[Federal Register: October 21, 2009 (Volume 74, Number 202)]
[Proposed Rules]
[Page 53954-53964]
[DOCID:fr21oc09-13]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230 and 240

[Release Nos. 33-9073; 34-60825; IC-28946; File No. S7-22-09]
RIN 3235-AK25

Amendments to Rules Requiring Internet Availability of Proxy
Materials

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We are proposing changes to the proxy rules under the
Securities Exchange Act of 1934 to improve the notice and access model
for furnishing proxy materials to shareholders. Specifically, we are
proposing revisions to our rules to provide additional flexibility
regarding the format of the Notice of Internet Availability of Proxy
Materials that is sent to shareholders. We are also providing guidance
about the current requirement for the Notice to identify the matters
intended to be acted on at the shareholders' meeting. In addition to
the proposed changes and guidance regarding the format of the Notice,
we are proposing a new rule that will permit issuers and soliciting
shareholders to include explanatory materials regarding the process of
receiving and reviewing proxy materials and voting. Finally, we are
proposing revisions to the timeframe for delivering a Notice to
shareholders when a soliciting person other than the issuer relies on
the notice-only option.

DATES: Comments should be received on or before November 20, 2009.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/proposed.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-22-09 on the subject line; or
     Use the Federal eRulemaking Portal (http://
www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-22-09. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's Web
site (http://www.sec.gov/rules/proposed.shtml). Comments are also
available for public inspection and copying in the Commission's Public
Reference Room, 100 F Street, NE., Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. All comments
received will be posted without change; we do not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Steven G. Hearne, Special Counsel in
the Office of Rulemaking, Division of Corporation Finance, at (202)
551-3430, or with respect to registered investment companies, Sanjay
Lamba, Senior Counsel, in the Office of Disclosure Regulation, Division
of Investment Management, at<PHONE_NUMBER>, 100 F Street, NE.,
Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to
Rule 14a-16 \1\ under the Securities Exchange Act of 1934 \2\ and Rule
498 \3\ under the Securities Act of 1933.\4\
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    \1\ 17 CFR 240.14a-16.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 17 CFR 230.498.
    \4\ 15 U.S.C. 77a et seq.
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I. Background

    As part of a continuing review of the proxy disclosure and
solicitation process, we have been exploring ways to improve the
disclosures shareholders receive when they are asked to make a voting
decision and the process followed when those votes are solicited. In
May 2009, we voted to propose changes to our proxy rules to require
issuers to include shareholder nominated directors in issuer proxy
statements if certain conditions are met.\5\ We also recently proposed
amendments to our proxy rules to enhance the compensation and corporate
governance disclosures that issuers are required to make and to address
certain proxy solicitation matters.\6\ We also approved changes
proposed by the New York Stock Exchange (``NYSE'') to its Rule 452 that
eliminated broker discretionary voting for uncontested elections of
directors at shareholder meetings.\7\
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    \5\ See Facilitating Shareholder Director Nominations, Release
No. 33-9046 (June 10, 2009) [74 FR 29024].
    \6\ See Proxy Disclosure and Solicitation Enhancements, Release
No. 33-9052 (July 10, 2009) [74 FR 35076].
    \7\ See Order Approving Proposed Rule Change, as modified by
Amendment No. 4, to Amend NYSE Rule 452 and Corresponding Listed
Company Manual Section 402.08 to Eliminate Broker Discretionary
Voting for the Election of Directors, Except for Companies
Registered under the Investment Company Act of 1940, and to Codify
Two Previously Published Interpretations that Do Not Permit Broker
Discretionary Voting for Material Amendments to Investment Advisory
Contracts with an Investment Company, Release No. 34-60215 (July 1,
2009) [74 FR 33293].
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    One of the other ways we identified to improve the proxy
solicitation process is to revise our notice and access proxy rules to
further facilitate informed shareholder participation in the proxy
voting process. In 2007 we amended the proxy rules by adopting a notice
and access model that required all issuers and other soliciting persons
to post their proxy materials on an Internet Web site and furnish
notice of the materials' availability to shareholders.\8\ The notice
and access model was intended to establish procedures that would
promote use of the Internet as a reliable and cost-efficient means of
making proxy materials available to shareholders. Even though we
recently adopted these requirements, we believe based on our experience
that it is important to propose these limited modifications in order to
advance the regulatory goals of the notice and access model.
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    \8\ See Internet Availability of Proxy Material, Release No. 34-
55146 (Jan. 22, 2007) [72 FR 4148] (``Internet Availability of Proxy
Material Adopting Release'') and Shareholder Choice Regarding Proxy
Materials, Release No. 34-56135 (July 26, 2007) [72 FR 42221]. The
rules were phased-in over a two year period. Large accelerated
filers, not including registered investment companies, were required
to use the model with respect to proxy solicitations commencing on
or after January 1, 2008. All other companies (including registered
investment companies), and soliciting persons, were required to use
the model for proxy solicitations commencing on or after January 1,
2009.
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    Under the notice and access model, an issuer or other soliciting
person may choose to provide proxy materials to shareholders under
either of two options, the ``notice-only option'' and the ``full set
delivery option.'' \9\ An issuer or other soliciting person is
permitted to provide proxy materials to some shareholders via the
notice-only option and to other shareholders via the full set delivery
option. Under both options, the issuer or other soliciting person must
make its proxy materials available on an Internet Web site.
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    \9\ The process of distributing proxy materials to beneficial
owners differs from the process for direct delivery of the materials
by an issuer to its record holders. Beneficial owners are owners
whose names do not appear directly in issuers' stock registers
because they hold their securities through a broker, bank, trustee,
or similar intermediary. The proxy rules, specifically Exchange Act
Rule 14a-13, Rule 14b-1 and Rule 14b-2 [17 CFR 240.14a-13, 240.14b-1
and 240.14b-2], impose obligations on issuers and intermediaries to
ensure that beneficial owners receive proxy materials and are given
the opportunity to participate in the shareholder voting process.
Under the proxy rules, intermediaries are required to forward the
proxy materials, other than the proxy card, along with a request for
voting instructions. The request for voting instructions is prepared
by the intermediary and the beneficial owner returns the voting
instructions to the intermediary. The intermediary is required to
vote the beneficial owners' shares in accordance with each owner's
voting instructions when formally executing the proxy card. In the
absence of voting instructions from the beneficial owner, the
intermediary may vote the beneficial owner's shares in its own
discretion under certain circumstances. See NYSE Rule 452.
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    The notice-only option permits the issuer or other soliciting
person to send only a Notice of Internet Availability of Proxy
Materials (``Notice'') to shareholders. The Notice must include, among
other things, the Internet Web site address where shareholders can
access the proxy materials and a description of the means by which a
shareholder can request paper or electronic copies of the
materials.\10\ Under this option, an issuer must send the Notice to
shareholders at least 40 days prior to the shareholder meeting to which
the proxy materials relate.\11\ A soliciting person other than the
issuer must send the Notice to shareholders by the later of 40 days
prior to the meeting or 10 days after the issuer first sends its Notice
or proxy materials to shareholders.\12\ An issuer or other soliciting
person must then provide copies of the proxy materials upon the request
of shareholders receiving the Notice.\13\ The full set delivery option
permits an issuer or other soliciting person to send the traditional
full set of proxy materials in paper to shareholders accompanied by the
Notice, or to include the information required in the Notice in the
proxy materials.\14\
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    \10\ See Exchange Act Rule 14a-16(b) and (d) [17 CFR 240.14a-
16(b) and (d)].
    \11\ See Exchange Act Rule 14a-16(a) [17 CFR 240.14a-16(a)].
    \12\ See Exchange Act Rule 14a-16(l) [17 CFR 240.14a-16(l)].
    \13\ See Exchange Act Rule 14a-16(j) [17 CFR 240.14a-16(j)].
    \14\ See Exchange Act Rule 14a-16(n) [17 CFR 240.14a-16(n)].
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    According to Broadridge Financial Solutions, Inc. (``Broadridge''),
1,312 corporate issuers used the notice-only option for distribution to
some portion of their beneficial owners under the notice and access
model in the 2009 proxy season.\15\ While issuers may enjoy significant
cost savings using the notice-only option under the notice and access
model, we are concerned by statistics indicating lower shareholder
response rates to proxy solicitations when the notice-only option is
used.\16\ According

to Broadridge, the percentage of ``retail'' shares \17\ voted by
shareholders in issuers using the notice-only option for distribution
to some portion of their beneficial owners is lower than the percentage
in issuers that exclusively use the full-set delivery option to provide
proxy materials to their shareholders.\18\ In addition, when comparing
between shareholders in issuers that used both the notice-only and full
set delivery options, the response rates of retail shares voted by
shareholders that received notice-only was half that of shareholders
that received full set delivery.\19\ With regard to the effect on
voting by retail account holders, rather than retail shares voted,
statistics provided by Broadridge indicate even lower voting response
rates for retail accounts that received notice-only instead of full-set
delivery.\20\ The available data do not necessarily exclude the
possibility that factors other than requirements of our notice and
access rules may contribute to the different voting response rates,
although the available data do not identify them.
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    \15\ See Broadridge Notice & Access, Statistical Overview of Use
with Beneficial Shareholders (as of May 31, 2009) at http://
www.broadridge.com/notice-and-access/NAStatsStory.pdf (``Broadridge
Statistical Overview''). Broadridge is the largest provider of
brokerage processing services with respect to beneficial owners
holding through a broker or similar intermediary and has provided
detailed statistical information on the use of the notice and access
model. The Broadridge Statistical Overview is generally limited to
comparisons between issuers that have used the notice-only option
for distribution to some portion of their beneficial owners and
issuers that exclusively used the full set delivery option and
comparisons between the first and second years of use of the notice-
only option. The data that is currently publicly available and
directly comparable to the data in the May 31, 2009 Broadridge
Statistical Overview does not provide a comparison to an issuer's
experience in the year prior to using the notice-only option for
distribution.
    \16\ The Commission has long had an interest in facilitating
shareholder participation in corporate governance and in fair
corporate suffrage. See, for example, the testimony of Chairman
Ganson Purcell in 1943, Securit[ies] and Exchange Commission Proxy
Rules: Hearings on H.R. 1493, H.R. 1821, and H.R. 2019 Before the
House Comm. on Interstate and Foreign Commerce, 78th Cong., 1st
Sess., at 17-19 (1943) and more recently Security Holder Director
Nominations, Release No. 34-48626 (Oct. 14, 2003) [68 FR 60784],
Shareholder Proposals Relating to the Election of Directors, Release
No. 34-56161 (July 27, 2007) [72 FR 43488], and Release No. 33-9046
in note 5 above.
    \17\ The term ``retail,'' as used in the Broadridge Statistical
Overview, does not refer to shares or accounts that are managed by
an advisor and that have previously consented to the electronic
delivery of their proxy materials. See Broadridge Statistical
Overview at 1. When not referring specifically to the Broadridge
statistics, this release uses the term individual shareholders to
more broadly refer to non-institutional shareholders generally.
    \18\ According to the Broadridge Statistical Overview, when
comparing the 11-month period from July 1, 2008 to May 31, 2009,
response rates were 4.11% less for retail shares voted in issuers
that used the notice-only option for distribution to some portion of
their beneficial owners (27.69%) compared to issuers that
exclusively used the full set delivery option (31.8%).
    \19\ According to the Broadridge Statistical Overview, for
companies that used a mixed approach--using the notice-only option
for some retail shareholders and the full set delivery option for
the remaining shareholders--the percentage of retail shares voted by
shareholders that received notice-only was 13.48% during the 11-
month period from July 1, 2008 to May 31, 2009. In comparison, the
percentage of retail shares voted by shareholders of the same set of
issuers that received full set delivery during the same period was
28.63%.
    \20\ The percentage of retail accounts that responded when
receiving notice-only under the mixed approach during the 11-month
period from July 1, 2008 to May 31, 2009 was only 4.10%. In
comparison, for companies that used a mixed approach, the percentage
of retail accounts that responded after receiving full-set delivery
during the same period was 21.44%. To the extent that retail account
data represent individual shareholders, the data indicates a large
difference in voting by individual shareholders that receive full-
set delivery as opposed to those that receive notice only. It is
important to note, however, that issuers (absent specific
instructions from a shareholder) have the flexibility under the
notice and access model to determine which shareholders will receive
notice-only or full set delivery of proxy materials. As a result,
when making such determinations, it is possible that consideration
is given to the historical response rates of particular shareholders
or certain similarly situated shareholders. Consequently, the subset
of retail investors that only receive the Notice may be stratified
to include those shareholders that are least likely to respond to
the materials. Among the other potential reasons for the difference
in these response rates may be an issuer's consideration of the
number of shares held in an account (e.g., all accounts holding 500
shares or more will receive a full set of proxy materials) when
deciding whether to furnish notice-only or full set delivery of
proxy materials.
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    We are exploring the reasons for the difference in retail share and
account voting response rates and whether our rules are creating
difficulties or affecting voting rates. We note that there appears to
have been some confusion among shareholders regarding the operation of
the notice and access model.\21\ The legend required to be put on the
Notice does not appear to have provided clear guidance for some
shareholders as to how those shareholders could access the proxy
materials online or request a paper copy of the proxy materials and
vote their shares. For example, the Commission's staff has received
reports of some shareholders attempting to indicate their voting
instructions by returning a marked copy of the Notice.\22\ Disclosing
the matters to be acted on in the Notice in the same format as the
matters listed in the proxy may have resulted in some shareholders
misunderstanding the purpose of the Notice. There may be other reasons
why shareholder participation under the notice and access model,
especially by individual shareholders, is lower, and we are soliciting
comment on why the participation rates are lower and how best to
advance the Commission's regulatory interest in informed shareholder
participation.
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    \21\ Our Office of Investor Education and Advocacy has received
complaints about the notice and access model and members of our
staff have heard about the experience of some issuers with the
notice and access model from informal meetings with Broadridge and
issuer representatives.
    \22\ Id.
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    We are proposing revisions to remove regulatory impediments that
may be reducing shareholder response rates to proxy solicitations. The
revisions are intended to permit issuers and other soliciting persons
to more effectively use the notice and access model. The proposed
amendments are described below. We are also soliciting comment on ways
to improve the mechanics of the notice and access model and other ways
to increase informed shareholder participation in the proxy
solicitation process.\23\ We intend to continue monitoring
implementation of the notice and access rules and may propose
additional revisions in order to achieve greater shareholder
participation.
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    \23\ For example, when the amendments to NYSE Rule 452 were
approved, we noted our support for the establishment of an Investor
Education Sub-Committee of the NYSE Proxy Working Group to develop
and encourage the NYSE and its member firms to implement an investor
education effort to inform investors about the amendments to NYSE
Rule 452, the proxy voting process, and the importance of voting.
See Release No. 34-60215 in Note 7 above. Our Office of Investor
Education and Advocacy is also considering ways to educate investors
about these matters.
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II. Proposed Amendments

A. Improving Clarity of the Notice

    Exchange Act Rule 14a-16(d) \24\ currently imposes strict
requirements regarding the content of the Notice, and requires the
Notice to be presented in a prescribed format.\25\ The rule requires
the Notice to contain a prominent legend indicating that the document
is an important notice regarding the Internet availability of proxy
materials for a specified shareholder meeting. Among other things, the
Notice also must indicate that it presents only an overview of the more
complete proxy materials available to the shareholders on the Internet
and must include a statement encouraging shareholders to access and
review the proxy materials at a specified Web site address. In
addition, the Notice must explain how a shareholder may request a paper
or e-mail copy of the proxy materials. Rule 14a-16(d)(3) further
requires the Notice to contain ``[a] clear and impartial identification
of each separate matter intended to be acted on and the soliciting
person's recommendations regarding those matters, but no supporting
statements.'' \26\ The intent behind the specific Notice requirements
was to inform shareholders of the availability of proxy materials and
to notify them of the matters to be considered and voted on at the
meeting. The specific limitations on the type of information that can
be included in the Notice were included because we do not intend the
Notice to become a means of persuading shareholders how to vote or to
deliver marketing or other materials

that may distract shareholders from the Notice.
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    \24\ 17 CFR 240.14a-16(d).
    \25\ 17 CFR 240.14a-16(d)(1).
    \26\ 17 CFR 240.14a-16(d)(3).
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    Exchange Act Rule 14a-16(f) imposes a strict prohibition on the
types of materials that may accompany the Notice when an issuer or
other soliciting person elects to follow the notice-only option.
Specifically, for companies other than registered investment companies,
the Notice under this option must be sent separately from other types
of shareholder communications and may not accompany any other document
or materials, except for a pre-addressed, postage-paid reply card for
requesting a copy of the proxy materials and a copy of a notice of
shareholder meeting required by state law.\27\ Therefore, a soliciting
person may not include additional materials to explain why the
shareholder is receiving only a Notice instead of the proxy materials.
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    \27\ Registered investment companies may also include a
prospectus or a report that is required to be transmitted to
shareholders by Section 30(e) of the Investment Company Act (15
U.S.C. 80a-29(e)) and the rules thereunder. See Exchange Act Rule
14a-16(f)(2)(iii) [17 CFR 240.14a-16(f)(2)(iii)].
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    In light of our serious concerns regarding shareholder confusion
and the potential that our rules may be causing a reduction in
shareholder voting, we propose to revise our rules to provide issuers
and other soliciting persons with additional flexibility in formatting
and selecting the language to be used in the Notice. Rather than
requiring the soliciting person to include a detailed legend that may
seem like boilerplate language to shareholders, we are proposing to
require that the information appearing on the Notice address certain
topics, without specifying the exact language to be used.\28\ We hope
the flexibility will allow issuers and other soliciting persons to
develop a more effective explanation of the importance and effect of
the Notice, including to provide clearer guidance for shareholders as
to how to access the proxy materials online, request a paper copy of
the proxy materials, and vote their shares.
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    \28\ See proposed Exchange Act Rule 14a-16(d), which would limit
the required legend to the line ``Important Notice Regarding the
Availability of Proxy Materials for the Shareholder Meeting To Be
Held on [insert meeting date]'' and would require the other
information currently required in the legend to be included in the
Notice, but not as part of a specified legend.
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    In addition, we have been informed that certain issuers are
interpreting Rule 14a-16(d)(3) to require them to comply with the
specific Exchange Act Rule 14a-4 \29\ formatting and content
requirements for disclosure of matters on the proxy card when
identifying in the Notice each separate matter to be acted on at the
meeting.\30\ Rule 14a-16(d)(3) provides for more flexibility regarding
the design of the Notice. It is not necessary that the Notice directly
mirror the proxy card. Rather, the rule simply requires that the Notice
identify each matter that will be considered at the meeting (e.g.,
election of directors; ratification of auditors; approval of a stock
option plan, etc.).
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    \29\ 17 CFR 240.14a-4.
    \30\ See note 21 above.
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    Further, in order to mitigate confusion about the Notice and to
allow issuers and other soliciting persons to better engage
shareholders, we propose to revise our rules to permit issuers and
other soliciting persons to accompany the Notice with an explanation of
the notice and access model.\31\ The exception provided would be
limited to the process of receiving or reviewing the proxy materials
and voting. Materials designed to persuade shareholders to vote in a
particular manner, change the method of delivery, or explain the basis
for sending only a Notice to shareholders would not be permitted under
the exception.\32\ With this increased flexibility, issuers could
better educate shareholders about the notice and access model. While
issuers would be permitted to provide their own explanation of the
process of receiving and reviewing the proxy materials and the process
of voting, we expect that many issuers will use standardized materials
prepared for this purpose.\33\
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    \31\ See proposed Exchange Act Rule 14a-16(f)(2)(iv).
    \32\ As we explained in the Internet Availability of Proxy
Material Adopting Release, ``The Notice is intended merely to make
shareholders aware that these proxy materials are available on an
Internet Web site; it is not intended to serve as a stand-alone
basis for making a voting decision.'' See note 8 above.
    \33\ Through informal meetings with the staff, issuer
representatives, intermediaries and proxy distribution service
providers have expressed interest in developing standardized
educational materials to be included with the Notice.
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    In addition to proposing to amend our rules to reduce possible
confusion about the Notice, the Office of Investor Education and
Advocacy, in consultation with the Division of Corporation Finance, has
been directed to develop a program designed to educate and inform
shareholders, especially individual shareholders, about the notice and
access model; explain how shareholders may participate through this
model; and explain shareholders' rights under this model. Although the
proposed amendments to our rules would permit, rather than require,
issuers and other soliciting persons to include explanatory information
about the Notice, the Commission strongly encourages issuers and other
soliciting persons who use the notice-only option to better inform
shareholders about the notice and access model. Issuers who have
experienced significant cost savings, but may also have experienced a
significant decrease in participation rates, may wish to consider using
those cost savings in educational efforts designed to increase informed
participation by shareholders.
    We are also proposing technical amendments to our rules for
registered investment companies. Rule 14a-16(f)(2)(iii) currently
permits a registered investment company to accompany the Notice with a
prospectus or report to shareholders.\34\ The Commission recently
adopted rule amendments that permit mutual funds \35\ to satisfy their
prospectus delivery obligations by sending or giving investors key
information in the form of a summary prospectus.\36\ Consistent with
permitting mutual funds to use a summary prospectus to satisfy their
delivery obligations, we propose to revise our rules to permit mutual
funds to accompany the Notice with a summary prospectus.\37\
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    \34\ 17 CFR 240.14a-16(f)(2)(iii). Unless otherwise specified or
the context otherwise requires, the term ``prospectus'' means a
prospectus meeting the requirements of Section 10(a) of the
Securities Act [15 U.S.C. 77j(a)]. See 17 CFR 240.0-1(d).
    \35\ We use the term ``mutual fund'' to mean a registered
investment company that is an open-end management company as defined
in Section 5(a)(1) of the Investment Company Act of 1940 [15 U.S.C.
80a-5(a)].
    \36\ See Enhanced Disclosure and New Prospectus Delivery Option
for Registered Open-End Management Investment Companies, Release No.
33-8998 (Jan. 13, 2009) [74 FR 4546]. Although the summary
prospectus is not a Section 10(a) prospectus, it may be used to
satisfy any prospectus delivery obligations under Section 5(b)(2) of
the Securities Act [15 U.S.C. 77e(b)(2)]. 17 CFR 230.498(c).
    \37\ See proposed amendment to Exchange Act Rule 14a-
16(f)(2)(iii). We are also proposing a conforming amendment to Rule
498 under the Securities Act [17 CFR 230.498], which permits mutual
funds to use a summary prospectus to satisfy their prospectus
delivery obligations. Rule 498(f)(2) provides that a fund's summary
prospectus shall be given greater prominence than any accompanying
materials. We are proposing to amend Rule 498 to provide that a
summary prospectus need not be given greater prominence than an
accompanying Notice. See proposed amendment to Rule 498(f)(2).
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Request for Comment
     Has use of the notice and access model made proxy
materials more or less accessible to shareholders? The Commission is
concerned by reports that indicate there has been a drop in shareholder
response rates to proxy solicitations by individual shareholders under
the notice and access model, especially when the notice-only option has
been used. We are proposing

changes to the Notice requirements intended to make the Notice clearer
and encourage efforts to better inform shareholders about participation
under the notice and access model. Do the proposed changes help in
enabling issuers and other soliciting persons to make the Notice
clearer? Will these changes help address concerns about confusion and
other factors that may be reducing shareholder participation? What
other changes to the notice and access model should we consider to
address these concerns?
     What factors have caused the lower shareholder response
rates by individual shareholders to proxy solicitations when the
notice-only option is used under the notice and access model? If the
lower shareholder response rates result primarily from the notice and
access model itself, would requiring issuers to deliver paper copies of
proxy materials to some subset of individual shareholders, such as
shareholders that own over a certain threshold of shares or that have
received paper copies of proxy materials and voted in the past, affect
voting rates? Does permitting issuers to choose to which shareholders
to provide notice-only and full set delivery affect voting rates? If
so, how are issuers exercising their discretion over full set delivery
and are they doing so appropriately? Would additional requirements
affect an issuer's ability to implement the notice and access model?
Are there other alternatives that would increase the voting rates under
the notice and access model?
     Should we consider adding requirements that would limit an
issuer's ability to use the notice-only option where the issuer has
experienced a decrease in shareholder participation as a result of
using the notice-only option for distribution to some portion of its
shareholders? For example, should we only allow an issuer to continue
to use the notice-only option if the shares voted or the voting
response rate has not decreased from the most recent issuer's meeting
when they provided all of their shareholders with full set delivery?
Would some decrease, such as 10% or 20% be acceptable? Should we
instead consider requiring shareholder participation to increase from
prior years in order for an issuer to continue to use the notice-only
option? Are there other participation-level conditions that we should
consider?
     Will shareholders find the Notice more confusing if we do
not prescribe how to describe the matters to be acted on at the
meeting? Should we prescribe minimum standards for formatting? Should
we instead require a legend to the effect that the Notice should not be
used for voting on matters, and that a separate proxy card or Vote
Instruction Form should be used for voting?
     Should we permit the Notice to be accompanied by materials
to explain the process of receiving and reviewing the proxy materials
and voting as proposed? Should we require that explanatory materials be
included? Should we allow these explanatory materials to include any
additional information? For example, should an issuer or other
soliciting person be permitted to explain what the benefits of using
the notice and access model would be? Should we specify by rule the
topics that cannot be included? Should we include the level of detail
in the explanation in this section in the text of the rule? For
example, should the rule specifically provide that the explanation in
the Notice may not contain materials designed to persuade shareholders
to vote in a particular manner, change the methods of delivery or
explain the basis for sending the Notice? Should a soliciting person be
permitted to explain why it has decided to use the notice-only option?
     The Commission is aware that there has been some confusion
relating to the Notice and that some shareholders have attempted to
indicate their voting instructions by returning a marked copy of the
Notice. What changes can we make to help shareholders better understand
the Notice? Should the Commission amend its rules to prohibit issuers
and other soliciting persons from including voting recommendations in
the Notice as permitted under Rule 14a-16(d)(3)? Would removing
recommendations increase the likelihood that a shareholder will access
the proxy materials through the Internet? Does the Notice currently
look too similar to a proxy card or Vote Instruction Form? Would
possible confusion in the Notice be reduced if the Commission amended
its rules to require identification of matters to be voted on by topic
rather than identifying the specific matters as they appear on the
proxy card, so that the Notice looks less like a proxy card or Vote
Instruction Form?
     Has the notice and access model lowered costs for issuers
and other soliciting persons resulting from the proxy solicitation
process? Have any costs increased? In your response, please quantify
the costs and savings of using the notice and access model, and provide
supporting data where possible.
     It is our understanding from informal conversations our
staff has had with issuers and proxy distribution service providers
that a number of issuers were discouraged from using the notice and
access model due to the difficulty of meeting the 40-day Notice mailing
requirement. Would a 30-day deadline for delivery of the Notice still
allow sufficient time for shareholders who prefer paper proxy materials
to request and receive them through the mail? Would changing to a 30-
day deadline encourage use and improve implementation of the notice and
access model? If the Notice mailing requirement for the issuer were
shortened, would any changes be necessary to the filing and mailing
requirements for soliciting persons other than the issuer?
     Some issuers have expressed concern regarding the fees
charged by proxy distribution service providers. Have the fees charged
by proxy distribution service providers affected use rates of the
notice and access model? Should the Commission address fees charged by
service providers relating to the implementation of the notice and
access model? If so, how?
     Should the Commission consider proposing suspension of the
notice and access rules until a later date to provide more time for
shareholders to understand and be better prepared for the notice and
access model? If so, how much time would be appropriate? Would
additional educational efforts be sufficient to inform shareholders
about the notice and access model, or would other efforts, such as
development of an on-line disclosure and voting infrastructure, be
needed? If so, why?

B. Proposed Amendment to Notice Deadlines for Soliciting Persons Other
Than the Issuer

    Under Rule 14a-16, if a soliciting person other than the issuer
chooses to use the notice-only option, the soliciting person must send
its Notice to shareholders by a date that is the later of:
     40 calendar days before the shareholder meeting to which
the proxy materials relate, or
     10 calendar days after the issuer first sends its Notice
or proxy statement to shareholders. \38\
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    \38\ 17 CFR 240.14a-16(l)(2)(i) and (ii).

We created this 10-day period to provide soliciting persons other than
the issuer desiring to rely on the notice-only option sufficient time
to respond to an issuer's mailing of proxy materials and still allow
shareholders receiving a Notice from the soliciting person enough time
to request paper copies of

the soliciting person's proxy materials.\39\
---------------------------------------------------------------------------

    \39\ See Internet Availability of Proxy Materials, Release No.
34-52926 (Dec. 8, 2005) [70 FR 74597] (``Internet Availability of
Proxy Materials Proposing Release'').
---------------------------------------------------------------------------

    The current 10-calendar-day requirement for soliciting persons to
send the Notice to shareholders can create potential compliance issues
for soliciting persons. Under current practice, the staff of the
Division of Corporation Finance reviews and provides comments on
preliminary proxy materials filed by soliciting shareholders in a
contested solicitation. While the staff makes great effort to review
filings and address comments as quickly as possible, there may continue
to be outstanding comments on a soliciting person's preliminary proxy
statement more than 10 calendar days after the soliciting person has
initially filed. Consequently, a soliciting person may not be in a
position to send its Notice within 10 calendar days after the issuer
first sends its Notice or proxy statement to shareholders.
    Thus, because a soliciting person is required to send its Notice
within 10 days after the issuer first sends its Notice or proxy
statement, the practical effect of Rule 14a-16, as currently written,
is to limit that person's ability to use the notice-only option. This
is because Rule 14a-16(b)(4) requires the soliciting person to make a
means to execute a proxy available to shareholders at the time the
Notice is first sent to shareholders. Rule 14a-4(f), however, prohibits
a person from providing a form of proxy unless it is accompanied, or
preceded, by a definitive proxy statement. Because the soliciting
person may not have finished revising its proxy statement and may not
have filed its definitive proxy statement with the Commission by that
time, the notice and access rules, combined with current staff review
practice, may, in many circumstances, prevent a soliciting person other
than the issuer from using the notice-only option for a proxy contest
if that soliciting person's initial proxy statement filing is made in
response to the issuer's definitive proxy statement filing.
    To improve implementation of the notice and access model, we
propose to amend Rule 14a-16(l)(2)(ii) to require the soliciting
shareholder relying on this alternative to file a preliminary proxy
statement within 10 days after the issuer files its definitive proxy
statement and to send its Notice to shareholders no later than the date
on which it files its definitive proxy statement with the Commission.
We believe that this proposed time period would provide sufficient time
for a soliciting person to prepare its proxy statement and respond to
any staff comments, while still permitting the soliciting person to use
the notice and access model. While the proposed rule does not provide
for a specific period of time before the meeting by which a soliciting
person would need to mail the Notice, the soliciting person should make
the Notice and proxy materials available to shareholders with
sufficient time for shareholders to review the materials and make an
informed voting decision.
Request for Comment
     We are proposing to revise one of the two alternative
Notice deadlines applicable to soliciting persons other than the issuer
to reconcile Rule 14a-16(b)(4) with Rule 14a-4(f) and better coordinate
the timing requirements with the Commission staff's review process. Is
there a preferable way to revise the rule to address this issue? If so,
how should we revise the rule?
     The proposed rule would require a soliciting person to
send its Notice to shareholders no later than the date on which it
files its definitive proxy statement with the Commission. The
soliciting person, however, has control over the date that it files a
definitive proxy statement. Is it necessary to impose a specific time
period by which a soliciting person other than the issuer must send its
Notice? If so, should we impose a specific time period after the filing
of the preliminary proxy by which a soliciting shareholder must send
its Notice?

III. General Request for Comment

    We request and encourage any interested person to submit comments
regarding:
     The proposed amendments that are the subject of this
release;
     Other ways to reduce regulatory impediments to shareholder
participation and thereby improve shareholder response rates to proxy
solicitations using the notice and access model or otherwise improve
the notice and access model;
     Additional or different changes; or
     Other matters that may have an effect on the proposals
contained in this release.
    We request comment from the point of view of issuers, investors,
and other market participants. With regard to any comments, we note
that such comments are of great assistance to our rulemaking initiative
if accompanied by supporting data and analysis of the issues addressed
in those comments.

IV. Paperwork Reduction Act

A. Background

    Certain provisions of the proposed rule amendments contain a
``collection of information'' within the meaning of the Paperwork
Reduction Act of 1995.\40\ The Commission is submitting this proposed
amendment to the Office of Management and Budget for review in
accordance with the PRA. An agency may not conduct or sponsor, and a
person is not required to comply with, a collection of information
unless it displays a currently valid control number. Compliance with
the rules as they are proposed to be amended would be mandatory,
however certain information collections under these rules are required
and some are voluntary. Responses to the information collections would
not be kept confidential and there would be no mandatory retention
period for the information disclosed.
---------------------------------------------------------------------------

    \40\ 44 U.S.C. 3501 et seq.; 5 CFR 1320.11.
---------------------------------------------------------------------------

    The proposed revision to Rule 14a-16 would permit issuers and other
soliciting persons to include explanatory materials about the notice
and access model along with the Notice. The proposed revision would
still require a legend in the Notice, but would allow more flexibility
in how prescribed topics are described in the legend.\41\ The proposed
explanatory materials would be a relatively short and straight-forward
explanation of the notice and access model that could accompany the
Notice. Finally, the proposed change to the filing deadline for
soliciting persons other than the issuer is not expected to affect the
burden estimates.
---------------------------------------------------------------------------

    \41\ We anticipate no change in the burden estimates for the
change in the legend requirement. The proposed rule would require
essentially the same information as is currently required in the
legend to continue to be conveyed creating no additional burden.
---------------------------------------------------------------------------

B. Regulation 14A and 14C

    The titles for the collections of information for operating
companies are: \42\
---------------------------------------------------------------------------

    \42\ The paperwork burden from Regulation S-K is imposed through
the forms that are subject to the requirements in those regulations
and is reflected in the analysis of those forms. To avoid a
Paperwork Reduction Act inventory reflecting duplicative burdens and
for administrative convenience, we assign a one-hour burden to
Regulation S-K.
---------------------------------------------------------------------------

     Regulation 14A (OMB Control No. 3235-0059); and
     Regulation 14C (OMB Control No. 3235-0057).
    We previously revised these collections of information in the
release that proposed the notice and access model as a voluntary model
for

disseminating proxy materials \43\ and the release in which we adopted
amendments requiring issuers and other soliciting persons to follow the
model.\44\ We submitted the revisions in both releases to the OMB for
review in accordance with the PRA. We received approval for the revised
information collections and now propose a further revision which we
will submit to OMB.
---------------------------------------------------------------------------

    \43\ See Internet Availability of Proxy Materials Proposing
Release in note 39 above.
    \44\ See the Internet Availability of Proxy Material Adopting
Release in note 8 above.
---------------------------------------------------------------------------

    Under the proposed amendments, an issuer or other soliciting person
will be permitted, but not required, to include explanatory materials
with the Notice. We expect that this information will generally consist
of approximately one or two paragraphs of text. For purposes of the
PRA, we estimate the annual burden if a soliciting person chooses to
prepare the explanatory materials would be approximately 0.5 reporting
hours per issuer or other soliciting person.\45\ We estimate that 75%
of the burden would be borne by the soliciting person and that 25% of
the burden would be borne by outside counsel retained by the soliciting
person at an average cost of approximately $400 per hour. The portion
of the burden carried by outside professionals is reflected as a cost,
while the portion of the burden carried by the issuer internally is
reflected in hours.
---------------------------------------------------------------------------

    \45\ As we have previously indicated, according to Broadridge,
it processes more than 95% of proxy materials that are sent to
beneficial owners on behalf of intermediaries. See the Internet
Availability of Proxy Materials Adopting Release in note 8 above. We
believe that issuers likely will rely on proxy distribution service
providers to provide the explanatory materials and that issuers and
intermediaries would provide explanatory materials that are
substantially the same to the beneficial owners that hold through
intermediaries, creating no additional annual burden to prepare an
intermediary's Notice.
---------------------------------------------------------------------------

    The following table summarizes the proposed PRA burden estimates
for Schedules 14A and 14C:

                    Table 1--Calculation of Incremental Paperwork Reduction Act Burden Estimates for Proxy and Information Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                         Form                              Annual      Incremental   Incremental         75% Issuer              25%           $400
-------------------------------------------------------  responses     hours/form       burden   -------------------------- Professional   Professional
                                                       ------------------------------------------                          --------------      cost
                                                                                (D)=(C)*0.75                     ---------------
                                                            (A)            (B)       (C)=(A)*(B)                            (E)=(C)*0.25   (F)=(E)*$400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Schedule 14A..........................................        7,300             0.5   3,650                        2,737.5    912.5             $365,000
Schedule 14C..........................................          680             0.5     340                            255       85              $34,000
    Total.............................................        7,980  ..............   3,990                        2,992.5    997.5             $399,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. Rule 20a-1

    Certain provisions of the current notice and access model contain
``collection of information'' requirements within the meaning of the
PRA, including preparation of Notices, maintaining Web sites,
maintaining records of shareholder preferences, and responding to
requests for copies. Those provisions increase the current burden for
the existing collection of information entitled ``Rule 20a-1 under the
Investment Company Act of 1940,\46\ Solicitation of Proxies, Consents
and Authorizations'' (OMB Control No. 3235-0158). Rule 20a-1 under the
Investment Company Act \47\ requires that the solicitation of a proxy,
consent, or authorization with respect to a security issued by an
investment company be in compliance with Regulation 14A,\48\ Schedule
14A,\49\ and all other rules and regulations adopted under Section
14(a) of the Exchange Act.\50\ It also requires a fund's investment
adviser, or a prospective adviser, to transmit to the person making a
proxy solicitation the information necessary to enable that person to
comply with the rules and regulations applicable to the solicitation.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 80a-1 et seq.
    \47\ 17 CFR 270.20a-1.
    \48\ 17 CFR 240.14a-1 et seq.
    \49\ 17 CFR 240.14a-101.
    \50\ 15 U.S.C. 78n(a).
---------------------------------------------------------------------------

    The notice and access model requires all registered investment
companies to post their proxy materials on an Internet Web site and
furnish Notice of the materials' availability to shareholders.\51\ The
Notices, the proxy materials posted on the Web site, and copies of the
proxy materials sent in response to shareholder requests are not kept
confidential.
---------------------------------------------------------------------------

    \51\ See the Internet Availability of Proxy Material Adopting
Release in note 8 above.
---------------------------------------------------------------------------

    For purposes of the PRA, we estimate that the annual burden
required to prepare and transmit a Notice to be approximately 1.5
reporting hours. This estimate is based on the PRA burden for issuers
other than investment companies to prepare and transmit a Notice. We
estimate that 75% of the burden is prepared by the investment company
and that 25% of the burden is prepared by outside counsel retained by
the investment company at an average cost of approximately $400 per
hour. Based on the number of proxy filings from registered investment
companies received by the Commission during 2008, we would expect
approximately 1,225 Notices to be filed annually. We estimate that the
total annual reporting burden for rule 20a-1 should be increased by
approximately 1,378 hours \52\ and that the annual cost would be
increased by approximately $735,000 \53\ for the services of outside
professionals to comply with the disclosure provisions of the existing
notice and access model.
---------------------------------------------------------------------------

    \52\ 1,225 Notices x 1.5 hours per Notice x .75 = 1,378 hours.
    \53\ 1,225 Notices x $400 per hour x 1.5 hours per Notice x .25
= $735,000.
---------------------------------------------------------------------------

    In addition, registered investment companies must permit
shareholders to make permanent elections to receive proxy materials in
paper or by e-mail. An investment company issuer must maintain records
as to which of its shareholders have made such an election. We believe
that many investment company issuers already maintain similar records
to keep track of their shareholders who have affirmatively consented to
electronic delivery consistent with past Commission guidance,\54\ as
well as their shareholders who have consented to householding of proxy
materials pursuant to Rule 14a-3(e).\55\ For purposes of the PRA, we
estimate that a typical investment company issuer will spend an
additional five hours per year, or a total of 6,125 hours, to

maintain these records.\56\ Because this is an internal recordkeeping
requirement, we do not expect a cost for hiring outside counsel.
---------------------------------------------------------------------------

    \54\ Use of Electronic Media for Delivery Purposes, Release No.
33-7233 (Oct. 6, 1995) [60 FR 53458] provided guidance on electronic
delivery of prospectuses, annual reports to security holders and
proxy solicitation materials under the Securities Act, the Exchange
Act, and the Investment Company Act.
    \55\ 17 CFR 240.14a-3(e).
    \56\ 1,225 filings with an estimated one filing per issuer or
soliciting person x 5 hours = 6,125 hours. This estimate is based on
the PRA burden for issuers other than investment companies to
maintain these records.
---------------------------------------------------------------------------

    Further, the notice and access model also requires an intermediary
to prepare its own Notice and provide it to beneficial owners. We
expect that all of the factual information required to appear in the
Notice will become available as part of the ordinary preparations for a
shareholder meeting. This Notice would be substantially the same as a
registered investment company's Notice, but will be modified by the
intermediaries to provide information that is relevant to beneficial
owners rather than registered holders. According to Broadridge, it
processes more than 95% of proxy materials that are sent to beneficial
owners on behalf of intermediaries, reducing the need to create
multiple intermediary Notices. In addition, the investment company
issuer or other soliciting person will provide the majority of
information required in the intermediary's Notice. Therefore, we
estimate that the additional burden to prepare an intermediary's Notice
will be approximately one hour, or a total annual burden of 1,225 hours
for all investment company proxy solicitations.\57\
---------------------------------------------------------------------------

    \57\ 1,225 notices x 1 hour per Notice = 1,225 hours. We do not
include a cost to intermediaries for hiring outside counsel because
we expect that the substantive contents of an intermediary's Notice
would be provided by the issuer or other soliciting person. The
estimates assume that Broadridge will continue to process over 95%
of the proxy solicitations on behalf of intermediaries, thereby
eliminating the need for each intermediary to prepare a separate
Notice.
---------------------------------------------------------------------------

    Finally, intermediaries must also maintain records to keep track of
which beneficial owners have made a permanent election to receive proxy
materials in paper or by e-mail. Like registered investment companies,
intermediaries already maintain records of shareholders' affirmative
consents to electronic delivery and householding of proxy materials. In
addition, intermediaries maintain records as to whether their
beneficial owner customers have objected, or not objected, to
disclosure of their identities to the investment company issuer. Like
investment company issuers, we believe this will result in an
additional annual burden of five hours, or a total of 6,125 hours, for
intermediaries.\58\
---------------------------------------------------------------------------

    \58\ This estimate is based on the PRA burden for intermediaries
for issuers other than investment companies to maintain records.
---------------------------------------------------------------------------

    We estimate that the total annual PRA reporting burden for Rule
20a-1 should be increased by 14,853 hours and $735,000 in professional
costs to reflect compliance with the existing notice and access model.
We request comment and supporting empirical data on the burden and cost
of sending copies of proxy materials under the notice and access model
for registered investment companies.
    Under the proposed amendments to the notice and access model, a
registered investment company or other soliciting person will be
permitted, but not required, to include explanatory materials with the
Notice. We expect that this information will generally consist of
approximately one or two paragraphs of text. For purposes of the PRA,
we estimate the annual burden if a soliciting person chooses to prepare
the explanatory materials would be approximately 0.5 reporting hours
per investment company. We estimate that 75% of the burden would be
borne by the investment company and that 25% of the burden would be
borne by outside counsel retained by the investment company at an
average cost of approximately $400 per hour. The portion of the burden
carried by outside professionals is reflected as a cost, while the
portion of the burden carried by the issuer internally is reflected in
hours. We estimate that the proposed amendments will increase the PRA
burden estimates under Rule 20a-1 by approximately 459 hours and
$61,250 in professional costs.

D. Solicitation of Comments

    We request comments in order to evaluate: (1) Whether the proposed
revision to the collection of information is necessary for the proper
performance of the functions of the agency, including whether the
information would have practical utility; (2) the accuracy of our
estimate of the burden of the proposed revisions to the collection of
information; (3) whether there are ways to enhance the quality,
utility, and clarity of the information to be collected; and (4)
whether there are ways to minimize the burden of the collection of
information on those who are to respond, including through the use of
automated collection techniques or other forms of information
technology.\59\
---------------------------------------------------------------------------

    \59\ 44 U.S.C. 3506(c)(2)(B).
---------------------------------------------------------------------------

    Any member of the public may direct to us any comments concerning
the accuracy of these burden estimates and any suggestions for reducing
these burdens. Persons submitting comments on the collection of
information requirements should direct the comments to the Office of
Management and Budget, Attention: Desk Officer for the Securities and
Exchange Commission, Office of Information and Regulatory Affairs,
Washington, DC 20503, and should send a copy to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090,
with reference to File No. S7-22-09. Requests for materials submitted
to OMB by the Commission with regard to these collections of
information should be in writing, refer to File No. S7-22-09, and be
submitted to the Securities and Exchange Commission, Office of Investor
Education and Advocacy, 100 F Street, NE., Washington, DC 20549-0213.
OMB is required to make a decision concerning the collection of
information between 30 and 60 days after publication of this release.
Consequently, a comment to OMB is best assured of having its full
effect if OMB receives it within 30 days of publication.

V. Cost-Benefit Analysis

A. Proposed Amendments

    The proposed amendments are designed to improve implementation of
the notice and access model. The proposed amendments to Exchange Act
Rule 14a-16 would revise the legend requirements in the rule to make
them more flexible, revise the deadline applicable to soliciting
persons other than the issuer to reconcile the rules and better
coordinate them with the Commission staff's review process, and permit
issuers and other soliciting persons to accompany the Notice with
explanatory materials regarding the process of receiving and reviewing
the proxy materials and voting.\60\
---------------------------------------------------------------------------

    \60\ We do not expect our proposed conforming amendment, which
would permit mutual funds to accompany the Notice with a summary
prospectus, to have a substantive impact on a mutual fund's decision
otherwise permitted under Rule 498 of the Securities Act to provide
a summary prospectus instead of a statutory prospectus to its
shareholders.
---------------------------------------------------------------------------

    We expect that the economic effect of the proposed amendments, if
adopted, would be to:
     Facilitate participation by shareholders who may be
confused by the operation of the notice and access model;
     Provide flexibility to soliciting persons in describing
the notice and access model; and
     Facilitate participation by some soliciting persons who
may currently be effectively precluded from using the notice-only
option.

B. Benefits

    As discussed above, by permitting some additional flexibility in
designing the Notice and permitting explanatory materials regarding the
process of receiving and reviewing the proxy materials and voting to
accompany the Notice, we expect that the proposal would improve
understanding of the notice and access model for participating
shareholders. Improved understanding of the model would reduce
confusion and may thereby improve the efficiency and effectiveness of
the proxy voting system. However, to the extent that issuers send
notices to shareholders that are less likely to respond, these benefits
may be limited.
    Revising one of the two alternative Notice deadlines applicable to
soliciting persons other than issuers to reconcile the rules' timing
requirements with the Commission staff's review process would
facilitate use of the notice-only option by soliciting persons who may
otherwise be precluded from using the notice-only option because of
their inability to meet the deadline for sending the Notice. This would
help lower costs for those persons by reducing impediments for certain
soliciting persons to participate in the proxy process.

C. Costs

    Eliminating the specific limitations of the legend requirement may
result in some soliciting persons providing a more confusing notice or
seeking to include soliciting, marketing or other materials that may
distract shareholders from the Notice. These activities would increase
the cost of shareholder participation in the proxy process, and could
distort votes and outcomes.\61\ In addition, an issuer or other
soliciting person that chooses to include explanatory materials in the
same mailing with the Notice would incur the cost of preparing that
information. We expect that this information generally would be no more
than a few paragraphs long. For purposes of the PRA, we estimate that
the proposal would cause an annual increase in the compliance burden
for issuers and other soliciting persons preparing explanatory
materials of approximately 3,450 hours of in-house personnel time and
approximately $460,000 for the services of outside professionals.
---------------------------------------------------------------------------

    \61\ Since intermediaries and their agents already have systems
to prepare and deliver proxy materials and the nature of the
proposed changes are relatively small, we do not expect the
intermediaries' role in sending explanatory material to beneficial
owners to affect their costs associated with the rule. In any event,
since soliciting persons reimburse intermediaries for their
reasonable expenses forwarding proxy materials, we do not expect
intermediaries to incur costs associated with the rule.
---------------------------------------------------------------------------

D. Request for Comments

    We request comment on all aspects of the cost-benefit analysis,
including identification of any additional costs or benefits of, or
suggested alternatives to, the proposed amendments. We also request
that those submitting comments provide, to the extent possible,
empirical data and other factual support for their views.

VI. Consideration of Burden on Competition and Promotion of Efficiency,
Competition, and Capital Formation

    Section 23(a) of the Exchange Act \62\ requires the Commission,
when making rules and regulations under the Exchange Act, to consider
the impact a new rule would have on competition. Section 23(a)(2)
prohibits the Commission from adopting any rule that would impose a
burden on competition not necessary or appropriate in furtherance of
the purposes of the Exchange Act. Section 2(b) of the Securities
Act,\63\ Section 3(f) of the Exchange Act \64\ and Section 2(c) of the
Investment Company Act \65\ require the Commission, when engaging in
rulemaking that requires it to consider whether an action is necessary
or appropriate in the public interest, to also consider whether the
action would promote efficiency, competition, and capital formation.
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78w(a).
    \63\ 15 U.S.C. 77b(b).
    \64\ 15 U.S.C. 78c(f).
    \65\ 15 U.S.C. 80a-2(c).
---------------------------------------------------------------------------

    The amendments would permit some additional flexibility in
designing the Notice, permit issuers and other soliciting persons to
accompany the Notice with explanatory materials regarding the process
of receiving and reviewing the proxy materials and voting, and revise
one of the two deadlines applicable to soliciting persons other than
the issuer to reconcile our rules and better coordinate the timing
requirements with the Commission staff's review process. The proposed
amendments are designed to reduce regulatory impediments and thereby
increase shareholder participation, improve implementation of the
notice and access model, and enhance investor understanding of the
operation of the notice and access model. These changes are intended to
improve the efficiency and effectiveness of the proxy process.
    We do not anticipate any effect on competition or capital formation
as a result of these proposed revisions.
    The Commission solicits comment on whether the proposed amendment,
if adopted, would affect efficiency, competition, and capital
formation.

VII. Initial Regulatory Flexibility Analysis

    This Initial Regulatory Flexibility Analysis has been prepared in
accordance with 5 U.S.C. 603. It relates to proposed revisions to
Exchange Act Rule 14a-16 that would permit some additional flexibility
in designing the Notice, permit issuers and other soliciting persons to
accompany the Notice with explanatory materials regarding the process
of receiving and reviewing the proxy materials and voting, and revise
one of the timing requirements applicable to soliciting persons other
than the issuer to reconcile our rules and better coordinate the
requirement with the Commission staff's review process.

A. Reasons for, and Objectives of, the Proposed Action

    The proposed amendments are designed to improve implementation of
the notice and access model. Based on our monitoring of the effects of
the notice and access model on the proxy solicitation process and the
experiences that issuers and shareholders have had with the notice and
access model to date, we believe that several revisions to the existing
rules would improve the operation of the model without adversely
affecting soliciting persons or shareholders' abilities to effectively
participate in the proxy process.
    Improved notice design and shareholder education should help to
mitigate the difference in shareholder participation in the proxy
voting process observed in the use of the notice and access model to
the extent the difference was caused by our regulations. The proposed
amendment to the timing requirements for soliciting persons other than
the issuer to file their preliminary proxy statements is designed to
better enable soliciting shareholders other than the issuer to use the
notice-only option.

B. Legal Basis

    We are proposing amendments to the forms and rules under the
authority set forth in Sections 6, 7, 10, and 19 of the Securities Act
of 1933, as amended, Sections 3(b), 13, 14, 15, and 23(a) of the
Exchange Act, as amended, and Sections 8, 20(a), 24(a), 24(g), 30, and
38 of the Investment Company Act, as amended.

C. Small Entities Subject to the Proposed Rules

    The proposals would affect issuers that are small entities.
Exchange Act Rule 0-10(a) \66\ defines an issuer to be a ``small
business'' or ``small organization'' for purposes of the Regulatory
Flexibility Act if it had total assets of $5 million or less on the
last day of its most recent fiscal year. We estimate that there are
approximately 1,100 public companies, other than investment companies,
that may be considered small entities.
---------------------------------------------------------------------------

    \66\ 17 CFR 240.0-10(a).
---------------------------------------------------------------------------

    For purposes of the Regulatory Flexibility Act, an investment
company is a small entity if it, together with other investment
companies in the same group of related investment companies, has net
assets of $50 million or less as of the end of its most recent fiscal
year.\67\ Approximately 178 registered investment companies meet this
definition. Moreover, approximately 34 business development companies
may be considered small entities.
---------------------------------------------------------------------------

    \67\ 17 CFR 270.0-10.
---------------------------------------------------------------------------

    Paragraph (c)(1) of Rule 0-10 under the Exchange Act \68\ states
that the term ``small business'' or ``small organization,'' when
referring to a broker-dealer, means a broker or dealer that had total
capital (net worth plus subordinated liabilities) of less than $500,000
on the date in the prior fiscal year as of which its audited financial
statements were prepared pursuant to Sec.  240.17a-5(d); and is not
affiliated with any person (other than a natural person) that is not a
small business or small organization. The Commission has estimated that
there were approximately 910 broker-dealers that qualified as small
entities as defined above.\69\ Small Business Administration
regulations define ``small entities'' to include banks and savings
associations with total assets of $165 million or less.\70\ The
Commission estimates that the rules might apply to approximately 9,475
banks, approximately 5,816 of which could be considered small banks
with assets of $165 million or less. The proposals may affect these
entities because they are intermediaries that are required under the
Commission's proxy rules to forward proxy materials, including the
Notice or any explanatory materials, on to shareholders who
beneficially own their shares through the intermediaries.\71\
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    \68\ 17 CFR 240.0-10(c)(1).
    \69\ These numbers are based on a review by the Commission's
Office of Economic Analysis of 2005 FOCUS Report filings reflecting
registered broker-dealers. This number does not include broker-
dealers that are delinquent on FOCUS Report filings.
    \70\ 13 CFR 121.201.
    \71\ An intermediary is not required to forward proxy materials
to beneficial owners unless the issuer or other soliciting person
provides assurance of reimbursement of the intermediary's reasonable
expenses incurred in connection with forwarding those materials. 17
CFR 240.14b-2(c)(2)(i). Therefore, any costs imposed on
intermediaries by the rules will be borne by the issuer or other
soliciting person.
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    We request comment on the number of small entities that would be
impacted by our proposals, including any available empirical data.

D. Reporting, Recordkeeping and Other Compliance Requirements

    The proposed amendments would allow soliciting persons more time to
use the notice-only model before a shareholder meeting and permit, but
do not require, issuers to include additional, explanatory material in
their Notice.

E. Duplicative, Overlapping or Conflicting Federal Rules

    We believe that there are no rules that conflict with or duplicate
the proposed rules.

F. Significant Alternatives

    The Regulatory Flexibility Act directs us to consider significant
alternatives that would accomplish the stated objective, while
minimizing any significant adverse impact on small entities. In
connection with the proposed amendments, we considered the following
alternatives:
     The establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to small entities;
     The clarification, consolidation or simplification of
disclosure for small entities;
     The use of performance standards rather than design
standards; and
     An exemption for small entities from coverage under the
proposals.
    The Commission has considered a variety of reforms to achieve its
regulatory objectives.
    The proposed amendments, if adopted, would apply to all issuers and
other soliciting persons, including small entities, that choose to rely
on the notice-only option. The amendments are intended to improve the
operation of the notice and access model by providing additional
flexibility in designing the Notice, permitting issuers and other
soliciting persons to accompany the Notice with explanatory materials
regarding the notice and access model, and revising one of the timing
requirements applicable to soliciting persons other than the issuer to
reconcile our rules and better coordinate the requirement with the
Commission staff's review process.
    We considered the use of performance standards rather than design
standards in the proposed rules. The proposal contains both performance
standards and design standards. We are proposing revising existing
design standards, such as the deadline applicable to soliciting persons
other than the issuer, to the extent that we believe necessary.
However, to the extent possible, we are proposing rules that impose
performance standards to provide issuers, other soliciting persons and
intermediaries with the flexibility to devise the means through which
they can comply with such standards. For example, the proposed
amendments regarding explanatory materials do not specify the content
of such information.
    We are requesting comment on whether separate requirements for
small entities would be appropriate. The purpose of the amendments is
to improve the implementation of the notice and access model based on
our experience with the model to date. Exempting small entities would
not be consistent with this goal. The establishment of any differing
compliance or reporting requirements or timetables or any exemptions
for small business issuers may not be in keeping with the objectives of
the proposed rules.

G. Solicitation of Comment

    We encourage comments with respect to any aspect of this Initial
Regulatory Flexibility Analysis. In particular, we request comments
regarding:
     The number of small entities that may be affected by the
proposed amendments;
     The existence or nature of the potential impact of the
proposed amendments on small entities discussed in the analysis; and
     How to quantify the impact of the proposed amendments.

Commenters are asked to describe the nature of any impact and provide
empirical data supporting the extent of the impact. Such comments will
be considered in the preparation of the Final Regulatory Flexibility
Analysis, if the proposals are adopted, and will be placed in the same
public file as comments on the proposed amendments themselves.

VIII. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of

1996,\72\ a rule is ``major'' if it has resulted, or is likely to
result in:
---------------------------------------------------------------------------

    \72\ Public Law 104-121, Title II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the U.S. economy of $100 million or
more;
     A major increase in costs or prices for consumers or
individual industries; or
     Significant adverse effects on competition, investment, or
innovation.

We request comment on whether the proposed amendments to Exchange Act
Rule 14a-16 would be a ``major rule'' for purposes of the Small
Business Regulatory Enforcement Fairness Act. We solicit comment and
empirical data on:
     The potential effect on the U.S. economy on an annual
basis;
     Any potential increase in costs or prices for consumers or
individual industries; and
     Any potential effect on competition, investment, or
innovation.

IX. Statutory Authority and Text of Rule and Form Amendments

    We are proposing the amendments pursuant to Sections 6, 7, 10, and
19 of the Securities Act of 1933, as amended, Sections 3(b), 13, 14,
15, and 23(a) of the Securities Exchange Act of 1934, as amended, and
Sections 8, 20(a), 24(a), 24(g), 30, and 38 of the Investment Company
Act of 1940, as amended.

List of Subjects in 17 CFR Parts 230 and 240

    Reporting and recordkeeping requirements, Securities.
    For the reasons set out in the preamble, Title 17, Chapter II of
the Code of Federal Regulation is proposed to be amended as follows.

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    1. The authority citation for Part 230 continues to read in part as
follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r,
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w,
78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37,
unless otherwise noted.
* * * * *
    2. Amend Sec.  230.498 by revising paragraph (f)(2) to read as
follows:

Sec.  230.498  Summary Prospectuses for open-end management investment
companies.

* * * * *
    (f) * * *
    (2) Greater prominence. If paragraph (c) or (d) of this section is
relied on with respect to a Fund, the Fund's Summary Prospectus shall
be given greater prominence than any materials that accompany the
Fund's Summary Prospectus, with the exception of other Summary
Prospectuses, Statutory Prospectuses, or a Notice of Internet
Availability of Proxy Materials under Sec.  240.14a-16 of this chapter.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

    3. The authority citation for Part 240 continues to read in part as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise
noted.
* * * * *
    4. Amend Sec.  240.14a-16 by:
    a. Revising paragraph (d)(1).
    b. Redesignating paragraphs (d)(2) through (d)(8) as paragraphs
(d)(5) through (d)(11);
    c. Adding new paragraphs (d)(2) through (d)(4);
    d. Removing the word ``and'' at the end of paragraph (f)(2)(ii);
    e. Revising paragraph (f)(2)(iii);
    f. Adding paragraph (f)(2)(iv); and
    g. Revising paragraph (l)(2)(ii).
    The revisions and additions read as follows:

Sec.  240.14a-16  Internet availability of proxy materials.

* * * * *
    (d) * * *
    (1) A prominent legend in bold-face type that states ``Important
Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting To Be Held on [insert meeting date]'';
    (2) An indication that the communication presents only an overview
of the more complete proxy materials, which contain important
information and are available on the Internet or by mail and
encouraging a security holder to access and review the proxy materials
before voting;
    (3) The Internet Web site address where the proxy materials are
available;
    (4) Instructions regarding how a security holder may request a
paper or e-mail copy of the proxy materials at no charge, including the
date by which they should make the request to facilitate timely
delivery, and an indication that they will not otherwise receive a
paper or e-mail copy;
* * * * *
    (f) * * *
    (2) * * *
    (iii) In the case of an investment company registered under the
Investment Company Act of 1940, the company's prospectus, a summary
prospectus that satisfies the requirements of Sec.  230.498(b) of this
chapter, or a report that is required to be transmitted to stockholders
by section 30(e) of the Investment Company Act (15 U.S.C. 80a-29(e))
and the rules thereunder; and
    (iv) An explanation of the process of receiving and reviewing the
proxy materials and voting as detailed in this section.
* * * * *
    (l) * * *
    (2) * * *
    (ii) The date on which it files its definitive proxy statement with
the Commission, provided its preliminary proxy statement is filed no
later than 10 calendar days after the date that the registrant files
its definitive proxy statement.
* * * * *

    Dated: October 14, 2009.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-25232 Filed 10-20-09; 8:45 am]

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[Federal Register Volume 83, Number 162 (Tuesday, August 21, 2018)]
[Notices]
[Pages 42287-42288]
[FR Doc No: 2018-17923]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OGC-2018-0591; FRL-9982-56-OGC]

Proposed Second Interim Settlement Agreement, Clean Water Act
Claims

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice; request for public comment.

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SUMMARY: In accordance with the EPA Administrator's October 16, 2017,
Directive Promoting Transparency and Public Participation in Consent
Decrees and Settlement Agreements, notice is hereby given of a proposed
Second Interim Settlement Agreement in a lawsuit filed by the West
Goshen Sewer Authority (``WGSA'' or ``Plaintiff'') in the United States
District Court for the Eastern District of Pennsylvania: West Goshen
Sewer Authority v. EPA, et al. On September 19, 2012, Plaintiff filed a
complaint alleging, inter alia, that the United States Environmental
Protection Agency (``EPA'') exceeded its statutory authority and acted
arbitrarily and capriciously when it established a ``total maximum
daily load'' for Goose Creek in southeastern Pennsylvania. The proposed
Second Interim Settlement Agreement would memorialize commitments by
WGSA, among other things, to install a ``CoMag'' ballasted flocculation
system at its wastewater treatment plant and achieve certain specified
discharge limits for phosphorus. After a period of time, EPA would
reassess the water quality of Goose Creek and decide whether to
withdraw, revise or retain the Goose Creek TMDL.

DATES: Written comments on the proposed Second Interim Settlement
Agreement must be received by September 20, 2018.

ADDRESSES: Submit your comments, identified by Docket ID number EPA-HQ-
OGC-2018-0591, online at www.regulations.gov (EPA's preferred method).
For comments submitted at www.regulations.gov, follow the online
instructions for submitting comments. Once submitted, comments cannot
be edited or removed from www.regulations.gov. The EPA may publish any
comment received to its public docket. Do not submit electronically any
information you consider to be Confidential Business Information (CBI)
or other information whose disclosure is restricted by statute.
Multimedia submissions (audio, video, etc.) must be accompanied by a
written comment. The written comment is considered the official comment
and should include discussion of all points you wish to make. The EPA
generally will not consider comments or comment contents located
outside of the primary submission (i.e. on the web, cloud, or other
file sharing system). For additional submission methods, please contact
the person identified in the For Further Information Contact section.
For the full EPA public comment policy, information about CBI or
multimedia submissions, and general guidance on making effective
comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Jim Curtin, Water Law Office (7451),
Office of General Counsel, U.S. Environmental Protection Agency, 1200
Pennsylvania Ave. NW, Washington, DC 20460; telephone:<PHONE_NUMBER>;
email address: [email protected].

SUPPLEMENTARY INFORMATION:

I. Additional Information About the Proposed Second Interim Settlement
Agreement

    On June 30, 2008, EPA established a nutrient total maximum daily
load (``TMDL'') for the Goose Creek Watershed in Chester and Delaware
Counties, Pennsylvania. EPA established that TMDL pursuant to the April
9, 1997 Consent Decree entered in American Littoral Society, et al., v.
EPA, No. 96-489 (E.D. Pa.). Among other things, the TMDL assigned
wasteload allocations (``WLAs'') for phosphorus to Goose Creek's point
source dischargers, WGSA's wastewater treatment plant being the
largest.
    WGSA filed a complaint against EPA on September 19, 2012, alleging
that in establishing the Goose Creek TMDL EPA failed to comply with
requirements of the Clean Water Act (CWA) and Administrative Procedure
Act (APA). In July 2013, the Court granted intervener status to the
Delaware Riverkeeper Network (``DRN'').
    The Court placed the case in ``civil suspense'' following the
parties' execution in January 2014 of a first ``Interim Settlement
Agreement'' (``the 2014 Agreement'') under which EPA reassessed the
water quality of Goose Creek and WGSA made voluntary improvements in
its operations to achieve phosphorus reductions. The parties have now
reached agreement on the terms of a ``Second Interim Settlement
Agreement'' in which (1) WGSA commits, among other things, to install a
``CoMag'' ballasted flocculation system at its wastewater treatment
plant and achieve certain specified discharge limits for phosphorus and
(2) EPA commits to reassess the water quality of Goose Creek and decide
whether to withdraw, revise or retain the Goose Creek TMDL.
    For a period of thirty (30) days following the date of publication
of this notice, the Agency will accept written comments relating to the
proposed Second Interim Settlement Agreement from persons who are not
named as parties or intervenors to the litigation in question. If so
requested, EPA will also consider holding a public hearing on whether
to enter into the proposed Second Interim Settlement Agreement. EPA or
the Department of Justice may withdraw or withhold consent to the
proposed Second Interim Settlement Agreement if the comments disclose
facts or considerations that indicate that such consent is
inappropriate, improper, inadequate, or inconsistent with the
requirements of the Act. Unless EPA or the Department of Justice
determines that consent to this proposed Second Interim Settlement
Agreement should be withdrawn, the parties intend to sign the Agreement
and inform the Court.

II. Additional Information About Commenting on the Proposed Second
Interim Settlement Agreement

A. How can I get a copy of the proposed Second Interim Settlement
Agreement?

    The official public docket for this action (identified by EPA-HQ-
OGC-2018-0591) contains a copy of the proposed Second Interim
Settlement Agreement. The official public docket is available for
public viewing at the Office of Environmental Information (OEI) Docket
in the EPA Docket Center, EPA West, Room 3334, 1301 Constitution Ave.
NW, Washington, DC. The EPA Docket Center Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays. The telephone number

for the Public Reading Room is<PHONE_NUMBER>, and the telephone number
for the OEI Docket is<PHONE_NUMBER>.
    An electronic version of the public docket is available on EPA's
website at www.epa.gov/dockets and also through www.regulations.gov.
You may use www.regulations.gov to submit or view public comments,
access the index listing of the contents of the official public docket,
and access those documents in the public docket that are available
electronically. Once in the system, key in the appropriate docket
identification number then select ``search.'' It is important to note
that EPA's policy is that public comments, whether submitted
electronically or in paper, will be made available for public viewing
online at www.regulations.gov without change, unless the comment
contains copyrighted material, CBI, or other information whose
disclosure is restricted by statute. Information claimed as CBI and
other information whose disclosure is restricted by statute is not
included in the official public docket or in the electronic public
docket.
    EPA's policy is that copyrighted material, including copyrighted
material contained in a public comment, will not be placed in EPA's
electronic public docket but will be available only in printed, paper
form in the official public docket. Although not all docket materials
may be available electronically, you may still access any of the
publicly available docket materials through the EPA Docket Center.

B. How and to whom do I submit comments?

    You may submit comments as provided in the ADDRESSES section.
Please ensure that your comments are submitted within the specified
comment period.
    If you submit an electronic comment, EPA recommends that you
include your name, mailing address, and an email address or other
contact information in the body of your comment and with any disk or CD
ROM you submit. This ensures that you can be identified as the
submitter of the comment and allows EPA to contact you in case EPA
cannot read your comment due to technical difficulties or needs further
information on the substance of your comment. Any identifying or
contact information provided in the body of a comment will be included
as part of the comment that is placed in the official public docket,
and made available in EPA's electronic public docket. If EPA cannot
read your comment due to technical difficulties and cannot contact you
for clarification, EPA may not be able to consider your comment.
    Use of the www.regulations.gov website to submit comments to EPA
electronically is EPA's preferred method for receiving comments. The
electronic public docket system is an ``anonymous access'' system,
which means EPA will not know your identity, email address, or other
contact information unless you provide it in the body of your comment.
In contrast to EPA's electronic public docket, EPA's electronic mail
(email) system is not an ``anonymous access'' system. If you send an
email comment directly to the Docket without going through
www.regulations.gov, your email address is automatically captured and
included as part of the comment that is placed in the official public
docket, and made available in EPA's electronic public docket.

    Dated: August 10, 2018.
Steven Neugeboren,
Associate General Counsel.
[FR Doc. 2018-17923 Filed 8-20-18; 8:45 am]
BILLING CODE 6560-50-P