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January 28, 2025

Corp Fin Issues New & Updated CDIs on Notices of Exempt Solicitations

Yesterday, Corp Fin issued three new CDIs and updated two existing CDIs addressing Notices of Exempt Solicitations (aka, PX14A6G filings). Here are the three new CDIs:

Question 126.08

Question: Can a person submit written soliciting material under the cover of a Notice of Exempt Solicitation on EDGAR if the written soliciting material has not been sent or given to security holders?

Answer: No. The submission of a Notice of Exempt Solicitation on EDGAR is not intended to be the means through which a person disseminates written soliciting material to security holders. Rather, its purpose is to notify the public of the written soliciting material that the person has sent or given to security holders through other means. See Release No. 34-30849 (June 23, 1992) (proposing the notice requirement so there would be public notice of extensive soliciting activity made in reliance on the Rule 14a-2(b)(1) exemption); Release No. 34-31326 (Oct. 16, 1992) (adopting the notice requirement in response to commenters’ concerns that, absent such a requirement, the Rule 14a-2(b)(1) exemption would permit large shareholders to conduct “secret” solicitation campaigns). [January 27, 2025]

Question 126.09

Question: Can a person submit a Notice of Exempt Solicitation on EDGAR for a written communication that does not constitute a “solicitation” under Rule 14a-1(l)?

Answer: No. Because Rule 14a-6(g) only applies to solicitations made pursuant to the Rule 14a-2(b)(1) exemption, only written communications that constitute a “solicitation” should be submitted under the cover of a Notice of Exempt Solicitation. For example, a written communication solely about matters that are not the subject of a solicitation by the registrant or a third party for an upcoming shareholder meeting generally would not be viewed as a solicitation and, therefore, should not be submitted under the cover of a Notice of Exempt Solicitation. [January 27, 2025]

Question 126.10

Question: Does Rule 14a-9, which prohibits materially false or misleading statements, apply to written soliciting materials sent or given to security holders in reliance on the Rule 14a-2(b)(1) exemption and filed under the cover of a Notice of Exempt Solicitation?

Answer: Yes. Rule 14a-2(b) does not provide an exemption from Rule 14a-9. As a result, written soliciting material attached to a Notice of Exempt Solicitation is subject to liability under Rule 14a-9. See also Release No. 34-31326 (Oct. 16, 1992) (“Pursuant to the [Rule 14a-2(b)(1)] exemption, solicitations by or on behalf of eligible persons would be exempt from all of the proxy statement filing, delivery and information requirements imposed by the proxy rules but remain subject to Rule 14a-9, which prohibits false or misleading statements in connection with written or oral solicitations.”). [January 27, 2025]

Updated CDIs are usually the most difficult ones for us to blog about, because we usually have to try to figure out the changes without any indication from the Staff about what they were. That’s not the case with this batch, because the Staff has included marked copies of each updated CDI showing the changes from the original version. This is a huge help to everyone who is trying to keep up to date on Corp Fin’s guidance and I sure hope it becomes a standard practice. Anyway, here are links to the marked versions of the updated CDIs, and you folks can see for yourselves what changes were made:

Question 126.06 – Addresses the circumstances under which the Staff will permit soliciting persons owning less than $5 million of the subject class of securities to voluntarily submit a Notice of Exempt Solicitation.

Question 126.07 – Addresses the presentation requirements applicable to the identifying information required by Rule 14a-103 in a Notice of Exempt Solicitation.

Gibson Dunn’s blog on the new & updated CDIs points out that public companies may find them helpful in dealing with some of the shenanigans that have plagued the exempt solicitation process in recent years:

The new and revised C&DIs will be welcome by companies in light of concerns that PX14A6G filings have become a bit of a “Wild West” where shareholder proponents or their representatives use PX14A6G filings to assert arguments or claims in support of their proposals without disclosing their involvement with the proposal, and without verifying or taking responsibility for claims set forth in their PX14A6G filings. In its annual “stakeholders meeting” with shareholder proponents, proponent representatives, and public companies, the Staff has confirmed that it will take appropriate action when informed of problematic PX14A6G filings. These C&DIs go a long way to help address those practices.

John Jenkins