On October 14, the Securities and Exchange Commission proposed rule changes to its notice and access proxy solicitation model in order to enhance shareholder comprehension of the “notice-only option” and improve shareholder response rates to proxy solicitations. The SEC adopted rules in 2007 allowing for proxy solicitations to be delivered either by providing notice to shareholders that proxy materials can be obtained via the Internet (the notice-only option) or by providing a traditional set of paper proxy materials to shareholders (the full-set delivery option).
In proposing its amendments to the delivery procedure for the notice-only option, the SEC cited its concern that shareholders have been less responsive to proxy solicitations using the notice-only option. The SEC also reported anecdotal instances where shareholders have misunderstood the purpose of the issuers’ notice regarding the electronic availability of proxy materials.
The SEC proposes, among other items, amending the notice and access provisions in Rule 14a-16 of the Exchange Act to provide additional flexibility by eliminating the current requirement to include a specific legend regarding the purpose of the notice, the online availability of proxy materials and the process for obtaining paper copies. The amended rule would require notices to address these topics without specifying the exact language to be used. The SEC also proposes to permit issuers and soliciting shareholders to include along with the notice an explanation of the process of receiving or reviewing proxy materials and voting. Presently, issuers are prohibited from including additional materials with the notice. These proposed changes are aimed at preventing shareholders from disregarding boilerplate language in the notice, as well as increasing issuers’ flexibility to explain the voting process to shareholders.
In addition, the SEC proposes to amend the deadlines under Rule 14a-16 to encourage broader use of the notice-only option by soliciting shareholders. The proposed rules would require a soliciting shareholder electing the notice-only option to file a preliminary proxy statement within 10 days after the issuer files its definitive proxy statement, and to send its notice to shareholders on the date the soliciting shareholder files its definitive proxy statement.
Public comments on the proposed rule amendments must be received by the SEC within 60 days after their publication in the Federal Register.
Click here for the SEC’s release regarding these proposed rules.