SECURITIES AND EXCHANGE COMMISSION 

17 CFR PARTS 240, 249 and 274 

[RELEASE NOS. 34-55146; IC-27671; File No. S7-10-05] 

RIN 3235-AJ47 

INTERNET AVAILABILITY OF PROXY MATERIALS 

AGENCY: Securities and Exchange Commission. 

ACTION: Final rule; request for comment on Paperwork Reduction Act burden 

estimates. 

SUMMARY: We are adopting amendments to the proxy rules under the Securities 

Exchange Act of 1934 that provide an alternative method for issuers and other persons to 

furnish proxy materials to shareholders by posting them on an Internet Web site and 

providing shareholders with notice of the availability of the proxy materials. Issuers must 

make copies of the proxy materials available to shareholders on request, at no charge to 

shareholders. The amendments put into place processes that will provide shareholders 

with notice of, and access to, proxy materials while taking advantage of technological 

developments and the growth of the Internet and electronic communications. Issuers that 

rely on the amendments may be able to significantly lower the costs of their proxy 

solicitations that ultimately are borne by shareholders. The amendments also might 

reduce the costs of engaging in a proxy contest for soliciting persons other than the 

issuer. The amendments do not apply to business combination transactions. The 

amendments also do not affect the availability of any existing method of furnishing proxy 

materials. 

DATES: Effective Date: March 30, 2007. 
Compliance Date: Persons may not send a Notice of Internet Availability of Proxy 

Materials to shareholders prior to July 1, 2007. 

Comment Due Date: Comments on the Paperwork Reduction Act burden estimate should 

be received on or before March 30, 2007.

ADDRESSES: Comments may be submitted by any of the following methods: 

Electronic comments:

• Use the Commission’s Internet comment form 

(http://www.sec.gov/rules/final.shtml); or 

• Send an e-mail to rule-comments@sec.gov. Please include File Number 

S7-10-05 on the subject line; or 

• Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow 

the instructions for submitting comments. 

Paper comments:

• Send paper comments in triplicate to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 100 F Street, NE, Washington, DC 

20549-1090. 

All submissions should refer to File Number S7-10-05. To help us process and review 

your comments more efficiently, please use only one method. The Commission will post 

all comments on its Internet Web site (http://www.sec.gov/rules/final.shtml). Comments 

also are available for public inspection and copying in the Commission’s Public 

Reference Room, 100 F Street, NE, Washington, DC 20549. All comments received will 

be posted without change; we do not edit personal identifying information from 

2
submissions. You should submit only information that you wish to make publicly 

available. 

FOR FURTHER INFORMATION CONTACT: Raymond A. Be, Special Counsel, 

Office of Rulemaking, Division of Corporation Finance, at (202) 551-3430, Securities 

and Exchange Commission, 100 F Street, NE, Washington, DC 20549-3628. 

SUPPLEMENTARY INFORMATION: We are amending Rules 14a-2,1 14a-3,2 14a4,3

 14a-7,4 14a-8,5 14a-12,6 14a-13,7 14b-1,8 14b-2,9 14c-2,10 14c-3,11 14c-5,12 14c-7,13

Schedule 14A,14 Schedule 14C,15 Form 10-K,16 Form 10-KSB,17 Form 10-Q,18 and Form 

10-QSB,19 under the Securities Exchange Act of 193420 and Form N-SAR21 under the 

 

1

 17 CFR 240.14a-2. 

2

 17 CFR 240.14a-3. 

3

 17 CFR 240.14a-4. 

4

 17 CFR 240.14a-7. 

5

 17 CFR 240.14a-8. 

6

 17 CFR 240.14a-12. 

7

 17 CFR 240.14a-13. 

8

 17 CFR 240.14b-1. 

9

 17 CFR 240.14b-2. 

10 17 CFR 240.14c-2. 

11 17 CFR 240.14c-3. 

12 17 CFR 240.14c-5. 

13 17 CFR 240.14c-7. 

14 17 CFR 240.14a-101. 

15 17 CFR 240.14c-101. 

16 17 CFR 249.310. 

17 17 CFR 249.310a. 

18 17 CFR 249.308a. 

19 17 CFR 249.308b. 

20 15 U.S.C. 78a et seq. 

21 17 CFR 249.330 and 274.101. 

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Exchange Act and the Investment Company Act of 1940.22 We also are adding new Rule 

14a-16 under the Exchange Act. 

Table of Contents 

I. Introduction 

II. Description of the Amendments 

A. The Notice and Access Model for Issuers 

1. Notice of Internet Availability of Proxy Materials 

 a. Householding 

 b. Security and Privacy on the Internet 

 i. Theft of Identification or Control Numbers 

 ii. Phishing 

iii. Misuse of Information by Issuers and Other 

Soliciting Persons 

2. Proxy Card 

3. Internet Web Site Posting of Proxy Materials 

4. Period of Reliance 

5. State Law Notices 

6. Additional Soliciting Materials 

7. Requests for Copies of Proxy Materials 

B. The Role of Intermediaries 

 1. Background 

 2. Discussion of the Amendments 

 3. Request for Copies by Beneficial Owners 

C. Soliciting Persons Other Than the Issuer 

 1. Mechanics of Proxy Solicitations by Persons Other Than the Issuer 

2. Timeframe for Sending Notice of Internet Availability of Proxy 

Materials 

3. Content of the Notice of Internet Availability of Proxy Materials of 

a Soliciting Person Other Than the Issuer 

4. Shareholder Lists and the Furnishing of Proxy Materials by the 

Issuer 

5. The Role of Intermediaries with Respect to Solicitations by 

Persons Other Than the Issuer 

D. Business Combination Transactions 

E. Compliance Date and Monitoring 

IV. Conforming and Correcting Revisions to the Proxy Rules 

V. Paperwork Reduction Act 

 A. Background 

 B. Summary of Amendments 

 C. Comments on PRA Estimates 

VI. Cost-Benefit Analysis 

 

22 15 U.S.C. 80a-1 et seq. 

4
 A. Background 

 B. Summary of Amendments 

 C. Benefits 

 D. Costs 

VII. Consideration of Burden on Competition and Promotion of Efficiency, 

Competition and Capital Formation 

VIII. Final Regulatory Flexibility Analysis 

 A. Need for the Amendments 

 B. Significant Issues Raised by Public Comment 

 C. Small Entities Subject to the Amendments 

 D. Reporting, Recordkeeping and Other Compliance Requirements 

 E. Agency Action to Minimize Effect on Small Entities 

IX. Statutory Basis and Text of Amendments 

I. Introduction 

On December 8, 2005, we proposed amendments to update the proxy rules to take 

greater advantage of communications technology by supplementing the existing 

regulatory framework with an alternative “notice and access” proxy model that could 

reduce significantly the printing and mailing costs associated with furnishing proxy 

materials to shareholders.23 Under the notice and access model that we proposed, an 

issuer would be able to satisfy its obligations under the Commission’s proxy rules by 

posting its proxy materials on a publicly-accessible Internet Web site (other than the 

Commission’s EDGAR Web site) and providing shareholders with a notice informing 

them that the materials are available and explaining how to access those materials. Under 

the proposal, an issuer relying on the model would be required to provide a requesting 

shareholder with a copy of the proxy materials in paper or by e-mail, at no charge to the 

 

23 Release No. 34-52926 (Dec. 8, 2005) [70 FR 74597]. For purposes of this release only, 

the term “proxy materials” includes proxy statements on Schedule 14A, proxy cards, 

information statements on Schedule 14C, annual reports to security holders required by 

Rules 14a-3 and 14c-3 of the Exchange Act, notices of shareholder meetings, additional 

soliciting materials, and any amendments to such materials. For purposes of this release, 

the term does not include materials filed under Rule 14a-12. 

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shareholder. We proposed that soliciting persons other than the issuer also would be able 

to rely on the notice and access model. 

We received approximately 140 comment letters on the proposed notice and 

access model from a variety of interested parties, including issuers and their agents, 

shareholders, intermediaries and their agents, financial printers, manufacturers of mailing 

products, and academics. There was significant disagreement among the commenters 

regarding these key issues raised by the proposed model: 

• The sufficiency of current Internet access among the U.S. population such 

that the proposed model would be desirable;24

• The effect that the proposed notice and access model might have on levels 

of proxy voting by shareholders; 25

• The level of security and privacy on the Internet;26

 

24 See, for example, letters suggesting that current rates of Internet access are sufficient 

from American Bar Association (ABA), America’s Community Bankers (ACB), 

Association of Ameritech SBC Retirees (SBC Retirees), Business Roundtable (BRT), 

Computershare Ltd. (Computershare), Proxinvest, Gary Tannahill, Hermes, Investment 

Company Institute (ICI), Securities Transfer Association (STA), and Sullivan & 

Cromwell. But also see, for example, letters from Association of BellTel Retirees 

(BellTel Retirees), Todd Collier, Joel Brown, James Davis, Donna Garal, Clark Green, 

Heather Harper, Frank Inman, William Lafollette, James Phipps, Beth Spletter, Megan 

Stroinski, and the United States Postal Service (USPS) suggesting that those rates are not 

sufficient.

25 Some commenters believed that the proposed model might result in a decline in voting by 

shareholders. See, for example, letters from Automatic Data Processing, Inc. (ADP), 

James Angel, Timothy Buchman, State Board of Administration of Florida (Florida State 

Board), Fund of Stockowners Rights (Stockowners Rights), IR Web Report, and 

Securities Industry Association (SIA). However, other commenters believed the rules 

may increase shareholder voting by facilitating the voting process. See, for example, 

letters from AFL-CIO, Robert Atkinson, Institutional Shareholder Services (ISS), 

Proxinvest, and Society of Corporate Secretaries and Governance Professionals 

(SCSGP). 

26 See, for example, letters from James Angel, Todd Collier, James Davis, William 

LaFollette, Matthew McGuire, and USPS.

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• The extent of potential savings to issuers and those conducting proxy 

contests that choose to rely on the proposed model;27 and 

• Whether the proposed model may make the proxy delivery system, 

particularly as it relates to beneficial owners holding in street name 

through their brokers or other intermediaries, too complex.28

Several commenters suggested revisions related to the proposed notice and access 

model, including the following: 

• The proposed rules should allow a shareholder to make an election to 

receive paper copies of the proxy materials with respect to any future 

solicitations that would remain in place until subsequently revoked by the 

shareholder;29

• An issuer should have to make the proxy card available to shareholders 

through the same medium it uses to make the proxy statement available to 

them;30

• The Commission should review and simplify the proxy delivery system as 

a whole rather than addressing the issue of electronic delivery of proxy 

materials in isolation;31 and 

 

27 See, for example, letters from ADP and Computershare. 

28 See letter from ABA. 

29 See letters from American Business Council (ABC), AFL-CIO, James Angel, CALSTRS, 

Florida State Board, Ohio Public Employees Retirement System (OPERS), San Diego 

City Employees’ Retirement System (San Diego Retirement), SIA, William Sjostrom, 

Stocklein Law Group, Swingvote, and Paul Uhlenhop. 

30 See letters from ACB, AFL-CIO, Amalgamated Bank of LongView Funds 

(Amalgamated Bank), BellTel Retirees, Council of Institutional Investors (CII), Florida 

State Board, Carl Hagberg, International Brotherhood of Teamsters (Teamsters), National 

Retiree Legislative Network (NRLN), San Diego Retirement, and Swingvote. 

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• The New York Stock Exchange (“NYSE”) should review its current 

schedule of maximum fees that its member firms may charge issuers to 

forward issuers’ proxy materials to beneficial owners.32

Although there was a mixed reaction to the proposal,33 we believe that current 

levels of access to the Internet merit adoption of the notice and access model as an 

alternative to the existing proxy distribution system. In this regard, we note that more 

than 10.7 million beneficial shareholders already have given their affirmative consent to 

electronic delivery of proxy materials and approximately 87.8% of shares voted were 

voted electronically or telephonically during the 2006 proxy season.34 Moreover, 

research submitted to us during the comment period indicates that approximately 80% of 

investors in the United States have access to the Internet in their homes, a greater 

percentage than we estimated at the proposing stage.35 Several commenters expressed 

the view that the current level of Internet usage is sufficiently high to warrant adoption of 

the proposed notice and access model.36 Although some commenters did not think that 

 31 See, for example, letters from BRT, Committee of Concerned Shareholders (Concerned 

Shareholders), Computershare, Carl Hagberg, Mellon, and STA. 

32 See letters from BRT, Computershare, and SCSGP. 

33 It appeared that many commenters opposing adoption mistakenly believed that they 

would lose the ability to receive paper copies. Others objected to having to request paper 

copies under the notice and access model. See, for example, letters from Arthur 

Comings, Dave Few, George Liddell, Robert Link, and Chloris Wolski. 

34 According to data available on the Web site of ADP. See 

www.ics.adp.com/release11/public_site/about/stats.html. 

35 See letter from ADP. At the proposing stage, we estimated that 75% of people in the 

United States had Internet access, but we did not have an estimate for the percentage of 

investors with Internet access. 

36 See, for example, letters from ABA, ACB, BRT, Computershare, Hermes, ICI, 

Proxinvest, SBC Retirees, STA, Sullivan & Cromwell, and Gary Tannahill,. 

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Internet access is sufficiently widespread, particularly among seniors,37 to warrant 

implementation of the proposed model at this time,38 the requirement that any 

shareholder lacking Internet access, or preferring delivery of a copy of the proxy 

materials, can make a permanent request to receive a copy of the proxy materials (and all 

future proxy materials) at no charge should substantially mitigate the concern about 

Internet access. 

Therefore, we are adopting the proposal substantially as proposed. The final rules 

are intended to allow issuers and other soliciting persons to establish procedures that will 

promote use of the Internet as a reliable and cost-efficient means of making proxy 

materials available to shareholders. Among those shareholders who access the proxy 

materials electronically, the rules also may increase the use of the Internet for voting 

proxies. An issuer’s or other soliciting person’s election to follow the notice and access 

model will be voluntary.39

Under the final rules, as discussed in more detail below, an issuer may satisfy its 

obligation under the Commission’s proxy rules to furnish proxy materials to shareholders 

in connection with a proxy solicitation by posting its proxy materials on a publiclyaccessible Internet Web site (other than the Commission’s EDGAR Web site) and 

sending a Notice of Internet Availability of Proxy Materials (“Notice”) to shareholders at 

least 40 calendar days before the shareholder meeting date indicating that the proxy 

 

37 See, for example, letters from American Association of Retired Persons (AARP), BellTel 

Retirees, Timothy Buchman, Todd Collier, NRLN, Printing Industries of America (PIA), 

Stockowners Rights, and Telephone Pioneers of America. 

38 See, for example, letters from BellTel Retirees, Joel Brown, Todd Collier, James Davis, 

Donna Garal, Clark Green, Heather Harper, Frank Inman, William Lafollette, James 

Phipps, Beth Spletter, Megan Stroinski, and USPS. 

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materials are available and explaining how to access those materials.40 Shareholders 

must have a means to execute a proxy as of the time on which the Notice is sent.41 The 

Notice also must explain how a shareholder can request a copy of the proxy materials and 

how a shareholder can indicate a preference to receive a paper or e-mail copy of any 

proxy materials distributed under the notice and access model in the future. An issuer 

may not send a proxy card along with the Notice; however, 10 calendar days or more 

after sending the Notice, the issuer may send a proxy card to shareholders.42 If an issuer 

chooses to send a proxy card without a copy of the proxy statement under this provision, 

a copy of the Notice must accompany the proxy card so that recipients will be notified 

again about the Web site on which the proxy statement is accessible. Finally, the notice 

and access model may not be used in conjunction with a proxy solicitation related to a 

business combination transaction. 

 39 In a companion release, the Commission is proposing to require issuers and other 

soliciting persons to follow a substantially similar model. See Release No. 34-55147. 

40 An issuer or other soliciting person also must continue to comply with Exchange Act 

Rules 14a-6 [17 CFR 240.14a-6] and 14c-5 [17 CFR 240.14c-5], which require the issuer 

or other soliciting person to file its proxy statement (or information statement) and 

additional soliciting material with the Commission. An issuer also must continue to 

comply with Exchange Act Rules 14a-3(c) [17 CFR 240.14a-3(c)] and 14c-3(b) [17 CFR 

240.14c-3(b)], which require an issuer to submit copies of its annual report to security 

holders to the Commission. The rules that we are adopting in this release do not affect 

any current Commission filing requirement, except that an issuer or other soliciting 

person following the notice and access model would be required to file the Notice as 

additional soliciting material under Exchange Act Rule 14a-6(b) [17 CFR 240.14a-6(b)]. 

41 As discussed in more detail in Section II.A.2 of this release, an issuer or any other 

soliciting person must provide a means for executing proxies available at the time the 

Notice is sent. It may not wait until it sends a paper or e-mail copy of the proxy card 10 

calendar days or more after sending the Notice to provide shareholders with a means to 

execute a proxy. 

42 An issuer may send a proxy card to shareholders before the conclusion of the 10-day 

period if the proxy card is accompanied or preceded by a copy, via the same medium, of 

the proxy statement and annual report to security holders if required by Rule 14a-3(b). 

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Shareholders and other persons conducting their own proxy solicitations may rely 

on the notice and access model under requirements substantially similar to the 

requirements that would apply to issuers. As a result, these rules may have the effect of 

reducing the cost of engaging in a proxy contest. However, unlike the requirements for 

an issuer, a soliciting person other than the issuer may selectively choose the shareholders 

from whom it desires to solicit proxies without the need to send an information statement 

to all other shareholders. 

The new rules do not affect the availability of other means of providing proxy 

materials to shareholders, such as obtaining affirmative consents for electronic delivery 

pursuant to existing Commission guidance.43 Thus, an issuer may rely on affirmative 

consents to furnish proxy materials to some shareholders, and rely on the notice and 

access model to furnish the materials to others. 

We are making several significant revisions to the proposed notice and access 

model in response to commenters’ concerns. First, the final rules do not permit a proxy 

card to accompany the Notice as we originally proposed, although the rules do permit an 

issuer or other soliciting person to send a proxy card 10 calendar days or more after it 

 

43 Release No. 33-7233 (Oct. 6, 1995) [60 FR 53458] (the “1995 Interpretive Release”) 

provided guidance on electronic delivery of prospectuses, annual reports to security 

holders and proxy solicitation materials under the Securities Act of 1933 [15 U.S.C. 77a 

et seq.], the Securities Exchange Act of 1934, and the Investment Company Act of 1940. 

Release No. 33-7288 (May 9, 1996) [61 FR 24644] (the “1996 Interpretive Release”) 

provided guidance on electronic delivery of required information by broker-dealers and 

transfer agents under the Securities Act, the Exchange Act, and the Investment Company 

Act. Release No. 33-7856 (Apr. 28, 2000) [65 FR 25843] (the “2000 Interpretive 

Release”) provided guidance on the use of electronic media to deliver documents under 

the federal securities laws, an issuer’s liability for Web site content, and basic legal 

principles that issuers and market intermediaries should consider in conducting online 

offerings. 

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sends the Notice, provided that a copy of the Notice or accompanies the proxy card.44 

Second, we are adopting a requirement that issuers and other soliciting persons send the 

Notice to shareholders at least 40 calendar days before the shareholder meeting date, 

rather than 30 calendar days before the meeting, as proposed. We are making this change 

so that issuers and other soliciting persons will still have at least a 30-day period in which 

they can send a proxy card to shareholders if they choose to do so. 

Third, in addition to the proposed requirement that a shareholder be able to 

request a paper or e-mail copy of the proxy materials for a particular meeting, the final 

rules require an issuer to allow shareholders to elect to receive paper or e-mail copies of 

proxy materials that the issuer will distribute in the future in reliance on the notice and 

access model. Similarly, intermediaries must allow beneficial owners to elect to receive 

paper or e-mail copies of any proxy materials that will be distributed in the future in 

reliance on the notice and access model with respect to all securities held in the beneficial 

owner’s account. Fourth, under the new rules, an intermediary must prepare its own 

Notice for distribution to beneficial owners. 

Fifth, the intermediary’s Notice sent to a beneficial owner will direct the owner to 

request paper or e-mail copies from his or her intermediary, rather than from the issuer. 

Finally, the final rules do not permit soliciting persons other than the issuer to engage in a 

conditional solicitation as proposed and, therefore, the rules require such persons to send 

 

44 An issuer or other soliciting person may, in the course of a solicitation, send several 

proxy cards to a shareholder. Under the notice and access model, the Notice must 

accompany each proxy card sent to a shareholder unless the issuer or other soliciting 

person sends a proxy statement with, or before, the proxy card and by the same medium 

as the proxy card is sent. 

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a copy of the proxy materials upon request from a shareholder to whom they have sent a 

Notice. 

II. Description of the Amendments 

A. The Notice and Access Model for Issuers 

 The notice and access model that we are adopting provides an alternative means 

for an issuer to furnish proxy materials to its shareholders. These proxy materials 

include: 

• notices of shareholder meetings; 

• Schedule 14A proxy statements and consent solicitation statements; 

• forms of proxy (i.e., proxy cards); 

• Schedule 14C information statements; 

• annual reports to security holders;45

• additional soliciting materials;46 and 

• any amendments to such materials that are required to be furnished to 

shareholders. 

In the proposing release, we sought comment on whether reliance on the notice 

and access model should be limited to particular types of issuers, shareholders, or 

transactions. The only restriction that we proposed was that the rules should not apply to 

business combination transactions. Commenters in favor of the notice and access model 

 

45 The requirement in Exchange Act Rules 14a-3(b) and 14c-3(a) to furnish annual reports 

to security holders does not apply to registered investment companies [17 CFR 240.14a3(b) and 240.14c-3(a)]. The rules that we are adopting do not apply to the requirement in 

Section 30(e) of the Investment Company Act of 1940 [15 U.S.C. 80a-29(e)] and the 

rules thereunder that every registered investment company transmit reports to 

shareholders at least semi-annually. 

13
generally supported broad availability of the notice and access model.47 Therefore, the 

new rules permit any issuer to use the notice and access model to disseminate its proxy 

materials to all types of shareholders, whether registered or beneficial owners, and with 

respect to any solicitation except those related to business combination transactions. 

1. Notice of Internet Availability of Proxy Materials 

To notify shareholders of the availability of the proxy materials on an Internet 

Web site, an issuer relying on the notice and access model must send a Notice to 

shareholders 40 calendar days48 or more in advance of the shareholder meeting date or, if 

no meeting is to be held, 40 calendar days or more in advance of the date that consents or 

authorizations may be used to effect the corporate actions.49 We believe that it is 

important for the Notice to be furnished in a way that brings it to each shareholder’s 

attention. Therefore, no other materials may accompany the Notice except for the notice 

of a shareholder meeting required under state corporation law.50 An issuer also may 

combine the Notice with the state law notice unless state law prohibits such combination. 

We have extended the proposed 30-day deadline for delivery of the Notice to a 

40-day deadline to provide issuers with time to encourage shareholders who have not 

 46 Our rules permit, but do not require, delivery of additional soliciting materials. See Rule 

14a-6(b).

47 See, for example, letters from ABC, ACB, Association of Corporate Counsel (ACC), 

Proxinvest, SCSGP, STA, and Sullivan & Cromwell. 

48 For purposes of determining this 40-day period under the new rules, the first day of this 

period would be the day on which the issuer sends the Notice. The 40th day would be the 

day prior to the meeting date or date of the corporate action. 

49 The Notice could be sent electronically to shareholders who have previously provided 

affirmative consent, or other evidence to show delivery, pursuant to our earlier guidance 

on electronic delivery. See the 1995 Interpretive Release and the 2000 Interpretive 

Release. 

50 The rules also permit a reply card for requesting a paper or e-mail copy of the proxy 

materials to accompany the Notice.

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executed a proxy to participate in the voting process and to provide shareholders with 

sufficient time to receive the Notice, request copies of the materials, if desired, and 

review the proxy materials prior to executing a proxy. Under the new rules, an issuer 

may send a proxy card 10 calendar days or more after sending the Notice. If an issuer 

chooses to send a proxy card under this provision, a proxy statement and annual report 

need not accompany the proxy card.51 However, if a copy of the proxy statement and 

annual report do not accompany or precede the proxy card, a copy of the Notice must 

accompany the proxy card so that shareholders can access the specified Web site without 

referring to the earlier Notice. This 10-day waiting period is designed to provide 

shareholders with sufficient time to access the proxy materials, or request a copy of the 

proxy materials, before the issuer sends a proxy card without an accompanying proxy 

statement and annual report. 

If an issuer chooses to follow the notice and access model, the Notice of Internet 

Availability of Proxy Materials must include the following information in clear and 

understandable terms:52

• A prominent legend in bold-face type that states: 

“Important Notice Regarding the Availability of Proxy Materials for 

the Shareholder Meeting to Be Held on [insert meeting date]. 

• This communication presents only an overview of the more 

complete proxy materials that are available to you on the 

Internet. We encourage you to access and review all of the 

 

51 Of course, an issuer still would be obligated to send a copy of the proxy statement and 

annual report if a shareholder requests a copy. An issuer also may send a proxy card 

before the end of the 10-day period if it is accompanied by the proxy statement and 

annual report. 

52 Appropriate changes must be made to the Notice if the issuer is providing an information 

statement pursuant to Regulation 14C or seeking to effect a corporate action by written 

consent. 

15
important information contained in the proxy materials before 

voting. 

• The [proxy statement] [information statement] [annual report 

to security holders] [is/are] available at [Insert Web site 

address]. 

• If you want to receive a paper or e-mail copy of these 

documents, you must request one. There is no charge to you 

for requesting a copy. Please make your request for a copy as 

instructed below on or before [Insert a date] to facilitate timely 

delivery.” 

• The date, time, and location of the meeting or, if corporate action is to be 

taken by written consent, the earliest date on which the corporate action 

may be effected; 

• A clear and impartial identification of each separate matter intended to be 

acted on and the issuer’s recommendations regarding those matters, but no 

supporting statements; 

• A list of the materials being made available at the specified Web site; 

• (1) A toll-free telephone number; (2) an e-mail address; and (3) an Internet 

Web site address where the shareholder can request a copy of the proxy 

materials, for all meetings and for the particular meeting to which the 

Notice relates; 

• Any control/identification numbers that the shareholder needs to access 

his or her proxy card; 

• Instructions on how to access the proxy card, provided that such 

instructions do not enable a shareholder to execute a proxy without having 

access to the proxy statement and annual report; and 

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• Information on how to obtain directions to be able to attend the meeting 

and vote in person. 

In response to commenters, we have added certain items to this list of permissible 

Notice information. First, we are clarifying that the Notice must contain instructions on 

how to access the proxy card. Such information should include any control or 

identification numbers necessary for the shareholder to execute a proxy, but may not 

include a means to execute a proxy, such as a telephone number, which would enable the 

shareholder to execute a proxy without having access to the proxy statement and annual 

report. 

A shareholder’s execution of a proxy via an Internet voting platform indicates that 

the shareholder has access to the Internet and, as such, is able to access the proxy 

materials electronically under the new rules. Similarly, if a shareholder executes a proxy 

via a telephone number placed on the Internet Web site which provides electronic access 

to the proxy materials, that indicates the shareholder has access to the Internet. However, 

if a telephone number for executing a proxy is placed on the Notice, there can be no 

assurance that a shareholder executing a proxy by means of that telephone number has 

access to the Internet Web site. Accordingly, placing such a telephone number on the 

Notice is not permitted. A telephone number for executing a proxy may, however, be 

provided on a proxy card sent to shareholders 10 calendar days or more after the Notice 

was sent because, by that time, a shareholder is likely to have had sufficient time to 

access the materials on the Internet or request copies. 

Also, in response to comments, we have revised the rules to require an issuer or 

other soliciting person to include instructions in the Notice about: (1) how a shareholder 

17
can request delivery of copies of proxy materials in paper or by e-mail in the future;53

and (2) how to attend the shareholder meeting and vote in person. The new rules also 

require the Notice to include an Internet Web site on which a shareholder can request a 

copy of the proxy materials, in addition to a toll-free telephone number and an e-mail 

address for that purpose. 

The Notice may include only the information specified above, unless it is being 

combined with the state law meeting notice, in which case any information required by 

state law also may be included in the Notice. While not required, to reduce the chance of 

parties creating false Notices to extract confidential information from shareholders, the 

Notice also may contain a statement advising shareholders that they are not required to 

provide any personal information, other than the identification or control number 

provided in the Notice (if such a number is used), to execute a proxy. 

To ensure that the Notice is clear and understandable, it must meet substantially 

the same plain English principles as apply to key sections of Securities Act prospectuses 

pursuant to Securities Act Rule 421(d).54 Both commenters remarking on the plain 

English aspect of the proposal supported such a requirement.55

Several commenters recommended that issuers should be able to include more 

information in the Notice than we proposed. They suggested that the rules should allow 

the Notice to incorporate information from the proxy statement and annual report that 

those commenters believe is the most important information contained in those 

documents. They believed that presenting this information on the Notice would enable 

 

53 See letters from ABA, Mellon Investor Services (Mellon), and SCSGP. 

54 17 CFR 230.421(d). 

55 See letters from Florida State Board and Proxinvest. 

18
shareholders to make an informed decision based on the Notice alone.56 We believe that 

the proxy statement and annual report to security holders represent the information 

necessary to make an informed voting decision. The Notice is intended merely to make 

shareholders aware that these proxy materials are available on an Internet Web site; it is 

not intended to serve as a stand-alone basis for making a voting decision. Because the 

disclosures in the proxy statement and annual report represent the information necessary 

for a voting decision, we do not believe it is appropriate to permit issuers and other 

soliciting persons to present only selected information from the proxy statement or annual 

report to security holders in the Notice. 

The form of the Notice will constitute other soliciting material that the issuer or 

other soliciting person must file with the Commission pursuant to Rule 14a-6(b)57 no 

later than the date on which it is first sent or given to shareholders.58

a. Householding 

Consistent with the proposal, the final rules permit an issuer to “household” the 

Notice pursuant to Rule 14a-3(e).59 Accordingly, an issuer could send a single copy of 

the Notice to one or more shareholders residing at the same address if the issuer satisfies 

all of the Rule 14a-3(e) conditions.60 An issuer is not required to re-solicit specific 

 

56 See letters from Carl Hagberg, Hermes, and James Reed. For example, one commenter 

suggested that each proposal be accompanied by the “pros and cons” associated with that 

proposal. See letter from James Reed. Another commenter recommended that the 

president’s letter, Management’s Discussion and Analysis and selected financial 

information be included. See letter from Carl Hagberg. 

57 17 CFR 240.14a-6(b). 

58 See Rule 14a-16(i) [17 CFR 240.14a-16(i)]. 

59 17 CFR 240.14a-3(e). 

60 If the Notice is sent via e-mail, the householding rules do not permit the sending of only 

one copy of the Notice to all shareholders in the household. Instead the Notice must be 

19
consent regarding the householding of the Notice from shareholders if it has obtained 

their consent to householding of proxy materials in the past. However, an issuer 

following the notice and access model must allow each householded account to execute 

separate proxies. Therefore, the issuer must provide separate identification or control 

numbers, if it uses such numbers, to each account at the shared address, as required by 

the current householding rule.61 Alternately, an issuer also may send separate Notices for 

each householded account in a single envelope. Commenters generally supported this 

aspect of the proposal.62

b. Security and Privacy on the Internet 

Several commenters were concerned about security and confidentiality of 

shareholder information that may be transmitted over the Internet.63 We believe that the 

final rules ameliorate many of these concerns. We address those concerns below. 

i. Theft of Identification or Control Numbers 

Some commenters were concerned that computer hackers may use any identifying 

information sent to shareholders to access their accounts.64 The Notice may contain 

identification or control numbers for executing proxies or providing voting instructions, if 

 

separately e-mailed to each shareholder. See Rule 14a-3(e)(1)(ii)(B)(4) [17 CFR 

240.14a-3(e)(1)(ii)(B)(4)]. 

61 Issuers also are required to share a listing of the shareholders that have consented to 

householding with soliciting shareholders, or afford the benefit of such consents to a 

soliciting shareholder if the issuer is mailing proxy materials on the shareholder’s behalf. 

See Rule 14a-7(a)(2) [17 CFR 240.14a-7(a)(2)]. 

62 See letters from BRT, Computershare, Proxinvest, and SCSGP. 

63 See, for example, letters from James Angel, Todd Collier, James Davis, William 

LaFollette, Matthew McGuire, and USPS. 

64 Record holders could not be subject to such manipulation because they do not hold their 

securities in a trading account with the company in the same sense as beneficial owners 

hold their securities in a brokerage account. 

20
an issuer or intermediary uses such numbers. We understand that these numbers, which 

are in common use today, usually provide the user only with access to execute proxies or 

provide voting instructions; they do not enable the user to buy or sell securities in a 

shareholder’s account or transfer funds from that account. Thus, more sensitive 

activities, such as trading securities or transferring funds, could not be performed by 

someone who has stolen this identifying information. Finally, we note that 85% of shares 

voted already are voted electronically using such identification or control numbers. 

ii. “Phishing” 

One commenter expressed concern that, if Notices are sent electronically, 

shareholders may be tricked into disclosing personal information to persons fraudulently 

purporting to be issuers or intermediaries by fake “phishing” e-mails purporting to be 

official Notices, but designed to extract personal information from a shareholder.65 We 

do not believe that the rules would provide significant opportunity for abuse through 

phishing for the following reasons. 

First, an issuer may send a Notice by e-mail only if the shareholder has 

affirmatively consented to such delivery. Second, the Notice is not permitted to request 

any confidential information from the shareholder. Rather, the only confidential 

information that a shareholder must provide to access the proxy card would be a 

confidential identification or control number used by many issuers and intermediaries to 

track votes. As noted above, this number does not provide access to a shareholder’s 

brokerage or bank account or permit the transfer of funds from a shareholder’s account. 

Therefore, the shareholder’s account number and other personal financial information 

 

65 See letter from William LaFollette. 

21
would not be in jeopardy of being stolen. The rules do permit an issuer or other soliciting 

person to include on the Notice a protective warning to shareholders, advising them that 

no personal information other than the identification or control number is necessary to 

execute a proxy.66

iii. Misuse of Information by Issuers and Other Soliciting Persons 

Other commenters were concerned that issuers themselves, or other soliciting 

persons, may use shareholder information inappropriately. For example, they were 

concerned that an issuer may use shareholders’ e-mail addresses for purposes other than 

proxy communications, such as advertising, or sell the e-mail addresses to third parties.67 

As a protective measure, one commenter suggested that the Internet Web site on which 

the proxy statement is posted should not require installation of cookies on the 

shareholder’s computer as a prerequisite for access to the Web site.68

We agree that shareholder information gathered under the amended rules should 

be used only for the purposes of furnishing proxy materials to shareholders. Thus, we 

have revised the final rules to clarify that an issuer or its agent must maintain the Internet 

Web site on which the proxy materials are posted in a manner that does not infringe on 

the anonymity of a shareholder accessing that Web site.69 For example, it may not track 

the identity of persons accessing that Web site to view the proxy statement.70 In addition, 

the Web site cannot require the installation of any “cookies” or other software that might 

 

66 See Rule 14a-16(f)(3) [17 CFR 240.14a-16(f)(3)]. 

67 See letter from Thomas Richardson. 

68 See letter from Bowne & Co. 

69 See Rule 14a-16(k)(1) [17 CFR 240.14a-16(k)(1)]. 

22
collect information about the accessing person. Further, the issuer and its agents may not 

use any e-mail address obtained from a shareholder for the purpose of requesting a copy 

of proxy materials for any purpose other than to send a copy of those materials to that 

shareholder. Finally, an issuer may not transfer a shareholder’s e-mail address to other 

persons without the shareholder’s express consent, except in connection with the 

distribution of proxy materials, such as an agent handling the proxy distribution on the 

issuer’s behalf.71

2. Proxy Card 

Under the notice and access model that we are adopting, an issuer is not permitted 

to furnish the proxy card together with the initial Notice for a particular solicitation. An 

issuer following the notice and access model must post the proxy card on the Web site 

with the proxy statement and any annual report no later than the time at which the Notice 

is sent to shareholders so that the documents are electronically available at the time 

shareholders receive the Notice.72 In addition, on that Web site, the issuer must 

concurrently provide shareholders with at least one method of executing a proxy vote.73 

We believe that a shareholder who accesses proxy materials on the Internet Web site 

should be able to execute a proxy as soon as the shareholder is able to electronically 

access the proxy statement. An issuer may provide a means to execute a proxy through a 

variety of methods, including by providing an electronic voting platform linked to the 

 70 Of course, the issuer would be permitted to track the identity, by means of the 

shareholder entering an issuer-provided control/identification number, of persons voting 

on an electronic platform in order to validate the election results. 

71 See Rule 14a-16(k)(2) [17 CFR 240.14a-16(k)(2)]. Rule 14a-16(k) is not designed to 

create new duties in private rights of action under the federal securities laws. 

72 See Rule 14a-16(b)(1) [17 CFR 240.14a-16(b)(1)]. 

73 See Rule 14a-16(b)(4) [17 CFR 240.14a-16(b)(4)]. 

23
Web site where the proxy materials are posted or a telephone number for executing a 

proxy. Merely providing a shareholder with a means to request a paper proxy card would 

not be sufficient because a shareholder would not be able to execute a proxy at the time it 

accesses the proxy materials. 

We received a significant number of comments on the aspect of our proposal that 

would have permitted the proxy card to accompany the Notice. Numerous commenters 

were concerned that physically separating the card from the proxy statement, as 

originally proposed, may lead to the type of uninformed voting that the proxy rules are 

intended to prevent.74 Some commenters were concerned that issuers may attempt to 

structure their solicitations in a manner that discourages access to the proxy statement, 

particularly with respect to shareholder proposals.75 Others, however, believed that 

separating the card from the proxy statement would not lead to such problems.76

We note these concerns and have revised the rules to require the proxy card to be 

accessible on the Internet along with the proxy statement and any annual report when the 

Notice is sent. The issuer may not send a proxy card with its initial Notice. However, we 

recognize that an issuer may wish to undertake subsequent soliciting activities to 

encourage shareholders who have not executed a proxy to do so. Currently, issuers often 

send replacement proxy cards accompanied by additional soliciting materials to 

shareholders who have not yet voted. To facilitate this re-solicitation process, the rules 

permit an issuer that is following the notice and access model to send a proxy card 10 

 

74 See, for example, letters from ACB, AFL-CIO, Amalgamated Bank, BellTel Retirees, 

CII, Florida State Board, Carl Hagberg, NRLN, San Diego Retirement, Swingvote, and 

Teamsters. 

75 See, for example, letters from AFL-CIO, Florida State Board, and Teamsters. 

24
calendar days or more after sending the Notice. This 10-day waiting period still provides 

a 30 day period during which an issuer can encourage shareholders to execute a proxy. 

Any such subsequent solicitation efforts may, but need not, include a copy of the proxy 

statement and any annual report to security holders. However, if the subsequent 

communication includes a proxy card, it also must include either a copy of the proxy 

statement and any annual report or a copy of the Notice.77

3. Internet Web Site Posting of Proxy Materials 

All proxy materials to be furnished through the notice and access model, other 

than additional soliciting materials, must be posted on a specified Internet Web site by 

the time the issuer sends the Notice to shareholders.78 These materials must remain on 

that Web site and be accessible to shareholders through the conclusion of the related 

shareholder meeting, at no charge to the shareholder. As discussed above, the Notice 

must identify clearly the Internet Web site address at which the proxy materials are 

available. The Internet Web site address must be specific enough to lead shareholders 

directly to the proxy materials,79 rather than to the home page or other section of the Web 

Site on which the proxy materials are posted, so that shareholders do not have to browse 

the Web site to find the materials. The Internet Web site that an issuer uses to 

electronically furnish its proxy materials to shareholders must be a publicly accessible 

 76 See, for example, letters from ABA, ACC, BRT, Computershare, ISS, New York State 

Bar Association (NY State Bar), and Proxinvest. 

77 See Rule 14a-16(h) [17 CFR 240.14a-16(h)]. 

78 Additional soliciting materials used after the Notice is sent must be posted on the 

specified Web site no later than the day on which those materials are first sent or given to 

shareholders. 

79 This Web site could be a central site with prominent links to each of the proxy-related 

disclosure documents listed in the Notice, as well as proxy materials posted on the Web 

site after the Notice is sent. 

25
Internet Web site other than the Commission’s EDGAR Web site.80 Commenters agreed 

that simply providing a link to the proxy materials on EDGAR was insufficient.81

Commenters were divided with respect to the type of document format that 

issuers or other soliciting persons should be required to use to post proxy materials on the 

Web site. This disagreement centered on whether most shareholders would prefer to be 

able to print out the document and read the hard copy version or read the document 

online. The final rules require the electronically posted proxy materials to be presented 

on the Internet Web site in a format, or formats, convenient for both printing and viewing 

online.82 Under technology commonly in use today, this may require posting the 

materials in two different formats. First, the materials should be posted in a format that 

provides a version of those materials, including all charts, tables, graphics, and similarly 

formatted information, that is substantially identical to the paper version of the materials. 

In addition, to take better advantage of the capabilities of the Internet, the 

materials also must be presented in a readily searchable format, such as HTML. This 

type of format would make the proxy materials easier to read on a computer screen. In 

addition, such a version may incorporate additional user-friendly features such as 

hyperlinks from a table of contents to enable shareholders to quickly and easily navigate 

through the document. Many Internet Web sites today provide documents in dual 

formats such as this. We believe this requirement will impose minimal burden on issuers. 

 

80 An issuer must continue to comply with Rules 14a-6 and 14c-5, which require the 

soliciting person to file its proxy statement (or information statement) and additional 

soliciting material with the Commission. An issuer also must continue to comply with 

Rules 14a-3(c) and 14c-3(b), which require an issuer to submit copies of its annual report 

to security holders to the Commission. The issuer must comply with these requirements 

by the time it posts the materials on the Web site. 

81 See letters from James Angel, SCSGP, and Swingvote. 

26
We also believe that, as technology progresses, new formats may be developed that will 

improve shareholders’ ability to print copies and read copies on their screens. Finally, to 

the extent a shareholder may need additional software to view the document, the Web site 

must contain a link to enable the shareholder to obtain the software free of charge.83

4. Period of Reliance 

The decision by an issuer or other soliciting person to follow the notice and access 

model is effective only with respect to a particular meeting. An issuer’s choice to rely on 

the notice and access model for one meeting therefore does not affect its determination of 

whether to rely on the model for subsequent meetings.84 Similarly, a shareholder that 

does not request a paper or e-mail copy of the proxy materials for one meeting is not 

bound by that decision with respect to any other shareholder meeting. Each time an 

issuer chooses to rely on the notice and access model for a shareholder meeting, it must 

comply anew with all of the requirements under that model, including delivery of the 

Notice and the 40-day notice period. 

We are adopting one important exception to this general principle. Numerous 

commenters were concerned that a shareholder desiring a paper or e-mail copy would 

have to request such a copy every year from each issuer in which he or she owns 

securities.85 We agree with commenters that this could be unduly burdensome for a 

 82 See Rule 14a-16(c) [17 CFR 240.14a-16(c)]. 

83 See the 1995 Interpretive Release No. 33–7233, at n. 24 and the accompanying text; 

Release No. 33–8128 (Sep. 16, 2002) [67 FR 58480]; Release No. 33–8230 (May 7, 

2003) [68 FR 25788]; and Release No. 33-8518 (Dec. 22, 2004) [70 FR 1505]. 

84 To the extent the Commission adopts the universal Internet availability model in 

companion Release 34-55147, this option will no longer be available to issuers. 

85 See, for example, letters from ABC, AFL-CIO, James Angel, CALSTRS, Florida State 

Board, OPERS, San Diego Retirement, SIA, William Sjostrom, Stocklein Law Group, 

Swingvote, and Paul Uhlenhop. 

27
shareholder who owns numerous securities. The commenters recommended that a 

provision be made that permits a shareholder to make a single election to receive a paper 

or e-mail copy of the proxy materials on a continuing basis in the future. We agree with 

those commenters and have revised the rules to enable shareholders to make a permanent 

election to receive paper or e-mail copies from each issuer.86

5. State Law Notices 

State business and corporation laws typically set forth shareholder meeting 

requirements, including meeting notice and voting requirements. The new rules are not 

intended to affect any applicable state law requirement concerning the delivery of any 

document related to a shareholder meeting or proxy solicitation. Thus, to the extent that 

state law requires a notice of shareholder meeting and proxy materials to be delivered by 

a particular means, the rules do not alter those requirements.87 For example, if the state 

in which an issuer is incorporated requires notices of shareholder meetings and proxy 

materials to be transmitted directly to shareholders in paper, the notice and access model 

does not provide an issuer with an option to satisfy its state law obligations by posting 

those materials on an Internet Web site. 

 

86 A shareholder that elects to receive paper or e-mail copies may, in the future, revoke that 

election. However, an issuer may continue to request that shareholder to accept 

electronic delivery or the notice and access model or seek that shareholder’s affirmative 

consent to electronic delivery. Nothing in the proxy rules prohibits an issuer from 

structuring incentives to encourage shareholders to accept electronic delivery or the 

notice and access model. 

87 See Rule 14a-16(e) [17 CFR 240.14a-16(e)]. Issuers typically include the meeting 

notices required by state law at the beginning of their proxy statements. As discussed 

previously, the new rules would permit any information necessary to meet a state law 

requirement to accompany or be combined with the Notice. 

28
6. Additional Soliciting Materials 

New Rule 14a-16 and revised Rules 14c-2 and 14c-3 require an issuer to post any 

additional soliciting materials required to be filed under Rule 14a-6(b) on the same 

Internet Web site on which the proxy materials are posted no later than the day on which 

the additional soliciting materials are first sent to shareholders or made public.88 Beyond 

the posting of the additional soliciting materials on the Internet Web site, issuers may 

decide which additional means, if any, are most effective for disseminating these 

materials (e.g., direct mail, e-mail, newspaper publication, etc.). 

7. Requests for Copies of Proxy Materials 

An issuer that satisfies its requirement to furnish proxy materials through the 

notice and access model has a separate requirement under Rule 14a-16(j)89 to deliver a 

copy of the proxy statement, annual report to security holders (if applicable) and proxy 

card to a requesting shareholder. Upon receipt of a request from a shareholder for a copy 

of the proxy statement, annual report, or proxy card, the issuer must send a copy (in paper 

or by e-mail, as requested) of those proxy materials to the shareholder within three 

business days after receiving the request, even if the request is made after the date of the 

shareholder meeting or corporate action to which the proxy materials relate. However, 

under the final rules, an issuer would be obligated to provide copies of the proxy 

materials only up until one year after the conclusion of the meeting or corporate action to 

which the materials relate. When the issuer provides a paper copy of the proxy materials 

 

88 Exchange Act Rule 14a-6(b) requires an issuer or other soliciting person choosing to 

deliver additional soliciting materials to file them with the Commission, in the same form 

that they are sent to shareholders, no later than the date that they are first sent or given to 

shareholders. 

89 17 CFR 240.14a-16(j). 

29
in response to a shareholder request, the issuer must use first class mail or other 

reasonably prompt means of delivery. 

A few commenters believed that a requirement to send copies of the proxy 

statement after the shareholder meeting has been held would be an unnecessary burden.90 

However, the proxy statement contains a portion of the total package of annual disclosure 

for public companies; in fact, many public companies satisfy their obligation to include 

information in Part III of the Form 10-K by including the information in their proxy 

statements and incorporating that information by reference into the Form 10-K.91 Just as 

the proxy rules require issuers to undertake in their proxy statements or annual reports to 

shareholders to provide copies of annual reports on Form 10-K for the most recent fiscal 

year to requesting shareholders,92 we believe it is appropriate to require issuers to provide 

copies of the proxy materials to requesting shareholders even after the shareholder 

meeting date. However, because the proxy statement (like the Form 10-K) is filed on 

EDGAR, we believe there should be a limit on the length of the period during which a 

shareholder may request a copy of the proxy materials from the issuer. Therefore, the 

final rules require issuers to provide the proxy statement and annual report to security 

holders only for one year after the conclusion of the meeting to which those materials 

relate.93

We agree with the views of commenters that the proposed two-business day 

timeframe may be too short for issuers to respond efficiently to paper requests of the 

 

90 See letters from BRT and SCSGP. 

91 See Instruction G(3) to Form 10-K, referenced in 17 CFR 249.310. 

92 See Rule 14a-3(b)(10) [17 CFR 240.14a-3(b)(10)]. 

93 See Rule 14a-16(j)(3) [17 CFR 240.14a-16(j)(3)]. 

30
proxy materials.94 Further, it is likely that a longer response period that enables an issuer 

to better cumulate batches of copies would reduce the cost of complying with the rules. 

However, these concerns must be balanced against our view that requests for copies be 

handled promptly. Thus, we have extended the response time to three business days.95

The requirements that an issuer deliver the Notice at least 40 calendar days before 

the shareholder meeting date and respond to a request for a copy of the proxy materials 

within three business days are designed to provide a shareholder with sufficient time to 

request a copy, receive it, review the proxy materials and make an informed voting 

decision. Several commenters believed that placing a deadline on shareholders to request 

copies would be appropriate.96 We do not believe such a deadline would be appropriate, 

particularly because the proxy statement is part of the “package” of disclosures we have 

deemed important for investors, as discussed above. However, under the rules, it is 

incumbent on the shareholder to request a copy in sufficient time to receive the copy of 

the proxy materials, review that copy, and execute a proxy. The rules require the issuer 

to insert a date in the Notice by which a shareholder should request a copy to ensure 

timely delivery.97

 Finally, we recognize that some issuers may be hesitant to adopt the notice and 

access model because of the potential dangers of significantly underestimating, or 

overestimating, the number of paper copies of the proxy materials that will be needed. If 

 

94 See, for example, letters from BRT, Computershare, ICI, NY State Bar, SCSGP, SIA, 

and Sullivan & Cromwell. 

95 See letters from Computershare, ICI, and STA. 

96 See letters from Computershare, SCSGP, and Sullivan & Cromwell. 

97 See Rule 14a-16(d)(1) [17 CFR 240.14a-16(d)(1)]. This date is intended to be a 

recommendation to shareholders to facilitate timely delivery, but does not restrict a 

shareholder’s ability to request copies after that date. 

31
an issuer underestimates that number, the cost of printing additional copies may be great. 

Similarly, overestimating that number would lead to unnecessary cost. We note that 

there is nothing in the rules that would prevent an issuer from sending a shareholder a 

communication well in advance of a proxy solicitation to determine the shareholder’s 

interest in receiving paper copies.98 Indeed, such a communication may be used to start 

creating a list of shareholders that wish to receive paper copies in the future. This may 

help issuers to estimate the number of paper copies that it needs to print for the 

solicitation. 

B. The Role of Intermediaries 

1. Background 

The process of distributing proxy materials to beneficial owners is considerably 

more complicated than direct delivery of the materials by an issuer to its record holders.99 

The proxy rules include four rules, Exchange Act Rule 14a-13, Rule 14b-1, Rule 14b-2, 

and Rule 14c-7 referred to collectively as the “shareholder communications rules,” that 

impose obligations on issuers and intermediaries to ensure that beneficial owners receive 

proxy materials and are given the opportunity to participate in the shareholder voting 

process. Basically, these rules require issuers to send their proxy materials to 

intermediaries for forwarding to the beneficial owners. 

 

98 A communication to shareholders that is limited to explaining the notice and access 

model generally and determining whether shareholders wish to receive future proxy 

materials in paper or by e-mail would not be associated with a particular solicitation and 

therefore would not be considered a Notice under the new rules. 

99 The discussion in this section of “beneficial owners” refers to beneficial owners whose 

names and addresses do not appear directly in issuers’ stock registers because they hold 

their securities through a broker, bank, trustee, or similar intermediary. 

32
Exchange Act Rule 14b-1 sets forth the obligations of registered brokers and 

dealers in connection with the prompt forwarding of certain issuer communications to 

beneficial owners. Rule 14b-2 sets forth similar obligations of banks, associations, and 

other entities that exercise fiduciary powers. Under these rules, upon request by the 

issuer, these intermediaries are required to indicate to the issuer within seven business 

days of receiving the request: 

• the approximate number of customers of the intermediary that are 

beneficial owners of the issuer that are held of record by the intermediary; 

• if the issuer has indicated pursuant to Rule 14a-13(a)100 or 14c-7(a)101 that 

it will distribute the annual report to security holders to beneficial owners 

who have not objected to disclosure to the issuer of their names, addresses, 

and securities positions, the number of beneficial owners who have 

objected to such disclosure;102 and 

• the identity of any agents of the intermediary acting on the intermediary’s 

behalf to fulfill its obligations under the rule. 

Pursuant to Rules 14b-1 and 14b-2, within five business days of receiving proxy 

materials from the issuer, the intermediary must forward the materials to beneficial 

owners who will not receive those materials directly from the issuer pursuant to Rule 

14a-13(c)103 or Rule 14c-7(c).104 Beneficial owners typically do not execute proxy cards 

 

100 17 CFR 240.14a-13(a). 

101 17 CFR 240.14c-7(a). 

102 In the case of bank intermediaries, Rule 14b-2 requires a bank to disclose the number of 

customers with accounts opened on or before December 28, 1986, who gave affirmative 

consent to disclosure to the issuer and the number of customers with accounts opened 

after December 28, 1986, who did not object to such disclosure. 

103 17 CFR 240.14a-13(c). 

33
because, under most state laws, only the record owner (i.e., the intermediary) has the 

authority to vote on matters presented to shareholders. As a result, intermediaries 

forward the proxy materials, other than the proxy card, along with a request for voting 

instructions. The request for voting instructions is similar to the proxy card, but is 

prepared by the intermediary instead of the issuer and the beneficial owner returns his or 

her voting instructions to the intermediary rather than to the issuer or independent vote 

tabulator. The intermediary is required to vote the beneficial owner’s shares in 

accordance with the owner’s voting instructions when formally executing the proxy 

card.105 The intermediary then returns the proxy card to the issuer or its vote tabulator. 

 2. Discussion of the Amendments 

 Under the amendments, an intermediary may follow the notice and access model 

only if the issuer requests it to do so and, in such cases, must follow that model. The 

amendments revise Rules 14b-1 and 14b-2 to require brokers, banks, and similar 

intermediaries, at the request of an issuer, to furnish proxy materials, including a Notice 

of Internet Availability of Proxy Materials, to beneficial owners of the issuer’s securities 

based on the notice and access model.106 If an issuer does not request intermediaries to 

follow the notice and access model, an intermediary could, on its own initiative, continue 

to rely on any other permitted method of furnishing proxy materials to beneficial owners, 

including the electronic delivery of proxy materials by affirmative consents, but could not 

follow the notice and access model on its own initiative. Comments varied on whether an 

intermediary should be allowed to follow the notice and access model on its own 

 104 17 CFR 240.14c-7(c). 

105 See Rule 14b-2(b)(3) [17 CFR 240.14b-2(b)(3)]. 

106 See Rules 14b-1(d) and 14b-2(d) [17 CFR 240.14b-1(d) and 240.14b-2(d)]. 

34
initiative.107 We believe that the issuer should be allowed to determine the best means 

for distributing its proxy materials, because the issuer ultimately pays the costs of that 

distribution. 

 With respect to beneficial owners, an issuer or other soliciting person relying on 

the notice and access model must provide the intermediary with all information necessary 

for the intermediary to prepare its own Notice of Internet Availability of Proxy Materials 

in sufficient time for the intermediary to prepare and send its Notice to beneficial owners 

at least 40 days before the meeting date.108 We understand that issuers, intermediaries 

and their agents currently coordinate a similar exchange of information to enable 

intermediaries to prepare and print requests for voting instructions ahead of their receipt 

of the proxy statement and annual report to security holders for forwarding to beneficial 

owners.109 We expect such coordination to continue to facilitate timely preparation of 

the intermediary’s Notice. Therefore, we have not included a specific timeframe in the 

rules for delivery of this information.110 Upon receipt of that information, the 

intermediary or its agent must prepare its own Notice, tailored for the intermediary’s 

 

107 See, for example, letters from ABA, ACC, Computershare, and SCSGP, supporting 

issuer control, as opposed to the letters from SIA, Swingvote, and University Bancorp, 

urging more control by intermediaries. 

108 See Rule 14a-16(a)(2) [17 CFR 240.14a-16(a)(2)]. 

109 Our rules set forth a series of timeframes regarding distribution of proxy materials to 

beneficial owners to facilitate timely delivery of those materials. 

110 Rule 14a-16(a)(2) requires an issuer to provide the information to an intermediary “in 

sufficient time” for the intermediary to prepare its own Notice. Other soliciting persons 

would be expected to provide their information to intermediaries in sufficient time to 

meet their applicable deadlines. 

35
beneficial owner customers.111 The intermediary must send this Notice to beneficial 

owners at least 40 calendar days before the date of the shareholder meeting.112

The intermediary’s Notice will generally contain the same information as an 

issuer’s Notice,113 with certain revisions to reflect the differences between registered 

holders and beneficial owners. Specifically, the intermediary’s Notice must contain the 

following information: 

• A prominent legend in bold-face type that states: 

“Important Notice Regarding the Availability of Proxy Materials for 

the Shareholder Meeting to Be Held on [insert meeting date].114

• This communication presents only an overview of the more 

complete proxy materials that are available to you on the 

Internet. We encourage you to access and review all of the 

important information contained in the proxy materials before 

voting. 

• The [proxy statement] [information statement] [annual report 

to security holders] [is/are] available at [Insert Web site 

address]. 

• If you want to receive a paper or e-mail copy of these 

documents, you must request one. There is no charge to you 

for requesting a copy. Please make your request for a copy as 

instructed below on or before [Insert a date] to facilitate timely 

delivery.” 

 

111 An intermediary’s Notice prepared in accordance with this rule would be impartial for 

purposes of Rule 14a-2(a)(1) [17 CFR 240.14a-2(a)(1)] and need not be filed pursuant to 

Rule 14a-6(b) [17 CFR 240.14a-6(b)] unless an intermediary solicits proxies on its own 

behalf. 

112 In the case of a Notice of a soliciting person other than the issuer, the intermediary must 

send the Notice to beneficial owners by the later of: (1) 40 calendar days prior to the 

meeting; or (2) 10 calendar days after the issuer first sends its proxy materials to 

investors. See Section II.C of this release. 

113 See Rule 14a-16(d) [17 CFR 240.14a-16(d)]. 

114 Appropriate changes must be made to the Notice if the issuer is providing an information 

statement pursuant to Regulation 14C or if the issuer or other soliciting person is seeking 

to effect a corporate action by written consent. 

36
• The date, time, and location of the meeting or, if corporate action is to be 

taken by written consent, the earliest date on which the corporate action 

may be effected; 

• A clear and impartial identification of each separate matter intended to be 

acted on and the issuer’s or other soliciting person’s recommendations 

regarding those matters, but no supporting statements; and 

• A list of the materials being made available at the specified Web site. 

The intermediary may choose whether to direct beneficial owners to the issuer’s 

Web site or to its own Web site to access the proxy disclosure materials. If it directs 

beneficial owners to its own Web site, access to that website must be free of charge and 

may not compromise a beneficial owners’ anonymity. If it directs beneficial owners to 

the issuer’s Web site, the intermediary must inform beneficial owners that they can 

submit voting instructions to the intermediary, but cannot execute a proxy directly in 

favor of the issuer unless the intermediary has executed a proxy in favor of the beneficial 

owner. In addition, the intermediary must provide the following information in its 

Notice, which is similar to the information in the issuer’s Notice, but applicable only to 

beneficial owners: 

• (1) A toll-free telephone number of the intermediary or its agent, (2) an 

e-mail address of the intermediary or its agent, and (3) an Internet Web 

site of the intermediary or its agent where the shareholder can request a 

copy of the proxy materials, for all meetings and for the particular meeting 

to which the Notice relates; 

37
• Any control/identification numbers that the beneficial owner needs to 

access his or her request for voting instructions; 

• Instructions on how to access the request for voting instructions on the 

Web site of the intermediary or its agent, provided that such instructions 

do not enable a beneficial owner to provide voting instructions without 

having access to the proxy statement and annual report; 

• Information on how to obtain directions to be able attend the meeting and 

vote in person;115 and 

• A brief description, if applicable, of the rules that permit the intermediary 

to vote the securities if the beneficial owner does not return his or her 

voting instructions.116

The intermediary’s Notice must contain instructions on how to access the request 

for voting instructions on the Web site of the intermediary or its agent. Such information 

should include any control or identification numbers necessary for the beneficial owner to 

provide voting instructions. However, the intermediary’s Notice cannot include a means, 

such as a telephone number, which would enable the beneficial owner to provide voting 

instructions without having access to the proxy statement and annual report. A telephone 

number that a beneficial owner can use to provide voting instructions may be provided on 

the Internet Web site on which the request for voting instructions is posted (as well as on 

a paper request for voting instructions sent to shareholders 10 days or more after the 

intermediary’s Notice was sent). Like an issuer, the intermediary cannot include a 

 

115 A beneficial owner wishing to attend the meeting and vote in person must obtain proxy 

voting authority from the intermediary through which he or she owns the security. 

116 See NYSE Rule 452. 

38
request for voting instructions with its Notice. However, at the issuer’s request, the 

intermediary will be required to send a copy of the request for voting instructions to 

beneficial owners, provided that 10 days have passed since the intermediary’s Notice was 

first sent. A copy of the intermediary’s Notice, or a copy of the proxy statement, must 

accompany that request for voting instructions. 

3. Request for Copies by Beneficial Owners 

The intermediary’s Notice must provide instructions on how a beneficial owner 

can request a copy of the proxy materials from the intermediary, rather than from the 

issuer. Under the new rules, a beneficial owner may not request a paper or e-mail copy 

directly from the issuer as originally proposed. We are making this revision to the 

proposal for several reasons. First, an issuer has no means to track the identity and 

preferences of beneficial owners for future solicitations because these owners are not 

registered in an issuer’s records as shareholders of the company. This tracking can be 

performed most efficiently by the intermediary because only it maintains records of the 

beneficial owner’s security holdings. Second, the intermediary is able to apply a 

beneficial owner’s request for paper or e-mail copies across all of a beneficial owner’s 

security holdings on an account-wide basis, making it easier for beneficial owners to elect 

to receive such copies with respect to all of the securities held by the beneficial owner. 

If a beneficial owner requests a copy of the materials from the intermediary, the 

intermediary must in turn request such a copy from the issuer or other soliciting person 

within three business days of receiving the request from the beneficial owner. The 

intermediary also would have to forward the materials to the beneficial owners within 

39
three business days after receipt from the issuer or other soliciting person.117 As 

originally proposed, the intermediary will be allowed to charge the issuer or other 

soliciting person for the cost it incurs in forwarding the copy of the proxy materials to the 

requesting beneficial owner.118

We also note that intermediaries typically keep records of whether a beneficial 

owner has affirmatively consented to electronic delivery of proxy materials on an 

account-wide basis. That is, a beneficial owner’s election for electronic delivery applies 

to all securities in the beneficial owner’s account, rather than to specific issuers. To 

make it clear to beneficial owners electing to receive copies of the proxy materials on an 

ongoing basis, the intermediary’s Notice must clarify that a permanent election to receive 

copies of the proxy materials in paper or e-mail will apply to all securities in the 

beneficial owner’s account.119

One commenter was concerned that the notice and access model only complicates 

an already complicated process for transmitting proxy materials to beneficial owners and 

 

117 Thus, the intermediary must request the copy from the issuer within three business days 

of receiving the shareholder’s request. Then the issuer must send the copy to the 

intermediary, which is a record holder or respondent bank under the final rules, within 

three business days of receiving the intermediary’s request. Finally, the intermediary is 

required to forward the copy to the requesting shareholder within three business days of 

receiving the copy from the issuer. 

118 See NYSE Rule 465. We note that a Proxy Working Group established by the NYSE is 

reviewing the NYSE’s current schedule of the specific maximum fees that NYSE 

member firms can charge an issuer under our rules requiring issuers to reimburse 

intermediaries for their reasonable direct and indirect expenses for forwarding proxy 

materials. We intend to work closely with the NYSE to evaluate the types of revisions 

that may be appropriate in light of our adoption of the notice and access model, including 

revision of existing fees as well as the creation of any new fees that may be reasonable 

under the notice and access model. Although NYSE Rule 465 applies only to NYSE 

member firms, other national securities exchanges have a similar rule and fee schedule. 

Non-broker intermediaries, such as banks, also rely on the fee schedule as an industry 

standard. 

40
may confuse shareholders.120 Other commenters recommended that the Commission 

review the proxy delivery process as a whole, rather than layer this model over the 

existing distribution regime.121 Although the Commission is sensitive to these concerns, 

a complete review of the proxy system at this time would only delay the potential 

benefits to issuers and shareholders offered by the notice and access model. As we gain 

additional experience with these rules, we will consider whether more extensive revisions 

to the proxy rules are warranted. 

In summary, the amendments would impose the following responsibilities on 

intermediaries that are requested by an issuer to follow the notice and access model: 

• The intermediary must prepare its own Notice and deliver this Notice to its 

beneficial owners after receiving the meeting information from the issuer 

or other soliciting person; 

• The intermediary must send its Notice to beneficial owners at least 40 

days prior to the meeting; 

• The intermediary must post its request for voting instructions on an 

Internet Web site; 

• The intermediary must maintain records of beneficial owners who make a 

permanent election to receive paper or e-mail copies of the proxy 

materials for all securities held in the beneficial owner’s account; and 

 119 See Rules 14b-1(d)(4)(iii) and 14b-2(d)(4)(iii) [17 CFR 240.14b-1(d)(4)(iii) and 

240.14b-2(d)(4)(iii)]. 

120 See letter from ABA. 

121 See, for example, letters from BRT, Concerned Shareholders, Computershare, Carl 

Hagberg, Mellon, and STA. 

41
• The intermediary must request a copy of the proxy materials from the 

issuer or other soliciting person within three business days after receiving 

a request from its beneficial owner customer and must forward that copy 

to the beneficial owner customer within three business days after receiving 

the copy from the issuer or other soliciting person. 

C. Soliciting Persons Other Than the Issuer 

Under the amendments, a person other than the issuer who undertakes his or her 

own proxy solicitation also can rely on the notice and access model. This situation 

typically would occur in the context of a proxy contest between a shareholder and 

management. We anticipate that the notice and access model will provide an alternative 

that may decrease significantly the printing and mailing costs associated with a proxy 

solicitation. We also believe that the same arguments that support modifying the existing 

framework to facilitate an alternative dissemination option for issuers apply equally to 

soliciting persons other than issuers. 

Several commenters supported extending the notice and access model to such 

parties.122 However, some commenters were concerned about the possibility of abuse of 

the model by shareholders conducting nuisance contests.123 These commenters 

recommended that the availability of the model be limited for soliciting persons other 

than the issuer.124 The proposed limitations included requiring the solicitation of all 

shareholders,125 requiring soliciting persons other than the issuer to provide copies of 

 

122 See, for example, letters from CALSTRS, Computershare, and Swingvote. 

123 See, for example, letters from Glen Buchbaum. 

124 See, for example, letters from ABA, ACC, BRT, ICI, ISS, Sullivan & Cromwell, and 

Swingvote. 

125 See letters from BRT and Swingvote. 

42
their proxy materials upon request,126 and imposing a minimum shareholding 

requirement in order for a soliciting person to take advantage of the model.127 Although 

the amendments would reduce the cost of a proxy contest, they do not eliminate all costs, 

such as costs of preparing the soliciting materials, legal fees, proxy solicitor fees, and 

other significant soliciting expenses. We believe these surviving costs should discourage 

frivolous contests. 

Although the mechanics of a solicitation under the notice and access model for a 

person other than the issuer are similar to those incurred by an issuer, we describe below 

several important differences in the way the amendments affect soliciting persons other 

than the issuer. 

1. Mechanics of Proxy Solicitations by Persons Other Than the Issuer 

The proxy rules currently treat persons other than the issuer differently from the 

issuer in a significant respect regarding the provision of information to shareholders 

regarding intended corporate actions. Specifically, an issuer must furnish to each 

shareholder either a proxy statement, if the issuer is soliciting proxies or consents from 

shareholders, or an information statement pursuant to Section 14(c) of the Exchange 

Act128 regarding shareholder meetings where corporate action is to be taken but no proxy 

authority or consent is sought. 

Soliciting persons other than the issuer are not subject to the requirements of 

Section 14(c). Thus, unlike the issuer, they have no obligation to furnish an information 

statement to shareholders from whom no proxy authority is sought. As a result, soliciting 

 

126 See letter from ABA. 

127 See letters from ABA, ICI and Sullivan & Cromwell. 

128 15 U.S.C. 78n(c). 

43
persons can limit the cost of a solicitation by soliciting proxies only from a select group 

of shareholders, such as those with large holdings, without furnishing other shareholders 

with any information. This enables a person other than the issuer to conduct a proxy 

contest in a variety of ways, some of which are not available to an issuer. The 

amendments that we are adopting relate only to the means of furnishing information to 

shareholders, and thus do not affect a soliciting person’s ability to effect such targeted 

solicitations. 

Under the new rules, a soliciting person other than the issuer may follow the same 

procedures as the issuer.129 In particular, it may furnish a Notice and post the proxy 

statement on an Internet Web site. As with an issuer, such a soliciting person may not 

include a proxy card with the Notice. It may, however, send a proxy card to the 

shareholders it is soliciting without a proxy statement 10 calendar days or more after 

initially sending the Notice to them, if the proxy card is accompanied either by a copy of 

the proxy statement or by another copy of the Notice. 

A soliciting person other than the issuer may selectively solicit shareholders under 

the notice and access model, just as it could under the current proxy rules (e.g., the 

soliciting person could choose to send the Notice only to certain shareholders, such as 

those owning more than a specified number of shares). As we discuss in more detail 

below, we have made revisions to Rule 14a-7 that will enable a soliciting person to 

distinguish between shareholders who have requested paper copies of the proxy materials 

 

129 As with the case of an issuer, the soliciting person also may solicit shareholders 

concurrently by any other means, for example, by sending a proxy statement and proxy 

card to certain shareholders. 

44
and those who have not.130 Under the notice and access model, a soliciting person other 

than the issuer may choose to send a Notice only to those shareholders who have not 

requested paper copies of the proxy materials. 

In the proposing release, we proposed a provision that would have permitted a 

soliciting person other than the issuer to send a Notice that would condition the 

solicitation on a shareholder’s willingness to access the proxy materials on an Internet 

Web site. One commenter suggested that a soliciting person should not be permitted to 

condition its solicitation in this manner and should have to provide a copy of its proxy 

statement to a requesting shareholder.131 We are persuaded that a shareholder receiving a 

Notice reasonably may conclude that he or she is entitled to receive a copy of the 

materials. Therefore, the final rules require a soliciting person other than an issuer to 

send a paper or e-mail copy of the proxy statement to any requesting shareholder to 

whom it has sent a Notice.132

2. Timeframe for Sending Notice of Internet Availability of Proxy 

Materials 

A solicitation in opposition to the issuer’s proposals to be voted on at a 

shareholder meeting often is not initiated until after the issuer has filed its proxy 

statement. As we noted in the proposing release, we therefore believe that it may be 

unfair to apply the same timeframe for distributing the Notice to soliciting persons as the 

 

130 17 CFR 240.14a-7. 

131 See letter from ABA. 

132 The proposing release also discussed the possibility of an electronic-only solicitation in 

which the soliciting person publishes a communication pursuant to Rule 14a-12 [17 CFR 

240.14a-12], but does not send any Notices to shareholders. We are not adopting the 

electronic-only option that we discussed in the proposing release as part of the notice and 

access model. However, as noted in the final rules, the amendments do not affect the 

45
timeframe that applies to issuers. Therefore, the amendments require a soliciting person 

other than the issuer that is following the notice and access model to send out its Notice 

by the later of: (1) 40 calendar days prior to the meeting; or (2) 10 calendar days after the 

issuer first sends out its proxy statement or Notice to shareholders. This is substantially 

the same requirement we proposed, except that we have changed the proposed 30-day 

deadline to 40 days to conform it to our revision of the deadline for issuers. 

3. Content of the Notice of Internet Availability of Proxy Materials of a 

Soliciting Person Other Than the Issuer 

The content of the Notice sent by a soliciting person other than the issuer could be 

different from the content of the issuer’s Notice. For example, if a solicitation in 

opposition is launched before the issuer has sent its own proxy statement or Notice, the 

full shareholder meeting agenda may not be known to the soliciting person at the time it 

sends its Notice to shareholders. In such a case, the soliciting person must include the 

agenda items in its Notice only to the extent known.133

Also, there may be circumstances in which a person soliciting proxies in 

opposition to the issuer may provide a partial proxy card, that is, a proxy card soliciting 

proxy authority only for the agenda items in which the soliciting person is interested 

rather than for all of the items, or presenting only a partial slate of directors. Typically, 

such a proxy would revoke any previously-executed proxy and the shareholder may lose 

his or her ability to vote on matters or directors other than those presented on the 

soliciting person’s card. To prevent a shareholder from unknowingly invalidating his or 

her vote on those other matters, a person soliciting in opposition that is presenting such a 

 

availability of any existing means by which an issuer or other person may furnish proxy 

materials under the proxy rules. 

46
card to shareholders must indicate clearly on its Notice whether execution of that card 

will invalidate the shareholder’s earlier vote on the other matters or directors reflected on 

the issuer’s proxy card. 

4. Shareholder Lists and the Furnishing of Proxy Materials by the 

Issuer 

Exchange Act Rule 14a-7 sets forth the obligation of issuers either to provide a 

shareholder list to a requesting shareholder or to send the shareholder’s proxy materials 

on the shareholder’s behalf. That rule provides that the issuer has the option to provide 

the list or send the shareholder’s materials, except when the issuer is soliciting proxies in 

connection with a going-private transaction or a roll-up transaction.134 Under the 

amendments, if the issuer is providing its shareholder list to a soliciting person, the issuer 

would be required to indicate which of those shareholders have permanently requested 

paper copies of proxy materials.135 The proposed rules would have required an issuer to 

share all information about its shareholders regarding electronic delivery. We have 

decided to limit this requirement. 

One commenter was concerned that a requirement to share information on 

affirmative consents may violate the issuer’s privacy policies and the terms of the consent 

agreement between the issuer and shareholder.136 The commenter also was concerned 

about divulging employees’ internal company e-mail addresses. We agree with this 

 133 See Rule 14a-16(l)(3)(i) [17 CFR 240.14a-16(l)(3)(i)]. 

134 See Exchange Act Rule 14a-7(b) [17 CFR 240.14a-7(b)]. If the issuer is soliciting 

proxies in connection with a going-private transaction or a roll-up transaction, the 

shareholder has the option to request the shareholder list or have the issuer send its 

materials. 

135 See proposed Note 3 to Exchange Act Rule 14a-7. 

136 See letter from SCSGP. 

47
comment and are not adopting that aspect of the proposal. However, the new rules do 

require an issuer to share information regarding whether a shareholder has made a 

permanent election to receive paper copies of the proxy materials. Such disclosure would 

not necessitate disclosure of a shareholder’s e-mail address. In addition, a shareholder 

who has made a permanent election to receive paper copies of the issuer’s proxy 

materials might reasonably expect to receive paper copies of proxy materials from other 

soliciting persons. Once that shareholder has made a permanent election, he or she 

should not be required to ask again for a paper copy of proxy materials.137

Similarly, if, under Rule 14a-7, the issuer elects to send the soliciting person’s 

proxy materials, the amendments require the issuer to refrain from forwarding the other 

soliciting person’s Notice to any shareholder who has made a permanent election to 

receive paper copies.138 If the soliciting person requests that the issuer follow the notice 

and access model, the soliciting person would be responsible for providing the issuer with 

copies of its Notice for all shareholders to whom it intends to provide a Notice. In that 

case, the issuer would have to send the soliciting person’s Notice with reasonable 

promptness after receipt from the soliciting person. An issuer could not decide on its 

own whether to send a soliciting person’s materials in paper or electronically. If the other 

soliciting person wishes to send a proxy card to shareholders 10 or more days after it first 

 

137 As noted above, this election would be effective until a shareholder revokes that election. 

138 The other soliciting person could, of course, provide paper copies of the proxy statement 

and proxy card to the issuer for forwarding to those shareholders who have elected to 

receive paper copies. 

48
sends the Notice, the issuer would be required to forward those proxy cards in a similar 

fashion.139

5. The Role of Intermediaries With Respect to Solicitations by Persons 

Other Than the Issuer 

Intermediaries generally furnish proxy materials to beneficial owners on behalf of 

soliciting persons other than the issuer under the conditions set forth in Exchange Act 

Rules 14b-1 and 14b-2.140 Although intermediaries historically have transmitted a 

soliciting person’s proxy materials in reliance on the procedures set forth in Rules 14b-1 

and 14b-2, these two rules do not explicitly address an intermediary’s obligations with 

respect to the forwarding of a soliciting person’s proxy materials. As proposed, the 

amendments clarify that intermediaries are obligated to send proxy materials on behalf of 

soliciting persons other than the issuer. 

D. Business Combination Transactions 

 As adopted, the notice and access model is not available with regard to proxy 

materials related to a business combination transaction, which includes transactions 

covered by Rule 165 under the Securities Act,141 as well as transactions for cash 

consideration requiring disclosure under Item 14 of Schedule 14A. Several 

commenters142 agreed that business combination transactions constitute highly 

extraordinary events for some issuers and frequently involve an offering of securities that 

 

139 As noted above, the issuer may alternatively provide the other soliciting person with a list 

of shareholders pursuant to Rule 14a-7. 

140 See Randall S. Thomas & Catherine T. Dixon, Aranow & Einhorn on Proxy Contests for 

Corporate Control, at §8.03(C) (3d ed. 2001). 

141 17 CFR 230.165. This prohibition would extend to persons who solicit proxies that are 

not parties to the transaction and any proxy materials in opposition to the transaction. 

142 See, for example, letters from ABA, Hermes, and Sullivan & Cromwell. 

49
must be registered under the Securities Act and require delivery of the prospectus.143 

They also typically involve proxy statements of considerable length and complexity. 

Other commenters nonetheless believed that the model should be extended to such 

transactions.144 They noted that even more savings may be realized by extending the 

model to such larger documents. The Commission desires to gain more experience with 

the notice and access model before extending it to business combination transactions. 

Based on our experience with the model once it is being used for more straightforward 

corporate actions, we will consider at a later date whether it is appropriate to extend the 

model to business combination transactions. 

E. Compliance Date and Monitoring 

 No issuer may send a Notice to shareholders before July 1, 2007. Issuers and 

intermediaries typically hire third parties to handle the logistics of proxy distribution. 

These companies will require time to adjust their systems to accommodate the notice and 

access model. Therefore, an issuer may not use the new model for meetings before 

August 10, 2007 because of the 40-day deadline. Similarly, if an issuer’s meeting will be 

on or after August 10, 2007, it may only send the Notice on or after July 1, 2007, even if 

the issuer wishes to send the Notice more than 40 days prior to the meeting date. 

 We desire to track the industry’s experience with the notice and access model to 

determine whether the rules are achieving their intended purposes. However, we do not 

currently intend to impose a requirement for issuers and other parties to provide us with 

 

143 The prospectus delivery requirements applicable to business combination transactions 

were not impacted by our securities offering reform initiative because such transactions 

were excluded. See Release No. 33-8591 (July 19, 2005) [70 FR 44271]. 

144 See, for example, letters from BRT, CALSTRS, Computershare, ICI, ISS, McData Corp, 

NY State Bar, Swingvote, SCSGP, William Sjostrom, and University Bancorp. 

50
data and experiences with the model. We welcome information from issuers and all other 

parties involved in the proxy distribution process about their experience with the notice 

and access model on a voluntary basis. Such information would include itemized costs of 

proxy solicitation before and after adoption of the model, shareholder voting data before 

and after adoption, the number of copies requested, and any problems encountered with 

implementing the program. Although such information may be aggregated with the data 

and experiences of others and presented to the public, we do not intend to divulge the 

identity of responding parties.

IV. Conforming and Correcting Revisions to the Proxy Rules 

The adopted rules reflect numerous amendments to terms used in the current 

proxy rules to explicitly accommodate the notice and access model. The changes are as 

follows: 

• We substitute the term “send” and other tenses of the verb for the term 

“mail” and its other tenses to avoid any misunderstanding that “mail” 

means only paper delivery through the U.S. mail system.145

• We clarify that the term “address” includes an electronic mail address.146

Furthermore, we clarify the use of the term “annual report(s)” in the proxy rules 

by changing all references to either “annual report(s) to security holders” or “annual 

report(s) on Form 10-K and/or Form 10-KSB,” as appropriate.147 Finally, we are 

 

145 Rules 14a-4(c)(1), 14a-8(e)(2), 14a-8(e)(3), 14a-8(m)(3), 14a-13(a)(5), 14a-13(c), 

14b-1(c)(2)(ii), 14b-2(c)(2)(ii), 14c-5(a) and 14c-7(a)(5). Also Note 2 to Rule 14a-13(a), 

Instruction 2 to paragraph (d)(2)(ii)(L) of Item 7 of Rule 14a-101, Note 2 to Rule 

14c-7(a) and Instruction 1 to Item 4 of Rule 14c-101.

146 Rules 14a-7(f), 14a-13(e), 14b-1(a)(2) and 14b-2(a)(4). 

147 Rules 14a-3(b)(1), 14a-3(b)(10), 14a-3(b)(13), 14a-3(e)(1)(i), 14a-3(e)(1)(i)(A), 

14a-3(e)(1)(i)(B), 14a-3(e)(1)(i)(C), 14a-3(e)(1)(i)(E), 14a-3(e)(1)(ii)(A), 

51
updating Rule 14a-2 and Forms 10-Q, 10-QSB, 10-K, 10-KSB, and N-SAR to revise 

outdated references to Exchange Act Rule 14a-11, which the Commission rescinded in 

1999.148

V. Paperwork Reduction Act 

A. Background 

The amendments contain “collection of information” requirements within the 

meaning of the Paperwork Reduction Act of 1995 (PRA).149 We published a notice 

requesting comment on the collection of information requirements in the proposing 

release, and submitted requests to the Office of Management and Budget for approval in 

accordance with the PRA.150 These requests were approved by OMB. Some of the 

revisions that we are making to the original proposal affect these collections of 

information. We will submit requests for approval of the revisions to OMB. We are 

requesting comment in this release with respect to these revisions. 

The titles for the collections of information are:151

 

14a-3(e)(1)(ii)(B)(2), 14a-3(e)(1)(ii)(B)(2)(ii), 14a-3(e)(1)(ii)(B)(2)(iii), 

14a-3(e)(1)(ii)(B)(3), 14a-3(e)(1)(iii), 14a-3(e)(2), 14a-3(e)(2)(i), 14a-3(e)(2)(ii), 

14a-12(c)(1), 14b-1(b)(2), 14b-1(c)(2)(ii), 14b-1(c)(3), 14b-2(b)(3), 14b-2(c)(2)(ii), 

14b-2(c)(4), 14c-2(a)(2), 14c-3(a)(1) and 14c-3(c). Also Note to paragraph (e)(1)(i)(B) of 

Rule 14a-3, Note D(3) to Rule 14a-101, Note G(1) to Rule 14a-101, Instruction 1 to 

paragraph (d)(2)(ii)(L) of Item 7 of Rule 14a-101, paragraph (e)(2) of Item 14 of Rule 

14a-101, Item 23 of Rule 14a-101, paragraph (a), (b), (c) and (d) of Item 23 to Rule 

14a-101, Note 1 to paragraph (b)(2) of Rule 14b-1, Note 1 to paragraph (b)(3) of Rule 

14b-2, section heading to Rule 14c-3, Item 5 of Rule 14c-101 and paragraph (a), (b), (c) 

and (d) of Item 5 of Rule 14c-101. 

148 See Release No. 33-7760 (Oct. 22, 1999) [64 FR 61408]. 

149 44 U.S.C. 3501 et seq.

150 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

151 In the proposing release, we described the proposed Notice of Internet Availability of 

Proxy Materials as a new collection of information, rather than a part of our existing 

collections of information related to Regulations 14A and 14C. However, we 

subsequently submitted to OMB a PRA analysis based on revisions to the Regulation 

52
Regulation 14A (OMB Control No. 3235-0059) 

Regulation 14C (OMB Control No. 3235-0057) 

An agency may not conduct or sponsor, and a person is not required to respond to, 

a collection of information unless it displays a currently valid OMB control number. 

B. Summary of Amendments 

The amendments will apply to a particular issuer or other soliciting person only if 

the issuer or soliciting person voluntarily chooses to rely on the notice and access model. 

However, if the issuer or soliciting person opts to rely on the new alternative model, 

compliance with the components of the model is mandatory. The Notices, the proxy 

materials posted on the Web site, and copies of the proxy materials sent in response to 

shareholder requests will not be kept confidential. 

The Notice must include the following prominent legend in bold-face type and 

other information described below: 

“Important Notice Regarding the Availability of Proxy Materials for the 

Shareholder Meeting to Be Held on [insert meeting date].152

• This communication presents only an overview of the more 

complete proxy materials that are available to you on the 

Internet. We encourage you to access and review all of the 

important information contained in the proxy materials before 

voting. 

• The [proxy statement] [information statement] [annual report 

to security holders] [is/are] available at [Insert Web site 

address]. 

 

14A and Regulation 14C collections. Based on our burden estimates associated with the 

Notice, the collection of information approved by OMB related to revisions to existing 

collections of information (Regulations 14A and 14C) and therefore we refer to those 

collections of information in this PRA discussion. 

152 Appropriate changes must be made to the Notice if the issuer is providing an information 

statement pursuant to Regulation 14C or seeking to effect a corporate action by written 

consent. 

53
• If you want to receive a paper or e-mail copy of these 

documents, you must request one. There is no charge to you 

for requesting a copy. Please make your request for a copy as 

instructed below on or before [Insert a date] to facilitate timely 

delivery.” 

• The date, time, and location of the meeting or, if corporate action is to be 

taken by written consent, the earliest date on which the corporate action 

may be effected; 

• A clear and impartial identification of each separate matter intended to be 

acted upon and the issuer’s or other soliciting person’s recommendations 

regarding those matters, but no supporting statements; 

• A list of the materials being made available at the specified Web site; 

• (1) A toll-free telephone number; (2) an e-mail address; and (3) an Internet 

Web site address where the shareholder can request a copy of the proxy 

materials, for all meetings and for the particular meeting to which the 

Notice relates; 

• Any control/identification number that the shareholder needs to access his 

or her proxy card; 

• Instructions on how to access the proxy card, provided that such 

instructions do not enable a shareholder to execute a proxy without having 

access to the proxy statement and annual report; and 

• Information on how to obtain directions to be able to attend the meeting 

and vote in person. 

54
Intermediaries must provide a similar notice to beneficial owners. We expect that 

all of the factual information required to appear in the Notice will become available as 

part of the ordinary preparations for a shareholder meeting. 

C. Comments on PRA Estimates 

We requested comment on the PRA analysis contained in the proposing release. 

In the proposing release, we estimated the annual burden for an issuer or other soliciting 

person to prepare a Notice to be approximately 1.5 hours. We estimated that 75% of the 

burden would be prepared by the issuer and that 25% of the burden would be prepared by 

outside counsel retained by the issuer at an average cost of approximately $300 per 

hour.153 Based on our receipt of 7,301 filings on Schedule 14A and 681 filings on 

Schedule 14C during our 2005 fiscal year, we estimated that 7,982 Notices would be filed 

annually, assuming that all issuers and other soliciting persons elected to follow the 

proposed notice and access model.154 We further estimated that the total annual reporting 

burden would be approximately 8,980 hours.155 Using the revised $400 average cost for 

retaining outside counsel, we are adjusting our annual cost estimate to approximately 

$1,197,300,156 which reflects the outside counsel cost. 

 

153 For convenience, the estimated PRA hour burdens have been rounded to the nearest 

whole number, and the estimated PRA cost burdens have been rounded to the nearest 

$100. At the proposing stage, we used an estimated hourly rate of $300.00 to determine 

the estimated cost to public companies of executive compensation and related disclosure 

prepared or reviewed by outside counsel. We recently have increased this hourly rate 

estimate to $400.00 per hour after consulting with several private law firms. The cost 

estimates in this release are based on the $400.00 hourly rate. We request comment on 

this estimated hourly rate. 

154 7,301 notices for 14A filers + 681 notices for 14C filers = 7,982 total notices. 

155 7,982 notices x 1.5 hours per notice x .75 = 8,980 hours. 

156 7982 notices x $400/hour x 1.5 hours/notice x .25 = $1,197,300. 

55
Although the notice and access model is an alternative to the existing model for 

the distribution of proxy materials to shareholders, and reliance upon it will be optional, 

we based our reporting burden and cost estimates on the assumption that all issuers or 

other soliciting persons in fiscal year 2005 would have relied on the notice and access 

model even though we realized that this would result in an overestimation of hour and 

cost burdens. The new alternative is voluntary, so the percentage of issuers and soliciting 

persons that will choose to rely on the new model is uncertain. 

In response to commenters’ remarks, we revised the proposal to require issuers to 

permit shareholders to make permanent elections to receive proxy materials in paper or 

by e-mail. An issuer must maintain records as to which of its shareholders have made 

such an election. Many issuers already maintain similar records to keep track of their 

shareholders who have affirmatively consented to electronic delivery consistent with past 

Commission guidance,157 as well as their shareholders who have consented to 

householding of proxy materials pursuant to Rule 14a-3(e).158 For purposes of the PRA, 

we estimate that a typical issuer will spend an additional five hours per year, or a total of 

39,910 hours for all issuers subject to the proxy rules, to maintain these records.159 

Because this is an internal recordkeeping requirement, we do not expect a cost for hiring 

outside counsel. 

The final rules also require an intermediary to prepare its own Notice. This 

Notice would be substantially the same as an issuer’s Notice, but will be modified by the 

 

157 See the 1995 Interpretive Release. 

158 17 CFR 240.14a-3(e). 

159 7,982 filings with an estimated one filing per issuer or soliciting person x 5 hours = 

39,910 hours.

56
intermediaries to provide information that is relevant to beneficial owners rather than 

registered holders. According to ADP, it processes more than 95% of proxy materials 

that are sent to beneficial owners on behalf of intermediaries, reducing the need to create 

multiple intermediary Notices. In addition, the issuer or other soliciting person will 

provide the majority of information required in the intermediary’s Notice. Therefore, we 

estimate that the burden to prepare an intermediary’s Notice will be approximately one 

hour, or a total annual burden of 7,982 hours for all proxy solicitations.160 

Intermediaries must also maintain records to keep track of which beneficial 

owners have made a permanent election to receive proxy materials in paper or by e-mail. 

Like issuers, intermediaries already maintain records of shareholders’ affirmative 

consents to electronic delivery and householding of proxy materials. In addition, 

intermediaries maintain records as to whether their beneficial owner customers have 

objected, or not objected, to disclosure of their identities to the issuer. Like issuers, we 

believe this will result in an annual burden of 39,910 hours for intermediaries. 

We did not receive any comments on the percentage of issuers and persons likely 

to rely on the notice and access model, nor did we receive any comments on our burden 

and cost estimates associated with preparing the Notice. However, several corporate 

commenters indicated that some issuers might be reluctant to rely on the notice and 

access model due to a concern that the costs of fulfillment of requests for paper copies 

under the model might offset some of the potential savings that they could realize from 

 

160 7,982 notices x 1 hour per notice = 7,982 hours. We do not include a cost to 

intermediaries for hiring outside counsel because we expect that the substantive contents 

of an intermediary’s Notice would be provided by the issuer or other soliciting person. 

The estimates assume that ADP will continue to process over 95% of the proxy 

solicitations on behalf of intermediaries, thereby eliminating the need for each 

intermediary to prepare a separate Notice. 

57
the model. We have revised the proposed model to address some of these concerns about 

fulfillment of requests for paper copies, but it is still difficult to predict the number of 

issuers and soliciting persons that will rely on the model. Therefore, we are not revising 

the original estimates that assume that all issuers and soliciting persons will rely on the 

notice and access model. As a result, these burden estimates likely are overstated. We 

will adjust them after we have actual experience with the notice and access model. We 

request comment on all of our hourly and cost burden estimates. 

Any member of the public may direct to us any comments concerning these 

burden and cost estimates and any suggestions for reducing the burdens and costs. 

Persons who desire to submit comments on the collections of information requirements 

should direct their comments to the OMB, Attention: Desk Officer for the Securities and 

Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 

20503, and send a copy of the comments to Nancy M. Morris, Secretary, Securities and 

Exchange Commission, 100 F Street, NE, Washington, DC 20549-9303, with reference 

to File No. S7-10-05. Requests for materials submitted to the OMB by us with regard to 

these collections of information should be in writing, refer to File No. S7-10-05, and be 

submitted to the Securities and Exchange Commission, Records Management, Office of 

Filings and Information Services, 100 F Street, NE, Washington, DC 20549. Because the 

OMB is required to make a decision concerning the collections of information between 

30 and 60 days after publication, your comments are best assured of having their full 

effect if the OMB receives them within 30 days of publication. 

58
VI. Cost-Benefit Analysis 

A. Background 

The amendments to the proxy rules enable issuers to take advantage of 

technological advances that have occurred in recent years to more efficiently furnish 

proxy materials to shareholders. We expect that these amendments will lead to 

significant cost reduction for proxy solicitations. The costs of solicitations ultimately are 

borne by shareholders. We are sensitive to the costs and benefits that result from our 

rules. In this section, we examine those costs and benefits. 

Issuers and other persons soliciting proxies must comply with the rule 

amendments only if they elect to furnish proxy materials pursuant to the notice and 

access model. No issuer or person conducting a proxy solicitation will be required to 

follow the notice and access model. We expect that an issuer or other soliciting person 

will follow the model only if it believes that it will experience cost savings as a result. 

We expect that having a choice among alternative models for furnishing proxy materials 

will limit the costs of the amendments by enabling issuers and other soliciting persons to 

choose one that is most efficient and cost effective under the issuer’s or other soliciting 

person’s particular circumstances. 

B. Summary of Amendments 

The amendments provide an alternative notice and access model that permits an 

issuer to furnish its proxy materials to shareholders by posting them on a publiclyaccessible Internet Web site (other than the Commission’s EDGAR Web site) and 

providing shareholders with a notice informing them that the materials are available and 

59
explaining how to access them. Under this alternative model, shareholders may request 

paper or e-mail copies of the proxy materials at no charge from the issuer. 

Under the amendments, an issuer can require intermediaries to follow similar 

procedures when forwarding the issuer’s proxy materials to beneficial owners. In 

addition, shareholders and other persons conducting their own proxy solicitations may 

follow the alternative model, under the same general requirements that apply to issuers. 

However, such persons will be able to limit their solicitations to shareholders who have 

not requested paper copies of the proxy materials from an issuer in connection with the 

issuer’s solicitation. 

C. Benefits 

The benefits to investors of the amendments include the following: (1) more 

rapid dissemination of proxy information to shareholders using the Internet; and (2) 

reduced printing and mailing costs for issuers, as well as other soliciting persons 

engaging in proxy contests. We expect that the reductions in printing and mailing costs 

and the potential decrease in the costs of proxy contests to be the most significant sources 

of economic benefit to investors of the amendments. 

In terms of paper processing alone, the benefits of the rule amendments are 

limited by the volume of paper processing that would occur otherwise. As we noted in 

the proposing release, Automatic Data Processing, Inc. (ADP) handles the vast majority 

of proxy mailings to beneficial owners.161 ADP publishes statistics that provide useful 

background for evaluating the likely consequences of the rule amendments. ADP 

 

161 We expect savings per mailing to record holders to roughly correspond to savings per 

mailing to beneficial owners. 

60
estimates that, during the 2006 proxy season,162 over 69.7 million proxy material 

mailings were eliminated through a variety of means, including householding and 

existing electronic delivery methods. During that season, ADP mailed 85.3 million paper 

proxy items to beneficial owners. ADP estimates that the average cost of printing and 

mailing a paper copy of a set of proxy materials during the 2006 proxy season was $5.64. 

We estimate that issuers and other soliciting persons spent, in the aggregate, $481.2 

million in postage and printing fees alone to distribute paper proxy materials to beneficial 

owners.163 Approximately 50% of all proxy pieces mailed by ADP in 2005 were mailed 

during the proxy season.164 Therefore, we estimate that issuers and other persons 

soliciting proxies from beneficial owners spent approximately $962.4 million in 2006 in 

printing and mailing costs.165

Based on the assumption that 19% of shareholders will choose to have paper 

copies sent to them when an issuer relies on the notice and access model, we estimate that 

the amendments could produce annual paper-related savings ranging from $48.3 million 

(if issuers who are responsible for 10% of all proxy mailings choose to rely on the notice 

and access model) to $241.4 million (if issuers who are responsible for 50% of all proxy 

mailings choose to rely on the notice and access model).166 This estimate excludes the 

 

162 According to ADP data, the 2006 proxy season extended from February 15, 2006 to May 

1, 2006. 

163 85.3 million mailings x $5.64/mailing = $481.2 million. 

164 According to ADP, in 2005, 90,013,175 of 179,833,774, or 50%, of proxy pieces were 

mailed during the 2005 proxy season. 

165 $481.2 million / 50% = $962.4 million. 

166 This range of potential cost savings depends on data on proxy material production, home 

printing costs, and first-class postage rates provided by Lexecon and ADP, and 

supplemented with modest 2006 USPS postage rate discounts. The fixed costs of notice 

and proxy material production are estimated to be $2.36 per shareholder. The variable 

costs of fulfilling a paper requests, including handling, paper, printing and postage, are 

61
effect of the provision of the amendments that will allow shareholders to make a 

permanent request for paper copies. That provision will enable issuers and other 

soliciting persons to take advantage of bulk printing and mailing rates for those 

requesting shareholders, and therefore should reduce the on-demand costs reflected in 

these calculations.167

We estimate that approximately 19% of shareholders will request paper copies. 

Commenters provided alternate estimates. For example, Computershare, a large transfer 

agent, estimated that less than 10% of shareholders would request paper copies.168 

According to a survey conducted by Forrester Research for ADP, 12% of shareholders 

report that they would always take extra steps to get their proxy materials, and as many as 

68% of shareholders report that they would take extra steps to get their proxy materials in 

paper at least some of the time. The same survey also finds that 82% of shareholders 

report that they look at their proxy materials at least some of the time. These survey 

results suggest that shareholders may review proxy materials even if they do not vote. 

 

estimated to be $6.11 per copy requested. Assumptions about percentages of 

shareholders requesting paper copies are derived from Forrester survey data furnished by 

ADP and adjusted for the reported likelihood that an investor will take extra steps to get 

proxy materials. Our estimate of the total number of shareholders is based on data 

provided by ADP and SIA. According to SIA’s comment letter, 78.49% of shareholders 

held their shares in street name. We estimate that the total number of proxy pieces 

mailed equals the number of pieces mailed to beneficial shareholders by ADP in 2005 

divided by 78.49%, which equals 179,833,774 / 78.49%, or 229,116,797. 

167 ADP commissioned a study by Lexecon to provide estimates for the total net cost/savings 

of the amendments to issuers. Lexecon’s study relied on 2005 postage rates with no firstclass mail discounts and a higher share of color printing at home than we assume above. 

It estimated that if all issuers adopt the notice and access model, if 9% of shareholders 

choose to print the materials at home, and 19% choose to have paper copies sent to them, 

then the amendments would produce a net savings of $205 million for issuers in the 

aggregate. However, if 20% of shareholders chose to print and 39% chose to request 

paper copies, the amendments would produce a net cost of $181 million. See Lexecon 

comment letter for more details. 

168 See letter from Computershare. 

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During the 2005 proxy season, only 44% of accounts were voted by beneficial owners. 

Put differently, 56%, or 84.8 million accounts, did not return requests for voting 

instructions. Our estimate that 19% of shareholders will request paper copies reflects the 

diverse estimates suggested by the available data. 

Although we expect the savings to be significant, the actual paper-related benefits 

will be influenced by several factors that we estimate will become less important over 

time. First, some issuers and other soliciting persons will likely not elect to follow the 

alternative model. We estimate that issuers who are responsible for between 10% and 

50% of all current proxy mailings will adopt the notice and access model during the first 

year of implementation of the amendments. Several commenters noted that some issuers 

may not be willing to try the model the first year, but rather will opt to wait and monitor 

the experience of other issuers that do try the model. Second, to the extent that some 

shareholders request paper copies of the proxy materials, the benefits of the amendments 

in terms of savings in printing and mailing costs will be reduced. Issuers are concerned 

that the cost per paper copy would be significantly greater if they have to mail copies of 

paper proxy materials to shareholders on an on-demand basis, rather than mailing the 

paper copies in bulk. Thus, if a significant number of shareholders request paper, the 

savings will be substantially reduced. Third, after adopting the notice and access model, 

issuers may face a high degree of uncertainty about the number of requests that they may 

get for paper proxy materials and may maintain unnecessarily large inventories of paper 

copies as a precaution. As issuers gain familiarity with the continued use of paper 

materials and as shareholders become more comfortable with receiving disclosures via 

the Internet, the number of paper copies are likely to decline, as will issuers’ tendency to 

63
print many more copies than ultimately are requested. This will lead to growth in paperrelated savings from the rule amendments over time. 

 Additional benefits will accrue from reductions in the costs of proxy solicitations 

by persons other than the issuer. Under the amendments, persons other than the issuer 

also can rely on the notice and access model, but will be able to limit the scope of their 

proxy solicitations to shareholders who have not requested paper copies of the proxy 

materials. We expect that the flexibility afforded to persons other than the issuer under 

the amendments will reduce the cost of engaging in proxy contests, thereby increasing the 

effectiveness and efficiency of proxy contests as a source of discipline in the corporate 

governance process. 

The effect of the amendments of lessening the costs associated with a proxy 

contest will be limited by the persistence of other costs, even under the notice and access 

model. One commenter noted that a large percentage of the costs of effecting a proxy 

contest go to legal, document preparation, and solicitation fees, while a much smaller 

percentage of the costs is associated with printing and distribution of materials.169 

However, other commenters suggested that the paper-related cost savings that can be 

realized from the rule amendments are substantial enough to change the way many 

contests are conducted.170

Finally, some benefits from the amendments may arise from a reduction in what 

may be regarded as the environmental costs of the proxy solicitation process.171 

Specifically, proxy solicitation involves the use of a significant amount of paper and 

 

169 See letter from ADP. 

170 See letters from CALSTRS, Computershare, ISS, and Swingvote. 

171 See letter from American Forests. 

64
printing ink. Paper production and distribution can adversely affect the environment, due 

to the use of trees, fossil fuels, chemicals such as bleaching agents, printing ink (which 

contains toxic metals), and cleanup washes. To the extent that paper producers 

internalize these costs and the costs are reflected in the price of paper and other materials 

consumed during the proxy solicitation process, our dollar estimates of the paper-related 

benefits reflect the elimination of these adverse environmental consequences under the 

amendments. 

D. Costs 

An issuer’s decision to use the notice and access model will introduce several new 

costs into the process of proxy distribution, including the following: (1) the cost of 

preparing, producing, and sending the Notice to shareholders; (2) the cost of processing 

shareholders’ requests for copies of the proxy materials and maintaining their permanent 

election preferences; and (3) the cost to shareholders of printing proxy materials at home 

that would otherwise be printed by issuers. 

The paper-related savings to issuers and other soliciting persons discussed under 

the benefits section above are adjusted for the cost of printing and sending Notices. If 

Notices are sent by mail, then the mailing costs may vary widely among parties. Postage 

rates likely would vary from $0.14 to $0.39 per Notice mailed, depending on numerous 

factors. In our estimates of the paper-related benefits above, we assume that each Notice 

costs a total of $0.42 to print and mail. Based on data from ADP and SIA, we estimate 

that issuers and other soliciting persons process a total of 229,116,797 accounts per 

65
year.172 The alternative model also requires minimal added disclosures in the form of a 

Notice to shareholders, informing them that the proxy materials are available at a 

specified Internet Web site. For purposes of the PRA, we have presented the extremely 

conservative estimate that the preparation and filing costs of the amendments, assuming 

that all issuers and other soliciting persons elect to follow the procedures, will be 

approximately $2,020,475.173 Under the alternate scenario presented above, these costs 

could range between $202,048 if 10% of issuers adopt the model and $1,010,238 if 50% 

of issuers adopt. The amendments also require issuers and intermediaries to maintain 

records of shareholders who have requested paper and e-mail copies for future proxy 

solicitations. We estimate that this cost to issuers and intermediaries will be 

approximately $9,977,500 if all issuers adopt the notice and access model,174 $997,500 if 

10% of issuers adopt the model, and $4,988,750 if 50% of issuers adopt the model. 

Issuers who adopt the notice and access model and their intermediaries will incur 

additional processing costs. The amendments will require an intermediary such as a 

bank, broker-dealer, or other association to follow the notice and access model if an 

issuer so requests. An intermediary that follows the notice and access model will be 

 

172 See www.ics.adp.com/release11/public_site/about/stats.html stating that ADP handled 

179,833,774 in fiscal year 2005 and letter from SIA stating that beneficial accounts 

represent 78.49% of total accounts. 

173 For PRA purposes, we estimate that issuers would spend a total of $897,975 on outside 

professionals to prepare this disclosure. We also estimate that issuers would spend a total 

of 8,980 hours of issuer personnel time preparing this disclosure. We estimate the 

average hourly cost of issuer personnel time to be $125, resulting in a total cost of 

$1,122,500 for issuer personnel time. This results in a total cost of $2,020,475 for all 

issuers. We expect that costs for posting the materials on a Web site will be minimal and 

are included in this calculation. 

174 For PRA purposes, we estimate that issuers and intermediaries would spend a total of 

79,820 hours of issuer and intermediary personnel time maintaining these records. We 

estimate the average hourly cost of issuer and intermediary personnel time to be $125, 

resulting in a total cost of $9,977,500 for issuer and intermediary personnel time. 

66
required to prepare its own Notice to beneficial owners, along with instructions on when 

and how to request paper copies and the website where the beneficial owner can access 

his or her request for voting instructions. Since issuers reimburse intermediaries for their 

reasonable expenses of forwarding proxy materials and intermediaries and their agents 

already have systems to prepare and deliver requests for voting instructions, we do not 

expect the intermediaries’ role in sending their Notices to beneficial owners to 

significantly affect the costs associated with the rule. 

Under the notice and access model, a beneficial owner must request a copy of 

proxy materials from its intermediary rather than from the issuer. The costs of collecting 

and processing requests from beneficial owners may be significant, particularly if the 

intermediary receives the requests of beneficial owners associated with many different 

issuers that specify different methods of furnishing the proxy. We expect that these 

processing costs will be highest in the first year after adoption but will subsequently 

decline as intermediaries develop the necessary systems and procedures and as beneficial 

owners increasingly become comfortable with accessing proxy materials online. In 

addition, the final rules permit a beneficial owner to specify its preference on an accountwide basis, which should reduce the cost of processing requests for copies. These costs 

are ultimately paid by the issuer and therefore would be included in an issuer’s 

assessment of whether to adopt the alternative model. 

Shareholders obtaining proxy materials online would incur any necessary costs 

associated with gaining access to the Internet. In addition, some shareholders may 

choose to print out the posted materials, which will entail paper and printing costs. We 

estimate that approximately 10% of all shareholders will print out the posted materials at 

67
home at an estimated cost of $7.05 per proxy package. Based on these assumptions, the 

amendments are estimated to produce annual home printing costs ranging from $16 

million (if issuers who are responsible for 10% of all current proxy mailings choose to 

rely on the notice and access model) to $80 million (if issuers who are responsible for 

50% of all current proxy mailings choose to rely on the notice and access model).175 

Investors have the option to incur no additional cost by either accessing the proxy 

materials online or requesting paper copies of the materials from the issuer. 

VII. Consideration of Burden on Competition and Promotion of Efficiency, 

Competition and Capital Formation 

 Section 23(a)(2) of the Exchange Act176 requires us, when adopting rules under 

the Exchange Act, to consider the impact that any new rule would have on competition. 

In addition, Section 23(a)(2) prohibits us from adopting any rule that would impose a 

burden on competition not necessary or appropriate in furtherance of the purposes of the 

Exchange Act. Section 3(f) of the Exchange Act177 and Section 2(c) of the Investment 

Company Act of 1940178 require us, when engaging in rulemaking that requires us to 

consider or determine whether an action is necessary or appropriate in the public interest, 

to consider, in addition to the protection of investors, whether the action will promote 

efficiency, competition, and capital formation. We have also discussed other impacts of 

 

175 This range of potential home printing costs depends on data provided by Lexecon and 

ADP. See letter from ADP. The Lexecon data was included in the ADP comment letter. 

To calculate home printing cost, we assume that 50% of annual report pages are printed 

in color and 100% of proxy statement pages are printed in black and white. The 

estimated percentage of shareholders printing at home is derived from Forrester survey 

data furnished by ADP and adjusted for the reported likelihood that an investor will take 

extra steps to get proxy materials. Total number of shareholders estimated as above 

based on data provided by ADP and SIA. See letters from ADP and SIA. 

176 15 U.S.C. 78w(a)(2). 

177 15 U.S.C. 78c(f). 

68
the amendments in our Cost-Benefit, Paperwork Reduction Act and Final Regulatory 

Flexibility Act Analyses. 

The amendments to the proxy rules are intended to improve efficiency by 

providing an alternative for issuers and other soliciting persons that could reduce the cost 

of soliciting proxies and sending information statements regarding shareholder meetings. 

Currently, many issuers must devote a significant amount of time and resources to proxy 

mailings. Similarly, undertaking a proxy contest is often a very costly endeavor. We 

expect that the amendments will reduce the time and resources related to such 

distributions. These costs include reimbursing intermediaries for their part in the process. 

As noted elsewhere in this release, commenters expressed concern that the 

amendments might reduce shareholder participation in the proxy voting process, making 

issuers more dependent on broker discretionary voting. Such a result would affect the 

efficiency of the current proxy voting process. We have made revisions to the 

amendments to minimize such effect, by making it easier for shareholders to continue to 

receive paper copies of the proxy materials. Similarly, there was concern that the 

amendments would increase the risk of shareholders conducting frivolous proxy contests. 

We have also revised the final rules to minimize this possibility, by eliminating the 

proposed conditional solicitation.179

Some commenters were concerned that the added procedures would complicate 

the proxy distribution process, reducing the efficiency of the process. The final rules are 

voluntary. No issuer or other soliciting person is required to rely on the notice and access 

model. Those that choose to rely on the model presumably have determined that the 

 178 15 U.S.C. 80a-2(c). 

69
additional procedures that they must follow would reduce their cost of soliciting proxies, 

thereby increasing the efficiency of the process. 

We considered the effects that the amendments would have on capital formation. 

The final rules do not directly affect the ability of issuers to raise capital. However, they 

are intended to reduce the cost of soliciting proxies. In addition, they facilitate proxy 

disclosure via the Internet, which may improve the manner in which investors receive 

those disclosures, thereby improving shareholder relations. 

We considered the possible effects of the amendments on competition. As noted 

elsewhere in this release, companies in, and related to, the financial printing industry 

were concerned about the negative effects that the rules may have on that industry. 

Conversely, these rules may create alternative industries that promote more user-friendly, 

computer-based systems for interaction with shareholders, thus creating new jobs and 

industries in this field. 

VIII. Final Regulatory Flexibility Analysis 

This Final Regulatory Flexibility Analysis has been prepared in accordance with 5 

U.S.C. 603. It relates to amendments to the proxy rules under the Exchange Act that will 

provide an alternative model for issuers and other persons soliciting proxies to satisfy 

certain of their obligations under the Commission’s proxy rules. An Initial Regulatory 

Flexibility Analysis (IRFA) was prepared in accordance with the Regulatory Flexibility 

Act in conjunction with the proposing release. The proposing release included, and 

solicited comment on, the IRFA. 

 179 See Section III.C.1 of Release No. 34-52926 (Dec. 8, 2005) [70 FR 74597]. 

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A. Need for the Amendments 

 On December 8, 2005, we proposed amendments to the rules regarding provision 

of proxy materials to shareholders.180 We are adopting those amendments, substantially 

as proposed, but with a few modifications in response to public comment. Specifically, 

the amendments create an alternative notice and access model by which issuers and other 

soliciting persons can electronically furnish their proxy materials to shareholders. The 

amendments are intended to put into place processes that will provide shareholders with 

notice of, and access to, proxy materials while taking advantage of technological 

developments and the growth of the Internet and electronic communications. Issuers that 

rely on the amendments may be able to significantly lower the costs of their proxy 

solicitations that ultimately are borne by shareholders. The fact that the amendments also 

apply to a soliciting person other than the issuer might help to reduce the costs of 

engaging in a proxy contest. 

The amendments also have the potential to improve the ability of shareholders to 

participate meaningfully in the proxy process by reducing the cost of undertaking a proxy 

contest and may increase management’s accountability and responsiveness to 

shareholders due to heightened concern about the possibility of a proxy contest. This, in 

turn, may enhance the value of shareholders’ investments. 

B. Significant Issues Raised by Public Comment 

In the proposing release, we requested comment on any aspect of the Initial 

Regulatory Flexibility Act Analysis, including the number of small entities that would be 

affected by the proposals, and both the qualitative and quantitative nature of the impact. 

 

180 Release No. 34-52926 (Dec. 8, 2005) [70 FR 74597]. 

71
We did not receive comment on the number of small entities that would be affected by 

the proposals. Also, no commenters noted any difference in the potential effect of the 

amendments on small entities as opposed to other entities. 

One commenter remarked that smaller companies depend more heavily on broker 

discretionary voting than larger companies in order to meet state law quorum 

requirements.181 Although the new rules do not affect the NYSE’s broker discretionary 

voting rule, that commenter noted that if the final rules reduce shareholder voting, such 

smaller companies would become even more dependent on broker discretionary voting. 

As noted elsewhere in this release, we have made revisions to the amendments to 

minimize such effect, by making it easier for shareholders to continue to receive paper 

copies of the proxy materials. 

C. Small Entities Subject to the Amendments 

Exchange Act Rule 0-10(a)182 defines an issuer to be a “small business” or “small 

organization” for purposes of the Regulatory Flexibility Act if it had total assets of $5 

million or less on the last day of its most recent fiscal year. We estimate that there are 

approximately 2,500 public companies, other than investment companies, that may be 

considered small entities. 

For purposes of the Regulatory Flexibility Act, an investment company is a small 

entity if it, together with other investment companies in the same group of related 

investment companies, has net assets of $50 million or less as of the end of its most 

recent fiscal year.183 Approximately 157 registered investment companies meet this 

 

181 See letter from ABC. 

182 17 CFR 240.0-10(a). 

183 See Rule 0-10 under the Investment Company Act of 1940 [17 CFR 270.0-10]. 

72
definition. Moreover, approximately 53 business development companies may be 

considered small entities. 

Paragraph (c)(1) of Rule 0-10 under the Exchange Act184 states that the term 

“small business” or “small organization,” when referring to a broker-dealer, means a 

broker or dealer that had total capital (net worth plus subordinated liabilities) of less than 

$500,000 on the date in the prior fiscal year as of which its audited financial statements 

were prepared pursuant to §240.17a-5(d); and is not affiliated with any person (other than 

a natural person) that is not a small business or small organization. As of 2005, the 

Commission estimates that there were approximately 910 broker-dealers that qualified as 

small entities as defined above.185 Small Business Administration regulations define 

“small entities” to include banks and savings associations with total assets of $165 

million or less.186 The Commission estimates that the rules will apply to approximately 

9,475 banks, approximately 5,816 of which could be considered small banks with assets 

of $165 million or less. 

No issuer is required to follow the notice and access model. However, we expect 

that many issuers will choose to follow the alternative model because of the substantial 

cost savings that they may realize. These issuers likely will include many small entities. 

Broker-dealer and bank intermediaries are required to comply with the notice and access 

model if an issuer or other soliciting person requests such intermediaries to follow the 

alternative model. 

 

184 17 CFR 240.0-10(c)(1). 

185 These numbers are based on a review by the Commission’s Office of Economic Analysis 

of 2005 Financial and Operational Combined Uniform Single (FOCUS) Report filings 

reflecting registered broker-dealers. This number does not include broker-dealers that are 

delinquent in their FOCUS Report filings. 

73
D. Reporting, Recordkeeping and Other Compliance Requirements 

If an issuer chooses to follow the model, it will be required to prepare, file, and 

furnish a Notice to shareholders. Similarly, upon request from an issuer or other 

soliciting person, a broker-dealer or bank intermediary will be required to prepare and 

furnish its own Notice to beneficial owners. These Notices must include factual 

information that is readily available to the issuer and intermediary. An issuer relying on 

the notice and access model also will be required to provide copies of the proxy materials 

to requesting shareholders and to maintain a Web site on which to post the proxy 

materials. Intermediaries will be required to forward copies of the proxy materials to 

requesting beneficial owners and to maintain a Web site on which to post its request for 

voting instructions. Those Web sites must be maintained in a manner to ensure that the 

anonymity of persons accessing the Web sites is preserved. Finally, issuers and 

intermediaries must maintain records regarding which shareholders have indicated a 

preference to receive paper or e-mail copies of the proxy materials in the future. 

E. Agency Action to Minimize Effect on Small Entities 

Compliance with the alternative notice and access model is voluntary for issuers. 

An issuer that is a small entity, like other types of entities subject to the proxy rules, need 

not elect to follow the alternative model. This flexibility to comply with traditional 

methods of distributing proxy materials to shareholders or to comply with the notice and 

access model will allow a small entity to choose the compliance means that will be most 

cost effective for its particular situation. It is likely that only the issuers that believe they 

 186 13 CFR 121.201. 

74
will realize cost savings or other benefits as a result of following the notice and access 

model will choose to do so. 

Broker-dealer and bank intermediaries that are small entities must comply with 

the requirements of the voluntary model upon request from an issuer or other soliciting 

person. However, an intermediary is not required to forward proxy materials to 

beneficial owners unless the issuer or other soliciting person provides assurance of 

reimbursement of the intermediary’s reasonable expenses incurred in connection with 

forwarding those materials. Therefore, any costs imposed on intermediaries by the rules 

will be borne by the issuer or other soliciting person, and ultimately shareholders. 

Exempting broker-dealers and banks that are small entities would lead to inconsistent 

means by which beneficial owners receive their proxy materials, which we believe would 

not be appropriate. 

We considered alternatives, such as permitting an intermediary to merely forward 

an issuer’s Notice rather than preparing its own Notice and permitting beneficial owners 

to request copies directly from the issuer. However, we believe that those alternatives 

create a high likelihood of confusion with respect to whether a beneficial owner would be 

entitled to execute a proxy card rather than provide voting instructions to his or her 

intermediary. To prevent such confusion, we have decided that such alternatives would 

not be appropriate. 

IX. Statutory Basis and Text of Amendments 

We are adopting the amendments pursuant to Sections 3(b), 10, 13, 14, 15, 23(a), 

and 36 of the Securities Exchange Act of 1934, as amended, and Sections 20(a), 30, and 

38 of the Investment Company Act of 1940, as amended. 

75
List of Subjects 

17 CFR Parts 240 and 249

Reporting and recordkeeping requirements, Securities. 

17 CFR Part 274 

 Investment companies, Reporting and recordkeeping requirements, Securities. 

PART 240 – GENERAL RULES AND REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

 1. The general authority citation for Part 240 is revised to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 

80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. 

* * * * * 

2. Amend §240.14a-2 by: 

a. Removing the period and adding a semicolon at the end of paragraph 

(b)(3)(ii); and 

b. Revising paragraph (b)(3)(iv). 

The revision reads as follows: 

§240.14a-2 Solicitations to which §240.14a-3 to §240.14a-15 apply. 

* * * * * 

(b) * * * 

(3) * * * 

76
(iv) The proxy voting advice is not furnished on behalf of any person soliciting 

proxies or on behalf of a participant in an election subject to the provisions of 

§240.14a-12(c); and 

* * * * * 

3. Amend §240.14a-3 by: 

a. Revising paragraphs (a), (e)(1)(i), the introductory text of paragraphs 

(e)(1)(ii)(A) and (e)(1)(ii)(B)(2), paragraphs (e)(1)(ii)(B)(2)(ii), (e)(1)(ii)(B)(2)(iii), 

(e)(1)(ii)(B)(3), (e)(1)(iii), and (e)(2); and 

b. Revising the term “annual report” to read “annual report to security 

holders” in paragraph (b)(13). 

The revisions read as follows: 

§240.14a-3 Information to be furnished to security holders. 

(a) No solicitation subject to this regulation shall be made unless each person 

solicited is concurrently furnished or has previously been furnished with: 

(1) A publicly-filed preliminary or definitive written proxy statement 

containing the information specified in Schedule 14A (§240.14a-101); 

(2) A publicly-filed preliminary or definitive proxy statement, in the form and 

manner described in §240.14a-16, containing the information specified in Schedule 14A 

(§240.14a-101); or 

(3) A preliminary or definitive written proxy statement included in a 

registration statement filed under the Securities Act of 1933 on Form S-4 or F-4 (§239.25 

or §239.34 of this chapter) or Form N-14 (§239.23 of this chapter) and containing the 

information specified in such Form. 

77
* * * * * 

(e)(1)(i) A registrant will be considered to have delivered an annual report to 

security holders, proxy statement or Notice of Internet Availability of Proxy Materials, as 

described in §240.14a-16, to all security holders of record who share an address if: 

(A) The registrant delivers one annual report to security holders, proxy 

statement or Notice of Internet Availability of Proxy Materials, as applicable, to the 

shared address; 

(B) The registrant addresses the annual report to security holders, proxy 

statement or Notice of Internet Availability of Proxy Materials, as applicable, to the 

security holders as a group (for example, “ABC Fund [or Corporation] Security Holders,” 

“Jane Doe and Household,” “The Smith Family”), to each of the security holders 

individually (for example, “John Doe and Richard Jones”) or to the security holders in a 

form to which each of the security holders has consented in writing; 

Note to paragraph (e)(1)(i)(B): Unless the registrant addresses the annual report to 

security holders, proxy statement or Notice of Internet Availability of Proxy Materials to 

the security holders as a group or to each of the security holders individually, it must 

obtain, from each security holder to be included in the householded group, a separate 

affirmative written consent to the specific form of address the registrant will use. 

(C) The security holders consent, in accordance with paragraph (e)(1)(ii) of 

this section, to delivery of one annual report to security holders or proxy statement, as 

applicable; 

 (D) With respect to delivery of the proxy statement or Notice of Internet 

Availability of Proxy Materials, the registrant delivers, together with or subsequent to 

78
delivery of the proxy statement, a separate proxy card for each security holder at the 

shared address; and 

(E) The registrant includes an undertaking in the proxy statement to deliver 

promptly upon written or oral request a separate copy of the annual report to security 

holders, proxy statement or Notice of Internet Availability of Proxy Materials, as 

applicable, to a security holder at a shared address to which a single copy of the 

document was delivered. 

(ii) Consent. (A) Affirmative written consent. Each security holder must 

affirmatively consent, in writing, to delivery of one annual report to security holders or 

proxy statement, as applicable. A security holder’s affirmative written consent will be 

considered valid only if the security holder has been informed of: 

* * * * * 

(B) * * * 

(2) The registrant has sent the security holder a notice at least 60 days before 

the registrant begins to rely on this section concerning delivery of annual reports to 

security holders, proxy statements or Notices of Internet Availability of Proxy Materials 

to that security holder. The notice must: 

* * * * * 

(ii) State that only one annual report to security holders, proxy statement or 

Notice of Internet Availability of Proxy Materials, as applicable, will be delivered to the 

shared address unless the registrant receives contrary instructions; 

(iii) Include a toll-free telephone number, or be accompanied by a reply form 

that is pre-addressed with postage provided, that the security holder can use to notify the 

79
registrant that the security holder wishes to receive a separate annual report to security 

holders, proxy statement or Notice of Internet Availability of Proxy Materials; 

* * * * * 

(3) The registrant has not received the reply form or other notification 

indicating that the security holder wishes to continue to receive an individual copy of the 

annual report to security holders, proxy statement or Notice of Internet Availability of 

Proxy Materials, as applicable, within 60 days after the registrant sent the notice required 

by paragraph (e)(1)(ii)(B)(2) of this section; and 

* * * * * 

(iii) Revocation of consent. If a security holder, orally or in writing, revokes 

consent to delivery of one annual report to security holders, proxy statement or Notice of 

Internet Availability of Proxy Materials to a shared address, the registrant must begin 

sending individual copies to that security holder within 30 days after the registrant 

receives revocation of the security holder’s consent. 

* * * * * 

(2) Notwithstanding paragraphs (a) and (b) of this section, unless state law 

requires otherwise, a registrant is not required to send an annual report to security 

holders, proxy statement or Notice of Internet Availability of Proxy Materials to a 

security holder if: 

(i) An annual report to security holders and a proxy statement, or a Notice of 

Internet of Availability of Proxy Materials, for two consecutive annual meetings; or 

(ii) All, and at least two, payments (if sent by first class mail) of dividends or 

interest on securities, or dividend reinvestment confirmations, during a twelve month 

80
period, have been mailed to such security holder’s address and have been returned as 

undeliverable. If any such security holder delivers or causes to be delivered to the 

registrant written notice setting forth his then current address for security holder 

communications purposes, the registrant’s obligation to deliver an annual report to 

security holders, a proxy statement or a Notice of Internet Availability of Proxy Materials 

under this section is reinstated. 

* * * * * 

4. Amend §240.14a-4 by: 

a. Removing the authority citation following the section; 

b. Revising the word “mailed” to read “sent” in the first sentence of 

paragraph (c)(1); and 

c. Revising the word “mails” to read “sends” in the last sentence of 

paragraph (c)(1). 

5. Amend §240.14a-7 by: 

a. Revising paragraphs (a)(2)(i) and (a)(2)(ii); 

 b. Adding paragraph (a)(2)(iii); and 

c. In the “Notes to §240.14a-7”, revising the numerical designation “1.” to 

read “Note 1 to §240.14a-8”, revising the numerical designation “2.” to read “Note 2 to 

§240.14a-7” and adding “Note 3 to §240.14a-7”. 

The revisions and additions read as follows: 

§240.14a-7 Obligations of registrants to provide a list of, or mail soliciting material 

to, security holders. 

* * * * * 

 (a) * * * 

81
 (2) * * * 

 (i) Send copies of any proxy statement, form of proxy, or other soliciting 

material, including a Notice of Internet Availability of Proxy Materials (as described in 

§240.14a-16), furnished by the security holder to the record holders, including banks, 

brokers, and similar entities, designated by the security holder. A sufficient number of 

copies must be sent to the banks, brokers, and similar entities for distribution to all 

beneficial owners designated by the security holder. The security holder may designate 

only record holders and/or beneficial owners who have not requested paper and/or e-mail 

copies of the proxy statement. If the registrant has received affirmative written or 

implied consent to deliver a single proxy statement to security holders at a shared address 

in accordance with the procedures in §240.14a-3(e)(1), a single copy of the proxy 

statement or Notice of Internet Availability of Proxy Materials furnished by the security 

holder shall be sent to that address, provided that if multiple copies of the Notice of 

Internet Availability of Proxy Materials are furnished by the security holder for that 

address, the registrant shall deliver those copies in a single envelope to that address. The 

registrant shall send the security holder material with reasonable promptness after tender 

of the material to be sent, envelopes or other containers therefore, postage or payment for 

postage and other reasonable expenses of effecting such distribution. The registrant shall 

not be responsible for the content of the material; or 

(ii) Deliver the following information to the requesting security holder within 

five business days of receipt of the request: 

(A) A reasonably current list of the names, addresses and security positions of 

the record holders, including banks, brokers and similar entities holding securities in the 

82
same class or classes as holders which have been or are to be solicited on management’s 

behalf, or any more limited group of such holders designated by the security holder if 

available or retrievable under the registrant’s or its transfer agent’s security holder data 

systems; 

(B) The most recent list of names, addresses and security positions of 

beneficial owners as specified in §240.14a-13(b), in the possession, or which 

subsequently comes into the possession, of the registrant; 

(C) The names of security holders at a shared address that have consented to 

delivery of a single copy of proxy materials to a shared address, if the registrant has 

received written or implied consent in accordance with §240.14a-3(e)(1); and 

(D) If the registrant has relied on §240.14a-16, the names of security holders 

who have requested paper copies of the proxy materials for all meetings and the names of 

security holders who, as of the date that the registrant receives the request, have requested 

paper copies of the proxy materials only for the meeting to which the solicitation relates. 

(iii) All security holder list information shall be in the form requested by the 

security holder to the extent that such form is available to the registrant without undue 

burden or expense. The registrant shall furnish the security holder with updated record 

holder information on a daily basis or, if not available on a daily basis, at the shortest 

reasonable intervals; provided, however, the registrant need not provide beneficial or 

record holder information more current than the record date for the meeting or action. 

* * * * * 

Notes to §240.14a-7.

* * * * * 

83
Note 3 to §240.14a-7. If the registrant is sending the requesting security holder’s 

materials under §240.14a-7 and receives a request from the security holder to furnish the 

materials in the form and manner described in §240.14a-16, the registrant must 

accommodate that request. 

6. Amend §240.14a-8 by revising the word “mail” to read “send” in the last 

sentence of paragraph (e)(2) and in paragraph (e)(3) and the word “mails” to read “sends” 

in the introductory text of paragraph (m)(3). 

7. Amend §240.14a-12 by revising the term “annual report” to read “annual 

report to security holders” in the heading of paragraph (c)(1) and the first sentence of 

paragraph (c)(1). 

8. Amend §240.14a-13 by revising the word “mailing” to read “sending” in 

paragraph (a)(5) and the word “mail” to read “send” in Note 2 following paragraph (a) 

and in paragraph (c), each time it appears. 

9. Add §240.14a-16 to read as follows: 

§240.14a-16 Internet availability of proxy materials. 

(a)(1) A registrant may furnish a proxy statement pursuant to §240.14a-3(a), or 

an annual report to security holders pursuant to §240.14a-3(b), to a security holder by 

sending the security holder a Notice of Internet Availability of Proxy Materials, as 

described in this section, 40 calendar days or more prior to the security holder meeting 

date, or if no meeting is to be held, 40 calendar days or more prior to the date the votes, 

consents or authorizations may be used to effect the corporate action, and complying with 

all other requirements of this section. 

84
(2) If the registrant chooses to provide the proxy statement or annual report to 

security holders to beneficial owners pursuant to this section, it must provide the record 

holder or respondent bank with all information listed in paragraph (d) of this section in 

sufficient time for the record holder or respondent bank to prepare, print and send a 

Notice of Internet Availability of Proxy Materials to beneficial owners at least 40 

calendar days before the meeting date. 

(b)(1) All materials identified in the Notice of Internet Availability of Proxy 

Materials must be publicly accessible, free of charge, at the Web site address specified in 

the notice on or before the time that the notice is sent to the security holder and such 

materials must remain available on that Web site through the conclusion of the meeting 

of security holders. 

(2) All additional soliciting materials sent to security holders or made public 

after the Notice of Internet Availability of Proxy Materials has been sent must be made 

publicly accessible at the specified Web site address no later than the day on which such 

materials are first sent to security holders or made public. 

(3) The Web site address relied upon for compliance under this section may 

not be the address of the Commission’s electronic filing system. 

(4) The registrant must provide security holders with a means to execute a 

proxy as of the time the Notice of Internet Availability of Proxy Materials is first sent to 

security holders. 

(c) The materials must be presented on the Web site in a format, or formats, 

convenient for both reading online and printing on paper. 

85
(d) The Notice of Internet Availability of Proxy Materials must contain the 

following: 

(1) A prominent legend in bold-face type that states: 

“Important Notice Regarding the Availability of Proxy Materials for the 

Shareholder Meeting to Be Held on [insert meeting date]. 

1. This communication presents only an overview of the more complete 

proxy materials that are available to you on the Internet. We encourage you to 

access and review all of the important information contained in the proxy materials 

before voting. 

2. The [proxy statement] [information statement] [annual report to 

security holders] [is/are] available at [Insert Web site address]. 

3. If you want to receive a paper or e-mail copy of these documents, you 

must request one. There is no charge to you for requesting a copy. Please make 

your request for a copy as instructed below on or before [Insert a date] to facilitate 

timely delivery.”;

(2) The date, time, and location of the meeting, or if corporate action is to be 

taken by written consent, the earliest date on which the corporate action may be effected; 

(3) A clear and impartial identification of each separate matter intended to be 

acted on and the soliciting person’s recommendations regarding those matters, but no 

supporting statements; 

(4) A list of the materials being made available at the specified Web site; 

(5) A toll-free telephone number, an e-mail address, and an Internet Web site 

where the security holder can request a copy of the proxy statement, annual report to 

86
security holders, and form of proxy, relating to all of the registrant’s future security 

holder meetings and for the particular meeting to which the proxy materials being 

furnished relate; 

(6) Any control/identification numbers that the security holder needs to access 

his or her form of proxy; 

(7) Instructions on how to access the form of proxy, provided that such 

instructions do not enable a security holder to execute a proxy without having access to 

the proxy statement and, if required by §240.14a-3(b), the annual report to security 

holders; and 

(8) Information on how to obtain directions to be able to attend the meeting 

and vote in person. 

(e)(1) The Notice of Internet Availability of Proxy Materials may not be 

incorporated into, or combined with, another document, except that it may be 

incorporated into, or combined with, a notice of security holder meeting required under 

state law, unless state law prohibits such incorporation or combination. 

(2) The Notice of Internet Availability of Proxy Materials may contain only 

the information required by paragraph (d) of this section and any additional information 

required to be included in a notice of security holders meeting under state law; provided 

that: 

(i) The registrant must revise the information on the Notice of Internet 

Availability of Proxy Materials, including any title to the document, to reflect the fact 

that: 

87
(A) The registrant is conducting a consent solicitation rather than a proxy 

solicitation; or 

(B) The registrant is not soliciting proxy or consent authority, but is furnishing 

an information statement pursuant to §240.14c-2; and 

(ii) The registrant may include a statement on the Notice to educate security 

holders that no personal information other than the identification or control number is 

necessary to execute a proxy. 

(f)(1) Except as provided in paragraph (h) of this section, the Notice of Internet 

Availability of Proxy Materials must be sent separately from other types of security 

holder communications and may not accompany any other document or materials, 

including the form of proxy. 

(2) Notwithstanding paragraph (f)(1) of this section, the registrant may 

accompany the Notice of Internet Availability of Proxy Materials with: 

(i) A pre-addressed, postage-paid reply card for requesting a copy of the 

proxy materials; and 

(ii) A copy of any notice of security holder meeting required under state law if 

that notice is not combined with the Notice of Internet Availability of Proxy Materials. 

(g) Plain English.

(1) To enhance the readability of the Notice of Internet Availability of Proxy 

Materials, the registrant must use plain English principles in the organization, language, 

and design of the notice. 

88
(2) The registrant must draft the language in the Notice of Internet 

Availability of Proxy Materials so that, at a minimum, it substantially complies with each 

of the following plain English writing principles: 

(i) Short sentences; 

(ii) Definite, concrete, everyday words; 

(iii) Active voice; 

(iv) Tabular presentation or bullet lists for complex material, whenever 

possible; 

(v) No legal jargon or highly technical business terms; and 

(vi) No multiple negatives. 

(3) In designing the Notice of Internet Availability of Proxy Materials, the 

registrant may include pictures, logos, or similar design elements so long as the design is 

not misleading and the required information is clear. 

(h) The registrant may, at its discretion, choose to furnish some proxy 

materials pursuant to §240.14a-3(a)(1) and other proxy materials pursuant to this section, 

provided that the registrant may not send a form of proxy to security holders until 10 

calendar days or more after the date it sent the Notice of Internet Availability of Proxy 

Materials to security holders, unless the form of proxy is accompanied or has been 

preceded by a copy of the proxy statement and any annual report to security holders that 

is required by §240.14a-3(b) through the same delivery medium. If the registrant sends a 

form of proxy after the expiration of such 10-day period and the form of proxy is not 

accompanied or preceded by a copy, via the same medium, of the proxy statement and 

any annual report to security holders that is required by §240.14a-3(b), then the registrant 

89
shall accompany the form of proxy with a Notice of Internet Availability of Proxy 

Materials. 

(i) The registrant must file a form of the Notice of Internet Availability of 

Proxy Materials with the Commission pursuant to §240.14a-6(b) no later than the date 

that the registrant first sends the notice to security holders. 

(j) Obligation to provide copies.

(1) The registrant must send, at no cost to the record holder or respondent 

bank and by U.S. first class mail or other reasonably prompt means, a paper copy of the 

proxy statement, information statement, annual report to security holders, and form of 

proxy (to the extent each of those documents is applicable) to any record holder or 

respondent bank requesting such a copy within three business days after receiving a 

request for a paper copy. 

(2) The registrant must send, at no cost to the record holder or respondent 

bank and via e-mail, an electronic copy of the proxy statement, information statement, 

annual report to security holders, and form of proxy (to the extent each of those 

documents is applicable) to any record holder or respondent bank requesting such a copy 

within three business days after receiving a request for an electronic copy via e-mail. 

(3) The registrant is required to provide copies of the proxy materials pursuant 

to paragraphs (j)(1) and (j)(2) for one year after the conclusion of the meeting or 

corporate action to which the proxy materials relate. 

(4) The registrant must maintain records of security holder requests to receive 

materials in paper or via e-mail for future solicitations and must continue to provide 

90
copies of the materials to a security holder who has made such a request until the security 

holder revokes such request. 

(k) Security holder information.

(1) A registrant or its agent shall maintain the Internet Web site on which it 

posts its proxy materials in a manner that does not infringe on the anonymity of a person 

accessing such Web site. 

(2) The registrant and its agents shall not use any e-mail address obtained 

from a security holder solely for the purpose of requesting a copy of proxy materials 

pursuant to paragraph (j) for any purpose other than to send a copy of those materials to 

that security holder. The registrant shall not disclose such information to any person 

other than an employee or agent to the extent necessary to send a copy of the proxy 

materials pursuant to paragraph (j). 

(l) A person other than the registrant may solicit proxies pursuant to the 

conditions imposed on registrants by this section, provided that: 

(1) A soliciting person other than the registrant is required to provide copies 

of its proxy materials only to security holders to whom it has sent a Notice of Internet 

Availability of Proxy Materials; and 

(2) A soliciting person other than the registrant must send its Notice of 

Internet Availability of Proxy Materials by the later of: 

(i) 40 calendar days prior to the security holder meeting date or, if no meeting 

is to be held, 40 calendar days prior to the date the votes, consents, or authorizations may 

be used to effect the corporate action; or 

91
(ii) 10 calendar days after the date that the registrant first send its proxy 

statement or Notice of Internet Availability of Proxy Materials to security holders. 

(3) Content of the soliciting person’s Notice of Internet Availability of Proxy 

Materials.

(i) If, at the time a soliciting person other than the registrant sends its Notice 

of Internet Availability of Proxy Materials, the soliciting person is not aware of all 

matters on the registrant’s agenda for the meeting of security holders, the soliciting 

person’s Notice on Internet Availability of Proxy Materials must provide a clear and 

impartial identification of each separate matter on the agenda to the extent known by the 

soliciting person at that time. The soliciting person’s notice also must include a clear 

statement indicating that there may be additional agenda items of which the soliciting 

person is not aware and that the security holder cannot direct a vote for those items on the 

soliciting person’s proxy card provided at that time. 

(ii) If a soliciting person other than the registrant sends a form of proxy not 

containing all matters intended to be acted upon, the Notice of Internet Availability of 

Proxy Materials must clearly state whether execution of the form of proxy will invalidate 

a security holder’s prior vote on matters not presented on the form of proxy. 

(m) This section shall not apply to a proxy solicitation in connection with a 

business combination transaction, as defined in §230.165 of this chapter. 

(n) This section provides a non-exclusive alternative by which an issuer or 

other person may furnish a proxy statement pursuant to §240.14a-3(a) or an annual report 

to security holders pursuant to §240.14a-3(b) to a security holder. This section does not 

affect the availability of any other means by which an issuer or other person may furnish 

92
a proxy statement pursuant to §240.14a-3(a), or an annual report to security holders 

pursuant to §240.14a-3(b), to a security holder. 

10. Amend §240.14a-101 by: 

a. Revising the term “annual report” to read “annual report on Form 10-K or 

Form 10-KSB” in Instruction 1 to paragraph (d)(2)(ii)(L) of Item 7; 

b. Revising the word “mail” to read “send” in Instruction 2 to paragraph 

(d)(2)(ii)(L) of Item 7; and 

c. Revising Item 23. 

The revision reads as follows. 

§240.14a-101 Schedule 14A. Information required in proxy statement. 

* * * * * 

Item 23. Delivery of documents to security holders sharing an address. If one 

annual report to security holders, proxy statement, or Notice of Internet Availability of 

Proxy Materials is being delivered to two or more security holders who share an address 

in accordance with §240.14a-3(e)(1), furnish the following information: 

(a) State that only one annual report to security holders, proxy statement, or 

Notice of Internet Availability of Proxy Materials, as applicable, is being delivered to 

multiple security holders sharing an address unless the registrant has received contrary 

instructions from one or more of the security holders; 

(b) Undertake to deliver promptly upon written or oral request a separate copy 

of the annual report to security holders, proxy statement, or Notice of Internet 

Availability of Proxy Materials, as applicable, to a security holder at a shared address to 

which a single copy of the documents was delivered and provide instructions as to how a 

93
security holder can notify the registrant that the security holder wishes to receive a 

separate copy of an annual report to security holders, proxy statement, or Notice of 

Internet Availability of Proxy Materials, as applicable; 

(c) Provide the phone number and mailing address to which a security holder 

can direct a notification to the registrant that the security holder wishes to receive a 

separate annual report to security holders, proxy statement, or Notice of Internet 

Availability of Proxy Materials, as applicable, in the future; and 

(d) Provide instructions how security holders sharing an address can request 

delivery of a single copy of annual reports to security holders, proxy statements, or 

Notices of Internet Availability of Proxy Materials if they are receiving multiple copies 

of annual reports to security holders, proxy statements, or Notices of Internet Availability 

of Proxy Materials.

11. Amend §240.14b-1 by: 

a. Revising paragraphs (b)(2) including the Note and (c)(2)(i); 

b. Revising the term “annual reports” to read “annual reports to security 

holders” in paragraphs (c)(2)(ii) and (c)(3); 

c. Revising the term “annual report” to read “annual report to security 

holders” in paragraph (c)(2)(ii); 

d. Revising the word “mail” to read “send” in paragraph (c)(2)(ii); and 

e. Adding paragraphs (d) and (e). 

The revisions and additions read as follows: 

§240.14b-1 Obligation of registered brokers and dealers in connection with the 

prompt forwarding of certain communications to beneficial owners. 

(b) * * * 

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(2) The broker or dealer shall, upon receipt of the proxy, other proxy 

soliciting material, information statement, and/or annual report to security holders from 

the registrant or other soliciting person, forward such materials to its customers who are 

beneficial owners of the registrant’s securities no later than five business days after 

receipt of the proxy material, information statement or annual report to security holders. 

Note to Paragraph (b)(2): At the request of a registrant, or on its own initiative so 

long as the registrant does not object, a broker or dealer may, but is not required to, 

deliver one annual report to security holders, proxy statement, information statement, or 

Notice of Internet Availability of Proxy Materials to more than one beneficial owner 

sharing an address if the requirements set forth in §240.14a-3(e)(1) (with respect to 

annual reports to security holders, proxy statements, and Notices of Internet Availability 

of Proxy Materials) and §240.14c-3(c) (with respect to annual reports to security holders, 

information statements, and Notices of Internet Availability of Proxy Materials) 

applicable to registrants, with the exception of §240.14a-3(e)(1)(i)(E), are satisfied 

instead by the broker or dealer. 

(c) * * * 

(2) * * * 

(i) Its obligations under paragraphs (b)(2), (b)(3) and (d) of this section if the 

registrant or other soliciting person, as applicable, does not provide assurance of 

reimbursement of the broker’s or dealer’s reasonable expenses, both direct and indirect, 

incurred in connection with performing the obligations imposed by paragraphs (b)(2), 

(b)(3) and (d) of this section; or 

* * * * * 

95
(d) Compliance with §240.14a-16. If a registrant or other soliciting person 

informs the broker or dealer that it intends to rely on §240.14a-16 to furnish proxy 

materials to beneficial owners and provides all of the relevant information listed in 

§240.14a-16(d) to the broker or dealer, the broker or dealer shall: 

(1) Prepare and send a Notice of Internet Availability of Proxy Materials 

containing the information required in paragraph (e) of this section to beneficial owners 

no later than: 

(i) With respect to a registrant, 40 calendar days prior to the security holder 

meeting date or, if no meeting is to be held, 40 calendar days prior to the date the votes, 

consents, or authorizations may be used to effect the corporate action; and 

(ii) With respect to a soliciting person other than the registrant, the later of: 

(A) 40 calendar days prior to the security holder meeting date or, if no meeting 

is to be held, 40 calendar days prior to the date the votes, consents, or authorizations may 

be used to effect the corporate action; or 

(B) 10 calendar days after the date that the registrant first sends its proxy 

statement or Notice of Internet Availability of Proxy Materials to security holders. 

(2) Establish a Web site at which beneficial owners are able to access the 

broker or dealer’s request for voting instructions and, at the broker or dealer’s option, 

establish a Web site at which beneficial owners are able to access the proxy statement 

and other soliciting materials, provided that such Web sites are maintained in a manner 

consistent with paragraphs (b), (c), and (k) of §240.14a-16; 

(3) Upon receipt of a request from the registrant or other soliciting person, 

send to security holders specified by the registrant or other soliciting person a copy of the 

96
request for voting instructions accompanied by a copy of the intermediary’s Notice of 

Internet Availability of Proxy Materials 10 calendar days or more after the broker or 

dealer sends its Notice of Internet Availability of Proxy Materials pursuant to paragraph 

(d)(1); and 

(4) Upon receipt of a request for a copy of the materials from a beneficial 

owner: 

(i) Request a copy of the soliciting materials from the registrant or other 

soliciting person, in the form requested by the beneficial owner, within three business 

days after receiving the beneficial owner’s request; 

(ii) Forward a copy of the soliciting materials to the beneficial owner, in the 

form requested by the beneficial owner, within three business days after receiving the 

materials from the registrant or other soliciting person; and 

(iii) Maintain records of security holder requests to receive a paper or e-mail 

copy of the proxy materials in connection with future proxy solicitations and provide 

copies of the proxy materials to a security holder who has made such a request for all 

securities held in the account of that security holder until the security holder revokes such 

request. 

(e) Content of Notice of Internet Availability of Proxy Materials. The broker 

or dealer’s Notice of Internet Availability of Proxy Materials shall: 

(1) Include all information, as it relates to beneficial owners, required in a 

registrant’s Notice of Internet Availability of Proxy Materials under §240.14a-16(d), 

provided that the broker or dealer shall provide its own, or its agent’s, toll-free telephone 

97
number, an e-mail address, and an Internet Web site to service requests for copies from 

beneficial owners; 

(2) Include a brief description, if applicable, of the rules that permit the broker 

or dealer to vote the securities if the beneficial owner does not return his or her voting 

instructions; and 

(3) Otherwise be prepared and sent in a manner consistent with paragraphs 

(e), (f), and (g) of §240.14a-16. 

12. Amend §240.14b-2 by: 

a. Revising the introductory text of paragraph (b)(3), the Note to paragraph 

(b)(3), and paragraph (c)(2)(i); 

b. Revising the term “annual reports” to read “annual reports to security 

holders” in paragraph (c)(2)(ii) and (c)(4); 

c. Revising the term “annual report” to read “annual report to security 

holders” in paragraph (c)(2)(ii); 

d. Revising the word “mail” to read “send” in paragraph (c)(2)(ii); and 

e. Adding paragraphs (d) and (e). 

The additions and revisions read as follows: 

§240.14b-2 Obligation of banks, associations and other entities that exercise 

fiduciary powers in connection with the prompt forwarding of certain 

communications to beneficial owners. 

* * * * * 

(b) * * * 

(3) Upon receipt of the proxy, other proxy soliciting material, information 

statement, and/or annual report to security holders from the registrant or other soliciting 

98
person, the bank shall forward such materials to each beneficial owner on whose behalf it 

holds securities, no later than five business days after the date it receives such material 

and, where a proxy is solicited, the bank shall forward, with the other proxy soliciting 

material and/or the annual report to security holders, either: 

* * * * * 

Note to Paragraph (b)(3): At the request of a registrant, or on its own initiative so 

long as the registrant does not object, a bank may, but is not required to, deliver one 

annual report to security holders, proxy statement, information statement, or Notice of 

Internet Availability of Proxy Materials to more than one beneficial owner sharing an 

address if the requirements set forth in §240.14a-3(e)(1) (with respect to annual reports to 

security holders, proxy statements, and Notices of Internet Availability of Proxy 

Materials) and §240.14c-3(c) (with respect to annual reports to security holders, 

information statements, and Notices of Internet Availability of Proxy Materials) 

applicable to registrants, with the exception of §240.14a-3(e)(1)(i)(E), are satisfied 

instead by the bank. 

* * * * * 

(c) * * * 

(2) * * * 

(i) Its obligations under paragraphs (b)(2), (b)(3), (b)(4) and (d) of this 

section if the registrant or other soliciting person, as applicable, does not provide 

assurance of reimbursement of its reasonable expenses, both direct and indirect, incurred 

in connection with performing the obligations imposed by paragraphs (b)(2), (b)(3), 

(b)(4) and (d) of this section; or 

99
* * * * * 

(d) Compliance with §240.14a-16. If a registrant or other soliciting person 

informs the bank that it intends to rely on §240.14a-16 to furnish proxy materials to 

beneficial owners and provides all of the relevant information listed in §240.14a-16(d) to 

the bank, the bank shall: 

(1) Prepare and send a Notice of Internet Availability of Proxy Materials 

containing the information required in paragraph (e) of this section to beneficial owners 

no later than: 

(i) With respect to a registrant, 40 calendar days prior to the security holder 

meeting date or, if no meeting is to be held, 40 calendar days prior to the date the votes, 

consents, or authorizations may be used to effect the corporate action; and 

(ii) With respect to a soliciting person other than the registrant, the later of: 

(A) 40 calendar days prior to the security holder meeting date or, if no meeting 

is to be held, 40 calendar days prior to the date the votes, consents, or authorizations may 

be used to effect the corporate action; or 

(B) 10 calendar days after the date that the registrant first sends its proxy 

statement or Notice of Internet Availability of Proxy Materials to security holders. 

(2) Establish a Web site at which beneficial owners are able to access the 

bank’s request for voting instructions and, at the bank’s option, establish a Web site at 

which beneficial owners are able to access the proxy statement and other soliciting 

materials, provided that such Web sites are maintained in a manner consistent with 

paragraphs (b), (c), and (k) of §240.14a-16; 

100
(3) Upon receipt of a request from the registrant or other soliciting person, 

send to security holders specified by the registrant or other soliciting person a copy of the 

request for voting instructions accompanied by a copy of the intermediary’s Notice of 

Internet Availability of Proxy Materials 10 days or more after the bank sends its Notice 

of Internet Availability of Proxy Materials pursuant to paragraph (d)(1); and 

(4) Upon receipt of a request for a copy of the materials from a beneficial 

owner: 

(i) Request a copy of the soliciting materials from the registrant or other 

soliciting person, in the form requested by the beneficial owner, within three business 

days after receiving the beneficial owner’s request; 

(ii) Forward a copy of the soliciting materials to the beneficial owner, in the 

form requested by the beneficial owner, within three business days after receiving the 

materials from the registrant or other soliciting person; and 

(iii) Maintain records of security holder requests to receive a paper or e-mail 

copy of the proxy materials in connection with future proxy solicitations and provide 

copies of the proxy materials to a security holder who has made such a request for all 

securities held in the account of that security holder until the security holder revokes such 

request. 

(e) Content of Notice of Internet Availability of Proxy Materials. The bank’s 

Notice of Internet Availability of Proxy Materials shall: 

(1) Include all information, as it relates to beneficial owners, required in a 

registrant’s Notice of Internet Availability of Proxy Materials under §240.14a-16(d), 

provided that the bank shall provide its own, or its agent’s, toll-free telephone number, 

101
e-mail address, and Internet Web site to service requests for copies from beneficial 

owners; and 

(2) Otherwise be prepared and sent in a manner consistent with paragraphs 

(e), (f), and (g) of §240.14a-16. 

13. Amend §240.14c-2 by: 

a. Revising paragraph (a); and 

b. Adding paragraph (d). 

The revision and addition read as follows: 

§240.14c-2 Distribution of information statement. 

(a)(1) In connection with every annual or other meeting of the holders of the 

class of securities registered pursuant to section 12 of the Act or of a class of securities 

issued by an investment company registered under the Investment Company Act of 1940 

that has made a public offering of securities, including the taking of corporate action by 

the written authorization or consent of security holders, the registrant shall transmit to 

every security holder of the class that is entitled to vote or give an authorization or 

consent in regard to any matter to be acted upon and from whom proxy authorization or 

consent is not solicited on behalf of the registrant pursuant to section 14(a) of the Act: 

(i) A written information statement containing the information specified in 

Schedule 14C (§240.14c-101); 

(ii) A publicly-filed information statement, in the form and manner described 

in §240.14c-3(d), containing the information specified in Schedule 14C (§240.14c-101); 

or 

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(iii) A written information statement included in a registration statement filed 

under the Securities Act of 1933 on Form S-4 or F-4 (§239.25 or §239.34 of this chapter) 

or Form N-14 (§239.23 of this chapter) and containing the information specified in such 

Form. 

(2) Notwithstanding paragraph (a)(1) of this section: 

(i) In the case of a class of securities in unregistered or bearer form, such 

statements need to be transmitted only to those security holders whose names are known 

to the registrant; and 

(ii) No such statements need to be transmitted to a security holder if a 

registrant would be excused from delivery of an annual report to security holders or a 

proxy statement under §240.14a-3(e)(2) if such section were applicable. 

* * * * * 

(d) A registrant may transmit an information statement to security holders 

pursuant to paragraph (a) of this section by satisfying the requirements set forth in 

§240.14a-16; provided, however, that the registrant may revise the information required 

in the Notice of Internet Availability of Proxy Materials to reflect the fact that the 

registrant is not soliciting proxies for the meeting. This paragraph (d) provides a nonexclusive alternative by which a registrant may transmit an information statement 

pursuant to paragraph (a) of this section to a security holder. This paragraph (d) does not 

affect the availability of any other means by which a registrant may transmit an 

information statement pursuant to paragraph (a) of this section to a security holder. 

14. Amend §240.14c-3 by: 

a. Removing the authority citation following this section; 

103
b. Revising paragraphs (a)(1) and (c); and 

c. Adding paragraph (d). 

The revisions and addition read as follows: 

§240.14c-3 Annual report to be furnished security holders. 

(a) * * * 

(1) The annual report to security holders shall contain the information 

specified in paragraphs (b)(1) through (b)(11) of §240.14a-3. 

* * * * * 

(c) A registrant will be considered to have delivered a Notice of Internet 

Availability of Proxy Materials, annual report to security holders or information 

statement to security holders of record who share an address if the requirements set forth 

in §240.14a-3(e)(1) are satisfied with respect to the Notice of Internet Availability of 

Proxy Materials, annual report to security holders or information statement, as applicable. 

(d) A registrant may furnish an annual report to security holders pursuant to 

paragraph (a) of this section by satisfying the requirements set forth in §240.14a-16. This 

paragraph (d) provides a non-exclusive alternative by which a registrant may furnish an 

annual report pursuant to paragraph (a) of this section to a security holder. This 

paragraph (d) does not affect the availability of any other means by which a registrant 

may furnish an annual report pursuant to paragraph (a) of this section to a security holder. 

15. Amend §240.14c-5 by revising the word “mailed” to read “sent” in the 

second sentence of the introductory text of paragraph (a). 

16. Amend §240.14c-7 by revising paragraph (a)(5) before the Note and the 

word “mail” to read “send” in Note 2 following paragraph (a). 

104
The revision reads as follows: 

§240.14c-7 Providing copies of material for certain beneficial owners. 

(a) * * * 

(5) Upon the request of any record holder or respondent bank that is supplied 

with Notices of Internet Availability of Proxy Materials, information statements and/or 

annual reports to security holders pursuant to paragraph (a)(3) of this section, pay its 

reasonable expenses for completing the sending of such material to beneficial owners. 

* * * * * 

17. Amend §240.14c-101 by: 

a. Revising the word “mailing” to read “sending” in Item 4, Instruction 1; 

and 

b. Revising Item 5. 

The revision reads as follows. 

§240.14c-101 Schedule 14C. Information required in information statement. 

* * * * * 

Item 5. Delivery of documents to security holders sharing an address. If one 

annual report to security holders, information statement, or Notice of Internet Availability 

of Proxy Materials is being delivered to two or more security holders who share an 

address, furnish the following information in accordance with §240.14a-3(e)(1): 

(a) State that only one annual report to security holders, information 

statement, or Notice of Internet Availability of Proxy Materials, as applicable, is being 

delivered to multiple security holders sharing an address unless the registrant has 

received contrary instructions from one or more of the security holders; 

105
(b) Undertake to deliver promptly upon written or oral request a separate copy 

of the annual report to security holders, information statement, or Notice of Internet 

Availability of Proxy Materials, as applicable, to a security holder at a shared address to 

which a single copy of the documents was delivered and provide instructions as to how a 

security holder can notify the registrant that the security holder wishes to receive a 

separate copy of an annual report to security holders, information statement, or Notice of 

Internet Availability of Proxy Materials, as applicable; 

(c) Provide the phone number and mailing address to which a security holder 

can direct a notification to the registrant that the security holder wishes to receive a 

separate annual report to security holders, information statement, or Notice of Internet 

Availability of Proxy Materials, as applicable, in the future; and 

(d) Provide instructions how security holders sharing an address can request 

delivery of a single copy of annual reports to security holders, information statements, or 

Notices of Internet Availability of Proxy Materials if they are receiving multiple copies 

of annual reports to security holders, information statements, or Notices of Internet 

Availability of Proxy Materials.

PART 249 - FORMS, SECURITIES EXCHANGE ACT OF 1934

18. The general authority citation for Part 249 is revised to read as follows: 

Authority: 15 U.S.C. 78a et seq., 7202, 7233, 7241, 7262, 7264, and 7265; and 18 

U.S.C. 1350, unless otherwise noted. 

* * * * * 

19. Amend Item 4 to “Part II - Other Information” of Form 10-Q (referenced 

in §249.308a) by revising paragraph (d) to read as follows: 

106
Note: The text of Form 10-Q does not, and this amendment will not, appear in the 

Code of Federal Regulations. 

Form 10-Q

* * * * * 

Part II - Other Information

* * * * * 

Item 4. Submission of Matters to a Vote of Security Holders.

* * * * * 

(d) A description of the terms of any settlement between the registrant and 

any other participant (as defined in Instruction 3 to Item 4 of Schedule 14A (§240.14a101)) terminating any solicitation subject to §240.14a-12(c), including the cost or 

anticipated cost to the registrant. 

* * * * * 

20. Amend Item 4 to “Part II - Other Information” of Form 10-QSB 

(referenced in §249.308b) by revising paragraph (d) to read as follows: 

Note: The text of Form 10-QSB does not, and this amendment will not, appear in 

the Code of Federal Regulations. 

Form 10-QSB

* * * * * 

Part II - Other Information

* * * * * 

Item 4. Submission of Matters to a Vote of Security Holders.

* * * * * 

107
(d) A description of the terms of any settlement between the registrant and 

any other participant (as defined in Instruction 3 to Item 4 of Schedule 14A (§240.14a101)) terminating any solicitation subject to §240.14a-12(c), including the cost or 

anticipated cost to the registrant. 

* * * * * 

21. Amend Item 4 to Part I of Form 10-K (referenced in §249.310) by revising 

paragraph (d) to read as follows: 

Note: The text of Form 10-K does not, and this amendment will not, appear in the 

Code of Federal Regulations. 

Form 10-K

* * * * * 

Part I

* * * * * 

Item 4. Submission of Matters to a Vote of Security Holders.

* * * * * 

(d) A description of the terms of any settlement between the registrant and 

any other participant (as defined in Instruction 3 to Item 4 of Schedule 14A (§240.14a101)) terminating any solicitation subject to §240.14a-12(c), including the cost or 

anticipated cost to the registrant. 

* * * * * 

22. Amend Item 4 to Part I of Form 10-KSB (referenced in §249.310b) by 

revise paragraph (d) to read as follows: 

Note: The text of Form 10-KSB does not, and this amendment will not, appear in 

the Code of Federal Regulations. 

108
Form 10-KSB

* * * * * 

Part I

* * * * * 

Item 4. Submission of Matters to a Vote of Security Holders.

* * * * * 

(d) A description of the terms of any settlement between the registrant and 

any other participant (as defined in Instruction 3 to Item 4 of Schedule 14A (§240.14a101)) terminating any solicitation subject to §240.14a-12(c), including the cost or 

anticipated cost to the registrant. 

* * * * * 

PART 274 – FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY 

ACT OF 1940 

23. The authority citation for Part 274 continues to read, in part, as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 78n, 78o(d), 

80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise noted. 

* * * * * 

24. Amend Sub-Item 77C to “Instructions to Specific Items” of Form N-SAR 

(referenced in §§ 249.330 and 274.101) by revising paragraph (d) to read as follows: 

Note: The text of Form N-SAR does not, and this amendment will not, appear in the 

Code of Federal Regulations. 

Form N-SAR 

* * * * *

Instructions to Specific Items 

109
* * * * * 

SUB-ITEM 77C: Submission of matters to a vote of security holders 

* * * * * 

(d) Describe the terms of any settlement between the registrant and any other 

participant (as defined in Instruction 3 to Item 4 of Schedule 14A (§240.14a-101)) 

terminating any solicitation subject to §240.14a-12(c), including the cost or anticipated 

cost to the registrant. 

* * * * * 

By the Commission. 

Nancy M. Morris 

Secretary 

January 22, 2007 

110