Shareholder Choice | The Altman Group

By: The Altman Group  09-12-2011
Keywords: Shareholder Meeting

Recently, the Security and Exchange Commission (the “SEC”) adopted amendments to the proxy rules. These amendments provide shareholders with a choice in how they receive proxy materials and take advantage of the Internet as a means of obtaining them.

Under the Shareholder Choice amendment, 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 said materials. Alternatively, issuers may choose to furnish shareholders with paper copies under procedures that are substantially similar to the traditional means of providing proxy materials. Lastly, an issuer has the option to utilize a combination of both these delivery options within one proxy campaign. One exception to the Shareholder Choice Rule is that fund reorganizations or other business combination proposals must be mailed using the conventional print/mail process. And, while Shareholder Choice has been a voluntary program since January 1, 2008; it will become mandatory effective January 1, 2009.

The SEC finds the benefits of these new rules to include a greater flexibility for shareholders to take advantage of the Internet, a potential reduction in paper processing and postage costs for issuers and a reduction in what may be regarded as the environmental costs of the proxy solicitation process.

How Shareholder Choice Works:

The “Shareholder Choice” model essentially offers issuers three options for making proxy material available to all shareholders. The three options are as follows:

OPTION 1 . The “notice only” option, has the following requirements:

  • 1. The proxy material must be posted on a secure Internet web site.
  • 2. You must send a meeting notice to all shareholders to inform them of the electronic availability of the proxy material at least 40 calendar days before the meeting date.
  • 3. You (or your agent) must respond to all shareholder requests for paper or e-mail copies of the proxy materials for the current shareholder meeting and/or all future shareholder meetings.

OPTION 2. The “full set delivery” option will follow procedures that are substantially similar to the traditional means of providing paper proxy materials with the following added requirements:

  • 1. You must send a notice in the package along with the hard copy proxy materials or incorporate all of the information required to appear in the Notice in the proxy statement and/or proxy card.
  • 2. You must post the proxy material on a publicly accessible web site no later than the date the first notice is sent to shareholders.

OPTION 3. The “combination” option gives issuers flexibility rather than having to choose option one or two as the exclusive means for providing proxy materials to shareholders. As an alternative, an issuer may, use the “notice only” option to provide materials to some shareholders and the “full set delivery” to other shareholders.

An initial mailing analysis of the registered and beneficial shareholder base in each fund will help to determine whether it would be prudent to stratify the mailing (“combination”) . By doing so, shareholders with larger share positions receive a complete package while shareholders with smaller positions receive the more cost-effective notice. The vote requirement, proxy timeline and other factors should all be considered when determining which option to use.

The notice must contain specific information (as noted below) whether it is mailed as a separate notice under the “notice only” option or incorporate into the proxy material under the “full set delivery” option (Note: The notice need not be incorporated in the actual proxy statement in the later option. But if not incorporated it must accompany those materials).

The SEC states that:

  • 1. The notice must be written in “plain” English.
  • 2. The notice may contain only the information specified by the rules and any other information required by state law.
  • 3. The notice may contain a protective warning to shareholders, advising them that no personal information other than the identification or control number is necessary to execute a proxy.
  • 4. A registered investment company may send its notice together with the prospectus and/or annual report to shareholders.
  • 5. The issuer must file the notice no later than the date that it first sends the notice to shareholders.
  • 6. Issuers may household the notice pursuant to Rule 14a-3(e) of Regulation 14A.

The key to Shareholder Choice and our successful execution of the new rule is our fully automated website We consider it the most advanced user-friendly Notice & Access shareholder voting website in our industry.

Key features of the Website

  • A secure website that does not request shareholder information
  • House–holding executed automatically with one control number
  • Fulfillment executed directly from the website

Keywords: Shareholder Meeting

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