On February 22, 2010, the Securities and Exchange Commission ("SEC") adopted amendments to the procedures that it previously had adopted to promote the use of the Internet as a reliable and cost-efficient means of making proxy materials available to shareholders.
The "notice and access" proxy rules adopted in 2007 had required issuers and other soliciting persons to post their proxy materials on the Internet and provide shareholders with a Notice of Internet Availability of Proxy Materials (the "Notice"). Issuers and other soliciting persons were given the option to furnish a full set of printed proxy materials to all shareholders, or to send only the Notice to shareholders. Commentators pointed to significant cost savings for issuers providing Notice-only, but the level of shareholder responses to proxy solicitations fell.
Concerned that shareholders are confused when an issuer or other soliciting person uses the Notice-only option, the SEC now has adopted amendments to permit issuers and other soliciting persons to be more flexible regarding the format and content of the Notice. That includes the ability to include explanatory materials that describe the reason for using the Notice-only approach, as well the process by which shareholders can obtain proxy materials and vote. Still prohibited with respect to the Notice is the use of materials designed to persuade shareholders to vote in a particular way or change the method of delivery of proxy materials. Issuers and other soliciting persons are required to indicate that the Notice is not a form for voting.
For a soliciting person other than the issuer, the amendments permit the Notice to be sent to shareholders as late as the later of (i) 40 days before the shareholders meeting and (ii) the date on which the soliciting person files its definitive proxy statement with the Commission, provided that the soliciting person had filed a preliminary proxy within 10 calendar days after the issuer files its definitive proxy statement.
The adopting release also confirmed previous guidance that the Notice need not directly mirror the proxy card. Rather, the Notice must clearly and impartially identify each separate matter intended to be acted on that will be considered at the meeting.
The SEC notes in the adopting release that the staff is conducting a comprehensive review of the mechanics by which proxies are voted and the way in which information is conveyed to shareholders, and is preparing a concept release to seek public comment on these issues.
The amendments become effective March 29, 2010.