On February 22, the Securities and Exchange Commission adopted final rule changes to its notice and access proxy solicitation model (also known as the “notice-only option”) which provides for Internet availability of proxy materials following the provision to shareholders of a notice of Internet availability. The amendments to Exchange Act Rule 14a-16, which governs use of the notice-only option, aim to facilitate shareholders’ understanding of the proxy solicitation process and to improve shareholder response rates, which have been lower when companies have used the notice-only option than when companies mail a full set of proxy materials to shareholders. The final rules include several revisions to the proposed rule changes previously reported in the October 16, 2009, edition of Corporate and Financial Weekly Digest.
The final rule changes include amending Rule 14a-16(d) to eliminate the 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 requires notices to address these topics without specifying the exact language to be used. In response to comment letters, new Rule 14a-16(d)(2) requires that the notice (1) indicate that it is not a form for voting and presents only an overview of the proxy materials, and (2) encourage shareholders to review the proxy materials before voting.
New Rule 14a-16(f)(2)(iv) allows companies and soliciting shareholders to include along with the notice an explanation of the process of receiving or reviewing proxy materials and voting, as proposed. The SEC also incorporated commenters’ suggestions to permit companies and soliciting shareholders to explain to shareholders the reasons for using the notice-only option. Furthermore, in its adopting release, the SEC confirmed prior guidance that the notice need not directly mirror the proxy card in form.
Additionally, as proposed in its earlier release, the SEC amended Rule 14a-16(l)(2)(ii) to require a soliciting person other than the issuer electing to use 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 no later than the date such soliciting person files its definitive proxy statement.
Click here for the SEC’s release regarding the new proxy rules.