Jun. 26, 2023
Dear Securities and Exchange Commission (SEC), I am writing to express my concerns regarding the proposed rule S7-06-22, specifically in relation to granting voting rights to cash settled derivatives on par with shareholders. While I appreciate the intention to promote transparency and inclusivity, I believe this approach lacks logical coherence and fairness due to the absence of delivery requirements for these derivatives. Granting voting rights to cash settled derivatives, without the obligation of physical delivery, creates a discrepancy that undermines the fundamental principles of shareholder democracy. Shareholders, who own actual shares in a company, have a vested interest and contribute to the company's success through their capital investment. In contrast, cash settled derivatives represent mere financial instruments tied to the underlying stock price without any direct ownership or inherent connection to the company. This discrepancy between shareholders and cash settled derivatives leads to an unjust situation where undisclosed parties, who hold these derivatives, can potentially wield voting power that exceeds the actual ownership of the company's shares. This distortion in voting power not only contradicts the principles of fairness but also poses a risk to the governance of publicly traded companies. Furthermore, the concept of granting voting rights to cash settled derivatives, which do not require physical delivery, lacks logical coherence. Voting rights are traditionally associated with the responsibility and commitment of shareholders, as they bear the long-term risks and rewards of their investments. Allowing derivatives, which operate solely on the basis of financial contracts, to exercise the same voting rights as shareholders undermines the integrity of the voting process and dilutes the voice of true owners. In light of these concerns, I strongly urge the SEC to reconsider the proposed rule S7-06-22 and ensure that voting rights are allocated in a manner that accurately reflects the ownership and commitment of shareholders. It is crucial to uphold the principles of fairness, transparency, and shareholder democracy, which form the bedrock of our capital markets. Thank you for considering my comment on this important matter. Sincerely, -DS