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Spotlight on Proxy Matters — Receiving Proxy Materials

I only received a single sheet of paper telling me to go to a website. What does that mean?

That means that the company has chosen to rely on a SEC rule that allows them to send a one-page notice instead of a full package of proxy materials. This allows companies to save significant yearly printing and mailing costs, as well as help the environment. For more information about these SEC rules, click here.

I received a large package, but there is no card that asks me how I want to vote. What should I do?

This is a rare occurrence, but look at the documents inside. If one of them is an "information statement" instead of a "proxy statement," that means that the company is not asking you for your vote. Usually limited to smaller companies with very large shareholders, this means that the company already has enough votes to determine the outcome of the election, and therefore is not asking for your vote. Nonetheless, under SEC rules, they are giving you information about the particular corporate action that is occurring.

I received a large package with proxy materials. What is in it?

If you receive a full package of proxy materials asking you to vote at an annual meeting of shareholders, it will contain disclosure documents consisting of the annual report and proxy statement. In addition, you will receive either a proxy card or a voting instruction form, depending on whether you are a registered owner or a beneficial owner.

A proxy card is a ballot that "registered owners" or "record holders" (that is, shareholders whose names the company keeps on record as owners of the company's shares) can use to vote at company meetings.

Sample Proxy Card
sample proxy card

A voting instruction form is provided to beneficial owners (that is, investors who hold their shares through a broker or other financial institution). Rather than voting directly, the form allows a beneficial owner to instruct his or her broker or other securities intermediary how to vote their shares at company meetings.

Sample Voting Instruction Form
sample voting instruction form

What is a "registered" owner? What is a "beneficial" owner?

A shareholder of a public company may hold shares either directly with the company, as the registered owner or record holder, or indirectly (for example, through a bank or broker-dealer), as a beneficial owner. Beneficial owners holding their shares at a broker-dealer or bank are sometimes said to be holding shares in "street name."

How do I know whether I'm a registered owner or a beneficial owner?

The card included in your proxy package, if you receive a full package, will give you some indication. If it names your broker, then you are a beneficial owner. Generally, individuals who purchased their shares through a broker are beneficial owners. The majority of U.S. investors own their securities as beneficial owners through their brokers and banks. If you are unsure how you hold your shares, contact the company or your broker or bank.

What is the difference between registered and beneficial owners when voting on corporate matters?

There are no significant differences between registered and beneficial owners regarding the value of your shares. Both have the same rights to dividends, stock splits, and any appreciation or depreciation in the value of the stock.

There are differences, however, when it comes to voting on corporate matters. Registered owners (or record holders) receive a proxy and cast votes directly with the company that issues the shares. Beneficial owners, on the other hand, receive a "voting instruction form" directing their broker or other financial institution how to vote their shares. The broker-dealer (or bank or custodian) then casts the vote with the company after receiving instructions from its customer, the beneficial owner.

If I am a beneficial owner and want to cast my own vote in an election directly, rather than have my broker-dealer cast it for me, can I?

Yes. There are two ways you can do this: (1) become a registered owner or (2) attend the meeting and ask your broker to execute a proxy in your behalf.

  1. You can become a registered owner by asking your broker to do one of the following:

    • "Certificate" your position, in which case you will receive an actual certificate for your stock (the broker may charge you an additional fee for this service and you would lose some ability to quickly sell your shares because you would have to physically deliver the certificate to do so); or
    • Move your holdings into a "direct registration system" or "DRS" account at the company. DRS is a system that allows investors to hold the securities electronically on the records of the company and to electronically transfer those securities between the company and their broker.

    Before requesting a certificate, shareholders should contact their broker-dealer to determine the process, timeframes, and fees associated with certificating the securities held in the investor's broker-dealer account.

  2. Alternately, to vote directly at a particular meeting, you can check the box on the voting instruction form indicating you plan to attend, then attend the meeting, and then vote your shares at the meeting. This will serve as a request to attend the meeting in person and to vote your shares directly (instead of you voting through your broker). Your broker should then send you an executed proxy to vote your shares that are registered in the broker's name.

What is DRS?

DRS is a system that allows investors to hold the securities in registered form on the records of the company and to electronically transfer those securities between the company and their broker-dealer. Investors holding in DRS are registered owners, but receive statements evidencing their ownership positions rather than holding a certificate. Electronic transfers between a broker-dealer and the company's transfer agent generally takes about three days, but investors should contact the company's transfer agent or their broker-dealer to determine if the position can be moved in time to ensure the transfer occurs before the record date for a meeting.

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.
Modified: 05/24/2012