By Anne Sherry, J.D.
NASAA is seeking comment on a proposal to require issuers to file proxy solicitation materials with the applicable state regulators within two business days after filing such materials with the SEC. Some NASAA committee members have observed proxy solicitations asking shareholders to vote on matters that raise investor protection concerns, like stripping out rights and protections derived from NASAA Statements of Policy that are a condition of state registration. Comments on the proposed amendments to the Form U-1 are due October 22.
The Corporation Finance Section Committee (“Section Committee”) and the Business Organizations and Accounting Project Group (“Project Group”) are requesting public comment to explore a possible solution to problems they have identified in some proxy solicitation materials. Project Group members have seen issuers propose to remove shareholder rights and protections from their governing documents that derive from NASAA Statements of Policy. Issuers are required to adopt these rights and protections as a condition of state registration, and it is not contemplated that they can later be stripped out while the offering remains state-registered. Members have also reviewed proxy statements that do not adequately disclose the proposed removal of these protections.
Issuers use NASAA’s Form U-1 to register their offerings in multiple states. While the form requires applicants to file additional documents as long as their state registration remains in effect, this requirement applies only to registration or offering statement amendments and the final prospectus (or any further amendments or supplements). Furthermore, not all NASAA members require the filing of proxy solicitation materials.
Accordingly, the Project Group is proposing to add a third set of filings to the update requirement of Form U-1. Like they currently do for registration or offering statement amendments and the final prospectus, Form U-1 would require issuers to agree to file proxy solicitation materials with the applicable state regulators within two business days after filing such materials with the SEC. This would include preliminary proxy statements, definitive proxy statements, definitive additional materials, and soliciting material.
The Project Group seeks comment on whether this list should exclude certain types of proxy solicitation materials in the interest of balancing investor protection and reducing compliance burdens. The Group notes that the proposed amendments would not create additional filing requirements for companies that are not subject to the federal proxy rules and are only distributing materials required by state corporate law.