter (i.e., considered a “broker non-vote” or “unvoted” shares), but does have authority to vote on discretionary (or “routine”) matters, at its discretion. The “limited” proxies in Berlin were granted by brokers holding shares, but for which no express directions had been given by the beneficial owner. The shares were “represented” at the shareholders meeting for the limited purpose of establishing a quorum and could be voted on discretionary (or “routine”) matters, all in according with the applicable rules of the New York Stock Exchange.' Licht v. Storage Technology Corp.,2005 WL 1252355 (Del.Ch., May 13, 2005).
- Dodd-Frank Connotation: Section 957 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) adopted new Section 6(b)(10) of the Securities Exchange Act. This provision requires all national securities exchanges to adopt rules that prohibit their members from voting on the election of a member of the board of directors of an issuer (except for a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940), executive compensation, or “any other significant matter, as determined by the Commission,” unless the member receives voting instructions from the beneficial owner of the shares.
- NYSE Rules 452.11 (as amended in September 2010) provides "[i]n the list of meetings of stockholders appearing in the Weekly Bulletin, after proxy material has been reviewed by the Exchange, each meeting will be designated by an appropriate symbol to indicate either (a) that members may vote a proxy without instructions of beneficial owners, (b) that members may not vote specific matters on the proxy, or (c) that members may not vote the entire proxy. Generally speaking, a member organization may not give or authorize a proxy to vote without instructions from beneficial owners when the matter to be voted upon" among other things,...(2) is the subject of a counter-solicitation, or is part of a proposal made by a stockholder which is being opposed by management (i.e., a contest);...(3) relates to a merger or consolidation (except when the company's proposal is to merge with its own wholly owned subsidiary, provided its shareholders dissenting thereto do not have rights of appraisal);...(19) is the election of directors, provided, however, that this prohibition shall not apply in the case of a company registered under the Investment Company Act of 1940; or...(21) relates to executive compensation. Make sure to call NYSE before you finalize your proxy statement.
- NASDAQ Rule 2251 currently (as of April 2016) governs when NASDAQ members may vote shares held for customers by adopting the FINRA Rules. The FINRA rule, in turn, currently prohibits members from voting any uninstructed shares, but also permits the member to follow the rules of another self regulatory organization (SRO) instead. In order to assure compliance, in all cases, with the newly adopted Section 6(b)(10), back in 2010, NASDAQ proposed to modify Rule 2251 to provide that in no event could a member vote uninstructed shares on the election of a member of the board of directors of an issuer (except for a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940), executive compensation, or “any other significant matter, as determined by the Commission,” unless instructed by the beneficial owner of the shares. In its final rule adopting the Nasdaq’s amendment to Rule 2251 to become compliant with the Dodd-Frank requirement, the SEC pointed out in foot note 12 thereto (see the final release: https://www.sec.gov/rules/sro/nasdaq/2010/34-62992.pdf): “The Commission has not, to date, adopted rules concerning other significant matters where uninstructed broker votes should be prohibited, although it may do so in the future. Should the Commission adopt such rules, we would expect Nasdaq to adopt coordinating rules promptly to comply with the statute.”
- Director's Abstention at Board Meeting: There is a Delaware case that supports the argument that a director who is present but does not vote at all is to be counted in the negative, Dillon v. Berg (326 F. Supp. 1214). It states, “It is established that where a statute requires a vote of a majority of directors present to pass a resolution, a director who is present and does not vote at all on the resolution is counted in the negative for the purpose of determining whether the resolution has been carried by a majority vote.” On the other hand, Section 144 of DGCL sets forth the circumstances in which an (interested) director’s vote can be considered void or voidable, that is, a contract or transaction between a corporation and 1 or more of its directors or officers, or between a corporation and any other corporation, partnership, association, or other organization in which 1 or more of its directors or officers, are directors or officers, or have a financial interest.
- "Solicitation in Opposition": Note 3 to Rule 14a-6 provides that the exclusion from filing a preliminary proxy does not apply for a “solicitation in opposition” in connection to the meeting. A “solicitation in opposition” is an independent solicitation by a shareholder. The SEC Staff believes that a company may not rely on Rule 14a-6 to omit a preliminary proxy filing if it knows—or reasonably should know—of a solicitation in opposition, notwithstanding the fact that the company does not “refer” to such a solicitation in its proxy statement. See Schedule 14A, Question 2 in the July 2001 Supplement to the Staff’s Manual of Publicly Available Telephone Interpretations. Also make sure you call the SEC Office of Mergers and Acquisitions regarding the nature of a potential independent solicitation by a shareholder.
- Rule 14a-8, including 14a-8(m) which relates to timing of issuer's definitive proxy material delivery if a shareholder proponent asks the SEC Staff to intervene because the shareholder doesn’t like the language in the company’s statement in opposition to the shareholder proposal, does not apply to independent solicitation by a shareholder.
- Liability. It doesn’t appear that there is any liability for filing a “deficient” preliminary proxy statement even though Note 2 to Rule 14a-6 warns companies that “the official responsible for the preparation of the proxy material should make every effort to verify the accuracy and completeness of the information required by the applicable rules.” However, if the same deficiencies exist when the company files the definitive proxy statement, it may be held liable under Rule 14a-9.
In the world-famous Nigerian Scam, a person is contacted via letter or email by a mysterious West African stranger outlining a secret path to untold riches. The stranger knows of a huge sum of cash or gold being hoarded in a vault somewhere, but to gain access to it, a bribe must go to a high-ranking official.
To reap a 30% share of the treasure, the "mark" is asked to deposit, say, $10,000 in the scammer's bank account to cover the bribe. The scammer assures the mark that things are proceeding as planned and asks for more money. When the mark finally runs out of cash or realizes the pot of gold does not exist, the scammer moves on to the next dupe. The con job, though idiotic and obvious, often succeeds.
Entire websites are devoted to warning the public about the Nigerian Scam. But how is this fraud, also known as the Nigerian 419 Scam (after the section of Nigerian law that covers the crime), any different from the Law School 419 Scam?
This scheme promises its gullible victims immense wealth and a brilliant future. It promises jobs that don't exist and careers that will never materialize. It offers degrees that are useless outside the state in which they were issued, and not much use inside. At the end of the line, the mark, often hundreds of thousands of dollars in debt, is left penniless.
![[image]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_va5BAIhZ3AXVBfbk04zElM5j_YMIKvNMbk7ojFReWv66juDFlvrqpoN4_iBqraXSZGDzbBfxpLGpfaWV92Co-lAvb3_BRKQjp6bOQ8Hq-bMj6otazTGV7PRpTDAW40IKG1cpwwMjcTZN39MntDXUcr6A=s0-d)
Bloomberg News
The mechanics of the Law School 419 Scam are very similar to those of the legendary Nigerian con job. First, the pigeon is asked to pony up a substantial amount of money to attend his first year in law school, despite the fact that law schools are cutting enrollment and some institutions are so embarrassed by the whole thing that they're setting up their own law firms to hire graduates. The powers-that-be assure the sucker that it's OK if he doesn't have the upfront money; the school knows people who will lend it to him. The vig is modest.
By the end of his first year, the mark has read a few articles warning that the legal industry is imploding. He's read that even graduates from Ivy League law schools are having a hard time landing jobs. He starts to wonder if he will ever see the big payoff he has been promised.
The scammer reassures him, telling him that to keep things percolating, he need only deposit an additional chunk of money in the scammer's account to pay for the second and the third year of school. At the same time, the mark is subjected to the Law School 419 Overpriced Law Book Scam.
At the end of the experience, the bamboozled sucker usually goes to work in retail.
People get really upset about the Nigerian Scam, but in their defense the Nigerians only ask for a few thousand dollars. Law schools ask for hundreds of thousands. And the Nigerian Scam does at least have a certain entertainment value: It makes the victim feel like he's been cast in a remake of the beguiling David Mamet/Steve Martin film "The Spanish Prisoner." Law schools provide no drama and no amusement. It's a straight rip-off.
These are by no means the only egregious scams that routinely impoverish the unknowing rube. There is also the Master's Degree in Gender Studies Scam, the Music Conservatory Scam, the Film School Scam and the Pas de Deux 419 Scam. Send us $150,000 and we can guarantee you a position in an orchestra somewhere. Or a career in Hollywood. Or a job as a ballerina.
We take checks, cash and money orders.
Other scams that have gone woefully unreported are the Cruise Ship Scam (send us a ton of money and we promise, promise that you won't end up tilted at a funny angle on a capsized ship off the coast of Cairo in December), the Any Movie Starring Colin Farrell Scam, the Managed Fund Scam, the Private School Scam (send us a hundred grand and we'll get that doofus into Yale no matter what) and the 30 Days to a Slimmer You Scam.
Perhaps the worst offender of all is The Political Action Committee 419 Scam. Send us thousands and thousands and thousands of dollars and we promise to get your capital-gains taxes lowered. Or at least get that scoundrel thrown out of office. Uh-oh; better send another check ASAP. Looks like we're going to need a bigger bribe.
To reap a 30% share of the treasure, the "mark" is asked to deposit, say, $10,000 in the scammer's bank account to cover the bribe. The scammer assures the mark that things are proceeding as planned and asks for more money. When the mark finally runs out of cash or realizes the pot of gold does not exist, the scammer moves on to the next dupe. The con job, though idiotic and obvious, often succeeds.
Entire websites are devoted to warning the public about the Nigerian Scam. But how is this fraud, also known as the Nigerian 419 Scam (after the section of Nigerian law that covers the crime), any different from the Law School 419 Scam?
This scheme promises its gullible victims immense wealth and a brilliant future. It promises jobs that don't exist and careers that will never materialize. It offers degrees that are useless outside the state in which they were issued, and not much use inside. At the end of the line, the mark, often hundreds of thousands of dollars in debt, is left penniless.
Bloomberg News
If Bernie Madoff were starting out today, he might found a law school.
By the end of his first year, the mark has read a few articles warning that the legal industry is imploding. He's read that even graduates from Ivy League law schools are having a hard time landing jobs. He starts to wonder if he will ever see the big payoff he has been promised.
The scammer reassures him, telling him that to keep things percolating, he need only deposit an additional chunk of money in the scammer's account to pay for the second and the third year of school. At the same time, the mark is subjected to the Law School 419 Overpriced Law Book Scam.
At the end of the experience, the bamboozled sucker usually goes to work in retail.
People get really upset about the Nigerian Scam, but in their defense the Nigerians only ask for a few thousand dollars. Law schools ask for hundreds of thousands. And the Nigerian Scam does at least have a certain entertainment value: It makes the victim feel like he's been cast in a remake of the beguiling David Mamet/Steve Martin film "The Spanish Prisoner." Law schools provide no drama and no amusement. It's a straight rip-off.
These are by no means the only egregious scams that routinely impoverish the unknowing rube. There is also the Master's Degree in Gender Studies Scam, the Music Conservatory Scam, the Film School Scam and the Pas de Deux 419 Scam. Send us $150,000 and we can guarantee you a position in an orchestra somewhere. Or a career in Hollywood. Or a job as a ballerina.
We take checks, cash and money orders.
Other scams that have gone woefully unreported are the Cruise Ship Scam (send us a ton of money and we promise, promise that you won't end up tilted at a funny angle on a capsized ship off the coast of Cairo in December), the Any Movie Starring Colin Farrell Scam, the Managed Fund Scam, the Private School Scam (send us a hundred grand and we'll get that doofus into Yale no matter what) and the 30 Days to a Slimmer You Scam.
Perhaps the worst offender of all is The Political Action Committee 419 Scam. Send us thousands and thousands and thousands of dollars and we promise to get your capital-gains taxes lowered. Or at least get that scoundrel thrown out of office. Uh-oh; better send another check ASAP. Looks like we're going to need a bigger bribe.
A version of this article appeared March 16, 2013, on page C11 in the U.S. edition of The Wall Street Journal, with the headline: Law Schools and Other Shameless Schemes.
Looking back, I have to admit that to some extent it was a scam even before summer 2008 when Lehman Brothers went belly up. Since summer 2008, it has definitely been a scam for a lot of law students.
Looking back, I have to admit that to some extent it was a scam even before summer 2008 when Lehman Brothers went belly up. Since summer 2008, it has definitely been a scam for a lot of law students.