SEC Investor Advocate Comments on Nasdaq Shareholder Approval Rules

The SEC Investor Advocate ("OIA") responded to Nasdaq's recent request for comments regarding its current shareholder approval rules (the "Rules") and whether they need to be changed.

The OIA made several recommendations:

• In order to address the concern that the Rules favor Nasdaq's well-capitalized companies at the expense of smaller companies, the OIA encouraged Nasdaq to consider enhancing qualitative listing standards for those well-capitalized companies that are listed on the Global Select Market instead of lowering standards on other tiers. Additionally, the OIA suggested a "race-to-the-top" approach to addressing any potential concerns about such disparate treatment.

• The OIA urged Nasdaq to consider the indirect impact of any rule change that would substitute some form of board committee approval for shareholders' approval, and whether independent directors can serve as adequate substitutes for shareholders in transactions that may involve heightened shareholders' risks.

The OIA criticized Nasdaq's comment request for not describing relevant academic literature on shareholder approvals, not attempting to review or provide empirical evidence on the topic, and not providing enough information and data about the ways in which changes to the Rules could affect investor protection and capital formation to allow interested parties to offer meaningful comments that could help to facilitate a more "evidence-based policymaking process."