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Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices
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separate proxy materials and entails substantial cost. Proposed Section 2.16
of the Bylaws provides CGM
stockholders an alternative path for having their nominees considered through the proxy process. This proposal is intended to respond to a stockholder proposal, submitted under Rule 14a8 of the Act, requesting that the Board take steps to implement a proxy access bylaw provision.50
The Exchanges state that, by permitting an Eligible Stockholder of CGM that meets the stated requirements to nominate directors and have its nominees included in CGMs annual meeting proxy statement,51 the proposal would strengthen the corporate governance of CGM, which the Exchanges believe is beneficial to both investors and the public interest.52 The Commission believes that the proposal to provide a process for stockholder proxy access in the Bylaws should help to provide the stockholders of CGM that meet the stated requirements of proposed Section 2.16 with an alternative opportunity to exercise their right to nominate directors for the Board, consistent with the Act.
The proposed rule changes, as modified by Amendment Nos. 1, would require CGM to include in its proxy materials information regarding the Stockholder Nominee and the Eligible Stockholder, including the Required Information, any Supporting Statement, and any other information CGM
determines to include relating to the Stockholder Nominee or the Eligible Stockholder.53 The Commission believes that the provision of such information could help stockholders to assess whether a nominee submitted pursuant to proposed Section 2.16
possesses the necessary qualifications and experience to serve as a director.
The proposed rule changes to the Bylaws limit the availability of proxy access in certain circumstances. For example, in order to be eligible to submit a nomination to be included in the proxy statement pursuant to 50 See supra note 5 and accompanying text. The Exchanges state that after receiving this stockholder proposal related to proxy access, CGM determined to take the stockholders requested steps to implement proxy access. See supra note 6 and accompanying text.
51 As discussed above, however, the Permitted Number of Stockholder Nominees under proposed Section 2.16 may not exceed the greater of two or 20% of the total number of directors in office, and under certain circumstances, could be less than two Stockholder Nominees. See proposed Bylaws Section 2.16c. See also supra notes 1617 and accompanying text.
52 See Notices, supra note 3, at 24058, 24065, 24089, 24082, 24051, and 24131, respectively.
53 See proposed Bylaws Section 2.16a. See also supra notes 1011 and accompanying text.

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proposed Section 2.16, a stockholder or a group of no more than 20
stockholders is required to own at least three percent of CGMs outstanding shares of capital stock continuously for at least three years.54 Furthermore, a stockholder may only nominate a director to be included in the proxy materials pursuant to proposed Section 2.16 if the stockholder represents that he or she acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control of CGM, and does not presently have such intent.55 The proposal also limits the number of director nominees submitted pursuant to proposed Section 2.16 that may be included in the proxy statement to the greater of two or 20% of the total number of directors of the Board.56 The proposal would allow CGM to disregard or omit director nominees submitted pursuant to proposed Section 2.16 from the proxy materials in certain circumstances, including when the Stockholder Nominee has provided any information to CGM or its stockholders that was untrue in any material respect or that omitted to state a material fact necessary to make the statements made, in light of the circumstances in which they were made, not misleading.57 Such limitations on proxy access seem designed to balance the ability of CGM
stockholders to participate more fully in the nomination and election process against the potential cost and practical difficulties of requiring inclusion of stockholder nominations in proxy materials.
As discussed above, the proposed proxy access provisions include safeguards that will help to ensure that any director nominees submitted pursuant to proposed Section 2.16
would qualify as independent directors and that the nominating shareholders nomination of the nominee, and the nominees membership on the Board, if elected, would not violate any applicable laws, rules or regulations of any government entity or relevant selfregulatory organization. Specifically, the proposal permits CGM to disregard and omit from the proxy materials any nominee whose election as a member of the Board would cause CGM to be in violation of the Bylaws, CGMs Certificate of Incorporation, the rules of the principal national securities 54 See proposed Bylaws Section 2.16fvi1. See also supra notes 1315 and accompanying text.
55 See proposed Bylaws Section 2.16d. See also supra note 21 and accompanying text.
56 See proposed Bylaws Section 2.16c. See also supra notes 8, 16, and 17 and accompanying text.
57 See proposed Section 2.16jx. See also supra notes 3436 and accompanying text.

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exchange on which CGMs capital stock is traded, or any applicable law, rule or regulation.58 CGM may also disregard or omit from the proxy materials any nominee who would not be an independent director under the Bylaws, the rules of the principal national securities exchange on which CGMs capital stock is traded,59 any applicable rules of the Commission, or any publicly disclosed standards used by the Board in determining and disclosing independence of CGMs directors.60 The Exchanges have represented that any independence standards adopted by the Board will apply uniformly to all director nominees, including Stockholder Nominees, and that any future independence standards adopted by the Board will comply with all applicable laws, rules, and regulations.61
In addition, the Stockholder Nominee must provide a written representation and agreement that, among other things, the nominee i is not and will not become a party to any Voting Commitment that has not been disclosed to CGM or any Voting Commitment that could reasonably be expected to limit or interfere with the Stockholder Nominees ability to comply, if elected as a director of CGM, with its fiduciary duties under applicable law, and ii will abide by and comply with the Bylaws, CGMs Certificate of Incorporation and applicable policies of CGM, including all applicable publicly disclosed 58 See proposed Bylaws Section 2.16jvi. See also supra notes 3436 and accompanying text.
59 The Commission notes that CGMs capital stock is listed on BZX and BZX is also currently the principal market on which CGMs stock is traded.
The Exchange has represented to Commission staff that for purposes of proposed Bylaws Section 2.16, the terms listed and traded have no meaningful difference in this context. The Commission notes that the national securities exchange that lists a security is the relevant exchange for compliance with listing standards including independence requirements. Although CGMs listing market is currently also the principal market on which its stock is traded, for the avoidance of confusion, the Commission believes CGM should amend this provision of its Bylaws to provide that CGM must comply with the listing standards of its listing market, including the independence requirements of its listing market, rather than those of the principal market on which its stock is traded, which market may change over time. See, e.g., Bylaws Section 3.3 At all times no less than twothirds of the members of the Board of Directors shall satisfy the independence requirements adopted by the Board of Directors for directors of CGM, as may be modified and amended by the Board of Directors from time to time, and which shall satisfy the independence requirements contained in the listing standards of each national securities exchange on which the common stock of CGM is listed. emphasis added.
60 See proposed Bylaws Section 2.16ji. See also supra notes 3436 and accompanying text.
61 See Amendment Nos. 1, supra note 4.

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