November 30, 2005

SEC Proposes “E-Proxy”

At yesterday’s open Commission meeting, the SEC proposed an alternative model of proxy delivery – a project the SEC calls “E-Proxy.” Here is the SEC’s press release and here is Chairman Cox’s opening statement. Below are notes from the open Commission meeting:

Purpose of E-Proxy – The proposals are intended to facilitate the use of technology in the proxy solicitation arena. The SEC is proposing an alternative notice and access model for satisfying Rule 14a-3 that people performing proxy solicitations could rely on.

Posting Proxy Materials– For an issuer proxy solicitation, the issuer must post proxy materials on a website that is publicly available (but the SEC’s website doesn’t count). The posted proxy materials must be substantially identical to any printed version of the proxy materials.

Delivery of Notice – The issuer would be required to deliver a “notice of availability” at least 30 days prior to the shareholder meeting. Banks and brokers and their agents must forward the notice of availability to the beneficial shareholders. No other shareholder communications can be delivered with the notice, but a proxy card can be delivered with a notice (though it is not required).

What is “Notice” – The notice must contain information about the meeting (date, time, place, etc.); the address of the website where the proxy materials are posted; a toll free phone number and an email address that shareholders may use to get paper versions of the proxy materials; and a description of matters to be acted on at the meeting and the recommendations of the company.

Making Paper Available – The issuer must respond to any requests for paper copies within two business days.

Proxy Card – The proposal would permit companies and other soliciting parties to deliver a proxy card with the notice of availability, but does not require them to do so. There was much discussion about concerns that shareholders would vote based on the information in the notice rather than in the proxy statement – and the proposing release will ask a series of questions about whether the proxy card should be delivered with the notice of availability or whether it should only be allowed to be delivered with the proxy materials.

Non-Issuers Too – Soliciting persons other than issuers would also be permitted to follow the proposed alternative model as well – these persons would be required to deliver notice at least 30 days before the meeting or within 10 days of the issuer filing proxy materials. As permitted under current rules, other solicitors would not have to solicit all shareholders, but would be permitted to target certain shareholders.

What is Not Affected – The SEC indicated that the proposed amendments would have no impact on any state law obligations regarding soliciting proxies or holding annual meetings, and would not apply to business combination transactions.

When New Rules Will Be Effective – The rules probably will not be implemented in time for the 2006 proxy season. There is a 60-day comment period.

FASB Tentatively Relaxes Standard on Tax Benefits From Uncertain Positions

Last week, the FASB tentatively adopted a “more likely than not” threshold for uncertain tax positions. If adopted, this would be a much more workable position than the “best estimate” method proposed in July.

In working on its final interpretation of FAS No. 109 to be issued in the first quarter of 2006, the FASB voted to pull back from a standard espoused in an exposure draft that the best estimate of the impact of a tax position be recorded only if that position “is probable of being sustained on audit based solely on the technical merits of the position.”

Deferred Compensation: Actions Employers MUST Take by End of the Year

If you deal with deferred compensation, I hope you are aware of Section 409A and the latest proposed IRS regulations – and the laundry list of things you need to do by the end of December. If not, look no further than yesterday’s blog by Mike Melbinger who provides such a laundry list.