Article by Laurence S. Lese , David J. Kaufman , Dietrich A. Loos and Peter D. Visalli
On October 14, 2009, the U.S. Securities and Exchange Commission (the "SEC") proposed amendments to the proxy rules under the Securities Exchange Act of 1934 that are intended to provide additional flexibility for issuers and other soliciting persons on the content and format of the Notice of Internet Availability of Proxy Materials (the "Notice"). In an effort to improve the clarity of the Notice and to better educate shareholders about the notice and access model, the SEC has proposed a new rule allowing issuers and other soliciting persons to accompany the Notice with an explanation of the process of reviewing and receiving proxy materials and voting. In addition, SEC Release No. 34-60825 (the "Release") provides guidance about the current requirement for the Notice to identify matters to be voted upon at the shareholders' meeting. Furthermore, the SEC has proposed revisions to the Notice delivery deadlines for soliciting persons other than issuers.
Changes to the Notice Requirements In support of the proposed amendments, the SEC cites reports indicating a decline in shareholder response rates to proxy materials among individual shareholders under the notice and access model, particularly for issuers using the notice-only option.1
The SEC expressed concern that its rules on the content and format of Notice may be causing confusion among shareholders—thus contributing to the decline.
The proposed amendments would mandate a brief legend in place of the current detailed legend. The amended legend in the Notice would be limited to the line "Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on [insert meeting date]." Following this legend, the Notice would address certain specified topics, as are in the current regulation, without specifying the exact language to be used, although it is likely that the new language would track the current language.
In addition, the SEC proposed that issuers and other soliciting persons following the notice-only option would be permitted to include an explanation of the process of receiving and reviewing the proxy materials and voting procedures. Although issuers and other soliciting persons would be permitted to include their own explanations, the SEC anticipates that many issuers would use standardized materials for this purpose. The Release notes that during...