Speech by SEC Staff:
Opening Statement for Electronic Proxy Release:
SEC Open Meeting
Raymond A. Be
Special Counsel, Office of Rulemaking
Division of Corporation Finance
U.S. Securities and Exchange Commission
December 13, 2006
Good afternoon. The rule amendments that we are recommending for adoption are intended to facilitate the increased use of technology by issuers and other soliciting persons to furnish their proxy materials to investors. Specifically, the amendments establish a new "notice and access" model for making proxy materials electronically available to shareholders on an Internet website as an alternative to traditional delivery methods. The version of the notice and access model that we are recommending the Commission adopt is substantially similar to the version of the model that we proposed late last year. We received approximately 140 comment letters on the
e-proxy proposal and have made a few significant modifications to the proposed model in response to the public comment.
In a nutshell, the "notice and access" model would operate as follows for an issuer conducting a proxy solicitation:
First, the issuer would post its proxy materials on a publicly accessible Internet website, other than the Commission's EDGAR website. Second, the issuer would deliver a "Notice of Internet Availability of Proxy Materials" to shareholders 40 days or more before the shareholder meeting to which the proxy materials relate. The Notice would have to include:
- A prominent legend in bold-face type advising shareholders of the date, time and location of the shareholder meeting;
- The address of the Internet website where shareholders can access the issuer's proxy materials;
- A toll-free phone number, e-mail address and Web site that shareholders can use to request copies of the proxy materials, at no cost to the shareholder; and
- A clear and impartial description of the matters to be considered at the meeting, along with the issuer's recommendations regarding those matters.
The Notice would have to be written in Plain English and could not contain any information beyond the information permitted by our rules. An issuer could not deliver any other shareholder communication along with the Notice to ensure that the Notice is given prominence and does not get lost among several other types of communications. Concurrently with delivery of the Notice, the issuer must provide shareholders with a means to vote. Possible voting means would include electronic voting over the Internet and telephone voting, or a combination of various methods of voting.
We recognize that some issuers that choose to rely on the notice and access model may wish to send their shareholders a paper or electronic proxy card to encourage shareholders who haven't voted to vote. The final rules permit this but indicate that the issuer may not send shareholders a proxy card that is not accompanied by, and delivered through the same medium as, the proxy statement until at least 10 days have elapsed after the issuer first sent the Notice of Internet Availability of Proxy Materials to shareholders. At this point, we believe that shareholders will have had sufficient time to access the online version of the proxy statement or request paper copies of it. We made this revision to the proposal in response to numerous comments expressing concern that shareholders would receive a proxy card without having had access to the proxy statement.
Under the notice and access model, a shareholder could request delivery of a paper or e-mail copy of the proxy materials. The issuer would have to respond to such requests within three business days. Many commenters were concerned that requiring a shareholder who desired paper copies to make such a request every year for every security that he or she owned would be burdensome, particularly on those who own numerous securities. Therefore, we have revised the model to allow a shareholder to request to receive all future proxy materials in paper or by e-mail.
The notice and access model would operate in a similar manner with respect to the delivery of proxy materials to beneficial owners whose securities are held by broker and bank intermediaries. The intermediary would create its own Notice to be delivered to beneficial owners, deliver the Notice to them, respond to requests for paper copies of proxy materials from beneficial owners and process the proxy voting instructions returned by beneficial owners. Beneficial owners may also request that an intermediary forward paper or e-mail copies of the proxy materials for all future shareholder meetings for all securities held in his or her account with that intermediary.
The notice and access model also would be available to persons other than the issuer soliciting proxies, but with some differences.
- First, consistent with practices under the existing proxy rules, a soliciting person other than the issuer does not have to solicit all shareholders, but rather may specifically target certain types of shareholders, such as large holders. Under the notice and access model, a soliciting person could limit its proxy solicitation only to shareholders that have not previously requested paper copies of proxy materials.
- Second, because such a solicitation may be initiated in response to an issuer's solicitation, a soliciting person would have to send the Notice out by a date that is the later of: 40 days before the meeting or 10 days after the company files its proxy materials.
The Division recommends that the new rules not become effective until July 1, 2007 to provide issuers, soliciting persons, intermediaries and their agents with sufficient time to prepare systems to accommodate the new model. Voluntary early compliance with the notice and access model would not be permitted.
The Division also is presenting to the Commission a proposing release to make the notice and access model mandatory for all proxy solicitations not associated with a business combination transaction. The mandatory model would be substantially identical to the voluntary model. Under this proposed model, soliciting parties must send a Notice to all of its shareholders and post its proxy materials on a publicly accessible website. However, in order to provide flexibility to permit a soliciting person to determine how it conducts its proxy solicitation, the soliciting person would be allowed to send a paper or e-mail copy of the materials along with the Notice.
We are revising our recommendation to incorporate a change circulated to the commissioners' offices yesterday by the Division of Investment Management. As revised, the proposing release would permit a registered investment company to deliver its prospectus and/or shareholder reports together with the Notice if the mandatory model is adopted.
Thank you. We would be happy to answer any questions that you have about the two e-proxy releases before you.