Friday, August 03, 2018

Staff addresses soliciting materials in update to C&DIs on proxy rules and Schedules 14A and 14C

By John Filar Atwood

A soliciting party may voluntarily submit a notice of exempt solicitation even if the party is not subject to 1934 Act Rule 14a-6(g)(1) as long as the cover of the notice clearly indicates that it is being filed voluntarily, according to the staff of the Division of Corporation Finance. The staff offered advice on this topic in an update to the compliance and disclosure interpretations (C&DIs) on the proxy rules and Schedules 14A and 14C. The new C&DIs replace the interpretations published in the manual of publicly available telephone interpretations and the March 1999 supplement to the telephone interpretations.

Rule 14a-6(g)(1) requires that any person who engages in a solicitation pursuant to 1934 Act Rule 14a-2(b)(1) and beneficially owns over $5 million of the class of securities that is the subject of the solicitation to furnish or mail to the Commission a statement containing the information specified in the notice of exempt solicitation. The statement must be sent no later than three days after the date the written solicitation is first sent or given to any security holder. 1934 Act Rule 14a-103 requires the soliciting party to attach only those written soliciting materials “required to be submitted” pursuant to Rule 14a-6(g)(1).

Voluntary filing. The staff stated that it will not object if a notice of exempt solicitation is filed voluntarily provided that the written soliciting material is submitted under the cover of notice of exempt solicitation, and the cover clearly states that the notice is being provided on a voluntary basis. In the staff’s view, disclosing that the submission is being made voluntarily will make it clear to investors the nature of the submission and that it is being made on behalf of a soliciting party who does not beneficially own more than $5 million of the class of subject securities.

Rule 14a-6(g)(1) requires a notice of exempt solicitation to contain the information specified in Rule 14a-103, including the name and address of the person relying on the exemption in Rule 14a-2(b)(1). The staff advised that when submitting a notice of exempt solicitation electronically on EDGAR, the written soliciting material cannot appear in the notice before the Rule 14a-103 information is presented.

Order of presentation. According to the staff, Rule 14a-103 is designed to be a “cover” to which previously disseminated written soliciting material is “attached.” Consequently, when submitting a notice on EDGAR, whether voluntarily or to satisfy the requirements of Rule 14a-6(g)(1), all of the information required by Rule 14a-103 must be presented in the submission before any written soliciting materials. The staff noted that this applies to any logo or other graphics used by the soliciting party.

The staff advised that to the extent that the notice itself is being used as a means of solicitation, the failure to present the Rule 14a-103 information in the manner described may be misleading within the meaning of 1934 Act Rule 14a-9. Any determination about whether the presentation of information is misleading will depend upon the particular facts and circumstances, the staff added.