Jun. 27, 2023
Dear Securities and Exchange Commission, I am writing to express my concerns regarding the proposed amendment that would include cash-settled derivatives holders under beneficial ownership, particularly in relation to their voting rights. Specifically, I am referring to the proposed new Rule 13d-3(e), which deems a holder of a cash-settled derivative security as the beneficial owner of the reference equity securities if the derivative is held with the purpose or effect of changing or influencing the control of the issuer of the reference securities. Currently, the concept of beneficial owner encompasses those who directly or indirectly acquire voting rights or the right to dispose of the issuer's securities. However, in my opinion, those who hold derivatives entitling them to economic exposure to a covered class should not be considered beneficial owners for the purpose of voting rights. While I understand the importance of the rule change for reporting purposes and acknowledge the viewpoints expressed by several commenters in favor of it, I firmly believe that conferring voting rights on derivatives holders undermines the right of bona fide shareholders to have a say in corporate governance. Granting voting rights to derivative holders would only exacerbate the already chaotic process of shareholder voting in matters of corporate governance. Despite pleas from the Senate, House of Representatives, and the Council of Institutional Investors, fixing the proxy plumbing remains a non-significant priority on the SEC's long-term agenda, as highlighted in the provided link (https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202204RIN=3235-AM16). Moreover, assigning voting rights to derivative holders would worsen the existing problems of over-voting and verification of proxy votes that have not been adequately addressed. It is worth noting that the SEC issued an Advanced Notice of Proposed Rulemaking in 2010 (https://www.sec.gov/rules/concept/2010/34-62495.pdf) to tackle these issues, which remain unresolved. If derivative holders desire to vote on matters of corporate governance, I believe they should be required to exercise that right only through direct beneficial ownership of the underlying security. This approach ensures a more direct and accountable participation in the decision-making process. I kindly request the Securities and Exchange Commission to carefully consider these concerns before finalizing the rule change. It is essential to prioritize the interests of bona fide shareholders and maintain the integrity of the shareholder voting process. Thank you for your attention to this matter. I trust that you will thoroughly evaluate all comments received during the feedback period and make informed decisions that promote transparent and effective corporate governance. Sincerely, Christophe Rollinger