Amendments to the SEC's e-proxy rules highlighted a
series of measures announced by the Commission to educate investors
about proxy voting and to support greater investor participation in
corporate elections. The agency also issued an investor alert that
provides information related to the recent changes to broker voting
rules and the impact of those new rules on proxy voting, and created
new Internet resources that explain the proxy voting process in
plain language.
The changes to the proxy rules are intended to clarify
and provide additional flexibility regarding the format of the
notice of internet availability sent to shareholders and to permit
issuers and other soliciting persons to better communicate with
shareholders by including explanatory materials regarding the use of
the notice and access proxy rules and the voting process. The
amendments also revise the timeframe for delivering a notice to
shareholders when a soliciting person other than the issuer relies
on the notice and access proxy rules, and permit mutual funds to
accompany the notice with a summary prospectus.
The amended rules require the information appearing in
the notice to address certain topics, without specifying the exact
language to be used. Issuers and other soliciting persons must also
indicate that the notice is not a form for voting. All soliciting
persons may also provide an explanation of 1) the process of
receiving and reviewing the proxy materials and voting under the
notice and access proxy rules and 2) the reasons for the use of
notice and access. However, materials designed to persuade
shareholders to vote in a particular manner or change the method of
the delivery of proxy materials are not permitted under the revised
exception.
The Commission stated in the adopting release that it
did not address any broader concerns with the proxy system or the
notice and access model raised by commenters that went beyond the
scope of the proposals. However, Chairman Mary Schapiro has directed
the staff to conduct a comprehensive review of the mechanics by
which proxies are voted and the way in which information is conveyed
to shareholders, and to prepare a concept release to seek public
comment on these issues.
Timeline Changes for Other Soliciting
Persons
With regard to soliciting persons other than the
issuer, the amended rules require the filing of a preliminary proxy
statement within 10 calendar days after the issuer files its
definitive proxy statement. The soliciting person must also send its
notice to shareholders no later than the date on which it files its
definitive proxy statement.
The SEC revised the current rule, which requires
soliciting persons to send the notice to shareholders 10 calendar
days after the date that the issuer first sends its proxy materials
to shareholders, because its operation could create potential
compliance issues for the soliciting persons. The staff review of
filings could result in outstanding comments on a soliciting
person’s preliminary proxy statement more than 10 calendar days
after the soliciting person has initially filed. The practical
effect of this requirement was to limit that soliciting person’s
ability to use the notice-only option if the soliciting person was
unable to file its definitive proxy statement with the Commission by
that time. According to the SEC, the revised rule provides
sufficient time for a soliciting person to prepare its proxy
statement and respond to any staff comments, while still permitting
the soliciting person to use the notice and access model.
The amended rule does not provide for a specific
period of time before the meeting by which a soliciting person is
required to mail the notice. The SEC advised, however, that the
soliciting person should make the notice and proxy materials
available to shareholders with sufficient time for shareholders to
review the materials and make an informed voting decision.
Release No. 33-9108 will be published in a forthcoming
Report.