As I wrote on Monday, the Corp Fin Staff issued a CDI last week that prohibits voluntary exempt solicitations. But how is that going to be policed? This Gibson Dunn blog points out a possible hook:

The revised interpretation does not directly address how the revised position will be monitored and enforced, but we note that Rule 15 of Regulation S-T provides the SEC with the authority to remove a submission from EDGAR if, among other things, the agency has reason to believe the submission is misleading or unauthorized.

Notably, the new interpretation does not prevent shareholder proponents and others from conducting exempt solicitations through platforms other than EDGAR. However, whether or not filed on EDGAR, exempt solicitations remain subject to the anti-fraud provision of Rule 14a-9, which makes it unlawful for any soliciting materials to contain false or misleading statements or omissions of a material fact, and the conditions set forth in Rule 14a-2(b)(1)(vi), under which the exemption from having to file a proxy statement is not available to “[a]ny person who, because of a substantial interest in the subject matter of the solicitation, is likely to receive a benefit from a successful solicitation that would not be shared pro rata by all other holders of the same class of securities.”

At this point, I think it’s a little murky what will happen if anyone tests the boundaries of the CDI. A stern finger-wagging, or something more? Even if the Staff would plan to pull down filings, there may not be anyone around to do that if the government shuts down. What we do know is that anti-fraud liability continues to apply. And in practice, companies should monitor their own EDGAR pages and alert the Staff if they see a problematic filing – providing a copy of the notice and information showing that the shareholder doesn’t own more than $5 million of stock of the company.

At least the CDI has finally given ESG and anti-ESG proponents something to agree on, with Jim McRitchie and the National Legal and Policy Center both publishing similar grievances yesterday. The NLPC screed is, to put it politely, “interesting.” I’ll note Jim Moloney wasn’t looking very wolf-like when I saw him this week. Yes, I deliberately linked to the Gibson Dunn blog to tie this all together.

– Liz Dunshee