Obtaining a Broker Letter & Short-termism

Usually obtaining a broker letter, evidencing ownership, to submit with a shareowner proposal is easy but sometimes it isn’t. I’d love to hear of difficulties you have experienced. Send me your story by email and maybe I’ll post it. Here’s my latest experience with TD Ameritrade. I must say, up until now they have been fine but this was just a little too bizarre not to share… and yes, I’m not always as polite as I should be.

From: James McRitchie |Date: 08/25/11 6:46 PM 1 Attachments| CSCO.pdf (137k)
Please send a broker letter evidencing ownership for Apple that I can submit along with a shareowner proposal for their next annual meeting. Because this letter may be referenced in the proxy, please do not include my account number. It would be helpful if the letter is signed, so that it doesn’t look like a draft. The letter should be addressed to me. However, in order to expedite delivery, please fax it to XXX at xxxxx. He is authorized to act as my agent with regard to this proxy filing. Because SEC rules require that shareowner proposals and evidence of ownership be submitted to a company on the same day, please call XXX at the same phone number, xxxxx, prior to faxing to ensure he is home. If there is any question as to his authorization to act as my agent, please contact me at xxxxx. See prior letter, attached, for Cisco.

The letter should indicate the following: “Pursuant to your request, this letter is to confirm that you have continuously held no less than 200 shares of Apple since at least August 1999.” Thanks for your help.

From: Message Center Client Services|Date: 08/26/11 9:03 AM
Dear James McRitchie, Thank you for your email inquiry. We will be happy to assist you with this, but we do need to wait til the company announces the record date for the annual meeting in 2012. Please reach out to us approximately one month before the Apple meeting. Best regards, Kristen of TD Ameritrade, Inc.

From: James McRitchie |Date: 08/26/11 10:42 AM
Kristen: Huh? From this year’s Schedule 14a http://www.sec.gov/Archives/edgar/data/320193/000119312511003231/ddef14a.htm

What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2012 annual meeting of shareholders?

Requirements for Shareholder Proposals to Be Considered for Inclusion in the Company’s Proxy Materials. Shareholder proposals to be considered for inclusion in the proxy statement and form of proxy relating to the 2012 annual meeting of shareholders must be received no later than September 9, 2011. In addition, all proposals will need to comply with Rule 14a-8 of the Securities Exchange Act of 1934 (the “Exchange Act”), which lists the requirements for the inclusion of shareholder proposals in company-sponsored proxy materials. Shareholder proposals must be delivered to the Company’s General Counsel by mail at 1 Infinite Loop, Cupertino, California 95014, MS: 301-4GC, by facsimile at (408) 253-7457 or by email at [email protected]

September 9th is not all that far away and proposals are taken in the order received (later similar proposals on the same subject are rejected). Early submission also provides opportunity for negotiations. I’m not sure why you are hesitating. Does Ameritrade have a policy of waiting until the last few days or something? I have never had this problem before.

From: Message Center Client Services|Date: 08/26/11 11:32 AMDear James McRitchie, Thank you for the information, however the link to the SEC.govs website you provided was for the meeting that took place on 2/23/2011. Our records show you voted “For” management on 2/22/2011.

If you have any questions or concerns, please reply to this email or call the Corporate Actions and Dividends Department at 888-723-8504, option 1. We are available Monday through Friday from 9 a.m. to 5:30 p.m. ET, excluding market holidays. We appreciate your business and look forward to serving your financial needs for many years to come.  Sincerely,  Jane of TD Ameritrade, Inc.

From: James McRitchie |Date: 08/29/11 11:19 AM
I can’t believe your resistance to providing a broker letter. Yes, the SEC filed document I refer to is from this year’s meeting. That is because the proxy is required to provide shareowners with the date that proposals are due for next year’s annual meeting. What does how I voted have to do with this request? Your statement about how I voted is like saying my eyes are brown… completely off topic. Please move this request up the line.

From this year’s Schedule 14a at http://www.sec.gov/Archives/edgar/data/320193/000119312511003231/ddef14a.htm

What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2012 annual meeting of shareholders?

Requirements for Shareholder Proposals to Be Considered for Inclusion in the Company’s Proxy Materials. Shareholder proposals to be considered for inclusion in the proxy statement and form of proxy relating to the 2012 annual meeting of shareholders must be received no later than September 9, 2011. In addition, all proposals will need to comply with Rule 14a-8 of the Securities Exchange Act of 1934 (the “Exchange Act”), which lists the requirements for the inclusion of shareholder proposals in company-sponsored proxy materials. Shareholder proposals must be delivered to the Company’s General Counsel by mail at 1 Infinite Loop, Cupertino, California 95014, MS: 301-4GC, by facsimile at (408) 253-7457 or by email at [email protected]

September 9th is not all that far away and proposals are taken in the order received (later similar proposals on the same subject are rejected). Early submission also provides opportunity for negotiations. I’m not sure why you are hesitating. Does Ameritrade have a policy of waiting until the last few days or something? I have never had this problem before.

Resolution By Phone

The next day I waited until past EDT and finally called. The first TD Ameritrade representative I spoke with told me they don’t provide letters evidencing ownership. I would have to gather up my statements to show how long I have held shares.

Working my way up the chain, I was finally able to talk with someone willing to issue the requested letter. I asked her why TD Ameritrade would be checking how I voted. She told me the representative probably misunderstood my request and thought I was asking if or how I had voted. I’m not sure how anyone could have missinterpreted my request in that way but apparently, they get that request fairly frequently. When they do, they look up our records through ProxyVote.com. I’m not sure I like the fact that brokerage staff can look up how I voted. However, even more troublesome is that they would report that I voted with “For” management, when I actually voted against two management recommendations. (see How I Voted at Apple)

I don’t want to make a mountain out of a molehill but it appears many brokerage staff know very little about proxy proposals and the role of brokers in supporting this key mechanism of corporate governance. Like many other brokers, TD Ameritrade offers dozens of courses and live workshops on trading stock and options. Wouldn’t it be nice if they offered something to investors (and to staff) that explained the fundamentals of corporate governance, especially how brokers fit in and how they can help shareowners? A broker could really differentiate itself if it offered a database of popular shareowner proposal templates and responses to counsel seeking no action letters from the SEC.

Unfortunately, brokers aren’t incentivized to get clients thinking like long-term investors. The more their clients treat stocks like betting slips at the races, the more commissions they will incur. Short-termism is at the root of many problems, from Enron to Lehman and global climate change.  Responsible long-term ownership would cure a world of ills. (What is Short Term? A Conversation Retesting Assumptions)

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