Opinion ID: 338688
Heading Depth: 1
Heading Rank: 3

Heading: Disclosure of stock purchases

Text: 28 During 1973 Medfield's nominees purchased an aggregate of 34,972 shares of Medfield common stock. Proxy Rule 14a.3(a), 17 C.F.R. § 240.14a-3(a), requires, in an election contest subject to Rule 14a-11, that certain information from Schedule 14B be included in the solicitation. Schedule 14A, 17 C.F.R. § 240.14a-101, Item 4(b). Schedule 14B requires a list of the purchases and sales of Medfield stock made within the past two years, the dates on which they were purchased or sold and the amount. 17 C.F.R. § 240.14a-102, Item 3(c). The purchases were not disclosed in Medfield's proxy material. 29 The district court found that Rule 14a-3 was thus violated, and further, that these nondisclosures also violated Rule 14a-9. Medfield concedes the 14a-3 violation, but contends that 14a-9 was not violated because the purchases were not material. While the district court made no finding on materiality we think that there was a substantial likelihood that knowledge of these purchases would have assumed actual significance in the deliberations of the reasonable shareholder. TSC Industries, Inc. v. Northway, Inc.,supra, --- U.S. at ----, 96 S.Ct. at 2133, 48 L.Ed.2d at 766. Although the total number of shares purchased by the nominees in 1973 represented only 4.9% of the voting stock, the great majority of those shares were purchased by a single nominee, the president of Medfield. A shareholder, being advised of this fact, might believe that this officer-nominee was attempting to acquire a degree of influence or control. Appellants, in their brief, concede that the disclosure of the purchases would have a tendency to affect a reasonable shareholder in determining how to vote, but argue that it is highly unlikely that this knowledge would have influenced any reasonable shareholder to vote against the management slate. Materiality does not depend on which way the information is likely to influence the shareholders to vote; rather it depends on whether the information is likely to influence the decision to vote.