The SEC has approved final amendments to its “notice and access” model of proxy material distribution (also known as “e-proxy”). Under current rules, companies and other soliciting persons must deliver to shareholders a Notice of Internet Availability of Proxy Materials (a “Notice”) in the exact form specified by the SEC and post proxy materials on a publicly accessible website. Soliciting persons can then elect to use a “notice-only” or a “full-set delivery” option (or some combination thereof) to distribute actual proxy materials to shareholders. Under the full-set delivery option, companies and other soliciting persons provide paper or e-mail copies of proxy materials as they did historically prior to adoption of e-proxy requirements.1 The SEC’s final e-proxy amendments were adopted substantially as proposed, with minor changes to reflect comments received. These amendments are effective March 29, 2010.
The amendments replace the SEC’s current legend for the Notice with a shorter legend that reads “Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on [insert meeting date].” Other information that was previously included in the legend must still be included in the Notice, but companies now have flexibility to tailor the language as they desire. Based on comments received, the SEC has also added a requirement that the Notice include an indication that it is not a form for voting and presents only an overview of the more complete proxy materials.
To further alleviate confusion as to whether the Notice can be used for voting purposes, the final release confirms that the Notice need not reflect the format and wording mandated by SEC rules for proxy cards as some companies had thought.
As an added option to help clarify the e-proxy process for shareholders, companies and other soliciting persons may include an explanation of the notice and access model with the Notice, so long as such explanation is limited to the process of receiving or reviewing proxy materials and voting. Additionally, to reflect comments received, the amendments also permit companies and other soliciting persons to include an explanation of the reasons for their use of the notice and access model. Statements intended to persuade shareholders to vote in a specific way or alter the method of delivery are not permitted.
Finally, the amendments extend the deadline for soliciting persons (other than the company) to deliver their proxy materials under the notice and access model in certain circumstances. Currently, such soliciting persons must send their Notices to shareholders by the later of (i) 40 calendar days before the shareholder meeting or action and (ii) ten calendar days after the company first sends its proxy statement or Notice to shareholders. Under the amendments, soliciting persons other than the company can send their Notices out as late as the date on which they file their definitive proxy statements with the SEC, so long as their preliminary proxy statements are filed no later than ten calendar days after the date that the company files its definitive proxy statement. The SEC chose not to specify a deadline before the meeting by which a soliciting person is required to mail the Notice, but noted that soliciting persons should provide the Notice and proxy materials with sufficient time for shareholders to review these materials and make an informed decision.
In the proposing release for the e-proxy amendments, the SEC sought comments on numerous aspects of the notice and access model generally, including whether the model has made proxy materials more or less accessible to shareholders and whether a 30-day deadline versus 40-day deadline would be more appropriate for companies to send their Notice to shareholders and post proxy materials online. The SEC chose not to address these comments in the final release, and instead stated that the Commission is continuing to consider these and other ways to further encourage shareholder participation. On a broader level, the Commission is conducting a comprehensive review of proxy voting mechanics and the ways in which proxy information is presented to shareholders and is preparing a concept release to seek public comment on these issues.