As part of the Securities and Exchange Commission’s (SEC) continuing review of the proxy disclosure and solicitation process, the SEC has recently proposed changes to the notice and access proxy rules to further facilitate informed shareholder participation in the proxy voting process and improve implementation of the notice and access model.
The revisions to the proxy rules proposed by the SEC are designed to permit issuers and other soliciting persons to more effectively use the notice and access model.
Proposed Rules
The SEC has proposed the following new proxy rules:
- Improving Clarity of the Notice
The current rule imposes strict requirements regarding the content of the Internet Availability Notice (the “Notice”) and requires that the Notice be presented in a prescribed format. In addition, the current rule imposes a strict prohibition on the types of materials that may accompany the Notice when an issuer or other soliciting person elects to follow the notice-only option. The new rule proposed by the SEC would provide issuers and other soliciting persons with additional flexibility in formatting and selecting the language to be used in the Notice. Rather than requiring a specific detailed legend, the new rule would require only that the information appearing on the Notice address certain topics, without specifying the exact language to be used.
- Providing Flexibility regarding Design of the Notice
The current rule has been interpreted by certain issuers to require them to comply with the specific formatting and content requirements rule for the disclosure of matters on the proxy card when identifying in the Notice each separate matter to be acted on at the meeting. The new rule proposed by the SEC would simply require that the Notice identify each matter that will be considered at the meeting, without having to mirror the format of the proxy card.
- Permitting Explanation of the Notice and Access Model
The current rules do not permit an issuer or soliciting person to include within the Notice any materials designed to persuade shareholders to vote in a particular manner or even any explanation of the basis for the decision to send only a Notice to shareholders. The new rule proposed by the SEC would permit issuers and other soliciting persons to accompany the Notice with an explanation of the notice and access model, including an explanation of the process of receiving and reviewing the proxy materials and of voting.
- Permitting Mutual Funds to Include a Summary Prospectus
The current rule permits a mutual fund to accompany its Notice with a prospectus or report to shareholders. In addition, the SEC recently adopted rule amendments that permit mutual funds to satisfy their prospectus delivery obligations by providing key information in the form of a summary prospectus. The new rule proposed by the SEC would permit mutual funds to accompany the Notice with a summary prospectus.
- Revising Notice Deadlines for Soliciting Persons
The current rules provides that if a soliciting person other than the issuer chooses to use the notice-only option, the soliciting person must send its Notice to shareholders by a date that is the later of (a) 40 calendar days before the shareholder meeting or (b) 10 calendar days after the issuer first sends its Notice to shareholders. The new rule proposed by the SEC would require the soliciting shareholder to file a preliminary proxy statement within 10 days after the issuer files its definitive proxy statement and to send its Notice to shareholders no later than the date on which it files its definitive proxy statement with the SEC.
The complete text of the proposed rule may be accessed at:
Release Nos. 33-9073; 34-60825; File No. S7-22-09
By: Steve Kronengold and David C. Zuckerbrot. © October 2009. All rights reserved.
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