As part of efforts to reverse a decline in retail voter participation in corporate elections, the Securities and Exchange Commission has approved the proposed amendments to its so-called e-proxy rules and launched an investor education campaign.
The e-proxy amendments, detailed in a 32-page adopting release published Feb. 22, provide more flexibility in the format and content of the Notice sent to shareholders about how to vote and allow issuers to send shareholders materials along with the notice explaining the e-proxy rules and the reasons for the use of notice and access. Materials designed to persuade shareholders to vote a particular way or change the method of the delivery of proxy materials still aren't allowed.
The final rule takes effect 30 days after publication in the Federal Register.
As previously reported, the changes followed a sharp decline in retail voting at companies that only sent shareholders notices without a full set of paper proxy materials, as permitted under the rule. The decline in retail voting also sharpened quorum fears for some companies, since a rule change took effect this year that eliminated the prior practice of allowing brokers to vote uninstructed retail shares in uncontested director elections.
The final rule requires an issuer or other soliciting person to indicate that the Notice isn't a form for voting. Under the previous rule, some shareholders attempted to vote by mailing back their notices.
The final rule also confirms guidance provided in the Proposing Release that the Notice doesn't have to directly mirror the proxy card.
Under the final rule, soliciting persons other than the issuer must file a preliminary proxy statement within 10 calendar 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 Commission.
The adopting release notes that the staff will continue to monitor the effects of the notice-and-access model as part of a broader review underway of proxy mechanics and voting.
"While we are not in this release addressing the broader concerns with the proxy system or the notice-and-access model raised by commenters that went beyond the scope of the proposals, we are continuing to consider these and other concerns relating to the proxy process that have been raised," the release states. "The staff is conducting a comprehensive review of the mechanics by which proxies are voted and the way in which information is conveyed to shareholders and is preparing a concept release to seek public comment on these issues."
The Commission also announced educational efforts to increase investor understanding of proxy mechanics and the notice-and-access model, including an Investor Alert, New Shareholder Rules for the 2010 Proxy Season, and new online resources explaining the proxy voting process in plain language.
The Alert provides investors information on the changes to broker voting rules and the impact on proxy voting. A new proxy matters Spotlight page provides information on the mechanics of proxy voting, the e-proxy rules, corporate elections, and proxy matters generally.