SECURITIES AND EXCHANGE COMMISSION 

17 CFR PART 240 

[RELEASE NOS. 34-56135; IC-27911; File No. S7-03-07] 

RIN 3235-AJ79 

SHAREHOLDER CHOICE REGARDING PROXY MATERIALS 

AGENCY: Securities and Exchange Commission. 

ACTION: Final rule. 

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

Exchange Act of 1934 to provide shareholders with the ability to choose the means by 

which they access proxy materials. Under the amendments, issuers and other soliciting 

persons will be required to post their proxy materials on an Internet Web site and provide 

shareholders with a notice of the Internet availability of the materials. The issuer or other 

soliciting person may choose to furnish paper copies of the proxy materials along with 

the notice. If the issuer or other soliciting person chooses not to furnish a paper copy of 

the proxy materials along with the notice, a shareholder may request delivery of a copy at 

no charge to the shareholder. 

DATES: Effective Date: January 1, 2008, except §240.14a-16(d)(3) and §240.14a16(j)(3) are effective October 1, 2007. 

Compliance Dates: “Large accelerated filers,” as that term is defined in Rule 12b-2 

under the Securities Exchange Act of 1934, not including registered investment 

companies, must comply with the amendments regarding proxy solicitations commencing 

on or after January 1, 2008. Registered investment companies, persons other than 

issuers, and issuers that are not large accelerated filers conducting proxy solicitations 
(1) may comply with the amendments regarding proxy solicitations commencing on or 

after January 1, 2008 and (2) must comply with the amendments regarding proxy 

solicitations commencing on or after January 1, 2009. 

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: The Commission is adopting amendments to 

Rules 14a-3,1 14a-7,2 14a-16,3 14a-101,4 14b-1,5 14b-2,6 14c-2,7 and 14c-38 under the 

Securities Exchange Act of 1934.9

Table of Contents 

I. Introduction 

II. Description of the Amendments 

A. Notice and Access Model for Issuers: Two Options for Making Proxy 

Materials Available to Shareholders 

1. The Notice Only Option: Sending a Notice Without a Full Set of 

Proxy Materials 

a. Contents of the Notice of Internet Availability of Proxy 

Materials 

b. Design of the specified publicly-accessible Web site 

c. Means to vote 

d. Request for paper or e-mail copies 

e. Delivery of a proxy card 

f. Web site confidentiality 

 

1

 17 CFR 240.14a-3. 

2

 17 CFR 240.14a-7. 

3

 17 CFR 240.14a-16. 

4

 17 CFR 240.14a-101. 

5

 17 CFR 240.14b-1. 

6

 17 CFR 240.14b-2. 

7

 17 CFR 240.14c-2. 

8

 17 CFR 240.14c-3. 

9

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

2
2. The Full Set Delivery Option: Sending a Notice with a Full Set of 

Proxy Materials 

a. Contents of the Notice or incorporation of Notice 

information 

b. Design of the specified publicly-accessible Web site 

c. Means to vote 

d. Repeat Delivery of a Proxy Card 

e. Web site confidentiality 

3. Differences Between the Full Set Delivery Option and the Notice 

Only Option 

a. Inclusion of a Full Set of Proxy Materials 

b. Request for Copies of the Proxy Materials 

c. 40-Day Deadline 

B. Implications of the Notice and Access Model for Intermediaries 

C. Reliance on the Notice and Access Model by Soliciting Persons Other 

Than the Issuer 

III. Clarifying Amendments 

A. No Requirement to Provide Recommendations 

B. Deadline for Responding to Requests for Copies After the Meeting 

C. Item 4 of Schedule 14A 

IV. Compliance Dates 

V. Paperwork Reduction Act 

VI. Cost-Benefit Analysis 

A. Background 

B. Summary of the Amendments 

C. Benefits 

 1. Versatility of the Internet 

 2. Reduction in Paper Processing Costs 

 3. Reduction in the Cost of Proxy Contests 

 4. Environmental Benefits 

D. Costs 

 1. Costs Under the Notice Only Option 

 2. Costs Under the Full Set Delivery Option 

 3. Costs to Intermediaries 

 4. Costs to Shareholders 

 5. Comments Regarding Unanticipated Costs 

6. Comment on the Complexity of the Notice and Access Model 

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 

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I. Introduction 

On January 22, 2007, we proposed amendments to the proxy rules that would 

require all issuers and other soliciting persons to furnish proxy materials to shareholders 

by posting them on an Internet Web site and providing shareholders with notice of the 

electronic availability of the proxy materials.10 Under the proposal, issuers and other 

soliciting persons would be permitted to deliver paper or e-mail copies of their proxy 

materials to shareholders along with the notice. The proposal was intended to provide all 

shareholders with the ability to choose the means by which they access proxy materials, 

including via paper, e-mail or the Internet, while still affording issuers and other 

soliciting persons flexibility in determining how to furnish their proxy materials to 

shareholders.11 In a companion release issued on the same date, we adopted the “notice 

and access” model that issuers and other soliciting persons may comply with on a 

voluntary basis for proxy solicitations commencing on or after July 1, 2007.12 

We received 23 comment letters on the proposal. The vast majority of 

commenters generally supported our goal of increasing reliance on technology to 

improve proxy distribution.13 However, many of the commenters thought that the 

 

10 See Release No. 34-55147 (Jan. 22, 2007) [72 FR 4176]. 

11 For purposes of this release, the term “proxy materials” includes proxy statements on Schedule 

14A [17 CFR 240.14a-101], proxy cards, information statements on Schedule 14C [17 CFR 

240.14c-101], annual reports to security holders required by Rules 14a-3 [17 CFR 240.14a-3] and 

14c-3 [17 CFR 240.14c-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 [17 CFR 240.14a-12]. 

12 Release No. 34-55146 (Jan. 22, 2007) [72 FR 4148]. 

13 See letters from AARP, American Business Conference (ABC), Automatic Data Processing 

Brokerage Services Group, now known as Broadridge Financial Solutions, Inc. (ADP), Bank of 

New York (BONY), U.S. Chamber of Commerce (Chamber of Commerce), Council of 

Institutional Investors (CII), Commerce Finance Printers Corp. (Commerce Finance Printers), 

Computershare, Dechert LLP (Dechert), Kathryn Elmore and Michael Allen (Elmore & Allen), 

4
Commission’s timetable for adopting the proposed amendments was too aggressive.14 

They suggested that we postpone adoption of the proposal until we gain experience from 

operation of the voluntary rule. 

Although we acknowledge the timing concerns raised by the commenters, we 

think that it is appropriate to adopt the proposal at this time because the model that we are 

adopting will provide shareholders with enhanced choices without changing significantly 

the obligations of an issuer or other soliciting person. The only new obligations that the 

revised notice and access model will impose on issuers and other soliciting persons 

compared to the voluntary rule is that an issuer or other person soliciting proxies who 

wishes to initially furnish a full set of proxy materials in paper to shareholders will be 

required to: (1) post those proxy materials on an Internet Web site; and (2) include a 

Notice of Internet Availability of Proxy Materials (Notice) with the full set or incorporate 

the Notice information into its proxy statement and proxy card.15

Furthermore, under the phase-in schedule that we are establishing for expanding 

the notice and access model to all issuers and other soliciting persons, the largest public 

companies will become subject to the model a year before any other companies become 

subject to the model. Most of these companies already appear to post their proxy 

 Investment Company Institute (ICI), Infosys Technologies Limited (Infosys), MailExpress, Reed 

Smith LLP (Reed Smith), Registrar and Transfer Company (Registrar and Transfer), Karl W. 

Reimers (Reimers), Ayal Rosenthal (Rosenthal), Society of Corporate Secretaries and Governance 

Professionals (SCSGP), Securities Industry and Financial Markets Association (SIFMA), Mark 

Snyder (Snyder), Shareholder Services Association (SSA), and Securities Transfer Association, 

Inc. (STA). 

14 See letters from AARP, ABC, ADP, BONY, Chamber of Commerce, CII, Computershare, ICI, 

Reed Smith, Registrar and Transfer, SCSGP, SIFMA, SSA, and STA. 

15 The effective result of the rules is that an intermediary must prepare Notices (or incorporate 

Notice information in its request for voting instructions) and create Web sites for all issuers for 

which securities are held by the intermediary’s customers, rather than only for issuers who elect to 

follow the notice and access model under the voluntary system. 

5
materials and Exchange Act reports on an Internet Web site.16 A large accelerated filer 

(not including registered investment companies) will have to comply with the notice and 

access model for solicitations beginning on or after January 1, 2008.17 All other issuers 

(including registered investment companies) and soliciting persons other than issuers will 

have to comply with the model for solicitations beginning on or after January 1, 2009. 

This tiered system of implementation addresses the commenters’ timing concerns by 

providing the Commission with a significant test group of large accelerated filers from 

which to obtain operating data and more than a full year to study the effects of the notice 

and access model and make any necessary revisions to the rules before they apply to 

other entities. 

In addition, several commenters were concerned that the proposals would have 

required all issuers to establish Internet voting platforms18 or to prepare their proxy 

materials at least 40 days prior to the shareholder meeting,19 and therefore would impose 

significant costs on issuers. As discussed in detail below, the final rules do not require, 

and the proposals would not have required, an issuer or other soliciting person to 

 

16 Based on a random sampling of 150 large accelerated filers, approximately 80% of such filers 

already post their proxy materials on a non-EDGAR Web site, while almost all of the rest provide 

a link on their Web site to the Commission’s EDGAR system. Only a small handful of such filers 

do not post their proxy materials on their Web site at all. We note, however, that currently there is 

no requirement that such Web sites preserve the anonymity of persons accessing the Web site. 

See Section II.A.1.f of this release for a description of this requirement. 

17 A large accelerated filer, as defined in Exchange Act Rule 12b-2 [17 CFR 240.12b-2], is an issuer 

that, as of the end of its fiscal year, has an aggregate worldwide market value of the voting and 

non-voting common equity held by its non-affiliates of $700 million or more, as measured on the 

last business day of the issuer’s most recently completed second fiscal quarter; has been subject to 

the requirements of Section 13(a) or 15(d) of the Exchange Act for a period of at least twelve 

calendar months; has filed at least one annual report pursuant to Section 13(a) or 15(d) of the 

Exchange Act; and is not eligible to use Forms 10-KSB and 10-QSB for its annual and quarterly 

reports. 

18 See letters from ABC, BONY, and Registrar and Transfer. 

19 See, for example, letters from Chamber of Commerce, CII, Commerce Financial Printers, Elmore 

& Allen, ICI, and STA. 

6
establish an Internet voting platform. Similarly, the rules do not require an issuer or other 

soliciting person that sends a full set of proxy materials to shareholders to prepare its 

proxy materials at least 40 days prior to the meeting. 

II. Description of the Amendments 

Under the amendments, an issuer that is required to furnish proxy materials to 

shareholders under the Commission’s proxy rules must post its proxy materials on a 

specified, publicly-accessible Internet Web site (other than the Commission’s EDGAR 

Web site) and provide record holders with a notice informing them that the materials are 

available and explaining how to access those materials.20 Intermediaries also must 

follow the notice and access model to furnish an issuer’s proxy materials to beneficial 

owners. Persons other than the issuer conducting their own proxy solicitations must 

comply with the notice and access model as well. By requiring Internet availability of 

proxy materials, the amendments are designed to enhance the ability of investors to make 

informed voting decisions and to expand use of the Internet to ultimately lower the costs 

of proxy solicitations. 

A. Notice and Access Model for Issuers: Two Options for Making Proxy 

Materials Available to Shareholders 

The notice and access model allows an issuer to select either of the following two 

options to provide proxy materials to shareholders: (1) the “notice only option” and (2) 

the “full set delivery option.” Under the notice only option, an issuer will comply with 

the same requirements that we adopted in connection with the voluntary notice and 

 

20 See revised Rule 14a-3(a). The notice and access model does not apply to a proxy solicitation 

related to a business combination transaction. See Rule 14a-16(m) [17 CFR 240.14a-16(m)]. 

Also, as with the voluntary model, the notice and access model does not apply if the law of the 

issuer’s state of incorporation would prohibit them from furnishing proxy materials in that 

manner. See Rule 14a-3(a)(3)(ii). 

7
access model. Under these requirements, the issuer must post its proxy materials on an 

Internet Web site and send a Notice to shareholders to inform them of the electronic 

availability of the proxy materials at least 40 days before the shareholders meeting. If an 

issuer follows this option, it must respond to shareholder requests for copies, including a 

shareholder’s permanent request for paper or e-mail copies of proxy materials for all 

shareholder meetings. 

Under the full set delivery option, an issuer can deliver a full set of proxy 

materials to shareholders, along with the Notice. An issuer need not prepare and deliver 

a separate Notice if it incorporates all of the information required to appear in the Notice 

into its proxy statement and proxy card,21 and it need not respond to requests for copies 

as required under the notice only option. 

An issuer does not have to choose one option or the other as the exclusive means 

for providing proxy materials to shareholders. Rather, an issuer may use the notice only 

option to provide proxy materials to some shareholders and the full set delivery option to 

provide proxy materials to other shareholders. We describe both options in greater detail 

below. 

1. The Notice Only Option: Sending a Notice Without a Full Set of 

Proxy Materials 

We are adopting the notice only option substantially as proposed. Under the 

notice only option, an issuer will follow the same procedures that we have established 

under the existing notice and access model that issuers may choose to comply with on a 

voluntary basis for proxy solicitations commencing on or after July 1, 2007.22 Under 

 

21 If not soliciting proxies, an issuer may incorporate the Notice information into its information 

statement. 

22 See Rule 14a-16 [17 CFR 240.14a-16]. 

8
these procedures, the issuer must send a Notice to shareholders at least 40 calendar days 

before the shareholder meeting date, or if no meeting is to be held, at least 40 calendar 

days before the date that votes, consents, or authorizations may be used to effect a 

corporate action, indicating that the issuer’s proxy materials are available on a specified 

Internet Web site and explaining how to access those proxy materials.23 Issuers may 

household the Notice pursuant to Rule 14a-3(e).24

a. Contents of the Notice of Internet Availability of Proxy Materials 

The Notice must contain the following information:25

• 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 

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.” 

 

23 Rule 14a-16(a)(1) [17 CFR 240.14a-16(a)(1)]. 

24 17 CFR 240.14a-3(e). 

25 Rule 14a-16(d) [17 CFR 240.14a-16(d)]. Appropriate changes must be made if the issuer is 

providing an information statement pursuant to Regulation 14C, seeking to effect a corporate 

action by written consent, or is a legal entity other than a corporation. 

9
• 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, if any, 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 

• Information about attending the shareholder meeting and voting in person. 

The Notice must be written in plain English.26 The Notice may contain only the 

information specified by the rules and any other information required by state law, if the 

issuer chooses to combine the Notice with any shareholder meeting notice that state law 

may require.27 However, the Notice may contain a protective warning to shareholders, 

 

26 Rule 14a-16(g) [17 CFR 240.14a-16(g)]. 

27 Rule 14a-16(e) [17 CFR 240.14a-16(e)]. 

10
advising them that no personal information other than the identification or control 

number is necessary to execute a proxy.28 In addition, a registered investment company 

may send its prospectus and/or report to shareholders together with the Notice.29 The 

issuer must file its Notice with the Commission pursuant to Rule 14a-6(b)30 no later than 

the date that it first sends the Notice to shareholders.31

b. Design of the specified publicly-accessible Web site 

An issuer must make all proxy materials identified in the Notice publicly 

accessible, free of charge, at the Web site address specified in the Notice on or before the 

date that the Notice is sent to the shareholder.32 The specified Web site may not be the 

Commission’s EDGAR system.33 The issuer also must post any subsequent additional 

soliciting materials on the Web site no later than the date on which such materials are 

first sent to shareholders or made public.34 The materials must be presented on the Web 

site in a format, or formats, convenient for both reading online and printing on paper.35 

 

28 Rule 14a-16(e)(2)(ii) [17 CFR 240.14a-16(e)(2)(ii)]. 

29 See new Rule 14a-16(f)(2)(iii). 

30 17 CFR 240.14a-6(b). 

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

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

33 Rule 14a-16(b)(3) [17 CFR 240.14a-16(b)(3)]. 

34 Rule 14a-16(b)(2) [17 CFR 240.14a-16(b)(2)]. 

35 Rule 14a-16(c) [17 CFR 240.14a-16(c)]. See Section II.A.3 of Release 34-55146 (Jan. 22, 2007) 

[72 FR 4148]. One commenter asked the Commission to consider the costs of requiring such 

formats. See letter from ICI. We believe that requiring readable and printable formats is 

important so that shareholders have meaningful access to the proxy materials. When determining 

the readability and printability of formats, issuers should consider the size of the files because 

many shareholders do not have broadband connections. Although some types of files may be 

suitable for persons with high-speed Internet access, the readability and printability of a document 

may be affected significantly by the time that it takes to download the document. 

11
The proxy materials must remain available on that Web site through the conclusion of the 

shareholder meeting.36

c. Means to vote 

An issuer also must provide shareholders with a method to execute proxies as of 

the time the Notice is first sent to shareholders.37 Several commenters on the proposal 

questioned whether this provision would require all issuers to establish Internet voting 

platforms.38 The final rules do not require, and the proposals would not have required, an 

issuer to establish an Internet voting platform. Rather, an issuer can satisfy this 

requirement through a variety of methods, including providing an electronic voting 

platform, a toll-free telephone number for voting, or a printable or downloadable proxy 

card on the Web site. As noted above, if a telephone number for executing a proxy is 

provided, such a telephone number may appear on the Web site, but not on the Notice 

because it would enable a shareholder to execute a proxy without having access to the 

proxy statement. 

d. Request for paper or e-mail copies 

An issuer must provide paper or e-mail copies at no charge to shareholders 

requesting such copies.39 It also must allow shareholders to make a permanent election 

to receive paper or e-mail copies of proxy materials distributed in connection with future 

proxy solicitations, and maintain records of those elections.40 Further, the issuer must 

provide a toll-free telephone number, e-mail address, and Internet Web site address as a 

 

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

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

38 See letters from ABC, BONY, and Registrar and Transfer. 

39 Rule 14a-16(j) [17 CFR 240.14a-16(j)]. 

40 See Rule 14a-16(d)(5) and (j)(4) [17 CFR 240.14a-16(d)(5) and (j)(4)]. 

12
means by which a shareholder can request a copy of the proxy materials for the particular 

shareholder meeting referenced in the Notice or make a permanent election to receive 

copies of the proxy materials on a continuing basis with respect to all meetings.41 The 

issuer also may include a pre-addressed, postage-paid reply card with the Notice that 

shareholders can use to request a copy of the proxy materials.42

e. Delivery of a proxy card 

An issuer may not send a paper or e-mail proxy card to a shareholder until 10 

calendar days or more after the date it sent the Notice to the shareholder, unless the proxy 

card is accompanied or preceded by a copy of the proxy statement and any annual report, 

if required, to security holders sent via the same medium.43 This provision is intended to 

assist an issuer’s efforts to solicit proxies if its initial efforts have not produced adequate 

response. This is similar to many issuers’ current practice of sending reminder notices 

and duplicate proxy cards to shareholders who have not responded to the issuer’s original 

request for proxy voting instructions. 

One commenter remarking on this aspect of the proposals expressed concern that 

shareholders receiving proxy cards separately from the proxy statement and annual report 

may make their voting decisions without the benefit of access to those disclosure 

documents.44 We appreciate this concern. However, at the point that a shareholder 

receives such a proxy card, the shareholder already would have received a Notice that 

provides information on how the shareholder can access the proxy materials and request 

 

41 Rule 14a-16(d)(5) [17 CFR 240.14a-16(d)(5)]. 

42 Rule 14a-16(f)(2)(i) [17 CFR 240.14a-16(f)(2)(i)]. 

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

44 See letter from CII. 

13
copies of the materials, if desired. Moreover, the shareholder also would receive another 

copy of the Notice with the proxy card. We believe that, at this point, the shareholder 

will have had ample opportunity to either access the proxy materials on the Internet Web 

site or request a copy of those materials. 

f. Web site confidentiality 

An issuer must 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 that 

Web site.45 An issuer also may not use any e-mail address provided by a shareholder 

solely to request a copy of proxy materials for any purpose other than to send a copy of 

those materials to that shareholder.46 The issuer also may not disclose a shareholder’s 

e-mail address to any person, except to its agent or an employee of the issuer. This 

disclosure may be made only for the purpose of facilitating delivery of a copy of the 

issuer’s proxy materials by the agent or employee to a shareholder requesting a copy of 

the materials. 

Three commenters were concerned about the provisions of the model that require 

a company to maintain the designated Web site in a manner that does not infringe on the 

anonymity of persons accessing the Web site.47 One commenter was concerned that the 

prohibition on “cookies” will raise the costs of maintaining Internet Web sites.48 

Conversely, one commenter was concerned that there could be potential abuses of 

shareholder privacy through information tracking and collection of information on 

 

45 Rule 14a-16(k)(1) [17 CFR 240.14a-16(k)(1)]. See Section II.A.1.b.iii of Release No. 34-55146 

(Jan. 22, 2007) [72 FR 4148]. 

46 Rule 14a-16(k)(2) [17 CFR 240.14a-16(k)(2)]. 

47 See letters from CII, ICI, and Reed Smith. 

48 See letter from ICI. 

14
Internet Web sites.49 Similar concerns regarding potential abuses of shareholder privacy 

also were raised with regard to the adoption of the voluntary notice and access model. 

Although we recognize that the confidentiality requirements may increase the cost 

of maintaining an Internet Web site, we believe that the protection of shareholder 

information is important. A rule that permits issuers to discover the identity of a person 

accessing the Web site could effectively negate a beneficial owner’s ability under the 

proxy rules to object to an intermediary’s disclosure of that beneficial owner’s identity to 

the issuer.50 In addition, a rule without this prohibition on the issuer may make some 

shareholders hesitant to access the proxy disclosures, which would not promote the 

purposes of this rule. Therefore we have retained this provision of the rule to help 

prevent potential abuses of shareholder information. 

We do not believe that this requirement will impose any undue burden on 

companies. Under the rule, a company must refrain from installing cookies and other 

tracking features on the Web site on which the proxy materials are posted. This may 

require segregating those pages from the rest of the company’s regular Web site or 

creating a new Web site. However, the rule does not require the company to turn off the 

Web site’s connection log, which automatically tracks numerical IP addresses that 

connect to that Web site. Although in most cases, this IP address does not provide 

companies with sufficient information to identify the accessing shareholder, companies 

may not use these numbers to attempt to find out more information about persons 

accessing the Web site. In addition, shareholders still concerned about their anonymity 

can request copies from their intermediaries. 

 

49 See letter from CII. 

15
2. The Full Set Delivery Option: Sending a Notice with a Full Set of 

Proxy Materials 

Under the “full set delivery option,” an issuer will follow procedures that are 

substantially similar to the traditional means of providing proxy materials in paper.51 

Under this option, in addition to sending proxy materials to shareholders as under the 

traditional method, an issuer must: 

• Send a Notice accompanied by a full set of proxy materials,52 or 

incorporate all of the information required to appear in the Notice into the 

proxy statement and proxy card;53 and 

• Post the proxy materials on a publicly accessible Web site no later than the 

date the Notice was first sent to shareholders.54

Issuers may household the Notice and other proxy materials pursuant to Rule 14a-3(e).55

a. Contents of the Notice or incorporation of Notice information 

Under the final rules that we are adopting, a separate Notice is not required if the 

issuer presents all of the information required in the Notice in its proxy statement and 

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

51 Under the traditional proxy delivery scheme, issuers could send proxy materials to shareholders 

via e-mail provided they followed Commission guidance regarding such delivery, which typically 

required obtaining affirmative consent from individual shareholders. See Release No. 33-7233 

(Oct. 6, 1995) [60 FR 53458]. Issuers may continue to rely on such guidance to send materials 

electronically to shareholders. See Section II.A. of this release. 

52 A “full set” of proxy materials would contain (1) a proxy statement or information statement, 

(2) an annual report if one is required by Rule 14a-3(b) or Rule 14c-3(a), and (3) a proxy card or, 

in the case of a beneficial owner, a request for voting instructions, if proxies are being solicited. 

53 See new Rule 14a-16(n)(2). 

54 As discussed below, this date does not have to be at least 40 days prior to the shareholder meeting 

date. 

55 17 CFR 240.14a-3(e). 

16
proxy card.56 In the proposing release, we solicited comment on whether we should 

permit the issuer that is sending a full set to incorporate the information required in the 

Notice into the proxy statement and proxy card, rather than require that issuer to prepare 

a separate Notice. Although we did not receive any comment on this issue, we do not see 

a compelling reason to require an issuer to include a separate Notice when it already is 

sending a shareholder a full set of proxy materials. We believe that providing the Notice 

information in the proxy materials will provide shareholders with sufficient information 

to access the materials on the Internet, while reducing costs to issuers. However, an 

issuer may prepare a separate Notice if it desires. 

The information required in the Notice, or proxy materials if no separate Notice is 

prepared, includes much, but not all, of the information that is required under the notice 

only option, including the following:57

• 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]. 

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

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

address]. 

 

56 Because issuers are obligated to provide proxy materials to beneficial owners, we recommend that 

issuers place only information required by the Notice that is relevant to all shareholders (record 

and beneficial owners) in the proxy statement, and present information that is relevant only to 

record holders on the proxy card so that beneficial owners are not confused by information in the 

proxy statement that would only be applicable to record holders. Required information disclosed 

on the proxy statement need not be repeated on the proxy card. 

57 See new Rule 14a-16(n)(4). Appropriate changes must be made if the issuer is providing an 

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

consent, or is a legal entity other than a corporation. 

17
• 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, if any, regarding those 

matters, but no supporting statements; 

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

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

his or her proxy card; and 

• Information about attending the shareholder meeting and voting in person. 

The issuer is not required to provide paper or e-mail copies upon request to 

shareholders to whom it has furnished proxy materials under this option because it would 

already have provided those shareholders with a copy of the proxy materials as part of its 

initial distribution.58 Therefore, the issuer need not provide instructions in the Notice as 

to how shareholders can request paper or e-mail copies of the proxy materials.59

If the issuer prepares a separate Notice, it must be written in plain English.60 The 

Notice may contain only the information specified by the rules and any other information 

required by state law, if the issuer chooses to combine the Notice with any shareholder 

meeting notice that state law may require.61 However, the Notice may contain a 

protective warning to shareholders, advising them that no personal information other than 

 

58 See new Rule 14a-16(n)(3)(ii). 

59 See new Rule 14a-16(n)(4)(ii). 

60 Rule 14a-16(g) [17 CFR 240.14a-16(g)]. 

61 Rule 14a-16(e) [17 CFR 240.14a-16(e)]. 

18
the identification or control number is necessary to execute a proxy.62 The issuer must 

file any such separate Notice with the Commission pursuant to Rule 14a-6(b) no later 

than the date that it first sends the Notice to shareholders.63

b. Design of the specified publicly-accessible Web site 

An issuer must post all proxy materials identified in the Notice, or proxy 

statement and proxy card if no separate Notice is prepared, on the publicly accessible 

Web site address specified in the Notice on or before the date that it sends the proxy 

materials to shareholders.64 The specified Web site may not be the Commission’s 

EDGAR system.65 The issuer also must post any subsequent additional soliciting 

materials on the Web site no later than the date on which such materials are first sent to 

shareholders or made public.66 The materials must be presented on the Web site in a 

format, or formats, convenient for both reading online and printing on paper.67 The 

proxy materials must remain available on that Web site through the conclusion of the 

shareholder meeting.68

c. Means to vote 

The notice and access model requires an issuer to provide shareholders with a 

method to execute proxies as of the time the Notice is first sent to shareholders.69 If an 

 

62 Rule 14a-16(e)(2)(ii) [17 CFR 240.14a-16(e)(2)(ii)]. 

63 Rule 14a-16(i) [17 CFR 240.14a-16(i)]. If the issuer incorporates the contents of the Notice into 

the proxy materials, a separate filing is not required. 

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

65 Rule 14a-16(b)(3) [17 CFR 240.14a-16(b)(3)]. 

66 Rule 14a-16(b)(2) [17 CFR 240.14a-16(b)(2)]. 

67 Rule 14a-16(c) [17 CFR 240.14a-16(c)]. See Section II.A.3 of Release 34-55146 (Jan. 22, 2007) 

[72 FR 4148]. 

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

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

19
issuer follows the full set delivery option, the proxy card or request for voting 

instructions included in the full set of proxy materials satisfies this requirement. 

Therefore, the issuer does not need to provide another means for shareholders to execute 

proxies or submit voting instructions for accounts receiving proxy materials through the 

full set delivery option. 

d. Repeat Delivery of a Proxy Card 

Even though a proxy card already will be included in the full set of proxy 

materials, an issuer relying on the full set delivery option subsequently may choose to 

deliver another copy of the proxy card to shareholders who have not returned the card. 

This is permissible under the current rules, and issuers commonly do so as a reminder for 

shareholders to vote. The reminder proxy card does not have to be accompanied by the 

Notice because the reminder card would have been preceded by the proxy statement via 

the same medium and may be sent at any time after the full set of proxy materials has 

been sent.70

e. Web site confidentiality 

As under the notice only option, an issuer must 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 that Web site.71 An issuer also may not use any e-mail address 

provided by a shareholder solely to request a copy of proxy materials for any purpose 

other than to send a copy of those materials to that shareholder.72 The issuer also may 

not disclose a shareholder’s e-mail address to any person other than the issuer’s employee 

 

70 See new Rule 14a-16(h)(2). 

71 Rule 14a-16(k)(1) [17 CFR 240.14a-16(k)(1)]. See Section II.A.1.b.iii of Release No. 34-55146 

(Jan. 22, 2007) [72 FR 4148]. 

20
or agent to the extent necessary to send a copy of the proxy materials to a requesting 

shareholder. 

3. Differences Between the Full Set Delivery Option and the Notice Only 

Option 

The full set delivery option varies from the notice only option in the following 

ways: 

• An issuer may accompany the Notice with a copy of the proxy statement, 

annual report to security holders, if required by Rule 14a-3(b),73 and a proxy 

card;74

• An issuer need not prepare a separate Notice if the issuer incorporates all of 

the Notice information into the proxy statement and proxy card;75

• Because the issuer already has provided shareholders with a full set of proxy 

materials, the issuer need not provide the shareholder with copies of the proxy 

materials upon request;76

• Because shareholders will not need extra time to request paper or e-mail 

copies, the issuer need not send the Notice and full set of proxy materials at 

least 40 days before the meeting date;77

 72 Rule 14a-16(k)(2) [17 CFR 240.14a-16(k)(2)]. 

73 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 240.14a-3(b) and 240.14c3(a)]. A soliciting person other than the issuer also is not subject to this requirement. Finally, an 

issuer is required to provide such a report for shareholder meetings at which directors are to be 

elected. 

74 See new Rule 14a-16(n)(1). 

75 See new Rule 14a-16(n)(2)(ii). See also footnote 58, above. 

76 See new Rule 14a-16(n)(3)(ii). 

77 See new Rule 14a-16(n)(3)(i). 

21
• Because the full set of proxy materials includes a proxy card or request for 

voting instructions, the issuer need not provide another means for voting at the 

time the Notice is provided unless it chooses to do so; and 

• The issuer need not include the part of the prescribed legend relating to 

security holder requests for copies of the documents and instructions on how 

to request a copy of the proxy materials.78

a. Inclusion of a Full Set of Proxy Materials 

The notice only option does not permit an issuer to accompany the Notice with 

any other documents.79 In contrast, an issuer relying on the full set delivery option will 

deliver a full set of proxy materials, including a proxy statement, annual report to 

shareholders if required by Rule 14a-3(b), and a proxy card, along with the Notice. 

Under this option, when the Notice is initially sent, it must be accompanied by all of 

these documents, not just some of them. For example, an issuer may not send only the 

Notice and a proxy card to a shareholder as part of its initial distribution of proxy 

materials.80 

b. Request for Copies of the Proxy Materials

As noted above, because an issuer relying on the full set delivery option will send 

shareholders copies of all of the proxy materials along with the Notice, there is no need 

for the issuer to provide these shareholders with a means to request a copy of the proxy 

 

78 See new Rule 14a-16(n)(4). 

79 Rule 14a-16(f)(1) [17 CFR 240.14a-16(f)(1)]. We note however, that under the notice only 

option, an issuer may send the Notice and proxy card together 10 days or more after it initially 

sends the Notice. See new Rule 14a-16(h)(1). 

80 However, it may send a reminder proxy card at any time after it initially sends the Notice 

accompanied by the full set of proxy materials. See new Rule 14a-16(h)(2). 

22
materials. The issuer therefore may exclude information from the Notice on how a 

shareholder may request such copies.81

c. 40-Day Deadline

Under the full set delivery option, if an issuer or other soliciting person sends a 

full set of the proxy materials with the Notice, it need not comply with the 40-day 

deadline in Rule 14a-16 for sending the Notice. Thus, if an issuer is unable or unwilling 

to meet the 40-day deadline, it still may begin its solicitation after that deadline provided 

that it complies with the full set delivery option. Six commenters on the proposal 

questioned whether the proposal would have required all issuers to prepare their proxy 

materials at least 40 days prior to the meeting.82 We have clarified that an issuer must 

comply with the 40-day period only if it intends to comply with the notice only option.83

B. Implications of the Notice and Access Model for Intermediaries 

An issuer or other soliciting person must provide each intermediary with the 

information necessary to prepare the intermediary’s Notice in sufficient time for the 

intermediary to prepare and send its Notice to beneficial owners within the timeframes of 

the model. An issuer that complies with the notice only option must provide the 

intermediary with the relevant information in sufficient time for the intermediary to 

prepare and send the Notice and post the proxy materials on the Web site at least 40 

calendar days before the shareholder meeting date.84

 

81 See Rule 14a-16(n)(4). 

82 See, for example, letters from Chamber of Commerce, CII, Commerce Financial Printers, Elmore 

& Allen, ICI, and STA. 

83 See Rule 14a-16(n)(3)(i). 

84 If a soliciting person other than the issuer elects to follow the notice only option, the Notice must 

be sent to shareholders by the later of: (1) 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 (2) 10 calendar days after the date 

23
An issuer that complies with the full set delivery option need not comply with the 

40-day deadline. The issuer need only provide the Notice information to the intermediary 

in sufficient time for the intermediary to prepare and send the Notice along with the full 

set of materials provided by the issuer. Under this option, as with the traditional method 

of delivering proxy materials, the intermediary must forward the issuer’s full set of proxy 

materials to beneficial owners within five business days of receipt from the issuer or the 

issuer’s agent.85

The intermediary’s Notice generally must contain the same types of information 

as an issuer’s Notice, but must be tailored specifically for beneficial owners.86 With 

respect to beneficial owners who receive a Notice under the notice only option, the 

intermediary also must forward paper or e-mail copies of the proxy materials upon 

request, permit the beneficial owners to make a permanent election to receive paper or email copies of the proxy materials, keep records of beneficial owner preferences, provide 

proxy materials in accordance with those preferences, and provide a means to access a 

request for voting instructions for its beneficial owner customers no later than the date the 

Notice is first sent. 

When the issuer is delivering full sets of proxy materials to beneficial owners, the 

intermediary must either prepare a separate Notice and forward it with the full set of 

proxy materials, or incorporate any information required in the Notice, but not appearing 

in the issuer’s proxy statement, in its request for voting instructions. 

 that the registrant first sends its proxy statement or Notice of Internet Availability of Proxy 

Materials to security holders. See Rule 14a-16(l)(2) [17 CFR 240.14a-16(l)(2)]. 

85 See Rule 14b-1(b)(2) [17 CFR 240.14b-1(b)(2)]. 

86 For a more complete discussion of the content of the intermediary’s Notice, see Section II.B.2 of 

Release No. 34-55146 (Jan. 22, 2007) [72 FR 4148]. 

24
C. Reliance on the Notice and Access Model by Soliciting Persons Other 

Than the Issuer 

Under the amendments, a soliciting person other than the issuer also must comply 

with the notice and access model. Such a person may solicit proxies pursuant to the 

notice only option, the full set delivery option, or a combination of the two.87 Consistent 

with the existing proxy rules and the voluntary model, the amendments treat such 

soliciting persons differently from the issuer in certain respects. 

First, a soliciting person is not required to solicit every shareholder or to furnish 

an information statement to shareholders not being solicited. It may select the specific 

shareholders from whom it wishes to solicit proxies. For example, under the notice and 

access model, a soliciting person other than the issuer can choose to send Notices only to 

those shareholders who have not previously requested paper copies.88

Second, if a soliciting person other than the issuer elects to follow the notice only 

option, it must send a Notice to shareholders by the later of: 

• 40 calendar days prior to the shareholder meeting date or, if no meeting is to 

be held, 40 calendar days prior to the date that votes, consents, or 

authorizations may be used to effect the corporate action; or 

 

87 That is, as in the case of an issuer, a soliciting person other than the issuer may solicit some 

shareholders using the notice only option, while soliciting other shareholders using the full set 

delivery option. 

88 Under Rule 14a-7(a)(2) [17 CFR 240.14a-7(a)(2)], an issuer is required to either mail the Notice 

on behalf of the soliciting person, in which case the soliciting person can request that the issuer 

send Notices only to shareholders who have not requested paper copies, or provide the soliciting 

person with a shareholder list, indicating which shareholders have requested paper copies. For a 

more complete discussion of the interaction of the model with Rule 14a-7, see Section II.C.4 of 

Release No. 34-55146 (Jan. 22, 2007) [72 FR 4148]. 

25
• 10 calendar days after the date that the issuer first sends its proxy materials to 

shareholders.89

This timing requirement does not apply to a solicitation pursuant to the full set delivery 

model. 

If, at the time the Notice is sent, a soliciting person other than the issuer is not 

aware of all matters on the shareholder meeting agenda, the Notice must provide a clear 

and impartial identification of each separate matter to be acted upon at the meeting, to the 

extent known by the soliciting person.90 The soliciting person’s Notice also must include 

a clear statement that there may be additional agenda items that the soliciting person is 

unaware of, and that the shareholder cannot direct a vote for those items on the soliciting 

person’s proxy card provided at that time.91 If a soliciting person other than the issuer 

sends a proxy card that does not reference all matters that shareholders will act upon at 

the meeting, the Notice must clearly state whether execution of the proxy card would 

invalidate a shareholder’s prior vote using the issuer’s card on matters not presented on 

the soliciting person’s proxy card.92

III. Clarifying Amendments 

Since adopting the notice and access model as a voluntary model, we have 

received several questions regarding implementation of that model. Some of these 

questions were received as comments on the proposing release to these amendments. To 

the extent such comments relate to the previously adopted voluntary model, the 

 

89 Rule 14a-16(l)(2) [17 CFR 240.14a-16(l)(2)]. 

90 Rule 14a-16(l)(3)(i) [17 CFR 240.14a-16(l)(3)(i)]. 

91 Id. 

92 Rule 14a-16(l)(3)(ii) [17 CFR 240.14a-16(l)(3)(ii)]. 

26
Commission’s staff is working with those commenters to provide guidance regarding 

implementation of those rules. However, several comments indicated aspects of the 

adopted rules that we believe would benefit from clarification in the regulatory text. To 

help clarify our intent, we are adopting the following technical amendments. 

A. No Requirement to Provide Recommendations 

Rule 14a-16(d)(3),93 as it was initially adopted under the voluntary notice and 

access model, required the Notice to contain “[a] clear and impartial identification of 

each separate matter intended to be acted on and the soliciting person’s recommendation 

regarding those matters.” Our intent with this provision was not to require an issuer or 

other soliciting person to have a recommendation for every matter. Therefore, we are 

revising this provision to clarify that an issuer or other a soliciting person must present its 

recommendation only if it chooses to make a recommendation on a particular matter to be 

acted upon by shareholders. 

B. Deadline for Responding to Requests for Copies After the Meeting 

We are also amending the requirements about the fulfillment of requests for paper 

or e-mail copies received after the conclusion of the meeting. The rules that we initially 

adopted as part of the voluntary notice and access model made no distinction in the 

fulfillment requirements based on whether the issuer received a request for a paper or email copy before or after the meeting date. We did state in the adopting release for the 

voluntary notice and access model that the post-meeting fulfillment provision is intended 

to require issuers to provide a copy of the proxy statement for one year “[j]ust as the 

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

 

93 17 CFR 240.14a-16(d)(3). 

27
shareholders to provide copies of annual reports on Form 10-K for the most recent fiscal 

year to requesting shareholders.”94 The rule relating to providing copies of the annual 

report on Form 10-K does not require the use of First Class mail or that the issuer 

respond within three business days.95 After the meeting is concluded, we do not believe 

there is such an urgent need to provide copies of the proxy materials in a timely manner 

to impose such requirements. Therefore, we are revising Rule 14a-16(j)(3)96 to clarify 

that, with respect to requests for copies received after the conclusion of the meeting, an 

issuer is not required to use First Class mail and is not required to respond within three 

business days. 

C. Item 4 of Schedule 14A 

 Item 4 of Schedule 14A97 requires that an issuer or other soliciting person 

describe the methods used for soliciting proxies if not using the mails. Because the 

amendments require issuers and other soliciting persons to comply with Rule 14a-16 with 

respect to all proxy solicitations not related to business combination transactions, we are 

revising this item to clarify that issuers and other soliciting persons need not describe the 

notice and access model when they are using it to solicit proxies. 

IV. Compliance Dates 

 Large accelerated filers, not including registered investment companies, must 

comply with the amendments with respect to solicitations commencing on or after 

January 1, 2008. Registered investment companies, soliciting persons other than the 

 

94 See Release No. 33-55146 (Jan. 22, 2007) [72 FR 4148]. 

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

96 17 CFR 240.14a-16(j)(3). 

97 17 CFR 240.14a-101. 

28
issuer, and issuers that are not large accelerated filers conducting proxy solicitations (1) 

may comply with the amendments for solicitations commencing on or after January 1, 

2008 and (2) must comply with the notice and access model for solicitations commencing 

on or after January 1, 2009. For example, a soliciting person other than the issuer that is 

soliciting proxies with respect to a shareholder meeting of a large accelerated filer is not 

required to follow the notice and access model until January 1, 2009, even though the 

large accelerated filer would be required to follow the model. However, such a soliciting 

person may voluntarily follow the model. 

As stated above, the primary concern of most commenters on the proposal was the 

Commission’s aggressive timetable for adopting the proposed rules. All 14 commenters 

on this topic requested that the Commission delay adoption of the proposed rules.98 This 

group of commenters included trade associations representing issuers, transfer agents, 

intermediaries, proxy distribution service providers, institutional investors, and other 

shareholders. 

Eight of these commenters were concerned that the short period between 

effectiveness of the voluntary model and adoption of the amendments in this release 

would not permit the Commission and the industry to properly evaluate the results of the 

voluntary model and prepare an adequate cost-benefit analysis.99 Data that the 

commenters felt would be important to capture regarding the voluntary model included: 

(1) the effect on voter participation; (2) the costs of implementing the model; and (3) the 

extent to which predicted savings are actually realized by companies and other soliciting 

 

98 See letters from AARP, ABC, ADP, BONY, Chamber of Commerce, CII, Computershare, ICI, 

Reed Smith, Registrar and Transfer, SCSGP, SIFMA, SSA, and STA. 

99 See letters from Chamber of Commerce, BONY, ICI, Reed Smith, Registrar and Transfer, 

SCSGP, SIMFA, and STA. 

29
persons. These commenters recommended that the Commission not adopt the proposed 

amendments until it has had the opportunity to assess the data received regarding 

companies’ experiences with the voluntary model. 

With respect to costs, three of these commenters were concerned regarding the 

cost of adopting rules that would require issuers to develop, or hire outside services to 

develop, an Internet voting platform.100 The rules that we are adopting do not require, 

and the proposals would not have required, such an Internet voting platform. Similarly, 

five commenters raised concerns regarding the ability of issuers to prepare their proxy 

materials at least 40 days before the date of the shareholder meeting, and costs associated 

with these efforts.101 The rules that we are adopting do not require, and the proposal 

would not have required, all issuers to comply with the 40-day deadline if they are 

unable, or choose not, to do so. 

As we have explained above, an issuer or other soliciting person may elect to 

comply with either: (1) the notice only option which is identical to the voluntary notice 

and access model; or (2) the full set delivery option. The latter option is substantially the 

same as the traditional system of providing proxy materials in paper, except that an issuer 

or other soliciting person complying with the full set delivery option also will have to: 

• prepare and send a Notice, or incorporate the Notice information into its 

proxy statement and proxy card; and 

• post its proxy materials on a publicly accessible Web site. 

 

100 See letters from ABC, BONY and Registrar and Transfer. 

101 See letters from Chamber of Commerce, CII, Commerce Financial Printers, Elmore & Allen, ICI, 

and STA. 

30
As we discuss more fully in our cost-benefit analysis, we believe that the cost to 

issuers and other soliciting persons to comply with these two requirements will not be 

significant, and therefore are expanding Internet availability of proxy materials to all 

shareholders. Many of the commenters’ concerns regarding costs were based on beliefs 

that the proposal would require an electronic voting platform, preparation of proxy 

materials at least 40 days before the shareholder meeting, and anonymity controls on the 

Web site that exceed what the proposal would actually require. As noted above, the 

proposals would not have required, and the final rules do not require, such provisions. 

Rather, an issuer or other soliciting person can substantially continue to follow the 

traditional method of proxy delivery with minimal changes. Because the amendments 

will not have a significant impact on the requirements placed on issuers and other 

soliciting persons, we believe it is appropriate to adopt them now. 

We also note that commenters have expressed concern, particularly in relation to 

the voluntary model, that if the model has a negative effect on shareholder participation, 

issuers may use the model to disenfranchise certain shareholders. We recognize these 

concerns and intend to monitor shareholder participation and take any steps necessary to 

prevent such abuse. 

Furthermore, the tiered compliance dates address commenters’ concerns because 

they will allow the Commission to better analyze the impact of the rules on a subset of 

issuers constituting large accelerated filers.102 As noted above, a review of existing Web 

sites of such issuers indicated that approximately 80% of them already post their filings, 

 

102 One commenter specifically noted that the timeframe would not allow the Commission to analyze 

the effects of one-full year of compliance for large accelerated filers who chose to accept the 

voluntary model. See letter from the Chamber of Commerce. The tiered system will allow the 

31
including proxy materials, on their Web site. Thus, most of the issuers that will be 

subject to the rules in the first year will be large issuers that appear to already post their 

proxy materials on their Web site. Therefore, we believe that this group is in the best 

position with respect to implementation costs in the first year while we evaluate the 

performance of the model. Adopting the amendments before the 2008 proxy season 

effectively creates a test group of issuers, enabling the Commission to study the 

performance of the model with a significant number of larger issuers and providing the 

Commission with an opportunity to make any necessary revisions to the rules before they 

apply to all issuers and other soliciting persons.

V. Paperwork Reduction Act 

Certain provisions of the amendments contain “collection of information” 

requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”), 

including preparation of Notices, maintaining Web sites, maintaining records of 

shareholder preferences, and responding to requests for copies. The titles for the 

collections of information are: 

Regulation 14A (OMB Control No. 3235-0059) 

Regulation 14C (OMB Control No. 3235-0057) 

We requested public comment on these collections of information in the release 

proposing the notice and access model as a voluntary model for disseminating proxy 

materials,103 and submitted them to the Office of Management and Budget (“OMB”) for 

review in accordance with the PRA. We received approval for the collections of 

 Commission to analyze a full year of experience under the notice and access model for all large 

accelerated filers. 

103 Release No. 34-52926 (Dec. 8, 2005) [70 FR 74597]. 

32
information. We submitted a revised PRA analysis to OMB in conjunction with the 

release adopting the notice and access model as a voluntary model.104 In those releases, 

we assumed conservatively that all issuers and other persons soliciting proxies would 

follow the voluntary model because the proportion of issuers and other soliciting persons 

that would elect to follow the model was uncertain. 

The rules that we are adopting require all issuers and other soliciting persons to 

follow the notice and access model, including the preparation of the Notice, as we 

assumed for our prior PRA analysis. Therefore, we estimate that the rule amendments 

will not impose any new recordkeeping or information collection requirements beyond 

those described in the release adopting the voluntary model, or necessitate revising the 

burden estimates for any existing collections of information requiring OMB’s approval. 

VI. Cost-Benefit Analysis 

A. Background 

We are adopting amendments to the proxy rules under the Exchange Act 

substantially as proposed that require issuers and other soliciting persons (jointly referred 

to as “soliciting parties”) to follow the notice and access model for furnishing proxy 

materials. The amendments are intended to provide all shareholders with the ability to 

choose the means by which they access proxy materials, to expand use of the Internet to 

ultimately lower the costs of proxy solicitations, and to improve shareholder 

communications. 

 

104 Release No. 34-55146 (Jan. 22, 2007) [72 FR 4147]. 

33
B. Summary of the Amendments 

The notice and access model that we are adopting requires soliciting parties to 

furnish proxy materials by posting them on a specified, 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 them. 

Under the model, soliciting parties may choose between two options with respect to how 

they will provide proxy materials to shareholders. Under the first option, the notice only 

option, a soliciting party may follow the procedures in Exchange Act Rule 14a-16 that we 

adopted on January 22, 2007 in connection with the voluntary model.105 Under this 

option, a soliciting party would send only a Notice indicating the Internet availability of 

the proxy materials to a solicited shareholder at least 40 days prior to the shareholders 

meeting and provide that shareholder with a paper or e-mail copy of the proxy materials 

upon request. 

Under the second option, the full set delivery option, soliciting parties may follow 

procedures substantially similar to the traditional method of sending paper copies of the 

proxy materials to a shareholder by accompanying the Notice with a full set of proxy 

materials. Under the full set delivery option, the soliciting party is not required to send 

the Notice and the full set of proxy materials at least 40 days prior to the shareholders 

meeting and need not provide a means for shareholders to request another set of the 

proxy materials. Moreover, a soliciting party need not prepare a separate Notice if it 

includes all of the information otherwise required in a Notice in the proxy statement or 

proxy card. 

 

105 Release No. 34-55146 (Jan. 22, 2007) [72 FR 4147]. 

34
A soliciting party may use the notice only option to provide proxy materials to 

some shareholders and the full set delivery option to provide proxy materials to other 

shareholders. The amendments also require intermediaries to follow similar procedures 

to provide beneficial owners with access to the proxy materials. Soliciting parties may 

not use the model with respect to a business combination transaction. 

C. Benefits 

1. Versatility of the Internet 

 Historically, soliciting parties decided whether to provide shareholders with the 

choice to receive proxy materials by electronic means. The amendments, which build on 

and incorporate the voluntary model that we adopted in January, are intended to provide 

all shareholders with the ability to choose the means by which they access proxy 

materials, to expand use of the Internet potentially to lower the costs of proxy 

solicitations, and to improve the efficiency of the proxy process and shareholder 

communications. The amendments provide all shareholders with the ability to choose 

whether to access proxy materials in paper, by e-mail or via the Internet. As technology 

continues to progress, accessing the proxy materials on the Internet should increase the 

utility of our disclosure requirements to shareholders. Information in electronic 

documents is often more easily searchable than information in paper documents. 

Shareholders will be better able to go directly to any section of the document that they are 

particularly interested in. The amendments also will permit shareholders to more easily 

evaluate data and transfer data using analytical tools such as spreadsheet programs. Such 

tools enable users to compare relevant data about several companies more easily. 

35
In addition, encouraging shareholders to use the Internet in the context of proxy 

solicitations may encourage improved shareholder communications in other ways. 

Current and future Internet communications innovations may enhance shareholders’ 

ability to interact not only with management, but with each other. Such access may 

improve shareholder relations to the extent that shareholders feel that they have enhanced 

access to management. Centralizing an issuer’s disclosure on a Web site may facilitate 

shareholder access to other important information, such as research reports and news 

concerning the issuer. We believe that increased reliance on the Internet for making 

proxy materials available to shareholders could ultimately lower the cost of soliciting 

proxies for all soliciting parties. 

2. Paper Processing Costs 

One of the purposes of the voluntary model was to reduce paper processing costs 

related to proxy solicitations. We previously estimated savings assuming that soliciting 

parties responsible for 10% to 50% of all proxy mailings would follow that model. We 

do not assume that the amendments will cause a soliciting party to change its decision 

under the voluntary model whether to send only a Notice or to send a full set of proxy 

materials to shareholders. Therefore, we do not assume for this analysis any savings in 

paper processing costs as a result of these particular amendments. However, because the 

voluntary model just recently became effective for proxy solicitations commencing on or 

after July 1, 2007, and therefore has not been used by many soliciting parties and because 

these amendments create a single notice and access model that includes aspects of the 

voluntary model, we are presenting a cost-benefit analysis that addresses the notice and 

36
access model as a whole, including our assessment of the benefits and costs created by 

the amendments. 

As we discussed in the adopting release for the voluntary model, the paper-related 

benefits of the notice and access model are limited by the volume of paper processing 

that would occur otherwise. As we noted in that release, Automatic Data Processing, 

Inc.106 (ADP) handles the vast majority of proxy mailings to beneficial owners.107 ADP 

publishes statistics that provide useful background for evaluating the likely consequences 

of the rule amendments. ADP estimates that, during the 2006 proxy season,108 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 soliciting parties spent, in the aggregate, $481.2 

million in postage and printing fees alone to distribute paper proxy materials to beneficial 

owners during the 2006 proxy season.109 Approximately 50% of all proxy pieces mailed 

by ADP in 2005 were mailed during the proxy season.110 Therefore, extrapolating this 

 

106 ADP recently spun off its brokerage services group, which is now called Broadridge Financial 

Solutions, Inc. However, because its comment letter was submitted when the group was part of 

ADP and carries the ADP letterhead, we continue to refer to the company as ADP for purposes of 

this release. 

107 We expect savings per mailing to record holders to roughly correspond to savings per mailing to 

beneficial owners. 

108 According to ADP data, the 2006 proxy season extended from February 15, 2006 to May 1, 2006. 

109 85.3 million mailings x $5.64/mailing = $481.2 million. 

110 According to ADP, in 2005, 90,013,175 proxy pieces out of a total 179,833,774 proxy pieces were 

mailed during the 2005 proxy season. Thus, we estimate that 50% of proxy pieces are mailed 

during the proxy season (90,013,175 proxy pieces during the season / 179,833,774 total proxy 

pieces = 0.5 or 50%). 

37
percentage to 2006, we estimate that soliciting parties from beneficial owners spent 

approximately $962.4 million in 2006 in printing and mailing costs.111

As was the case with the voluntary model, for soliciting parties following the 

notice only option, paper-related savings may be reduced by the cost of fulfilling requests 

for paper copies.112 We estimate that approximately 19% of shareholders would request 

paper copies from such soliciting parties. Commenters on the voluntary model provided 

alternate estimates. For example, Computershare, a large transfer agent, estimated that 

less than 10% of shareholders would request paper copies.113 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. 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 would request paper copies reflects the diverse 

estimates suggested by the available data. 

Based on the assumption that 19% of shareholders would choose to have paper 

copies sent to them when a soliciting party initially sends them only a Notice, we 

 

111 $481.2 million / 50% = $962.4 million. 

112 Soliciting parties that choose to follow the full set delivery option will not incur fulfillment costs. 

Such soliciting parties are not required to provide paper copies to shareholders upon request 

because they would have provided such copies at the outset. 

113 See letter commenting on Release No. 34-52926 (Dec. 8, 2005) [70 FR 74598] from 

Computershare. 

38
estimated that the voluntary model could produce annual paper-related savings ranging 

from $48.3 million (if soliciting parties responsible for 10% of all proxy mailings choose 

to follow the notice only option) to $241.4 million (if soliciting parties responsible for 

50% of all proxy mailings choose to follow the notice only option).114 This estimate 

excludes the effect of the provision of the amendments that would allow shareholders to 

make a permanent request for paper copies. That provision enables soliciting parties 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. 

Although we expect the savings to be significant from the notice and access 

model as a whole, the actual paper-related benefits will be influenced by several factors 

that we estimate should become less important over time. First, to the extent that 

shareholders request paper copies of the proxy materials, the benefits of the notice and 

access model in terms of savings in printing and mailing costs will be reduced. Soliciting 

parties have expressed concern 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 

 

114 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, including $0.42 to print and mail the Notice. The variable 

costs of fulfilling a paper request, including handling, paper, printing and postage, are estimated to 

be $6.11 per copy requested. Our estimate of the total number of shareholders is based on data 

provided by ADP and SIFMA (at the time it submitted these comments, the SIFMA was known as 

the Securities Industry Association or SIA). According to SIFMA’s comment letter on Release 

No. 34-52926 (Dec. 8, 2005) [70 FR 74598], 78.49% of shareholders held their shares in street 

name. We estimate that the total number of proxy pieces mailed to both registered holders and 

beneficial owners is approximately 229,116,797 (179,833,774 proxy pieces to beneficial owners / 

78.49% = 229,116,799 total proxy pieces). To calculate the potential cost savings, for the 

percentage of proxy piece mailings replaced by the Notice (10% or 50% times 229,116,799 proxy 

pieces), we estimate the total savings of not printing and sending full sets ($5.64) and subtract the 

estimated costs of printing and sending Notices and fulfilling paper requests ($2.36 + (19.2% x 

39
shareholders request paper, the savings will be substantially reduced. Second, soliciting 

parties 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 soliciting parties gain experience with the number of sets of 

paper materials that they need to supply to requesting shareholders, and as shareholders 

become more comfortable with receiving disclosures via the Internet, the number of 

paper copies are likely to decline, as would soliciting parties’ tendency to print many 

more copies than ultimately are requested. This should lead to growth in paper-related 

savings from the notice and access model over time. 

3. Reduction in the Cost of Proxy Contests 

 Benefits would accrue under the notice and access model from additional 

reductions in the costs of proxy solicitations by persons other than the issuer. Soliciting 

persons other than the issuer also must comply with the notice and access model, but can 

limit the scope of their proxy solicitations to shareholders who have not requested paper 

copies of the proxy materials. The flexibility afforded to persons other than the issuer 

under the model ultimately may 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. However, because the amendments do not 

significantly change the options available to such soliciting person from the existing 

rules, we do not anticipate that the amendments will change significantly the number of 

soliciting persons other than issuers who select the notice only option as opposed to the 

number who would have chosen to follow the voluntary model. 

 $6.11)). 10% x 229,116,799 proxy pieces x ($5.64 - ($2.36 + (19.2% x $6.11)) = $48.3 million. 

50% x 229,116,799 proxy pieces x ($5.64 - ($2.36 + (19.2% x $6.11)) = $241.4 million. 

40
The effect of the notice and access model of lessening the costs associated with a 

proxy contest will be limited by the persistence of other costs. One commenter on the 

proposal to create the voluntary model 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.115 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.116

4. Environmental Benefits 

Finally, some benefits from the notice and access model, as revised, may arise 

from a reduction in what may be regarded as the environmental costs of the proxy 

solicitation process.117 Specifically, proxy solicitation involves the use of a significant 

amount of paper and 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. Although not all of these 

costs may be internalized by paper producers, to the extent that such producers do 

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 

model. 

 

115 See letter commenting on Release No. 34-52926 (Dec. 8, 2005) [70 FR 74598] from ADP. 

116 See letters commenting on Release No. 34-52926 (Dec. 8, 2005) [70 FR 74598] from CALSTRS, 

Computershare, ISS, and Swingvote. 

117 See letter commenting on Release No. 34-52926 (Dec. 8, 2005) [70 FR 74598] from American 

Forests. 

41
D. Costs 

The amendments require all soliciting parties, including those who follow the full 

set delivery option, to (1) prepare and print a Notice (or incorporate Notice information 

into its proxy statement and proxy card) and (2) post the proxy materials on an Internet 

Web site. Because the notice only option is identical to the voluntary model, soliciting 

parties that choose that option will incur the same costs and savings as they would have 

under the voluntary model. 

1. Costs Under the Notice Only Option 

A soliciting party that chooses to follow the notice only option would incur the 

same costs as a soliciting party that chose to follow the voluntary model. These costs 

include the following: (1) the cost of preparing, producing, and sending the Notice to 

shareholders; (2) the cost of posting proxy materials on an Internet Web site; (3) 

providing a means to execute a proxy as of the date that the Notice is sent; and (4) the 

cost of processing shareholders’ requests for copies of the proxy materials and 

maintaining their permanent election preferences if a soliciting party elects to follow the 

notice only option. 

Under the amendments, soliciting parties must prepare and print the Notice to 

shareholders and post their proxy materials on an Internet Web site. As noted above, 

these costs would apply to soliciting parties irrespective of which option they choose. A 

soliciting party following the notice only option also must separately send the Notice to 

shareholders. As we stated in the release adopting the voluntary model, the paper-related 

savings to soliciting parties discussed under the benefits section above are adjusted for 

the cost of preparing, printing and sending Notices. 

42
In the release adopting the voluntary model, we assumed, for purposes of the 

PRA, that all soliciting parties would elect to follow the procedures, resulting in a total 

estimated cost to prepare the Notice of approximately $2,020,475.118 We are adjusting 

this amount to $2,469,475 to reflect a change in the basis of our cost estimate for 

personnel time.119 Based on the percentage range of soliciting parties that we estimated 

would adopt the voluntary model, we estimated that these costs for soliciting parties who 

follow the notice only option could range between $246,948 (if soliciting parties 

responsible for 10% of all proxy mailings followed the notice only option) and 

$1,234,736 (if soliciting parties responsible for 50% of all proxy mailings followed the 

notice only option).120

If Notices are sent by mail, then the mailing costs may vary widely among parties. 

Postage rates likely would vary from $0.14 to $0.41 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 $0.13 to print and $0.29 to mail. Based on data from ADP 

and SIA, we estimate that soliciting parties send a total of 229,116,797 proxy pieces per 

year.

121 In the release adopting the voluntary model, we assumed that only those 

 

118 In the voluntary model adopting release, we estimated that soliciting parties would spend a total of 

$897,975 on outside professionals to prepare this disclosure. We also estimated that soliciting 

parties would spend a total of 8,980 hours of personnel time preparing this disclosure. We 

estimated the average hourly cost of personnel time to be $125, resulting in a total cost of 

$1,122,500 for personnel time and a total cost of $2,020,475 ($1,122,500 + $897,975 = 

$2,020,475). 

119 We are adjusting this estimate of personnel time to be $175 to be consistent with our other 

releases. This results in an in-house cost of $1,571,500 (8,980 hours x $175/hour = $1,571,500) 

and a total cost of $2,469,475 ($1,571,500 + $897,975 = $2,469,475) for soliciting parties 

following the notice only option. For purposes of the PRA analysis, we are not adjusting the 

hourly burden imposed on soliciting parties and, therefore, are not revising our PRA submission. 

120 $2,469,475 * 10% = $246,948. $2,469,475 * 50% = $1,234,736. 

121 See www.ics.adp.com/release11/public_site/about/stats.html stating that ADP handled 

179,833,774 in fiscal year 2005 and letter commenting on Release No. 34-52926 (Dec. 8, 2005) 

[70 FR 74598] from SIFMA stating that beneficial accounts represent 78.49% of total accounts. 

43
soliciting parties that choose to follow the voluntary model would incur these printing 

and mailing costs. We estimated that the costs to print the Notices would range from 

$9.6 million (if soliciting parties responsible for 10% of all current proxy mailings choose 

to follow the notice only option) and $48.1 million (if soliciting parties responsible for 

50% of current proxy mailings choose to follow the notice only option).122 These same 

costs would be incurred by soliciting parties following the notice only option under the 

revised model. 

Soliciting parties that follow the notice only option must post their proxy 

materials on an Internet Web site. Although costs for establishing a Web site and posting 

materials on it can vary greatly, the rules do not require elaborate Web site design. The 

rules only require that a soliciting party obtain a Web site and post several documents on 

that Web site. Several companies currently provide Web hosting services for free, 

including significant memory to post the required documents and bandwidth to handle 

several thousand “hits” per month.123 We also noted that several Web hosting services 

provided Web sites which would handle up to five million hits per month are available 

for approximately $5 to $8 per month, or $60 to $96 per year.124 Based on a review of 

several Internet Web page design firms, we estimate that the cost of designing a Web site 

 

122 10% x 229,116,797 x ($0.13 + $0.29) = $9.6 million. 50% x 229,116,797 x ($0.13 + $0.29) = 

$48.1 million. As stated above, these costs would be significantly offset by savings as a result of 

not being required to print and mail full sets of proxy materials, resulting in a net savings of $48.3 

million (if issuers responsible for 10% of all proxy mailings choose to follow the notice only 

option) to $241.4 million (if issuers responsible for 50% of all proxy mailings choose to follow the 

notice only option) for issuers choosing to follow the notice only option. 

123 A review found free Web hosting services that permit the posting of up to 100M of data, with a 

bandwidth capacity of 10,000MB. A document’s size can vary dramatically depending on its 

design. Typical proxy statement and annual report sizes vary from 200KB for documents with 

few graphics such as an annual report on Form 10-K to 5MB for elaborate “glossy” annual reports. 

Based on this range of sizes, we estimate that a free Web hosting service would enable between 

1,000 and 25,000 “hits” per month. 

44
that meets the basic requirements of the notice and access model would be approximately 

$300. Thus, we estimate that the approximate total cost to establish a new Web site 

would be approximately $360 per year for a soliciting party, or a range of $0.3 million (if 

soliciting parties responsible for 10% of all proxy mailings would not have followed the 

voluntary model) to $1.4 million (if soliciting parties responsible for 50% of all proxy 

mailings would not have followed the voluntary model).125 This estimate assumes that 

the soliciting party obtains a new Web site to post the proxy materials. We believe that 

the cost to soliciting parties that already maintain Web sites would be less. 

The Web site on which the proxy materials are posted must maintain the 

anonymity of shareholders accessing the site. As discussed elsewhere in the release, this 

requirement requires a soliciting party to refrain from installing software on the Web site 

that tracks the identity of persons accessing the Web site. Thus, this requirement does 

not impose any added burden on soliciting party establishing new Web sites. A soliciting 

party that already has a Web site must segregate a portion of that Web site so that any 

tracking software on its general Web site does not track persons accessing the portion 

containing the proxy materials. Such segregation of the Web site requires minimal effort 

and should not impose a significant burden on such parties. 

The rules also require that the proxy materials be posted in a format or formats 

convenient for printing on paper or viewing online. One commenter was concerned that 

this would impose an unnecessary burden on soliciting parties. Currently, Internet Web 

sites regularly present the same document in multiple formats for the convenience of 

 124 We found several services which permit the posting of up to 300GB of data, with a bandwidth 

capacity of 3000GB, and include web design programs at prices between $5 and $8 per month. 

125 Based on filings in our last fiscal year, we estimate 7,982 proxy solicitations per year. 10% x 

7,982 x $360 = $0.3 million. 50% x 7,982 x $360 = $1.4 million. 

45
readers. In particular, Internet Web sites regularly post large files for Internet users with 

broadband connections and smaller files for users who do not have broadband 

connections. In light of this common practice on the Internet, we do not believe that this 

requirement will impose a significant burden on soliciting parties. 

Soliciting parties must provide a means to vote as of the date on which the Notice 

is first sent. Those following the notice only option can do so by creating an electronic 

voting platform, providing a telephone number or posting a printable proxy card on the 

Web site. Some commenters questioned whether the model would require the creation of 

an electronic voting platform, which they estimated would cost approximately $3,000.126 

The amendments do not require such a voting platform. A soliciting party may simply 

post a printable proxy card or a telephone number for executing a proxy on its Web site, 

which should impose little burden. 

The cost of processing shareholders’ requests for copies of the proxy materials if 

a soliciting party elects to follow the notice only option is addressed as an offset to the 

savings discussed in the Benefits section of this analysis. 

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 total cost if all issuers followed the notice only option would be 

approximately $13,098,500.127 Thus, we estimated the cost due to the voluntary model 

would be approximately $1.3 million (if issuers responsible for 10% of all proxy mailings 

 

126 See letters from BONY and Registrar and Transfer. 

127 In the voluntary model adopting release, we estimated, for PRA purposes, 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 $175, resulting in a total cost of $13,068,500 for issuer and intermediary 

personnel time. 

46
followed the notice only option) and $6.5 million (if issuers responsible for 50% of all 

proxy mailings followed the notice only option).128 

2. Costs Under the Full Set Delivery Option 

A soliciting party following the full set delivery option must either prepare a 

Notice or incorporate the Notice information into its proxy statement or proxy card. We 

base our estimates on preparing a separate Notice because we believe this would involve 

a greater cost. However, we anticipate that a significant number of soliciting parties 

would choose to incorporate the information into their materials. Based on the range that 

we estimated for soliciting parties following the notice only option, we estimate that 

soliciting parties responsible for 50% to 90% of all proxy mailings would choose to 

follow the full set delivery option. Soliciting parties who follow this option would not 

incur mailing costs in addition to costs incurred under the traditional system because the 

Notice would be included in the much larger package of the full set of proxy materials. 

When the Commission adopted the voluntary model, we estimated that soliciting 

parties responsible for 10% to 50% of all proxy mailings would rely on the voluntary 

model. Under the amendments, we assume that soliciting parties that we estimated 

would not have followed the voluntary model (i.e., soliciting parties responsible for 50% 

to 90% of all proxy mailings) would incur the cost of preparing and printing a Notice (or 

incorporating Notice information into their proxy materials)129 and posting the proxy 

materials on an Internet Web site. 

 

128 $13,098,500 x 10% = $1,309,850. $13,098,500 * 50% = $6,549,250. 

129 We do not expect an incremental increase in mailing cost for the Notice for soliciting parties that 

choose the full set delivery option because the Notice is substantially smaller than the full set of 

proxy materials currently sent under the traditional system and must accompany that full set (or be 

incorporated into those materials). 

47
We estimate that the cost for soliciting parties that would not have followed the 

voluntary model to prepare a Notice will range between $1.2 million (if soliciting parties 

responsible for 50% of all proxy mailings would not have followed the voluntary model) 

and $2.2 million (if soliciting parties responsible for 90% of all proxy mailings would not 

have followed the voluntary model).130

Similarly, we estimate that the cost for such parties of printing the Notice will 

range between $14.9 million131 (if soliciting parties responsible for 50% of all proxy 

mailings would not have followed the voluntary model) and $26.8 million132 (if soliciting 

parties responsible for 90% of all proxy mailings would not have followed the voluntary 

model). Soliciting parties can significantly reduce this cost to print the Notice by 

incorporating the Notice information into the proxy materials instead of printing a 

separate Notice. Printing costs for the full set of proxy materials would be identical to 

such costs under the traditional method of providing proxy materials by mail and 

therefore do not represent an incremental cost increase as a result of these rules. 

We do not expect an incremental increase in mailing cost for the Notice for 

soliciting parties that choose the full set delivery option because the Notice is 

substantially smaller than the full set of proxy materials currently sent under the 

traditional system and must accompany that full set (or be incorporated into the proxy 

statement and proxy card). 

 

130 As noted above, we calculated a total cost of $2,469,475 for preparing the Notice for purposes of 

the PRA. $2,469,475 * 50% = $1,234,736. $2,469,475 * 90% = $2,222,528. 

131 50% x 229,116,797 x $0.13 = $14.9 million. 

132 90% x 229,116,797 x $0.13 = $26.8 million. We assume that the additional cost of mailing the 

Notice together with the full set of proxy materials is negligible. 

48
In addition, under the amendments, soliciting parties that would not have 

followed the voluntary model must post their proxy materials on an Internet Web site. As 

we noted above, although costs for establishing a Web site and posting materials on it can 

vary greatly, the rules do not require elaborate Web site design. The rules only require 

that a soliciting party obtain a Web site and post several documents on that Web site. As 

with the notice only option, we estimate that the approximate total cost to establish a new 

Web site would be approximately $360 per year for a soliciting party, or a range of $1.4 

million (if soliciting parties responsible for 50% of all proxy mailings would not have 

followed the voluntary model) to $2.6 million (if soliciting parties responsible for 90% of 

all proxy mailings would not have followed the voluntary model).133

3. Costs to Intermediaries 

Soliciting parties and intermediaries will incur additional processing costs under 

the notice and access model. The amendments require an intermediary such as a bank, 

broker-dealer, or other association to follow the notice and access model with respect to 

all issuers. An intermediary must prepare its own Notice to beneficial owners, along with 

instructions on when and how to request paper copies and the Web site where the 

beneficial owner can access his or her request for voting instructions. Since soliciting 

parties 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 involvement of intermediaries in 

sending their Notices to significantly affect the costs associated with the rules. 

 

133 50% x 7,982 x $360 = $1.4 million. 90% x 7,982 x $360 = $2.6 million. 

49
Under the notice and access model, a beneficial owner desiring a copy of the 

proxy materials from a soliciting party following the notice only option must request such 

a copy from its intermediary. 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 soliciting parties 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 

amendments permit a beneficial owner to specify its preference on an account-wide basis, 

which should reduce the cost of processing requests for copies. These costs ultimately 

are paid by the soliciting party. 

4. Costs to Shareholders 

Under the amendments, a shareholder can avoid any additional cost by accessing 

the proxy materials on the Internet if they already have Internet access or by requesting 

copies of the proxy materials from the soliciting parties if the shareholder is a record 

holder or the intermediary if the shareholder is a beneficial owner. Shareholders who do 

not already have Internet access and wish to access the 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 would entail paper 

and printing costs. We estimate that approximately 10% of all shareholders receiving a 

Notice under the notice only option would print out the posted materials at home at an 

estimated cost of $7.05 per proxy package. Based on these assumptions, we estimated 

50
that the voluntary model could produce incremental annual home printing costs ranging 

from $16 million (if soliciting parties responsible for 10% of all current proxy mailings 

follow the notice only option) to $80 million (if soliciting parties responsible for 50% of 

all current proxy mailings follow the notice only option).134 Shareholders of issuers that 

follow the full set delivery option would not incur such costs. 

5. Comments Regarding Unanticipated Costs 

Several commenters expressed concern with the adoption of these amendments 

before the Commission has collected operating data from the voluntary model. The 

recommended delaying adoption until the market has had more experience with the 

voluntary model before requiring companies to follow the notice and access model. As 

we note elsewhere in the release, the amendments adopted in this release do not require 

soliciting parties to follow procedures substantially different from the procedures 

available under the voluntary model. Soliciting parties who wish to furnish their proxy 

materials via traditional paper delivery may continue to do so, with the only added 

requirements being that they must post their proxy materials on an Internet Web site and 

prepare a Notice (or incorporate the Notice information into their proxy statement and 

proxy card). 

In addition, only large accelerated filers that are subject to the proxy rules will be 

subject to the requirements in 2008. All other filers need not, but may, follow the notice 

 

134 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 SIFMA. See letters 

commenting on Release No. 34-52926 (Dec. 8, 2005) [70 FR 74598] from ADP and SIFMA. 

51
and access model before January 1, 2009. Most large accelerated filers already appear to 

post their proxy materials on the Internet. As noted above, a review of existing Web sites 

of such issuers indicated that approximately 80% of them already post their filings, 

including proxy materials, on their Web site. Thus, most of the issuers that will be 

subject to the rules in the first year will be large issuers that already post their proxy 

materials on their Web site. Therefore, we believe that no company will incur significant 

cost as a result of these amendments in the first year, while we evaluate the performance 

of the model. Although they may need to implement some procedures to ensure the 

anonymity of persons accessing those materials, we do not believe this requirement will 

impose a significant burden on these companies. 

Furthermore, the tiered compliance dates address commenters’ concerns because 

they will allow the Commission to better analyze the impact of the rules on a subset of 

issuers constituting large accelerated filers.135 Adopting the amendments for large 

accelerated filers before the 2008 proxy season effectively creates a test group of issuers, 

enabling the Commission to study the performance of the model with a significant 

number of larger issuers and to make any necessary revisions to the rules before they 

apply to all issuers and other soliciting persons. 

6. Comment on the Complexity of the Notice and Access Model 

One commenter expressed concern that the proposed rule would make the proxy 

delivery system too complex for beneficial owners holding in street name through their 

 

135 One commenter specifically noted that the timeframe would not allow the Commission to analyze 

the effects of one-full year of compliance for large accelerated filers who chose to accept the 

voluntary model. See letter from the Chamber of Commerce. The tiered system will allow the 

Commission to analyze a full year of experience under the notice and access model for all large 

accelerated filers. 

52
brokers or other intermediaries.136 We acknowledge that the amendments provide 

shareholders with more options with respect to the manner in which they are able to 

access their proxy materials, and thereby add complexity to the proxy distribution system. 

However, we believe that shareholder choice as to the means by which they access proxy 

materials and the expanded use of the Internet to provide such information to 

shareholders ultimately will provide shareholders with better access to information, 

which we believe can make the proxy process more efficient. In adopting the voluntary 

model, we created a provision that allows a shareholder to make a one-time election of 

the means by which they access proxy materials to simplify the model for those 

shareholders. In addition, by choosing to follow the full set delivery option, issuers and 

other soliciting persons wishing to do so can continue to furnish their proxy materials 

through procedures substantially similar to traditional methods of furnishing proxy 

materials. These provisions should significantly simplify the process for all shareholders. 

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

Competition and Capital Formation 

 Section 23(a)(2) of the Exchange Act137 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 Act138 and Section 2(c) of the Investment 

 

136 See letter from Reed Smith. We received similar comments on our proposals to adopt the notice 

and access model as a voluntary means of furnishing proxy materials. 

137 15 U.S.C. 78w(a)(2). 

138 15 U.S.C. 78c(f). 

53
Company Act of 1940139 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. 

The amendments require all issuers and other soliciting persons to follow the 

notice and access model for all proxy solicitations, other than those associated with 

business combination transactions. The amendments are intended to provide all 

shareholders with the ability to choose the means by which they access proxy materials, 

to expand use of the Internet to lower the costs of proxy solicitations, and to improve 

shareholder communications. Historically, issuers decided whether to provide 

shareholders with the choice to receive proxy materials by electronic means. The 

amendments provide all shareholders with the ability to choose whether to access proxy 

materials in paper, by e-mail or via the Internet. We believe that expanded use of 

electronic communications to replace current modes of disclosures on paper and physical 

mailings will increase the efficiency of the shareholder communications process. Use of 

the Internet permits technology developers to enhance a shareholder’s experience with 

respect to such communications. It permits interactive communications at real-time 

speeds. Improved shareholder communications may improve relationships between 

shareholders and management. Retail investors may have easier access to management. 

In turn, this may lead to increased confidence and trust in well-managed, responsive 

issuers. 

 

139 15 U.S.C. 80a-2(c). 

54
The amendment may have the effect of initially raising costs on issuers and other 

soliciting persons by requiring persons who choose to follow the full set delivery option 

to post the proxy materials on a Web site and prepare a Notice (or incorporate Notice 

information into their proxy statement and proxy card). Commenters were concerned 

that the amendments may create other inefficiencies such as reducing shareholder voting 

participation and increased reliance on broker discretionary voting. The amendments do 

not significantly differ from the voluntary model. Issuers who are concerned about a 

reduction in voting participation still have the option to send a full set of proxy materials 

to all shareholders. Therefore, we do not believe that the amendments will have a 

significant impact compared to the previously-adopted voluntary model on shareholder 

voting participation, and hence reliance on broker discretionary voting. 

We also considered the effect of the amendments on competition and capital 

formation, including the effect that the amendments may have on industries servicing the 

proxy soliciting process. We do not anticipate any significant effects on capital 

formation. We also anticipate that some companies whose business model is based on 

the dissemination of paper-based proxy materials may experience some adverse 

competition effects from the amendments. However, the full set delivery option permits 

companies to continue to send paper copies to shareholders. Thus, we do not anticipate 

that the amendments will have an incremental impact on this industry different from the 

voluntary model. The amendments may also promote competition among Internet-based 

information services. 

55
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 rules and forms under the Exchange Act that 

require issuers, other persons soliciting proxies, and intermediaries to follow the notice 

and access model for all proxy solicitations except for those associated with a business 

combination transaction. 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. 

A. Need for the Amendments 

 On January 22, 2007, we proposed amendments to the rules regarding provision 

of proxy materials to shareholders. We are adopting those amendments, substantially as 

proposed. Specifically, the amendments require issuers and other persons soliciting 

proxies to provide shareholders with Internet access to proxy materials. The amendments 

are intended to provide all shareholders with the ability to choose the means by which 

they access proxy materials, to expand use of the Internet to ultimately lower the costs of 

proxy solicitations, and to improve shareholder communications. We anticipate that the 

model will enhance the ability of investors to make informed decisions and ultimately to 

lower the costs of proxy solicitations. 

The amendments also will provide all shareholders with the ability to choose 

whether to access proxy materials in paper, by e-mail or via the Internet. Developing 

technologies on the Internet should expand the ways in which required disclosures can be 

used by shareholders. Electronic documents are more easily searchable than paper 

documents. Users are better able to go directly to any section of the document that they 

56
believe to be the most important. They also permit users to more easily evaluate data. It 

enables users to more easily download data into spreadsheet or other analytical programs 

so that they can perform their own analyses more efficiently. A centralized Web site 

containing proxy-related disclosure may facilitate shareholder access to other relevant 

information such as research reports and news about the issuer. 

In addition, encouraging shareholders to use the Internet in the context of proxy 

solicitations may have the side-effect of improving shareholder communications in other 

ways. Internet tools may enhance shareholders’ ability to communicate not only with 

management, but with each other. Such direct access may improve shareholder relations 

to the extent shareholders have improved access to management. 

B. Significant Issues Raised by Public Comment 

Five commenters were concerned that smaller firms may not realize the savings 

contemplated by the mandatory model and may even incur increased costs.140 One 

commenter suggested that the Commission develop “ways to ‘scale’ the notice and access 

model for smaller public companies so as to reduce the cost of compliance,” but did not 

provide any recommendations on how to do so.141

Several commenters were concerned about the increased set-up costs for issuers, 

including small entities. One commenter estimated that, based on its “back-of-envelope” 

estimate, the cost of outsourcing the requirements to a third party provider could cost 

companies over $5,000 and may exceed $10,000, including the establishment of an 

Internet voting platform.142 Three other commenters estimated that the proposal would 

 

140 See letters from ABC, BONY, Reed Smith, Registrar and Transfer, and STA. 

141 See letter from ABC. 

142 See letter from ABC. 

57
cost companies approximately $3,000 to establish such an Internet voting platform.143 

However, as noted previously, the amendments do not require companies to establish 

such a platform.144 One of these commenters noted that although posting the proxy 

materials on the Internet is not necessarily expensive or difficult, outsourcing this 

function to an outside firm could cost hundreds, if not thousands, of dollars to do so.145

One commenter was concerned that the prohibition on “cookies” raises the costs 

for maintaining the Web sites.146 Although this prohibition does raise the cost to 

maintain the Web sites, we believe that eliminating this prohibition may have a negative 

effect on shareholders’ willingness to access the proxy materials via an Internet Web site. 

We do not believe this requirement will create undue burden on companies. Soliciting 

parties must refrain from installing cookies and other tracking features on the Web site or 

portion of the Web site where the proxy materials are posted. This may require 

segregating those pages from the rest of the soliciting party’s regular Web site or creating 

a new Web site. However, the rules do not require the company to turn off the Web site’s 

connection log, which automatically tracks numerical IP addresses that connect to that 

Web site. Although in most cases, this IP address does not provide a soliciting party with 

sufficient information to identify the accessing shareholder, soliciting parties may not use 

these numbers to attempt to find out more information about persons accessing the Web 

site. 

 

143 See letters from BONY, Registrar and Transfer, and STA. 

144 See letters from BONY and Registrar and Transfer. 

145 See letter from Registrar and Transfer. 

146 See letter from ICI. 

58
C. Small Entities Subject to the Amendments 

The amendments affect issuers that are small entities. Exchange Act Rule 

0-10(a)147 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 1,100 public 

companies, other than investment companies, that may be considered small entities.148

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.149 Approximately 164 registered investment companies meet this 

definition. Moreover, approximately 51 business development companies may be 

considered small entities. 

Paragraph (c)(1) of Rule 0-10 under the Exchange Act150 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 

 

147 17 CFR 240.0-10(a). 

148 The estimated number of reporting small entities is based on 2007 data including the 

Commission’s EDGAR database and Thomson Financial’s Worldscope database. This represents 

an update from the number of reporting small entities estimated in prior rulemakings. See, for 

example, Executive Compensation and Related Disclosure, Release No. 33-8732A (Aug. 29, 

2006) [71 FR 53158] (in which the Commission estimated a total of 2,500 small entities, other 

than investment companies). 

149 17 CFR 270.0-10. 

150 17 CFR 240.0-10(c)(1). 

59
Commission estimates that there were approximately 910 broker-dealers that qualified as 

small entities as defined above.151 Small Business Administration regulations define 

“small entities” to include banks and savings associations with total assets of $165 

million or less.152 The Commission estimates that the rules might apply to approximately 

9,475 banks, approximately 5,816 of which could be considered small banks with assets 

of $165 million or less. 

D. Reporting, Recordkeeping and Other Compliance Requirements 

The amendments require all issuers, including small entities, to follow the notice 

and access model. This model does not significantly change an issuer’s obligations under 

current rules. An issuer choosing to follow the notice only option would incur costs 

identical to costs that it would have incurred under the voluntary model. An issuer 

following the full set delivery option would incur two costs in addition to the current cost 

of sending proxy materials under the traditional method: (1) the cost of preparing a 

Notice of Internet Availability of Proxy Materials and (2) the cost of posting the proxy 

materials on a Web site with anonymity controls. 

For purposes of the Paperwork Reduction Act, we have estimated that the Notice 

would take approximately 1.5 hours to prepare because the information is readily 

available to the issuer. We estimated that 75% of that burden would be incurred by inhouse, while 25% of the burden would reflect costs of outside counsel, at a cost of $400 

per hour, or approximately $150 per Notice. With respect to printing the Notice, for 

purposes of the Cost-Benefit Analysis we estimated a cost of $0.13 per copy to print the 

 

151 These numbers are based on a review by the Commission’s Office of Economic Analysis of 2005 

FOCUS Report filings reflecting registered broker-dealers. This number does not include brokerdealers that are delinquent on FOCUS Report filings. 

152 13 CFR 121.201. 

60
Notice. However, an issuer may reduce this cost by incorporating the Notice information 

into its proxy materials. 

As we noted in our Cost-Benefit Analysis, we anticipate the cost of posting the 

proxy materials on a publicly accessible Web site to be relatively low. Although an 

issuer may choose to pay more for an elaborate Web site, the rules do not require such a 

Web site. An issuer with a small shareholder base may be able to post its materials on a 

free Web hosting service. As we note in more detail in the Cost-Benefit Analysis, based 

on our estimate of the typical size of a proxy statement and annual report, we estimate 

such services provide sufficient bandwidth for approximately 1,000 to 25,000 hits per 

month.153 We also noted that several Web hosting services provided Web sites which 

would handle up to five million hits per month are available for approximately $5 to $8 

per month, or $60 to $96 per year. Based on a review of several Internet Web page 

design firms, we estimate that the design of a Web site meeting the base requirements of 

the rules would be approximately $300. 

Intermediaries must follow substantially similar requirements with respect to 

beneficial owners of the issuer’s securities. Issuers, including small entities, are required 

to reimburse intermediaries for the cost of complying with these requirements. These 

costs are incorporated in our estimate of costs to issuers. 

E. Agency Action to Minimize Effect on Small Entities 

The amendments require all issuers and intermediaries, including small entities, to 

follow the notice and access model. The purpose of the amendments is to provide all 

 

153 These calculations are based on typical file sizes of proxy statements and annual reports. The 

lower capacity (1,000) corresponds to files that are elaborate “glossy” annual statements. We 

believe the higher capacity (25,000) is a more reasonable estimate for small entities because small 

61
shareholders with the ability to choose the means by which they can access proxy 

materials, to expand use of the Internet to ultimately lower the costs of proxy 

solicitations, and to improve shareholder communications. Exempting small entities 

would not be consistent with this goal and we do not believe that the additional 

compliance requirements that we are imposing are significant. 

We believe that in the long run, use of the Internet for shareholder 

communications not only may decrease costs for all issuers, but also may improve the 

quality of shareholder communications by enhancing a shareholder’s ability to search and 

manipulate proxy disclosures. However, in the short term, we are adopting a tiered 

system of compliance dates to minimize the burdens on smaller issuers, including small 

entities. Under this tiered system, issuers that are not large accelerated filers need not 

comply with the requirements until January 1, 2009. This would provide smaller issuers 

more time to adjust to the amendments and learn from the experiences of larger filers. 

Furthermore, adopting the amendments for large accelerated filers before the 2008 proxy 

season effectively creates a test group of issuers, enabling the Commission to study the 

performance of the model with a significant number of larger issuers and to make any 

necessary revisions to the rules before they apply to all issuers, including small entities. 

Intermediaries that are small entities also are subject to the amendments. We 

understand that the task of forwarding proxy materials to over 95% of beneficial 

ownership accounts currently is handled by a single entity. Because a third-party 

outsourcing alternative is readily available and issuers are required to reimburse such 

costs to the intermediary, we believe that imposing the amendments on small entities will 

 entities tend to send annual reports on Form 10-K to meet their Rule 14a-3(b) requirements rather 

than spend the significant cost of producing a “glossy” annual report. 

62
not create a substantial burden on small entities. Thus, we have decided not to exempt 

intermediaries that are small entities from the amendments. Such an exemption may 

create disparity in the way shareholders receive proxy materials. Shareholders owning 

securities through such intermediaries would not have the ability to choose the means by 

which they receive proxy disclosures. 

We considered the use of performance standards rather than design standards in 

the amendments. The amendments contain both performance standards and design 

standards. We are adopting design standards to the extent that we believe compliance 

with particular requirements is necessary. For example, we are using a design standard 

with respect to the contents of the Notice so that investors get uniform information 

regarding access to important information. However, to the extent possible, we are 

adopting rules that impose performance standards to provide issuers, other soliciting 

persons and intermediaries with the flexibility to devise the means through which they 

can comply with such standards. For example, we are adopting a performance standard 

for providing for anonymity on the Web site so that issuers and other soliciting persons 

can determine for themselves the least costly option to meet the requirement. 

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. 

List of Subjects 

17 CFR Part 240

Reporting and recordkeeping requirements, Securities. 

63
For the reasons set out in the preamble, Title 17, Chapter II of the Code of Federal 

Regulations is amended as follows. 

PART 240 – GENERAL RULES AND REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

 1. The authority citation for Part 240 continues to read, in part, 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-3 by revising paragraph (a) to 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 proxy statement, in the form and 

manner described in §240.14a-16, containing the information specified in Schedule 14A 

(§240.14a–101); 

(2) 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; or 

(3) A publicly-filed preliminary or definitive proxy statement, not in the form 

and manner described in §240.14a-16, containing the information specified in Schedule 

14A (§240.14a–101), if: 

64
(i) The solicitation relates to a business combination transaction as that term 

is defined in §230.165 of this chapter; or 

(ii) The solicitation may not follow the form and manner described in 

§240.14a-16 pursuant to the laws of the state of incorporation of the registrant; 

* * * * * 

3. Amend §240.14a-7 by removing Note 3 to §240.14a-7. 

4. Amend §240.14a-16 by: 

a. Revising paragraphs (a), (d)(3), (f)(2)(i), (f)(2)(ii), (h), (j)(3), and (n); and 

b. Adding paragraph (f)(2)(iii). 

The revisions and additions to read as follows: 

240.14a-16 Internet availability of proxy materials. 

 (a)(1) A registrant shall 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. 

(2) Unless the registrant chooses to follow the full set delivery option set forth 

in paragraph (n) of 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. 

65
* * * * * 

(d) * * * 

(3) A clear and impartial identification of each separate matter intended to be 

acted on and the soliciting person’s recommendations, if any, regarding those matters, but 

no supporting statements; 

* * * * * 

(f) * * * 

(2) * * * 

 (i) A pre-addressed, postage-paid reply card for requesting a copy of the 

proxy materials; 

(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; 

and 

(iii) In the case of an investment company registered under the Investment 

Company Act of 1940, the company’s prospectus or a report that is required to be 

transmitted to stockholders by section 30(e) of the Investment Company Act (15 U.S.C. 

80a-29(e)) and the rules thereunder. 

* * * * * 

(h) The registrant may send a form of proxy to security holders if: 

(1) At least 10 calendar days or more have passed since the date it first sent 

the Notice of Internet Availability of Proxy Materials to security holders and the form of 

proxy is accompanied by a copy of the Notice of Internet Availability of Proxy Materials; 

or 

66
(2) The form of proxy is 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). 

* * * * * 

(j) * * * 

(3) The registrant must provide copies of the proxy materials for one year 

after the conclusion of the meeting or corporate action to which the proxy materials 

relate, provided that, if the registrant receives the request after the conclusion of the 

meeting or corporate action to which the proxy materials relate, the registrant need not 

send copies via First Class mail and need not respond to such request within three 

business days. 

* * * * * 

 (n) Full Set Delivery Option.

(1) For purposes of this paragraph (n), the term full set of proxy materials 

shall include all of the following documents: 

(i) A copy of the proxy statement; 

(ii) A copy of the annual report to security holders if required by §240.14a3(b); and 

(iii) A form of proxy. 

(2) Notwithstanding paragraphs (e) and (f)(2) of this section, a registrant or 

other soliciting person may: 

(i) Accompany the Notice of Internet Availability of Proxy Materials with a 

full set of proxy materials; or 

67
(ii) Send a full set of proxy materials without a Notice of Internet Availability 

of Proxy Materials if all of the information required in a Notice of Internet Availability of 

Proxy Materials pursuant to paragraphs (d) and (n)(4) is incorporated in the proxy 

statement and the form of proxy. 

(3) A registrant or other soliciting person that sends a full set of proxy 

materials to a security holder pursuant to this paragraph (n) need not comply with 

(i) The timing provisions of paragraphs (a) and (l)(2); and 

(ii) The obligation to provide copies pursuant to paragraph (j). 

(4) A registrant or other soliciting person that sends a full set of proxy 

materials to a security holder pursuant to this paragraph (n) need not include in its Notice 

of Internet Availability of Proxy Materials, proxy statement, or form of proxy the 

following disclosures: 

(i) Paragraphs 1 and 3 of the legend required by paragraph (d)(1); 

(ii) Instructions on how to request a copy of the proxy materials; and 

(iii) Instructions on how to access the form of proxy pursuant to paragraph 

(d)(7). 

5. Amend §240.14a-101 by revising the first sentence of Item 4(a)(c) to read 

as follows: 

§240.14a-101 Schedule 14A. Information required in proxy statement. 

* * * * * 

Item 4. Persons Making the Solicitation—(a) * * * 

 (3) If the solicitation is to be made otherwise than by the use of the mails or 

pursuant to §240.14a-16, describe the methods to be employed. * * * 

68
* * * * * 

6. Amend §240.14b-1 by: 

a. Revising the introductory text of paragraph (d); and 

b. Adding paragraph (d)(5). 

The revision and addition read as follows. 

§240.14b-1 Obligation of registered brokers and dealers in connection with the 

prompt forwarding of certain communications to beneficial owners. 

* * * * * 

(d) Upon receipt from the soliciting person of all of the information listed in 

§240.14a-16(d), the broker or dealer shall: 

* * * * * 

(5) Notwithstanding any other provisions in this paragraph (d), if the broker or 

dealer receives copies of the proxy statement and annual report to security holders (if 

applicable) from the soliciting person with instructions to forward such materials to 

beneficial owners, the broker or dealer: 

(i) Shall either: 

(A) Prepare a Notice of Internet Availability of Proxy Materials and forward it 

with the proxy statement and annual report to security holders (if applicable); or 

(B) Incorporate any information required in the Notice of Internet Availability 

of Proxy Materials that does not appear in the proxy statement into the broker or dealer’s 

request for voting instructions to be sent with the proxy statement and annual report (if 

applicable); 

(ii) Need not comply with the following provisions: 

(A) The timing provisions of paragraph (d)(1)(ii); and 

69
(B) Paragraph (d)(4); and 

(iii) Need not include in its Notice of Internet Availability of Proxy Materials 

or request for voting instructions the following disclosures: 

(A) Legends 1 and 2 in §14a-16(d)(1) of this chapter; and 

(B) Instructions on how to request a copy of the proxy materials. 

* * * * * 

7. Amend §240.14b-2 by: 

a. Revising the introductory text of paragraph (d); and 

b. Adding paragraph (d)(5). 

The revision and addition 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. 

* * * * * 

(d) Upon receipt from the soliciting person of all of the information listed in 

§240.14a-16(d), the bank shall: 

* * * * * 

(5) Notwithstanding any other provisions in this paragraph (d), if the bank 

receives copies of the proxy statement and annual report to security holders (if 

applicable) from the soliciting person with instructions to forward such materials to 

beneficial owners, the bank: 

(i) Shall either: 

(A) Prepare a Notice of Internet Availability of Proxy Materials and forward it 

with the proxy statement and annual report to security holders (if applicable); or 

70
(B) Incorporate any information required in the Notice of Internet Availability 

of Proxy Materials that does not appear in the proxy statement into the bank’s request for 

voting instructions to be sent with the proxy statement and annual report (if applicable); 

(ii) Need not comply with the following provisions: 

(A) The timing provisions of paragraph (d)(1)(ii); and 

(B) Paragraph (d)(4); and 

(iii) Need not include in its Notice of Internet Availability of Proxy Materials 

or request for voting instructions the following disclosures: 

(A) Legends 1 and 2 in §14a-16(d)(1) of this chapter; and 

(B) Instructions on how to request a copy of the proxy materials. 

* * * * * 

8. Amend §240.14c-2 by revising paragraph (d) to read as follows: 

§240.14c-2 Distribution of information statement. 

* * * * * 

(d) A registrant shall 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 shall revise the information required 

in the Notice of Internet Availability of Proxy Materials, including changing the title of 

that notice, to reflect the fact that the registrant is not soliciting proxies for the meeting. 

9. Amend §240.14c-3 by revising paragraph (d) to read as follows: 

§240.14c-3 Annual report to be furnished security holders. 

* * * * * 

71
(d) A registrant shall furnish an annual report to security holders pursuant to 

paragraph (a) of this section by satisfying the requirements set forth in §240.14a-16. 

By the Commission. 

Florence E. Harmon 

Deputy Secretary 

July 26, 2007 

72