Amendments to the SEC's e-proxy rules highlighted a series of measures announced by the Commission to educate investors about proxy voting and to support greater investor participation in corporate elections. The agency also issued an investor alert that provides information related to the recent changes to broker voting rules and the impact of those new rules on proxy voting, and created new internet resources that explain the proxy voting process in plain language.
The changes to the proxy rules are intended to clarify and provide additional flexibility regarding the format of the notice of internet availability sent to shareholders and to permit issuers and other soliciting persons to better communicate with shareholders by including explanatory materials regarding the use of the notice and access proxy rules and the voting process. The amendments also revise the timeframe for delivering a notice to shareholders when a soliciting person other than the issuer relies on the notice and access proxy rules, and permit mutual funds to accompany the notice with a summary prospectus.
The amended rules require the information appearing in the notice to address certain topics, without specifying the exact language to be used. Issuers and other soliciting persons must also indicate that the notice is not a form for voting. All soliciting persons may also provide an explanation of 1) the process of receiving and reviewing the proxy materials and voting under the notice and access proxy rules and 2) the reasons for the use of notice and access. However, materials designed to persuade shareholders to vote in a particular manner or change the method of the delivery of proxy materials are not permitted under the revised exception.
The Commission stated in the adopting release that it did not address any broader concerns with the proxy system or the notice and access model raised by commenters that went beyond the scope of the proposals. However, Chairman Mary Schapiro has directed the staff to conduct a comprehensive review of the mechanics by which proxies are voted and the way in which information is conveyed to shareholders, and to prepare a concept release to seek public comment on these issues.
Timeline Changes for Other Soliciting Persons
With regard to soliciting persons other than the issuer, the amended rules require the filing of a preliminary proxy statement within 10 calendar days after the issuer files its definitive proxy statement. The soliciting person must also send its notice to shareholders no later than the date on which it files its definitive proxy statement.
The SEC revised the current rule, which requires soliciting persons to send the notice to shareholders 10 calendar days after the date that the issuer first sends its proxy materials to shareholders, because its operation could create potential compliance issues for the soliciting persons. The staff review of filings could result in outstanding comments on a soliciting person’s preliminary proxy statement more than 10 calendar days after the soliciting person has initially filed. The practical effect of this requirement was to limit that soliciting person’s ability to use the notice-only option if the soliciting person was unable to file its definitive proxy statement with the Commission by that time. According to the SEC, the revised rule provides sufficient time for a soliciting person to prepare its proxy statement and respond to any staff comments, while still permitting the soliciting person to use the notice and access model.
The amended rule does not provide for a specific period of time before the meeting by which a soliciting person is required to mail the notice. The SEC advised, however, that the soliciting person should make the notice and proxy materials available to shareholders with sufficient time for shareholders to review the materials and make an informed voting decision.
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