October 16, 2009

Surprise: The SEC Proposes Changes to E-Proxy

Well, it’s not really a surprise since we’ve been waiting a few years for this proposing release to amend Notice & Access, which the SEC finally issued last night. The surprise is that it wasn’t a product of an open Commission meeting. The SEC smartly issued this set of proposals without the fanfare of an open meeting, which is not required if all of the Commissioners sign an order (ie. seriatim). Since these e-proxy proposals are not likely to be controversial – at least compared to the outstanding proposals the SEC has out there – the SEC went with what used to be the traditional route of getting a proposal out of the SEC (more recently, nearly all proposals are the product of open Commission meetings; it wasn’t that way a decade ago).

One problem is the late date of this proposing release. The comment period is 30 days from the proposals being published in the Federal Register, which doesn’t give the SEC much breathing room to adopt changes to the e-proxy rules ahead of the upcoming proxy season.

Then again, the impact of the loss of broker nonvotes for director elections may cause many companies – ones that have used e-proxy during the past few proxy seasons – to go back to mailing paper (one of the subjects of our “Quick Survey on Impact of Loss of Broker Nonvotes for ’10 Proxy Season“). So these proposals may be a day late and dollar short (sorta like NIRI’s newly released “Standards of Practices for Notice & Access, Volume II“).

The proposing release is pretty short (the “meat” is 21 pages) and there are three main items proposed:

1. More flexibility for the form of Notice that companies use (which will catch the rules up to what the SEC already has informally blessed for the revised Notice that Broadridge has been using recently)
2. Enabling companies (and others who use e-proxy) to enclose explanatory materials with the Notice
3. Tweak timeframe when someone other than an issuer relies on e-proxy to make it more feasible to do (changing to a later of (i) 40 days before the shareholder meeting or (ii) file preliminary proxy within 10 days of issuer filing a definitive proxy and send Notice no later than date on which it files its definitive proxy with the SEC)

Note that the SEC didn’t propose reducing the 40-day timeframe for issuers – but did ask this question on page 17 as to whether to reduce it to 30 days. By at least asking the question, the SEC arguably could adopt something like this if it so desired. In comparison, the SEC didn’t propose nor ask the question about whether issuers could just send the notice with a proxy card from the “get go.” So this type of framework couldn’t be adopted unless the SEC re-proposed it.

The First Company Creates a Year-Round E-Forum

The first company has created a year-round e-forum (there have been a number of companies that have created e-forums for their annual meeting, such as Intel and Amgen). In this podcast, Abe Wischnia of Abe Wischnia & Associates and Jnyaneshwar Prabhu of iMiners explain why – and how – a company can start its own e-forum for shareholders, including:

– What motivated you and your client company to implement an electronic shareholder forum?
– How can an electronic shareholder forum enhance corporate disclosure and transparency?
– What about processes and policies to maintain control of the board content and to ensure that SEC rules and regulations aren’t violated?
– How expensive/time consuming was it to create the e-forum?
What is the process by which iMiners can help others that are considering an e-forum?
– What else does iMiners do?

Just found out that there is a famous “B Romanek” with handbags at Barneys – feel violated somehow…

The Fees Remain the Same (Not to be Confused with “The Song Remains the Same”)

Last week, the SEC issued this fee rate advisory, announcing a a continuing resolution as part of its annual ritual of delaying the new rates for registrations statements, etc. until Congress passes the government’s budget for the new fiscal year that started on October 1st. Until Congress acts, all fee rates remain at their current rates.

– Broc Romanek