[Federal Register: February 26, 2010 (Volume 75, Number 38)]
[Rules and Regulations]
[Page 9073-9081]
[DOCID:fr26fe10-15]

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Part III

Securities and Exchange Commission

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17 CFR Parts 230 and 240

Amendments to Rules Requiring Internet Availability of Proxy Materials;
Final Rule

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230 and 240

[Release Nos. 33-9108; 34-61560; IC-29131; File No. S7-22-09]
RIN 3235-AK25

Amendments to Rules Requiring Internet Availability of Proxy
Materials

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are amending rules under the Securities Exchange Act of
1934 and the Securities Act of 1933 to clarify and provide additional
flexibility regarding the format of the Notice of Internet Availability
of Proxy Materials that is sent to shareholders and to permit issuers
and other soliciting persons to better communicate with shareholders by
including explanatory materials regarding the reasons for the use of
the notice and access proxy rules and the process of receiving and
reviewing proxy materials and voting pursuant to the notice and access
proxy rules. The amendments also revise the timeframe for delivering a
Notice to shareholders when a soliciting person other than the issuer
relies on the notice and access proxy rules and permit mutual funds to
accompany the Notice with a summary prospectus.

DATES: Effective Date: March 29, 2010.

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 amending 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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Table of Contents

I. Background and Overview of the Amendments
II. Discussion of the Amendments
    A. Revisions to the Notice Requirements and Inclusion of
Explanatory Materials
    1. Proposed Amendments
    2. Comments on the Proposed Amendments
    3. Final Rule
    B. Amendment to Notice Deadlines for Soliciting Persons Other
Than the Issuer
    1. Proposed Amendment
    2. Comments on the Proposed Amendment
    3. Final Rule
    C. Additional Comments on the Proposed Amendments and Actions
Taken by the Commission
    D. Technical Amendments Relating to Registered Investment
Companies
III. Paperwork Reduction Act
IV. Cost-Benefit Analysis
V. Consideration of Burden on Competition and Promotion of
Efficiency, Competition and Capital Formation
VI. Final Regulatory Flexibility Analysis
VII. Statutory Authority and Text of the Amendments

I. Background and Overview of the Amendments

    On October 14, 2009, we proposed amendments to the notice and
access proxy rules to remove regulatory impediments that may be
reducing shareholder response rates to proxy solicitations by
permitting issuers and other soliciting persons to more effectively use
the notice and access model.\5\ These amendments were proposed based on
our continuing review of the disclosures shareholders receive when they
are asked to make a voting decision and the process followed when those
votes are solicited.\6\ As discussed in detail below, we are adopting
the proposed amendments with certain modifications based on the
comments received on the proposal.
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    \5\ Amendments to Rules Requiring Internet Availability of Proxy
Materials, Release No. 33-9073 (Oct. 14, 2009) [74 FR 53954] (the
``Proposing Release'').
    \6\ See, e.g., Facilitating Shareholder Director Nominations,
Release No. 33-9046 (June 10, 2009) [74 FR 29024], Proxy Disclosure
Enhancements, Release No. 33-9089 (Dec. 16, 2009) [74 FR 68443], and
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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    We received 25 comment letters in response to the proposed
amendments.\7\ These letters came from corporations, professional
associations, institutional investors, law firms, transfer agents,
proxy service providers and other interested parties. We have reviewed
and considered all of the comments that we received on the proposed
amendments. Most commenters supported the use of the notice and access
model and the Commission's proposed modifications to improve its
implementation.\8\ The adopted rules reflect changes made in response
to some of these comments. We explain our revisions with respect to
each proposed rule amendment in more detail throughout this release.
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    \7\ See letters from American Bar Association (``ABA''),
American Business Conference (``ABC''), Ameriprise Financial, Inc.
(``Ameriprise''), Association of Corporate Counsel (``ACC''), The
Altman Group (``Altman''), BNY Mellon Shareowner Services (``BNY''),
Broadridge Financial Solutions, Inc. (``Broadridge''), Independent
Steering Committee of Broadridge Investor Communications Solutions
(``Broadridge Steering Committee''), California State Teachers
Retirement System (``CalSTRS''), Calvert Group Limited
(``Calvert''), U.S. Chamber of Commerce (``Chamber''), Computershare
Limited (``Computershare''), Corporate Governance, Diversified
Global Graphics Group (``DG3''), Edison International (``Edison''),
Investment Company Institute (``ICI''), Intel Corporation
(``Intel''), IR WebReport.com, Moxy Vote (``Moxy''), National
Investor Relations Institute (``NIRI''), Otter Tail Corporation
(``Otter Tail''), Registrar and Transfer Company (``R&T''), Sullivan
& Cromwell (``S&C''), Society of Corporate Secretaries and
Governance Professionals (``SCSGP''), and Securities Transfer
Association, Inc. (``STA'').
    \8\ See, e.g., letters from ABA, ABC, ACC, Altman, BNY,
Broadridge, Broadridge Steering Committee, CalSTRS, Calvert,
Chamber, Computershare, Edison, ICI, Intel, NIRI, Otter Tail, R&T,
S&C, SCSGP, and STA.
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    In 2007, the Commission established procedures that promote the use
of the Internet as a reliable and cost-efficient means of making proxy
materials available to shareholders.\9\ The notice and access proxy
rules require all issuers and other soliciting persons to post their
proxy materials on an Internet Web site and provide a Notice of
Internet Availability of Proxy Materials (``Notice'') to shareholders.
These rules also provide issuers and other soliciting persons an option
as to whether to send a full set of proxy materials to all shareholders
or to send shareholders only the Notice. According to Broadridge
Financial Solutions, Inc. (``Broadridge''), over 1,300 corporate
issuers used the notice-only option for distribution of the Notice to
some portion of their beneficial owners under the notice and access
model in the 2009 proxy season.\10\ Commenters, including

Broadridge and transfer agents who conduct the distribution to
registered owners, indicated that issuers have experienced significant
cost savings in printing, postage and processing fees.\11\
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    \9\ 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].
    \10\ See Broadridge Notice & Access, Statistical Overview of Use
with Beneficial Shareholders (as of June 30, 2009) attached to the
letter from Broadridge (``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 does not provide a comparison to an issuer's experience in
the year prior to using the notice-only option for distribution.
    \11\ See, e.g., letters from Broadridge, BNY, and R&T. Some
commenters noted that processing fees were reduced on distributions
to registered owners, but expressed concern about the processing
fees charged by service providers for distributions to beneficial
owners. See, e.g., letters from Altman, BNY, ICI, NIRI, Otter Tail,
R&T, and STA.
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    As we noted in the Proposing Release, while many issuers have
experienced significant cost savings using the notice-only option,
statistics indicate lower shareholder response rates to proxy
solicitations when the notice-only option is used.\12\ We are concerned
that some investors may be confused when issuers and other soliciting
persons distribute proxy materials using the notice-only option and we
believe our rules should be amended to provide additional flexibility
for issuers and other soliciting persons to better communicate with
shareholders to reduce that confusion.
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    \12\ See notes 18-20 of the Proposing Release.
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    We are adopting amendments today to provide issuers and other
soliciting persons with additional flexibility to provide to
shareholders a more effective explanation of the importance and effect
of the Notice and the reasons for its use, which should better
facilitate use of our rules and improve investor understanding.
Specifically, the amendments provide additional flexibility regarding
the format and content of the Notice, permit issuers and other
soliciting persons to better communicate with shareholders by including
explanatory materials regarding the reasons for the use of the notice
and access rules and the process of receiving and reviewing proxy
materials and voting, and revise the timeframe for delivering a Notice
to shareholders when a soliciting person other than the issuer relies
on the notice-only option.

II. Discussion of the Amendments

A. Revisions to the Notice Requirements and Inclusion of Explanatory
Materials

    We proposed amendments to Exchange Act Rule 14a-16 to provide
issuers and other soliciting persons with additional flexibility to
develop a more effective Notice and to provide shareholders with
guidance as to how to access the proxy materials online, request a
paper copy of the proxy materials, and vote their shares. We are
adopting the amendments generally as proposed with some changes as
recommended by commenters.
1. Proposed Amendments
    Under the amendments we proposed, issuers and other soliciting
persons would have 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 proposed to require that the
information appearing on the Notice address certain topics, without
specifying the exact language to be used.\13\ Further, in order to
mitigate confusion about the Notice and to allow issuers and other
soliciting persons to better engage shareholders, we proposed to revise
Exchange Act Rule 14a-16(f)(2)\14\ to permit issuers and other
soliciting persons to accompany the Notice with an explanation of the
notice and access model, which would be limited to an explanation of
the process of receiving and reviewing the proxy materials and voting.
Materials designed to persuade shareholders to vote in a particular
manner, change the method of delivery of proxy materials, or explain
why the person was sending only a Notice to shareholders would not be
permitted under the proposed amendments.
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    \13\ As proposed, Exchange Act Rule 14a-16(d) 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.
    \14\ 17 CFR 240.14a-16(f)(2).
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2. Comments on the Proposed Amendments
    Most commenters supported the additional flexibility provided by
the proposed amendments to design and prepare the Notice and provide
explanatory materials, and many of these commenters offered additional
suggestions for improving the proposals.\15\ Several commenters
recommended that the design and wording of the Notice should be
required to clearly indicate that the Notice is not a proxy card and
may not be voted.\16\ Other commenters supported a uniform and easily
recognizable design for the Notice,\17\ requiring intermediaries to
forward the Notice in issuer provided envelopes,\18\ or requiring that
the Notice identify proxy items by topic rather than specific
proposals.\19\
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    \15\ See, e.g., letters from ABA, ACC, BNY, Broadridge,
Broadridge Steering Committee, Calvert, Chamber, Computershare,
Edison, ICI, Intel, Otter Tail, R&T, S&C, SCSGP, and STA.
    \16\ See, e.g., letters from ABA, Altman, Otter Tail, and Intel.
Letters from ABA, Altman and Intel suggested the inclusion of a
mandatory legend indicating that a separate proxy card should be
used for voting.
    \17\ See letter from Otter Tail.
    \18\ See letter from Edison.
    \19\ See letter from Intel suggesting that the mandated format
of the Notice be changed so that matters to be addressed at the
annual meeting be identified by topic rather than identifying the
specific proposals in order to avoid confusion between the Notice
and the proxy card.
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    Several commenters supported more flexibility than we had proposed
for the explanatory materials, such as permitting an issuer to explain
the reasons for its use of the notice-only option.\20\ Commenters
suggested that an issuer's rationale for using the notice-only option
would enhance shareholders' understanding of the reasons for receiving
the Notice, inform investors of the benefits of using the notice-only
option and help to distinguish the Notice from the proxy card, without
influencing a shareholder's voting decision.\21\ One commenter
supported additionally requiring that intermediaries be required to
pass explanatory materials on to beneficial owners.\22\
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    \20\ See, e.g., letters from ABA, ACC, S&C, and STA.
    \21\ See, e.g., letters from ABA and ACC.
    \22\ See letter from ABA.
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    Finally, one commenter noted that if the Commission approved the
proposed amendments to the Notice requirements, a technical change is
necessary to Exchange Act Rule 14a-16(n).\23\ Rule 14a-16(n) addresses
the notice and access requirements when an issuer or other soliciting
person sends a full set of proxy materials to security holders. The
suggested technical change related to references in Rule 14a-16(n)(4)
to the disclosure requirements of the Notice in Exchange Act Rule 14a-
16(d). Since the proposed amendments revise the disclosure requirements
of Rule 14a-16(d), conforming changes should also be made to 14a-
16(n)(4).
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    \23\ See letter from S&C.
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3. Final Rule
    After considering the comments, we are adopting the amendments to
our requirements regarding the Notice and the rules about what
materials may accompany the initial distribution of the Notice as
proposed with some changes as recommended by commenters. The final rule
provides issuers and other soliciting persons with additional
flexibility in formatting and selecting the language to be used in the
Notice, as proposed. The information appearing on the Notice is
required to address

certain topics, without specifying the exact language to be used. In
response to comments requesting that the rules specifically state that
the Notice is not a form of proxy and may not be voted, we are adopting
final rules that require an issuer or other soliciting person to
indicate that the Notice is not a form for voting. We are not, however,
adopting suggested changes to the Notice requirements that would
require a prescribed legend that the Notice is not a proxy card. We are
also not adopting changes to the Notice that would require a uniform
design for the Notice or would require that the Notice identify proxy
items by topic rather than specific identification. We believe that the
requirement that the Notice indicate that it is not a form for voting
and the additional flexibility provided by the revised rules, as well
as the guidance regarding the requirements of redesignated Exchange Act
Rule 14a-16(d)(6),\24\ address the concerns raised by commenters. These
changes also provide issuers and other soliciting persons the
flexibility to draft the Notice more effectively. We believe that the
flexibility should discourage the development of boilerplate
disclosure, which is one of the problems our amendments are designed to
address.
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    \24\ We are redesignating 17 CFR 240.14a-16(d)(2) through 17 CFR
240.14a-16(d)(8) as 17 CFR 240.14a-16(d)(5) through 17 CFR 240.14a-
16(d)(11). Prior to this redesignation, the referenced paragraph was
17 CFR 240.14a-16(d)(3) as indicated in the Proposing Release. After
adoption, as noted here, the referenced paragraph is 17 CFR 240.14a-
16(d)(6).
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    As noted above, several commenters supported additional flexibility
to allow the materials to address the reasons for the use of the
notice-only option.\25\ Consistent with the proposal, the final rule
permits issuers and other soliciting persons to accompany the Notice
with an explanation of the notice and access model.\26\ As proposed,
new Exchange Act Rule 14a-16(f)(2)(iv) \27\ allows issuers and other
soliciting persons to provide an explanation of the process of
receiving and reviewing the proxy materials and voting under the notice
and access proxy rules. In a change from the proposal, new Exchange Act
Rule 14a-16(f)(2)(iv) also permits an explanation of the reasons for
the use of the notice and access rules, as some commenters suggested.
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    \25\ See note 20 above.
    \26\ We emphasize that under revised Rule 14a-16(f)(2) only
registrants and other soliciting persons, and not other parties, may
accompany a Notice with explanatory materials.
    \27\ This new provision is an additional exception to the
general rule in Exchange Act Rule 14a-16(f) that the Notice be sent
separately from other types of security holder communications.
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    We concur that additional flexibility to explain the reasons for
the use of the notice and access rules and the notice-only option may
enhance shareholders' understanding of the notice and access model and,
therefore, we have expanded the exception to include those topics.
Materials designed to persuade shareholders to vote in a particular
manner or change the method of the delivery of proxy materials are
still not permitted under the revised exception.\28\ As also noted
above, one commenter suggested that we specifically require that
intermediaries and their agents be required to distribute explanatory
materials prepared in reliance on the amended rules. Since issuers and
other soliciting persons are generally required to reimburse
intermediaries for the reasonable expenses incurred in connection with
forwarding materials to shareholders, we are not at this time
specifically requiring intermediaries and their agents to forward
explanatory materials. Of course, to the extent that materials that
accompany the Notice are ``other soliciting materials'' then our
current rules \29\ would specifically require distribution of the
materials.
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    \28\ While the Notice continues to permit the soliciting person
to include their recommendations as provided in redesignated
Exchange Act Rule 14a-16(d)(6), 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.''
    \29\ See 17 CFR 240.14b-1(b)(2) and 17 CFR 240.14b-2(b)(3).
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    In response to comments, we are also making a technical change to
Exchange Act Rule 14a-16(n). Rule 14a-16(n)(4) details the notice and
access disclosures that registrants and other soliciting persons are
not required to include in proxy materials when they choose to send a
full set of proxy materials to security holders. Since we are amending
the notice and access disclosure requirements in Rule 14a-16(d), we are
making conforming changes to Rule 14a-16(n)(4). Specifically, we are
revising Rule 14a-16(n)(4)(i) to delete the reference to legend
requirements that are no longer part of Rule 14a-16(d)(1) and to make
reference to new paragraph 14a-16(d)(2) and changing the reference to
``(d)(7)'' in Rule 14a-16(n)(4)(iii) to ``(d)(10)'' to track the new
numbering in Rule 14a-16(d).
    Finally, we are confirming the guidance provided in the Proposing
Release that it is not necessary that the Notice directly mirror the
proxy card. Rather, Exchange Act Rule 14a-16(d)(6) provides that the
Notice must clearly and impartially identify each separate matter
intended to be acted on that will be considered at the meeting. We do
not believe the Notice has to conform to the specific Exchange Act Rule
14a-4 \30\ formatting and content requirements for disclosure of
matters on the proxy card.
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    \30\ 17 CFR 240.14a-4.
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B. Amendment to Notice Deadlines for Soliciting Persons Other Than the
Issuer

    We proposed to amend Exchange Act Rule 14a-16(l)(2)(ii) \31\ to
improve the workability of the notice and access rules that apply to
soliciting persons, other than the issuer, that choose to use the
notice-only option.
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    \31\ 17 CFR 240.14a-16(l)(2)(ii).
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1. Proposed Amendment
    As we noted in the Proposing Release, the current requirement in
Exchange Act Rule 14a-16(l)(2) that requires soliciting persons to send
the Notice to shareholders 10 calendar days after the date that the
issuer first sends its proxy materials to shareholders can create
potential compliance issues for soliciting persons. The staff review of
filings may result in outstanding comments on a soliciting person's
preliminary proxy statement more than 10 calendar days after the
soliciting person has initially filed. The practical effect of this
requirement was to limit that soliciting person's ability to use the
notice-only option if the soliciting person was unable to file its
definitive proxy statement with the Commission by that time. To improve
implementation of the notice and access model, we proposed to amend
Exchange Act Rule 14a-16(l)(2)(ii) to require soliciting persons
relying on this alternative \32\ to file a preliminary proxy statement
within 10 calendar 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.
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    \32\ Alternatively, a soliciting person may also send the Notice
40 calendar days before the shareholder meeting to which the proxy
materials relate. 17 CFR 14a-16(l)(2)(i).
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2. Comments on the Proposed Amendment
    Comments on the proposal were limited and mixed. One commenter
supported the Commission's proposal for a soliciting person to file a
preliminary proxy statement within 10 calendar days after the issuer
files its definitive proxy statement and send its Notice no later than
the date on which it files its definitive proxy statement.\33\ Other
commenters expressed concern

that without a specific time requirement for sending the Notice prior
to the shareholder meeting, shareholders may not have sufficient time
to access and consider the materials provided or obtain paper copies
prior to casting their vote.\34\
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    \33\ See letter from ABA.
    \34\ See, e.g., letters from Ameriprise, SCSGP, and S&C.
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3. Final Rule
    After considering the comments, we are adopting the revisions as
proposed to amend Exchange Act Rule 14a-16(l)(2)(ii) to require
soliciting persons other than the issuer to file a preliminary proxy
statement within 10 calendar 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 continue to believe that the time period provides
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 rule
does not provide for a specific period of time before the meeting by
which a soliciting person is required to mail the Notice, the
soliciting person should, and generally it would be in their best
interest to, make the Notice and proxy materials available to
shareholders with sufficient time for shareholders to review the
materials and make an informed voting decision.

C. Additional Comments on the Proposed Amendments and Actions Taken by
the Commission

    Some commenters indicated their belief that the proposed amendments
would result in only modest improvements.\35\ A number of commenters
recommended revising the notice and access model to permit issuers to
send a proxy card and business reply envelope, either with or without a
short summary proxy statement accompanying the Notice in order to
increase voting rates and facilitate shareholder participation.\36\
Other commenters expressed support for reducing the amount of time
required for sending the Notice prior to the meeting from 40 days to 30
days.\37\ Still other commenters expressed concern regarding the notice
and access processing fee structure, the lack of competition for proxy
service providers and issuers' inability to negotiate the fees which
results in limitations on the amount of the cost savings from switching
to the notice and access model.\38\ We are not addressing these issues
at this time, as the Commission is still considering these and other
ways to further encourage informed shareholder participation.
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    \35\ See, e.g., letters from ABC and R&T.
    \36\ See, e.g., letters from Altman, Chamber, Computershare,
Edison, ICI, Intel, R&T, SCSGP, and STA.
    \37\ See, e.g., letters from ABA, ACC, Altman, Broadridge
Steering Committee, Calvert, Chamber, Computershare, ICI, Intel,
NIRI, Otter Tail, R&T, and SCSGP.
    \38\ See, e.g., letters from Altman, DG3, Otter Tail, NIRI, R&T,
SCSGP, and STA.
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    Many commenters suggested that the Commission should do more to
improve not only the notice and access model, but also the proxy
process generally.\39\ While supporting the proposal, a number of
commenters suggested that the Notice and lack of explanatory materials
accompanying the Notice were not the primary reasons for reduced retail
voting and advocated for more sweeping changes.\40\ A few commenters
did not directly address the proposed amendments, but made broader
appeals regarding the proxy process or provided alternative
insights,\41\ and one commenter suggested that use of the notice and
access model undermines investor protection and should be repealed.\42\
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    \39\ See, e.g., letters from ABA, ABC, Altman, BNY, Broadridge,
Broadridge Steering Committee, Chamber, Computershare, Edison, ICI,
Intel, NIRI, Otter Tail, R&T, S&C, and SCSGP.
    \40\ See, e.g., letters from ABC, Altman, ICI, NIRI, R&T, and
STA.
    \41\ See, e.g., letters from Corporate Governance, DG3, and
Moxy.
    \42\ See letter from IRWebReport.com.
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    While we are not in this release addressing the broader concerns
with the proxy system or the notice and access model raised by
commenters that went beyond the scope of the proposals, we are
continuing to consider these and other concerns relating to the proxy
process that have been raised. At the direction of the Chairman, the
Commission's staff is conducting a comprehensive review of the
mechanics by which proxies are voted and the way in which information
is conveyed to shareholders and is preparing a concept release to seek
public comment on these issues.\43\ In that review, the Commission's
staff will continue to monitor shareholder activity under, and the
effects of, the notice and access model. In addition, the Commission's
staff is undertaking educational efforts to increase understanding of
proxy mechanics generally and the notice and access model of delivery
of proxy materials.\44\
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    \43\ See Speech by Chairman Mary Schapiro to the Practising Law
Institute's 41st Annual Institute on Securities Regulation (Nov. 4,
2009) at http://sec.gov/news/speech/2009/spch110409mls.htm.
    \44\ Information about the Commission's educational efforts can
be found at: http://www.sec.gov/spotlight/proxymatters.shtml.
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D. Technical Amendments Relating to Registered Investment Companies

    We are also adopting, as proposed, technical amendments to our
rules for registered investment companies. Exchange Act Rule 14a-
16(f)(2)(iii) currently permits a registered investment company to
accompany the Notice with a prospectus or report to shareholders.\45\
The Commission recently adopted rule amendments that permit mutual
funds \46\ to satisfy their prospectus delivery obligations by sending
or giving investors key information in the form of a summary
prospectus.\47\ Consistent with permitting mutual funds to use a
summary prospectus to satisfy their delivery obligations, we are
revising our rules to permit mutual funds to accompany the Notice with
a summary prospectus.\48\ Commenters that addressed this issue
supported the technical amendments.\49\
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    \45\ 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).
    \46\ 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)(1)].
    \47\ 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).
    \48\ See amendment to Exchange Act Rule 14a-16(f)(2)(iii). We
are also adopting 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 mutual fund's summary prospectus
shall be given greater prominence than any accompanying materials.
We are amending Rule 498(f)(2) to provide that a summary prospectus
need not be given greater prominence than an accompanying Notice.
    \49\ See, e.g., letters from ABA, Calvert, and ICI.
---------------------------------------------------------------------------

III. Paperwork Reduction Act

A. Background

    Certain provisions of the amendments contain a ``collection of
information'' within the meaning of the Paperwork Reduction Act of
1995.\50\ The Commission published a notice requesting comment on the
collection of information requirements in the Proposing Release for the
amendments,

and we are submitting these requirements to the Office of Management
and Budget for review in accordance with the PRA.\51\ 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 amended is mandatory;
however, certain information collections under these rules are required
and some are voluntary. Responses to the information collections will
not be kept confidential and there is no mandatory retention period for
the information disclosed.
---------------------------------------------------------------------------

    \50\ 44 U.S.C. 3501 et seq.; 5 CFR 1320.11.
    \51\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

B. Summary of the Final Rules

    As discussed in more detail below, the amendments that we are
adopting provide additional flexibility regarding the format of the
Notice that is sent to shareholders, permit issuers and other
soliciting persons to better communicate with shareholders by including
explanatory materials regarding the reasons for the use of the notice
and access rules and the process of receiving and reviewing proxy
materials and voting, and revise the timeframe for delivering a Notice
to shareholders when a soliciting person other than the issuer relies
on the notice-only option.
    In the Proposing Release, we requested comment on the PRA analysis.
We received no comments that addressed our burden estimates for the
proposed amendments.
1. Regulation 14A and 14C
    The titles for the collections of information for operating
companies are:
     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 \52\ and the release in which we
adopted amendments requiring issuers and other soliciting persons to
follow the model.\53\ We submitted the revisions in those releases and
are submitting the amendments to OMB for review in accordance with the
PRA.
---------------------------------------------------------------------------

    \52\ See Internet Availability of Proxy Materials, Release No.
34-52926 (Dec. 8, 2005) [70 FR 74597].
    \53\ See the Internet Availability of Proxy Material Adopting
Release at note 9 above.
---------------------------------------------------------------------------

    We have made some additional changes to the amendments, but we do
not expect those changes to affect our estimates.\54\ The following
table summarizes for purposes of the PRA the burden estimates for
Schedules 14A and 14C reflecting amendments that permit, but do not
require, an issuer or other soliciting person to include explanatory
materials with the Notice, which are the only amendments in the release
affecting our burden estimates:
---------------------------------------------------------------------------

    \54\ While the revised amendments additionally permit an
explanation of the reasons for an issuer's use of the notice and
access rules, we expect the additional explanation to be part of the
same drafting process and to be limited to a few lines of text.
Likewise, the required clarification that the Notice is not a form
for voting should not add materially to the time to prepare the
disclosure. We therefore believe the changes do not affect our
burden estimates.

                    Table 1--Calculation of Incremental Paperwork Reduction Act Burden Estimates for Proxy and Information Statements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                $400
                         Form                               Annual        Incremental     Incremental      75% Issuer          25%         Professional
                                                           responses      hours/form        burden                         Professional        cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   (A)             (B)     (C)=(A)*(B)      (D)=(C)*0.75     (E)=(C)*0.25   (F)=(E)*$400
                                                       -------------------------------------------------------------------------------------------------
Schedule 14A..........................................            7300             0.5            3650           2737.5            912.5        $365,000
Schedule 14C..........................................             680             0.5             340            255               85            34,000
                                                       -------------------------------------------------------------------------------------------------
    Total.............................................            7980  ..............            3990           2992.5            997.5         399,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. 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,\55\ Solicitation of Proxies, Consents
and Authorizations'' (OMB Control No. 3235-0158). Rule 20a-1 under the
Investment Company Act \56\ 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,\57\ Schedule
14A,\58\ and all other rules and regulations adopted under Section
14(a) of the Exchange Act.\59\ 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.
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.\60\ 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.
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 80a-1 et seq.
    \56\ 17 CFR 270.20a-1.
    \57\ 17 CFR 240.14a-1 et seq.
    \58\ 17 CFR 240.14a-101.
    \59\ 15 U.S.C. 78n(a).
    \60\ See the Internet Availability of Proxy Material Adopting
Release at note 9 above.
---------------------------------------------------------------------------

    The following discussion summarizes the burden estimates for Rule
20a-1 that we provided in the Proposing Release. For purposes of the
PRA, we estimate that the total annual reporting burden for Rule 20a-1
increased by approximately 1,378 hours and that the annual cost
increased by approximately $735,000 for the services of outside
professionals to comply with the disclosure provisions of the existing
notice and access model. In addition, for purposes of the PRA, we
estimate that a typical investment company issuer spends an additional
five hours per year, or a total of 6,125 hours, to maintain these
records as to which of its shareholders have made an election to
receive proxy materials in paper or by e-mail. Further, we estimate
that the additional burden to prepare an intermediary's Notice is
approximately one hour, or a total annual burden of 1,225 hours for all
investment company

proxy solicitations. Finally, like investment company issuers, we
estimate that the requirement to maintain records to keep track of
which beneficial owners have made a permanent election to receive proxy
materials in paper or by e-mail results in an additional annual burden
of five hours, or a total of 6,125 hours, for intermediaries. We
received no comments on the estimates and are making no adjustments. In
total, we estimate that the annual PRA reporting burden for current
Rule 20a-1 increased by 14,853 hours and $735,000 in professional costs
to reflect compliance with the existing notice and access model.
    With respect to the amendments in this release, we have made some
additional clarifying changes, but we do not expect those changes to
affect our estimates. We estimate that the amendments that permit, but
do not require, an issuer or other soliciting person to include
explanatory materials with the Notice, increase the PRA burden
estimates under Rule 20a-1 by approximately 459 hours and $61,250 in
professional costs.\61\
---------------------------------------------------------------------------

    \61\ See the Proposing Release for calculations underlying the
burden estimates.
---------------------------------------------------------------------------

IV. Cost-Benefit Analysis

A. Introduction

    We are adopting amendments designed to improve implementation of
the notice and access model by revising the legend requirements in the
rule to make them more flexible, permitting the Notice to be
accompanied by explanatory materials regarding the reasons for the use
of the notice and access rules and the process of receiving and
reviewing the proxy materials and voting, and revising the timeframe
for delivering a Notice to shareholders when a soliciting person other
than the issuer relies on the notice-only option.\62\ We received no
comments on the costs and benefits of the amendments.
---------------------------------------------------------------------------

    \62\ 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. No commenters suggested it would have a substantial
impact.
---------------------------------------------------------------------------

    We expect the amendments to:
     Facilitate participation by shareholders who may be
confused by the operation of the notice and access model;
     Provide additional flexibility 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
reasons for the use of the notice and access rules and the process of
receiving and reviewing the proxy materials and voting to accompany the
Notice, the amendments are intended to reduce regulatory impediments
and improve understanding of the notice and access model for
participating shareholders. Improved understanding of the model through
an explanation of the reasons for the use of the Notice and the process
of receiving and reviewing proxy materials and voting should reduce
confusion and may thereby improve the efficiency and effectiveness of
the proxy voting system. The benefits may be limited if issuers send
notices to shareholders that are less likely to respond. Some
commenters noted lower shareholder response rates under the notice and
access model.\63\
---------------------------------------------------------------------------

    \63\ See, e.g., Broadridge, BNY, Computershare, and R&T.
---------------------------------------------------------------------------

    Revising one of the two alternative Notice deadlines applicable to
soliciting persons other than issuers is intended to 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 through use of the notice-
only option.

C. Costs

    Eliminating the specific limitations of the legend requirement may
result in some soliciting persons providing a more confusing Notice.
This may increase the cost of shareholder participation in the proxy
process, and to the extent that it affects participation, could distort
votes and outcomes. In addition, an issuer or other soliciting person
that chooses to include explanatory materials in the same mailing with
the Notice will incur the cost of preparing that information.\64\ For
purposes of the PRA, we estimate that the amendments will cause an
aggregate annual increase in the compliance burden for operating and
investment company 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.
---------------------------------------------------------------------------

    \64\ 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 of forwarding proxy materials, we do not expect
intermediaries to incur costs associated with the rule.
---------------------------------------------------------------------------

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

    Section 23(a) of the Exchange Act \65\ 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,\66\ Section 3(f) of the Exchange Act \67\ and Section 2(c) of the
Investment Company Act \68\ 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.
---------------------------------------------------------------------------

    \65\ 15 U.S.C. 78w(a).
    \66\ 15 U.S.C. 77b(b).
    \67\ 15 U.S.C. 78c(f).
    \68\ 15 U.S.C. 80a-2(c).
---------------------------------------------------------------------------

    The amendments that we are adopting permit additional flexibility
in designing the Notice, permit issuers and other soliciting persons to
better communicate with shareholders by accompanying the Notice with
explanatory materials regarding the reasons for the use of the notice
and access rules and the process of receiving and reviewing the proxy
materials and voting, and revise the timeframe for delivering a Notice
to shareholders when a soliciting person other than the issuer relies
on the notice-only option. The 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.
    No commenters suggested, and we do not anticipate, any effect on
competition

or capital formation as a result of these revisions.

VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis has been prepared in
accordance with 5 U.S.C. 603. It relates to revisions to Exchange Act
Rule 14a-16 and related changes that would permit some additional
flexibility in designing the Notice, permit issuers and other
soliciting persons to better communicate with shareholders by
accompanying the Notice with explanatory materials regarding the
reasons for the use of the notice and access rules and the process of
receiving and reviewing the proxy materials and voting, and revise the
timeframe for delivering a Notice to shareholders when a soliciting
person other than the issuer relies on the notice-only option. An
Initial Regulatory Flexibility Analysis (IRFA) was prepared in
accordance with the Regulatory Flexibility Act in conjunction with the
Proposing Release. The Proposing Release included, and solicited
comment on, the IRFA.

A. Reasons for, and Objectives of, the Amendments

    The 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 these revisions will improve the operation of
the model without adversely affecting soliciting persons' or
shareholders' abilities to participate effectively 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 the restrictions in our
regulations. The amendment to the timing requirements for soliciting
persons other than the issuer to file their preliminary proxy
statements is designed to better enable soliciting persons other than
the issuer to use the notice-only option.

B. Significant Issues Raised by Commenters

    We did not receive comments specifically addressing the impact of
the proposed amendments on small entities.

C. Small Entities Subject to the Amendments

    The amendments affect issuers that are small entities. Exchange Act
Rule 0-10(a) \69\ 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.
---------------------------------------------------------------------------

    \69\ 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.\70\ Approximately 168 registered investment companies meet this
definition. Moreover, approximately 33 business development companies
may be considered small entities.
---------------------------------------------------------------------------

    \70\ 17 CFR 270.0-10.
---------------------------------------------------------------------------

    Paragraph (c)(1) of Rule 0-10 under the Exchange Act \71\ 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 Exchange Act Rule 17a-5(d); \72\
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.\73\ Small Business
Administration regulations define ``small entities'' to include banks
and savings associations with total assets of $165 million or less.\74\
The Commission estimates that the amendments might apply to
approximately 9,475 banks, approximately 5,816 of which could be
considered small banks with assets of $165 million or less.\75\
---------------------------------------------------------------------------

    \71\ 17 CFR 240.0-10(c)(1).
    \72\ 17 CFR 240.17a-5(d).
    \73\ 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 in FOCUS Report filings.
    \74\ 13 CFR 121.201.
    \75\ We note that while not subject to the amendments, the
amendments 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. 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.
---------------------------------------------------------------------------

D. Reporting, Recordkeeping and Other Compliance Requirements

    The amendments revise the timeframe for delivering a Notice to
shareholders when a soliciting person other than the issuer relies on
the notice-only option, require clarification that the Notice is not a
form for voting and permit, but do not require, issuers or other
soliciting persons to include additional, explanatory material in their
Notice.

E. Agency Action To Minimize Effect on Small Entities

    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. 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 better communicate with shareholders by accompanying the Notice with
explanatory materials regarding the reasons for the use of the notice
and access rules and the process of receiving and reviewing the proxy
materials and voting, and revising the timeframe for delivering a
Notice to shareholders when a soliciting person other than the issuer
relies on the notice-only option.
    We considered the use of performance standards rather than design
standards in the amendments. The amendments contain both performance
standards and design standards. We are revising existing design
standards, such as the deadline applicable to soliciting persons other
than the issuer. However, we are imposing 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 amendments regarding explanatory materials
do not dictate wording of such information, but allow flexibility in
how to communicate the information.
    We considered different compliance standards for the small entities
that will be affected by the amendments. In the Proposing Release, we
solicited comment regarding the possibility of different standards for
small entities. We did not receive comment on this particular issue. We
are not aware of

any different standards that would be consistent with the purposes of
the amendments.

VII. Statutory Authority and Text of the Amendments

    The amendments described in this release are being adopted 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
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.

0
For the reasons set out in the preamble, the Commission amends Title
17, Chapter II of the Code of Federal Regulation as follows.

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

0
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.
* * * * *

0
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

0
3. The general authority citation for Part 240 is revised to read 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 and 12 U.S.C.
5221(e)(3), unless otherwise noted.
* * * * *
0
4. Amend Sec.  240.14a-16 by:
0
a. Revising paragraph (d)(1).
0
b. Redesignating paragraphs (d)(2) through (d)(8) as paragraphs (d)(5)
through (d)(11);
0
c. Adding new paragraphs (d)(2) through (d)(4);
0
d. Removing the word ``and'' at the end of paragraph (f)(2)(ii);
0
e. Revising paragraph (f)(2)(iii);
0
f. Adding paragraph (f)(2)(iv);
0
g. Revising paragraph (l)(2)(ii);
0
h. Revising paragraph (n)(4)(i); and
0
i. In paragraph (n)(4)(iii) removing the reference to ``(d)(7)'' and
adding in its place ``(d)(10)''.
    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 is not a form for voting
and 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 reasons for a registrant's use of the
rules detailed in this section and 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.
* * * * *
    (n) * * *
    (4) * * *
    (i) Instructions regarding the nature of the communication pursuant
to paragraph (d)(2) of this section;
* * * * *

    By the Commission.

    Dated: February 22, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-3891 Filed 2-25-10; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 182 (Wednesday, September 19, 2018)]
[Proposed Rules]
[Pages 47321-47324]
[FR Doc No: 2018-20106]

-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2018-0797; Product Identifier 2018-NM-096-AD]
RIN 2120-AA64

Airworthiness Directives; Saab AB, Saab Aeronautics (Formerly
Known as Saab AB, Saab Aerosystems) Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

-----------------------------------------------------------------------

SUMMARY: We propose to supersede Airworthiness Directive (AD) 2018-11-
07, which applies to all Saab AB, Saab Aeronautics Model SAAB 2000
airplanes. AD 2018-11-07 requires a one-time inspection of an affected
lug attaching the aileron bellcrank support bracket to the rear spar of
the wing and the adjacent area of the installed support brackets, a
thickness measurement of the affected lug, repetitive inspections of
the affected aileron bellcrank support brackets, and corrective actions
if necessary. AD 2018-11-07 also provided an optional terminating
action for the repetitive inspections. Since we issued AD 2018-11-07,
we have determined that it is necessary to require the terminating
action. This proposed AD would retain the actions of AD 2018-11-07 and
require the terminating action for the repetitive inspections. We are
proposing this AD to address the unsafe condition on these products.

DATES: We must receive comments on this proposed AD by November 5,
2018.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For service information identified in this NPRM, contact Saab AB,
Saab Aeronautics, SE-581 88, Link[ouml]ping, Sweden; telephone +46 13
18 5591; fax +46 13 18 4874; email [email protected];
internet http://www.saabgroup.com. You may view this referenced service
information at the FAA, Transport Standards Branch, 2200 South 216th
St., Des Moines, WA. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>.

Examining the AD Docket

    You may examine the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-
0797; or in person at Docket Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. The AD docket contains
this NPRM, the regulatory evaluation, any comments received, and other
information. The street address for Docket Operations (phone 800-647-
5527) is in the

ADDRESSES section. Comments will be available in the AD docket shortly
after receipt.

FOR FURTHER INFORMATION CONTACT: Shahram Daneshmandi, Aerospace
Engineer, International Section, Transport Standards Branch, FAA, 2200
South 216th St., Des Moines, WA 98198; telephone and fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Comments Invited

    We invite you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under the ADDRESSES section. Include ``Docket No. FAA-2018-0797;
Product Identifier 2018-NM-096-AD'' at the beginning of your comments.
We specifically invite comments on the overall regulatory, economic,
environmental, and energy aspects of this proposed AD. We will consider
all comments received by the closing date and may amend this proposed
AD based on those comments.
    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We
will also post a report summarizing each substantive verbal contact we
receive about this proposed AD.

Discussion

    We issued AD 2018-11-07, Amendment 39-19295 (83 FR 24399, May 29,
2018) (``AD 2018-11-07''), for all Saab AB, Saab Aeronautics Model SAAB
2000 airplanes. AD 2018-11-07 requires a one-time inspection of the
affected lug attaching the aileron bellcrank support bracket to the
rear spar of the wing and the adjacent area of the installed aileron
bellcrank support brackets, a thickness measurement of the affected lug
attaching the support bracket to the rear spar of the wing, repetitive
inspections of the affected aileron bellcrank support brackets, and
corrective actions if necessary. AD 2018-11-07 also provides an
optional terminating action for the repetitive inspections. AD 2018-11-
07 resulted from the identification of a manufacturing defect on
certain aileron bellcrank support brackets that resulted in the
material thickness of the affected lug attaching the support bracket to
the rear spar of the wing to be insufficient. We issued AD 2018-11-07
to detect and correct the defect of the aileron bellcrank support
bracket, which, in the event of an aileron jam, could lead to failure
of the support bracket and result in reduced controllability of the
airplane.

Actions Since AD 2018-11-07 Was Issued

    In the preamble of AD 2018-11-07, we stated that we were
considering further rulemaking to require the replacement of all
affected support brackets. The planned compliance time for the support
bracket replacements allowed adequate time for notice and opportunity
for public comment on the merits of the replacement. Therefore, the
requirement for the replacement was not included in AD 2018-11-07. We
have now determined that further rulemaking is necessary to include
this requirement.

Related Service Information Under 1 CFR Part 51

    Saab AB, Saab Aeronautics has issued Saab Service Bulletin 2000-27-
056, dated April 18, 2018. This service information describes
procedures for a detailed visual inspection for cracks, corrosion, and
damage (including missing paint) of the affected lug and the adjacent
area of the installed aileron bellcrank support brackets on the left-
hand and right-hand wings; a thickness measurement of the affected lug
attaching the support bracket to the rear spar of the wing; and
replacement of aileron bellcrank support brackets. This service
information is reasonably available because the interested parties have
access to it through their normal course of business or by the means
identified in the ADDRESSES section.

FAA's Determination

    This product has been approved by the aviation authority of another
country, and is approved for operation in the United States. Pursuant
to our bilateral agreement with the State of Design Authority, we have
been notified of the unsafe condition described in the MCAI and service
information referenced above. We are proposing this AD because we
evaluated all the relevant information and determined the unsafe
condition described previously is likely to exist or develop on other
products of the same type design.

Proposed Requirements of This NPRM

    This proposed AD would retain the requirements of AD 2018-11-07,
and change the optional terminating action into a requirement. This
proposed AD would require accomplishing the actions specified in the
service information described previously. This proposed AD would remove
the requirement to send the inspection results to the manufacturer.

Differences Between This Proposed AD and the MCAI or Service
Information

    Where the MCAI specifies to submit an inspection report, this
proposed AD would not require reporting.

Costs of Compliance

    We estimate that this proposed AD affects 8 airplanes of U.S.
registry. We estimate the following costs to comply with this proposed
AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
              Labor cost                      Parts cost            Cost per product     Cost on U.S.  operators
----------------------------------------------------------------------------------------------------------------
Up to 19 work-hours x $85 per hour =   Up to $18,074..........  Up to $19,689..........  Up to $157,512.
 $1,615.
----------------------------------------------------------------------------------------------------------------

    We have received no definitive data for the on-condition costs
specified in this proposed AD.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. Subtitle VII: Aviation Programs,
describes in more detail the scope of the Agency's authority.
    We are issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701: ``General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.
    This proposed AD is issued in accordance with authority delegated
by the Executive Director, Aircraft Certification Service, as
authorized by FAA Order 8000.51C. In accordance

with that order, issuance of ADs is normally a function of the
Compliance and Airworthiness Division, but during this transition
period, the Executive Director has delegated the authority to issue ADs
applicable to transport category airplanes to the Director of the
System Oversight Division.

Regulatory Findings

    We determined that this proposed AD would not have federalism
implications under Executive Order 13132. This proposed AD would not
have a substantial direct effect on the States, on the relationship
between the national Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
    For the reasons discussed above, I certify this proposed
regulation:
    1. Is not a ``significant regulatory action'' under Executive Order
12866,
    2. Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979),
    3. Will not affect intrastate aviation in Alaska, and
    4. Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

The Proposed Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by removing Airworthiness Directive (AD)
2018-11-07, Amendment 39-19295 (83 FR 24399, May 29, 2018), and adding
the following new AD:

Saab AB, Saab Aeronautics (Formerly Known as Saab AB, Saab
Aerosystems): Docket No. FAA-2018-0797; Product Identifier 2018-NM-
096-AD.

(a) Comments Due Date

    We must receive comments by November 5, 2018.

(b) Affected ADs

    This AD replaces AD 2018-11-07, Amendment 39-19295 (83 FR 24399,
May 29, 2018) (``AD 2018-11-07'').

(c) Applicability

    This AD applies to Saab AB, Saab Aeronautics (formerly known as
Saab AB, Saab Aerosystems) Model SAAB 2000 airplanes, certificated
in any category, all manufacturer serial numbers.

(d) Subject

    Air Transport Association (ATA) of America Code 27, Flight
controls.

(e) Reason

    This AD was prompted by the identification of a manufacturing
defect on certain aileron bellcrank support brackets that resulted
in insufficient material thickness of the affected lug attaching the
support bracket to the rear spar of the wing. We are issuing this AD
to detect and correct a defect of the aileron bellcrank support
bracket, which, in the event of an aileron jam, could lead to
failure of the support bracket and result in reduced controllability
of the airplane.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.

(g) Retained Definitions, With No Changes

    (1) This paragraph restates the definition specified in
paragraph (g)(1) of AD 2018-11-07, with no changes. For the purposes
of this AD, affected support brackets are aileron bellcrank support
brackets, part number (P/N) 7327993-813 and P/N 7327993-814, for
which it has been determined that the affected lug attaching the
support bracket to the rear spar of the wing has a thickness of less
than 2.75 mm (0.108 in.), as specified in Saab Service Bulletin
2000-27-056, dated April 18, 2018.
    (2) This paragraph restates the definition specified in
paragraph (g)(2) of AD 2018-11-07, with no changes. For the purposes
of this AD, serviceable support brackets are aileron bellcrank
support brackets, P/N 7327993-813 and P/N 7327993-814, for which it
has been determined that the affected lug attaching the support
bracket to the rear spar of the wing has a thickness of 2.75 mm
(0.108 in.) or more, as specified in Saab Service Bulletin 2000-27-
056, dated April 18, 2018.

(h) Retained One-Time Inspection, With No Changes

    This paragraph restates the requirements of paragraph (h) of AD
2018-11-07, with no changes. Within 100 flight cycles or 30 days,
whichever occurs first after June 13, 2018 (the effective date of AD
2018-11-07), accomplish a detailed visual inspection for cracks,
corrosion, and damage (including missing paint) of the affected lug
and the adjacent area of the aileron bellcrank support brackets
installed on the left-hand (LH) and right-hand (RH) wings, and
measure the thickness of the affected lug attaching the aileron
bellcrank support bracket to the rear spar of the wing, in
accordance with the Accomplishment Instructions of Saab Service
Bulletin 2000-27-056, dated April 18, 2018.

(i) Retained Repetitive Inspections, With No Changes

    This paragraph restates the requirements of paragraph (i) of AD
2018-11-07, with no changes. If, during the measurement required by
paragraph (h) of this AD, it is determined that the affected lug
attaching the aileron bellcrank support bracket to the rear spar of
the wing has a thickness of less than 2.75 mm (0.108 in.), at
intervals not to exceed 100 flight cycles, accomplish a detailed
visual inspection for cracks, corrosion, and damage (including
missing paint) of that affected support bracket in accordance with
the Accomplishment Instructions of Saab Service Bulletin 2000-27-
056, dated April 18, 2018. Accomplishing the replacement specified
in paragraph (l) of this AD terminates the repetitive inspections
required by this paragraph for that bracket.

(j) Retained Corrective Actions, With No Changes

    This paragraph restates the requirements of paragraph (j) of AD
2018-11-07, with no changes. If, during any inspection required by
paragraph (h) or (i) of this AD, any crack, corrosion, or damage
(including missing paint) is found, before further flight, obtain
corrective actions instructions approved by the Manager,
International Section, Transport Standards Branch, FAA; or the
European Aviation Safety Agency (EASA); or Saab AB, Saab
Aeronautics' EASA Design Organization Approval (DOA). If approved by
the DOA, the approval must include the DOA-authorized signature.
Accomplish the corrective actions within the compliance time
specified therein. If no compliance time is specified in the
corrective actions instructions, accomplish the corrective action
before further flight.

(k) Retained Parts Installation Limitation, With No Changes

    This paragraph restates the requirements of paragraph (m) of AD
2018-11-07, with no changes. As of June 13, 2018 (the effective date
of AD 2018-11-07), it is allowed to install on any airplane an
aileron bellcrank support bracket P/N 7327993-813 or P/N 7327993-
814, provided it is a serviceable support bracket.

(l) New Requirement of This AD: Replacement

    Within 6 months after the effective date of this AD, replace
each affected support bracket with a serviceable support bracket, in
accordance with the Accomplishment Instructions of Saab Service
Bulletin 2000-27-056, dated April 18, 2018. Replacing each affected
support bracket terminates the inspections required by paragraph (i)
of this AD for that airplane.

(m) Other FAA AD Provisions

    (1) Alternative Methods of Compliance (AMOCs): The Manager,
International Section, Transport Standards Branch, FAA, has the
authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal

inspector or local Flight Standards District Office, as appropriate.
If sending information directly to the International Section, send
it to the attention of the person identified in paragraph (n)(2) of
this AD. Information may be emailed to: [email protected].
    (i) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.
    (ii) AMOCs approved previously for AD 2018-11-07, are approved
as AMOCs for the corresponding provisions of this AD.
    (2) Contacting the Manufacturer: As of the effective date of
this AD, for any requirement in this AD to obtain corrective actions
from a manufacturer, the action must be accomplished using a method
approved by the Manager, International Section, Transport Standards
Branch, FAA; or the European Aviation Safety Agency (EASA); or Saab
AB, Saab Aeronautics' EASA Design Organization Approval (DOA). If
approved by the DOA, the approval must include the DOA-authorized
signature.

(n) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information
(MCAI) EASA Airworthiness Directive 2018-0103, dated April 30, 2018,
for related information. This MCAI may be found in the AD docket on
the internet at http://www.regulations.gov by searching for and
locating Docket No. FAA-2018-0797.
    (2) For more information about this AD, contact Shahram
Daneshmandi, Aerospace Engineer, International Section, Transport
Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198;
telephone and fax<PHONE_NUMBER>.
    (3) For service information identified in this AD, contact Saab
AB, Saab Aeronautics, SE-581 88, Link[ouml]ping, Sweden; telephone
+46 13 18 5591; fax +46 13 18 4874; email
[email protected]; internet http://www.saabgroup.com. You may view this service information at the FAA,
Transport Standards Branch, 2200 South 216th St., Des Moines, WA.
For information on the availability of this material at the FAA,
call<PHONE_NUMBER>.

    Issued in Des Moines, Washington, on September 10, 2018.
Michael Kaszycki,
Acting Director, System Oversight Division, Aircraft Certification
Service.
[FR Doc. 2018-20106 Filed 9-18-18; 8:45 am]
 BILLING CODE 4910-13-P