SEC proposal for universal e-proxy materials

By: Cydney Posner

The SEC has posted a new proposal regarding universal availability on the internet of proxy materials. In contrast to the voluntary notice and access model just adopted, the proposal would require issuers and other soliciting persons to post proxy materials on a web site and provide shareholders with notice of the availability of the proxy materials. The proposal would allow shareholders to choose whether to receive proxy materials on paper, by e-mail or internet. However, the proposal would also permit issuers to include a full set of proxy materials with the initial notice and thereby avoid compliance with the mailing deadline for the notice. As a result, the net effect of the proposal is to require posting of proxy materials and delivery of a notice of internet availability.

If adopted, the universal Internet availability amendments could become effective for large accelerated filers as soon as January 1, 2008, and for all other issuers as soon as January 1, 2009.

As with the voluntary e-proxy rules just adopted, the term "proxy materials" as used here includes proxy statements, proxy cards, information statements, annual reports to shareholders, notices of shareholder meetings, additional soliciting materials and any amendments to these materials, but does not include materials filed under Rule 14a-12.

Universal Internet Availability Model

The proposal would require issuers to comply with requirements that are substantially similar to the voluntary notice and access model just adopted, including the requirement to send to shareholders a plain English Notice of Internet Availability of Proxy Materials at least 40 calendar days before the meeting date or the date that votes, consents or authorizations may be used to effect a corporate action. The Notice would contain the same information as required under the voluntary model and would be subject to the same content limitations and SEC filing requirements.

As under the voluntary model, an issuer would have to make publicly accessible, free of charge, at the web site address specified in the Notice (which may not be an EDGAR address) all proxy materials identified in the Notice on or before the date that the Notice was sent to the shareholders. Any subsequent additional soliciting materials would need to be posted no later than the date on which the materials were first sent to shareholders or made public. The format, or formats, must be convenient for both reading online and printing on paper. The proxy materials would have to remain available on that web site through the conclusion of the shareholder meeting. An issuer would be required to provide copies at no charge to requesting shareholders and to allow shareholders to make a permanent election to receive in the future paper or e-mail copies of proxy materials. An issuer would also have to provide shareholders with a method to execute proxies as of the time the Notice is first sent to shareholders using methods as suggested in the voluntary rules just adopted. As with the voluntary rules, there would be a 10-day waiting period before an issuer could send a proxy card to a shareholder, unless the proxy card were accompanied or preceded by a copy of the proxy statement and ARS or another copy of the Notice. Householding would be available. Issuers would also need to observe the shareholder privacy and security requirements set forth in the voluntary rules. An issuer could not use the universal Internet availability model in the context of a business combination transaction.

Intermediaries and Non-Issuer Soliciting Persons

The proposed universal internet availability rules applicable to intermediaries and non-issuer soliciting persons are substantially the same as those adopted for the voluntary notice and access model.

Option to Send Full Set of Proxy Materials with Notice Under the Universal Internet Availability Model

The only significant distinction from the voluntary notice and access model is that, under the proposed universal internet availability model, a "full set" of proxy materials, including a proxy statement, ARS (if required) and proxy card or request for voting instructions (but not less than a full set), could accompany the Notice that is sent to shareholders and beneficial owners. As a result, issuers or other soliciting persons could furnish paper copies of the proxy materials to some or all of the shareholders in the first instance as part of the same delivery package. In that event, any reference to a shareholder’s right to request copies of the materials could be deleted from the Notice. In addition, if an issuer or other soliciting person sent a full set of the proxy materials with the Notice, it would not need to comply with the 40-day deadline in Rule 14a-16 for sending the Notice. For example, if an issuer were unable to meet the 40-day deadline, it could still begin its solicitation after that deadline so long as the Notice was accompanied by a full set of the proxy materials.

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