\230\ Id.; see also Virginia Bankshares, 501 U.S. at 1092, 1095.
For example, if a speaker states the belief that a company has the
highest market share, while knowing that the company in fact has the
second highest market share, that statement of belief would be an
``untrue statement of fact'' about the speaker's own belief.
    \231\ Omnicare, 575 U.S. at 185-86; see also Virginia
Bankshares, 501 U.S. at 1092, 1095. For example, in stating its
opinion that shareholders should vote for a particular director-
candidate, a PVAB may support that opinion by reference to that
candidate's prior professional experience. Those descriptions of the
candidate's professional experience would be statements of fact
potentially subject to liability under Rule 14a-9, notwithstanding
the context in which they were made (i.e., as support for a
statement of opinion).
    \232\ Omnicare, 575 U.S. at 188.
    \233\ Id. at 189. In Omnicare, the court offered the example of
``an unadorned statement of opinion about legal compliance: `We
believe our conduct is lawful.''' Id. at 188. The court noted that
``[i]f the issuer makes that statement without having consulted a
lawyer, it could be misleadingly incomplete.'' Id. This example can
also be applied to a PVAB's proxy voting advice if, for example, it
makes a statement of opinion regarding the legality of a
registrant's proposal or corporate action without having consulted a
lawyer.

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

    Omnicare and Virginia Bankshares support our view that neither mere
disagreement with a PVAB's analysis, methodology, or opinions, nor a
bare assertion that a PVAB failed to reveal the basis for its
conclusions, would suffice to state a claim under Rule 14a-9. Rather, a
litigant ``must identify particular (and material) facts'' indicating a
misstatement or omission of a material fact that renders a PVAB's
statements misleading in one of the three senses above--which, the
Supreme Court noted, is ``no small task.'' \234\ As such, a PVAB would
not face liability under Rule 14a-9 for exercising its discretion to
rely on a particular analysis, methodology, or set of information--
while relying less heavily on or not adopting alternative analyses,
methodologies, or sets of information, including those advanced by a
registrant or other party--when formulating its voting recommendations.
Similarly, a PVAB would not face liability under Rule 14a-9, for
example, simply because it did not accept a registrant's suggested
revisions to its proxy voting advice concerning such discretionary
matters. Instead, a PVAB's potential liability under Rule 14a-9 \235\
turns on whether its proxy voting advice contains a material
misstatement or omission of fact.\236\
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    \234\ Id. at 194. We further note that both Omnicare and
Virginia Bankshares were cases against registrants; we are not aware
of any enforcement actions or private lawsuits against a PVAB based
on statements of opinion in connection with proxy voting matters.
    \235\ This release does not address any duties or liabilities
that a PVAB may have under the Investment Advisers Act of 1940, as
applicable.
    \236\ Several commenters expressed concern that a statement in
the Interpretive Release suggests a PVAB may be subject to liability
under Rule 14a-9 for its ``opinions, reasons, recommendations or
beliefs'' even in the absence of a misstatement or omission of
material fact. See letters from Glass Lewis; ISS. That is not the
case. Rather, the Commission noted, citing Virginia Bankshares, that
``Rule 14a-9 extends to opinions, reasons, recommendations, or
beliefs that are disclosed as part of a solicitation, which may be
statements of material facts for purposes of the rule.''
Interpretive Release at 47419 & n.31 (emphasis added). That
statement is consistent with, and was merely intended to reflect,
the case law summarized above regarding the limited circumstances in
which a statement of opinion may be actionable under Rule 14a-9 as a
misstatement or omission of material fact.
---------------------------------------------------------------------------

    One commenter asserted that the Commission's discussion in the 2021
Proposing Release ``fails to appreciate that any statements of opinion
by [PVABs] must be considered as a part of the total mix of information
being provided by [PVABs] as to how their opinions are generated'' and
that ``[a]ny statement of opinion by a [PVAB] will carry with it the
implicit representation that the opinion was generated using the robust
methodologies otherwise described by [PVABs], and the implicit
representation that the [PVAB's] opinion is not the result of a
conflict of interest.'' \237\ However, Omnicare and Virginia Bankshares
recognize that statements of opinion can, in some circumstances, carry
such implicit factual representations as to the basis for the opinion.
Further, we do not believe that the commenter has offered any basis to
conclude that the principles set forth in those cases should or would
apply differently to proxy voting advice.
---------------------------------------------------------------------------

    \237\ See letter from Prof. Verret.
---------------------------------------------------------------------------

    The same commenter also asserted that the discussion in the 2021
Proposing Release will not receive judicial deference.\238\ That
assertion misunderstands the purpose of that discussion, which is to
summarize our understanding of the applicable case law to help clarify
for market participants the limited circumstances in which a PVAB's
statement of opinion may be subject to liability under Rule 14a-9. To
the extent this discussion does provide such clarity, we believe it may
help mitigate the concerns regarding uncertainty as to the application
of Rule 14a-9 to PVABs' statements of opinion that could impair the
independence of their proxy voting advice.
---------------------------------------------------------------------------

    \238\ Id.
---------------------------------------------------------------------------

    In addition, while one commenter recommended that, rather than
delete Note (e), we should amend it to include our view that Rule 14a-9
liability does not extend to mere differences of opinion regarding
proxy voting advice,\239\ we decline to do so. Amending Note (e) as
that commenter suggested would not address our reasons for deleting it.
For example, even with the commenter's suggested change, Note (e) would
continue to raise a risk of confusion regarding the application of Rule
14a-9 to proxy voting advice because it would continue to single out
proxy voting advice and its methodology, its sources of information,
and any conflicts of interest.
---------------------------------------------------------------------------

    \239\ See supra note 217 and accompanying text.
---------------------------------------------------------------------------

    Although some commenters that generally supported the 2021 Proposed
Amendments recommended that we exempt all or portions of proxy voting
advice from Rule 14a-9 liability,\240\ we are not doing so. We believe
that the law we have summarized above regarding the application of Rule
14a-9 to statements of opinion adequately addresses the concerns that
PVABs, their clients, and others have expressed regarding the potential
for perceived litigation risks to impair the independence of proxy
voting advice, particularly in conjunction with our deletion of Note
(e). Exempting all or parts of proxy voting advice from Rule 14a-9
liability entirely could eliminate liability even in the narrow
circumstances considered in Omnicare and Virginia Bankshares, in which
statements of opinion in such advice contain a material misstatement or
omission. We believe that it is appropriate to continue to subject
proxy voting advice to Rule 14a-9 liability for material misstatements
or omissions to help ensure that PVABs' clients are provided with the
information they need to make fully informed voting decisions and to
mitigate some of the concerns that opposing commenters raised in their
comment letters.\241\
---------------------------------------------------------------------------

    \240\ See supra notes 205-209 and accompanying text.
    \241\ See, e.g., supra notes 102-105 and accompanying text
(expressing concern that, without the Rule 14a-2(b)(9)(ii)
conditions, PVABs will be exempt from the proxy rules' information
and filing requirements without sufficient alternative investor
protection mechanisms, the transparency of proxy voting advice could
suffer, and the conflicts of interest disclosure requirement in Rule
14a-2(b)(9)(i) will be hollow); supra notes 192-193 and accompanying
text (expressing concern that the deletion of Note (e) will weaken
antifraud provisions that were intended to protect investors against
PVABs' false or misleading statements and reduce transparency in the
public markets); supra note 196 and accompanying text (expressing
concern regarding the prevalence of errors in proxy voting advice);
supra note 216 and accompanying text (expressing concern about any
efforts to exempt all or parts of proxy voting advice from Rule 14a-
9 liability).
---------------------------------------------------------------------------

    Finally, we note that several commenters expressed similar process-
based concerns regarding the proposed deletion of Note (e) as they
expressed with respect to the proposed amendments to Rule 14a-
2(b)(9).\242\ However, for the reasons discussed in Section II.A.3 and
above, we believe that deleting Note (e) is appropriate.\243\
---------------------------------------------------------------------------

    \242\ See supra note 191 and accompanying text.
    \243\ See supra note 155 and accompanying text. Further, the
timing-based concerns that opposing commenters expressed with
respect to the 2021 Proposed Amendments are less relevant with
respect to Note (e) given that Note (e) became effective on Nov. 2,
2020, before we issued the 2021 Proposed Amendments. 2020 Adopting
Release at 55082, 55122.
---------------------------------------------------------------------------

III. Other Matters

    If any of the provisions of these amendments, or the application
thereof to any person or circumstance, is held

to be invalid, such invalidity shall not affect other provisions or the
application of such provisions to other persons or circumstances that
can be given effect without the invalid provision or application. In
particular, the amendments to Rule 14a-2(b)(9) operate independently
from the amendments to Rule 14a-9.
    Pursuant to the Congressional Review Act, the Office of Information
and Regulatory Affairs has designated these amendments a ``major
rule,'' as defined by 5 U.S.C. 804(2).

IV. Economic Analysis

    As discussed above, the purpose of these amendments is to avoid
burdens on PVABs that may impede and impair the timeliness and
independence of proxy voting advice and avoid misperceptions regarding
the application of Rule 14a-9 liability to proxy voting advice, while
also preserving investors' confidence in the integrity of such advice.
Specifically, we are amending Rule 14a-2(b)(9) to rescind the Rule 14a-
2(b)(9)(ii) conditions (as well as the related safe harbors and
exclusions set forth in Rules 14a-2(b)(9)(iii) through (vi)) to address
the risks that these conditions pose to the cost, timeliness, and
independence of proxy voting advice on which many investors rely. We
also are amending Rule 14a-9 to delete paragraph (e) of the Note to
that rule because Note (e) appears not to have achieved--and, instead,
appears to have undermined--its stated goal.
    The discussion below addresses the economic effects of the
amendments, including their anticipated costs and benefits, as well as
the likely effects of the amendments on efficiency, competition and
capital formation.\244\ We also analyze the potential costs and
benefits of reasonable alternatives to these amendments. Where
practicable, we have attempted to quantify the economic effects of the
amendments; however, in most cases, we are unable to do so because
either the necessary data is unavailable or certain effects are not
quantifiable.
---------------------------------------------------------------------------

    \244\ Section 3(f) of the Exchange Act [17 U.S.C. 78c(f)]
directs the Commission, when engaging in rulemaking where it is
required to consider or determine whether an action is necessary or
appropriate in the public interest, to consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition, and capital formation. Further, Section 23(a)(2) of the
Exchange Act [17 U.S.C. 78w(a)(2)] requires the Commission when
making rules under the Exchange Act, to consider the impact that the
rules would have on competition, and 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.
---------------------------------------------------------------------------

A. Economic Baseline

    The baseline against which the costs, benefits, and the impact on
efficiency, competition, and capital formation of the amendments are
measured consists of the current regulatory requirements applicable to
registrants, PVABs, investment advisers, and other clients of PVABs, as
well as current industry practices used by these entities in connection
with the preparation, distribution, and use of proxy voting advice.
    The 2020 Adopting Release provided an overview of the role of PVABs
in the proxy process, including a discussion of existing economic
research on PVABs and the nature of proxy voting advice they
provide.\245\
---------------------------------------------------------------------------

    \245\ See 2020 Adopting Release at 55122-32.
---------------------------------------------------------------------------

1. Affected Parties and Current Market Practices
a. Proxy Voting Advice Businesses
    As of November 2021, the proxy voting advice industry in the United
States consists of three major firms: ISS, Glass Lewis, and Egan-Jones.
     ISS, founded in 1985, is a privately held company that
provides research and analysis of proxy issues, custom policy
implementation, vote recommendations, vote execution, governance data,
and related products and services.\246\ ISS also provides advisory/
consulting services, analytical tools, and other products and services
to corporate registrants through ISS Corporate Solutions, Inc. (a
wholly owned subsidiary).\247\ As of May 2022, ISS had nearly 2,600
employees in 29 locations, and covers approximately 48,000 shareholder
meetings in 115 countries, annually.\248\ ISS states that it executes
more than 12.8 million ballots annually on behalf of its clients
representing 5.4 trillion shares.\249\ ISS is registered with the
Commission as an investment adviser and identifies itself as a pension
consultant providing advice to plans with more than $200 million as the
basis for registering as an adviser.\250\
---------------------------------------------------------------------------

    \246\ See U.S. Gov't Accountability Office, GAO-17-47, Report to
the Chairman, Subcommittee on Economic Policy, Committee on Banking,
Housing, and Urban Affairs, U.S. Senate, Corporate Shareholder
Meetings: Proxy Advisory Firms' Role in Voting and Corporate
Governance Practices, 6 (2016), available at https://www.gao.gov/assets/690/681050.pdf (``2016 GAO Report'').
    \247\ Id.
    \248\ See ISS, About ISS, available at https://www.issgovernance.com/about/about-iss.
    \249\ See id.
    \250\ See ISS, Form ADV (Mar. 31, 2022), available at https://reports.adviserinfo.sec.gov/reports/ADV/111940/PDF/111940.pdf (``ISS
Form ADV filing''); see also 2016 GAO Report, supra note 246, at 9.
---------------------------------------------------------------------------

     Glass Lewis, established in 2003, is a privately held
company that provides research and analysis of proxy issues, custom
policy implementation, vote recommendations, vote execution, and
reporting and regulatory disclosure services to institutional
investors.\251\ As of May 2022, Glass Lewis had more than 380 employees
worldwide that provide services to more than 1,300 clients that
collectively manage more than $40 trillion in assets.\252\ Glass Lewis
states that it covers more than 30,000 shareholder meetings across
approximately 100 global markets annually.\253\ Glass Lewis is not
registered with the Commission in any capacity.
---------------------------------------------------------------------------

    \251\ 2016 GAO Report, supra note 246, at 7.
    \252\ See Glass Lewis, Company Overview, available at https://www.glasslewis.com/company-overview/.
    \253\ Id.
---------------------------------------------------------------------------

     Egan-Jones was established in 2002 as a division of Egan-
Jones Ratings Company.\254\ Egan-Jones is a privately held company that
provides proxy services, such as notification of meetings, research,
and recommendations on selected matters to be voted on, voting
guidelines, execution of votes, and regulatory disclosure.\255\ As of
September 2016, Egan-Jones' proxy research or voting clients mostly
consisted of mid- to large-sized mutual funds,\256\ and the firm
covered approximately 40,000 companies.\257\ Egan-Jones Ratings Company
(Egan-Jones' parent company) is registered with the Commission as a
Nationally Recognized Statistical Ratings Organization.\258\
---------------------------------------------------------------------------

    \254\ See 2016 GAO Report, supra note 246, at 7.
    \255\ Id.
    \256\ Id.
    \257\ Id. While ISS and Glass Lewis have published updated
coverage statistics on their websites, the most recent data
available for Egan-Jones was compiled in the 2016 GAO Report.
    \258\ See Order Granting Registration of Egan-Jones Rating
Company as a Nationally Recognized Statistical Rating Organization,
Exchange Act Release No. 34-57031 (Dec. 21, 2007), available at
https://www.sec.gov/ocr/ocr-current-nrsros.html#egan-jones.
---------------------------------------------------------------------------

    Of these PVABs, ISS and Glass Lewis are the largest and most often
used for proxy voting advice.\259\ We do not have

access to general financial information for ISS, Glass Lewis, or Egan-
Jones such as annual revenues, earnings before interest, taxes,
depreciation and amortization, and net income. We also do not have
access to client-specific financial information or more general or
aggregate information regarding the economics of the PVAB industry.
---------------------------------------------------------------------------

    \259\ See 2016 GAO Report, supra note 246, at 8, 41 (``In some
instances, we focused our review on Institutional Shareholder
Services (ISS) and Glass Lewis and Co. (Glass Lewis), because they
have the largest number of clients in the proxy advisory firm market
in the United States.''). See also letters in response to the SEC
Staff Roundtable on the Proxy Process from Center on Executive
Compensation (Mar. 7, 2019) (noting that there are ``two firms
controlling roughly 97% of the market share for such services'');
Society for Corporate Governance (Nov. 9, 2018) (``While there are
five primary proxy advisory firms in the U.S., today the market is
essentially a duopoly consisting of Institutional Shareholder
Services . . . and Glass Lewis & Co. . . . .'').
---------------------------------------------------------------------------

    As part of our consideration of the baseline for the amendments, we
focus on the industry practice that is particularly relevant for the
amendments to Rule 14a-2(b)(9): PVABs' procedures for engaging with
registrants. As mentioned above and in the 2021 Proposing Release,\260\
all three major PVABs have certain policies, procedures, and
disclosures in place intended to provide assurances to clients about
the information used to formulate the proxy voting advice they
receive.\261\ In some cases, PVABs seek input from registrants to
further these objectives. Glass Lewis and Egan-Jones offer registrants
some form of pre-release review of at least some of their proxy voting
advice reports, or the data used in their reports. ISS does not provide
draft proxy voting advice to any United States registrants, but it
engages with registrants during the process of formulating its proxy
voting advice. All three PVABs also offer registrants access to proxy
voting advice after it is distributed to clients, in some cases for a
fee, and offer mechanisms by which registrants can provide feedback on
such advice. Finally, the 2021 Annual Report of the Independent
Oversight Committee (the ``Oversight Committee'') of the Best Practice
Principles Group (the ``BPPG''), an industry group composed of six
PVABs that includes ISS and Glass Lewis,\262\ found that all member
firms met the standards established in the BPPG's three Best Practices
Principles for Providers of Shareholder Voting Research and
Analysis,\263\ which include communication with and feedback from
registrants.\264\ The Oversight Committee--which is composed of non-
PVAB stakeholders in proxy voting advice, including representatives
from the institutional investor, registrant, and academic communities--
is responsible for reviewing the BPPG member-PVABs' compliance with the
principles. This report did not include Egan-Jones because it is not a
member of the BPPG.
---------------------------------------------------------------------------

    \260\ See 2021 Proposing Release at 67386-87.
    \261\ See id.
    \262\ The BPPG was formed in 2013 after the European Securities
and Markets Authority requested that PVABs engage in a coordinated
effort to develop an industry-wide code of conduct focusing on
enhancing transparency and disclosure. See Best Practice Principles
Oversight Committee, Annual Report 2021 at 7 (July 1, 2021),
available at https://bppgrp.info/wp-content/uploads/2021/07/2021-AR-Independent-Oversight-Committee-for-The-BPP-Group-1.pdf (``2021
Annual Report''). Its six member-PVABs are Glass Lewis, ISS,
Minerva, PIRC, Proxinvest, and EOS at Federated Hermes. Id.
    \263\ See Stephen Davis, First Independent Report on Proxy
Voting Advisory Firm Best Practices (July 14, 2021), available at
https://corpgov.law.harvard.edu/2021/07/14/first-independent-report-on-proxy-voting-advisory-firm-best-practices/; see also 2021 Annual
Report, supra note 262.
    \264\ The three principles are (1) service quality; (2)
conflicts-of-interest avoidance or management; and (3)
communications policy. See 2021 Annual Report, supra note 262, at
33-34.
---------------------------------------------------------------------------

    Additionally, it is our understanding that some PVABs currently
provide their clients with notifications of and links to filings by
registrants that are the subject of proxy voting advice in their online
platforms.\265\ These notifications and links provide a means for
clients to access additional definitive proxy materials that
registrants may file in response to proxy voting advice.
---------------------------------------------------------------------------

    \265\ 2021 Proposing Release at 67388, n.57.
---------------------------------------------------------------------------

b. Clients of Proxy Voting Advice Businesses and Underlying Investors
    Clients that use PVABs for proxy voting advice will be affected by
the amendments. In turn, investors and other groups on whose behalf
these clients make voting determinations will be affected. One of the
three major PVABs--ISS--is registered with the Commission as an
investment adviser and, as such, provides annually updated disclosure
with respect to its types of clients on Form ADV. Table 1 below reports
client types as disclosed by ISS.\266\
---------------------------------------------------------------------------

    \266\ See ISS Form ADV filing (describing clients classified as
``Other'' as ``Academic, vendor, other companies not able to
identify as above'').

                Table 1--Number of Clients by Client Type
                         [As of March 31, 2022]
------------------------------------------------------------------------
                                                               Number of
                     Type of client \a\                         clients
                                                                  \b\
------------------------------------------------------------------------
Banking or thrift institutions..............................         193
Pooled investment vehicles..................................         317
Investment companies........................................          37
Pension and profit sharing plans............................         173
Charitable organizations....................................          48
State or municipal government entities......................          14
Other investment advisers...................................        1030
Insurance companies.........................................          53
Sovereign wealth funds and foreign official institutions....          11
Corporations or other businesses not listed above...........          79
Other.......................................................         291
                                                             -----------
  Total.....................................................       2,246
------------------------------------------------------------------------
\a\ The table excludes client types for which ISS indicated either zero
  clients or fewer than five clients.
\b\ Form ADV filers indicate the approximate number of clients
  attributable to each type of client. If the filer has fewer than five
  clients in a particular category (other than investment companies,
  business development companies, and pooled investment vehicles), it
  may indicate that it has fewer than five clients rather than reporting
  the number of clients.

    Table 1 illustrates the types of clients that utilize the services
of one of the largest PVABs. For example, while investment advisers
(``Other investment advisers'' in Table 1) constitute a 46 percent
plurality of clients for ISS, other types of clients include pooled
investment vehicles (14 percent) and pension and profit sharing plans
(eight percent). Other clients include corporations, charitable
organizations, and insurance companies.\267\ Certain of these clients,
such as pension plans, make voting determinations that affect the
interests of a wide array of individual investors, beneficiaries, and
other constituents.
---------------------------------------------------------------------------

    \267\ Id.
---------------------------------------------------------------------------

c. Registrants
    The amendments also will affect registrants that have a class of
equity securities registered under Section 12 of the Exchange Act and
non-registrant parties that conduct proxy solicitations with respect to
those registrants.\268\ In addition, there are certain other companies
that do not have a class of equity securities registered under Section
12 of the Exchange Act that file proxy materials with the Commission.
Finally, Rule 20a-1 under the Investment Company Act subjects all
registered management investment companies to the Federal proxy
rules.\269\
---------------------------------------------------------------------------

    \268\ Foreign private registrants are exempt from the Federal
proxy rules under Rule 3a12-3(b) of the Exchange Act. See 17 CFR
240.3a12-3. Furthermore, we are not aware of any asset-backed
registrants that have a class of equity securities registered under
Section 12 of the Exchange Act. Most asset-backed registrants are
registered under Section 15(d) of the Exchange Act and thus are not
subject to the Federal proxy rules. 23 asset-backed registrants
obtained a class of debt securities registered under Section 12 of
the Exchange Act as of December 2021. As a result, these asset-
backed registrants are not subject to the Federal proxy rules.
    \269\ Under Rule 20a-1 of the Investment Company Act, registered
management investment companies must comply with regulations adopted
pursuant to Section 14(a) of the Exchange Act that would be
applicable to a proxy solicitation if it were made with respect to a
security registered pursuant to Section 12 of the Exchange Act. See
17 CFR 270.20a-1. Additionally, ``registered management investment
company'' means any investment company other than a face-amount
certificate company or a unit investment trust. See 15 U.S.C. 80a-4.

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

    We note that because registrants are owned by investors, effects on
registrants as a result of the amendments will accrue to investors.
Among the investors in a given registrant, there may be individual
investors or groups of investors that may want to influence the
direction that the registrant should pursue. Those individual investors
or groups of investors could be clients of PVABs. Separately, given the
principal-agent relationship between shareholders and management of a
corporation, there may exist conflicts between management of the
registrant and investors. Some investors therefore may use PVABs'
advice as part of their decision-making process on a particular matter
presented for shareholder approval for which management's interests may
not be aligned with those of investors in general.
    We estimate that, as of December 31, 2021, the amendments may
affect approximately 18,400 entities. Specifically, there were
approximately 5,800 registrants with a class of securities registered
under Section 12 of the Exchange Act \270\ and approximately 30
companies without a class of securities registered under Section 12 of
the Exchange Act that filed proxy materials.\271\ In addition, there
were 12,445 registered management investment companies that were
subject to the proxy rules: (i) 11,780 open-end funds, out of which
2,398 were Exchange Traded Funds (``ETFs'') registered as open-end
funds or open-end funds that had an ETF share class; (ii) 651 closed-
end funds; and (iii) 14 variable annuity separate accounts registered
as management investment companies.\272\ We also identified 98 Business
Development Companies (``BDCs'') that could be subject to the
amendments.\273\
---------------------------------------------------------------------------

    \270\ We estimated the number of registrants with a class of
securities registered under Section 12 of the Exchange Act by
reviewing all Forms 10-K and 10-K/A filed during calendar year 2021
with the Commission. After reviewing these forms, we then counted
the number of unique registrants that identify themselves as having
a class of securities registered under Section 12(b) or Section
12(g) of the Exchange Act. This estimate excludes: (1) foreign
private issuers that filed both Forms 20-F and 40-F; (2) asset-
backed registrants that filed Forms 10-D and 10-D/A; and (3) BDCs
that filed Form 10-K or an amendment during calendar year 2021 with
the Commission.
    \271\ We identified these issuers as those that: (1) are subject
to the reporting obligations of Exchange Act Section 15(d), but do
not have a class of equity securities registered under Exchange Act
Section 12(b) or 12(g); and (2) have filed any proxy materials
during calendar year 2021 with the Commission. To identify
registrants reporting pursuant to Section 15(d) but not registered
under Section 12(b) or Section 12(g), we reviewed all Forms 10-K
filed in calendar year 2020 with the Commission. We then counted the
number of unique registrants that identified themselves as subject
to Section 15(d) reporting obligations with no class of equity
securities registered under Section 12(b) or Section 12(g).
    \272\ We estimated the number of unique registered management
investment companies based on Forms N-CEN filed between Dec. 2020
and Dec. 2021 with the Commission. Open-end funds are registered on
Form N-1A, while closed-end funds are registered on Form N-2.
Variable annuity separate accounts registered as management
investment companies are trusts registered on Form N-3.
    \273\ Business development companies are a category of closed-
end investment company that are not registered under the Investment
Company Act [15 U.S.C. 80a-2(a)(48) and 80a-53-64] and have been
issued an 814-reporting number. Our estimate includes 82 BDCs that
filed a Form 10-K in 2021, as well as 16 BDCs that were not traded.
---------------------------------------------------------------------------

    These estimates are an upper bound of the number of potentially
affected companies because not all of these registrants may file proxy
materials related to a meeting for which a PVAB issues proxy voting
advice in a given year. Out of the approximately 18,300 potentially
affected registrants, approximately 5,565 registrants filed proxy
materials with the Commission during calendar year 2021.\274\ Out of
the 5,565 registrants, 4,621 of these registrants (83 percent) were
Section 12 or Section 15(d) registrants and the remaining 944
registrants (17 percent) were registered management investment
companies.
---------------------------------------------------------------------------

    \274\ We considered the following proxy materials in our
analysis: DEF14A; DEF14C; DEFA14A; DEFC14A; DEFM14A; DEFM14C;
DEFR14A; DEFR14C; DFAN14A; N-14; PRE 14A; PRE 14C; PREC14A; PREM14A;
PREM14C; PRER14A; PRER14C. Form N-14 can be a registration statement
and/or proxy statement. We also manually reviewed all Forms N-14
filed during calendar year 2021 with the Commission, excluding any
Forms N-14 that are exclusively registration statements from our
estimates.
---------------------------------------------------------------------------

2. Current Regulatory Framework
    On July 22, 2020, the Commission adopted the 2020 Final Rules. The
2020 Final Rules:
     Amended Rule 14a-1(l) to codify the Commission's
interpretation that proxy voting advice generally constitutes a
``solicitation'' subject to the proxy rules.
     Adopted Rule 14a-2(b)(9) to add new conditions to two
exemptions (set forth in Rules 14a-2(b)(1) and (3)) that PVABs
generally rely on to avoid the proxy rules' information and filing
requirements. Those conditions include:
    [cir] New conflicts of interest disclosure requirements; and
    [cir] The Rule 14a-2(b)(9)(ii) conditions.
     Amended the Note to Rule 14a-9, which prohibits false or
misleading statements, to include specific examples of material
misstatements or omissions related to proxy voting advice.
Specifically, Note (e) provides that the failure to disclose material
information regarding proxy voting advice, ``such as the [PVAB's]
methodology, sources of information, or conflicts of interest'' could,
depending upon particular facts and circumstances, be misleading within
the meaning of the rule.
    The changes to the definition of ``solicitation'' and to Rule 14a-9
became effective on November 2, 2020. The conditions set forth in Rule
14a-2(b)(9) became effective on December 1, 2021. On June 1, 2021, the
Division of Corporation Finance issued a statement that it would not
recommend enforcement action based on the Interpretive Release or the
2020 Final Rules during the period in which the Commission is
considering further regulatory action in this area. This staff
statement did not alter the compliance date for the Rule 14a-
2(b)(9)(ii) conditions.

B. Benefits and Costs

    In the following sections, we discuss the economic effects of the
amendments in terms of the specific benefits and costs of the final
amendments.
    Several commenters raised broader concerns with how the Commission
conducted its economic analysis in the 2021 Proposing Release. One
commenter asserted the Commission did not conduct appropriate due
diligence in issuing the 2021 Proposing Release and instead relied
solely on statements made by market participants in private
meetings.\275\ This commenter also contended that, because the
Commission did not ``possess any financial or cost information to
support'' its economic analysis, the Commission ``lacks evidence to
support the fundamental assumptions that underpin the Proposed Rule.''
\276\ We rely on a number of sources of information to inform our
economic analysis, including publicly available data. And our decision
to adopt the amendments does not rest on any statements made by market
participants in private meetings. Moreover, for reasons the Commission
explained at the time, the analysis of the economic effects of adopting
Rule 14a-2(b)(9)(ii) was primarily qualitative in nature. In the 2021
Proposing Release, and for the same reasons, the Commission provided a
qualitative discussion of the economic effects of rescinding the Rule
14a-2(b)(9)(ii) conditions. The Commission noted

where it lacked data and solicited feedback and additional data from
commenters. Having not received information or data that would permit a
quantitative analysis, we again engage in a qualitative analysis of the
costs and benefits of rescinding the conditions.
---------------------------------------------------------------------------

    \275\ See letter from BIO.
    \276\ Id.
---------------------------------------------------------------------------

    Another commenter expressed concern that the economic analysis in
the 2021 Proposing Release ``makes passing reference to impacts on
issuers and investors'' and ``focused almost entirely on the costs
borne and benefits received by the PVABs.'' \277\ We disagree, however,
as, both in the 2021 Proposing Release and in our discussion below, we
have substantively discussed and weighed the potential effects of the
amendments on both registrants and investors, such as the potential
impact of the rescission of the notice requirement on registrants.
---------------------------------------------------------------------------

    \277\ See letter from CCMC II.
---------------------------------------------------------------------------

1. Benefits
    In this section, we discuss benefits of the amendments that accrue
to PVABs, their clients, registrants, and investors. The main benefit
for PVABs from our rescission of the Rule 14a-2(b)(9)(ii) conditions
would be the reduction of any initial or ongoing \278\ direct costs
associated with modifying their current systems and methods, or
developing and maintaining new systems and methods. Those costs have
been and/or will be incurred to satisfy the requirement of Rule 14a-
2(b)(9)(ii)(A) that PVABs adopt and publicly disclose written policies
and procedures reasonably designed to ensure that registrants that are
the subject of proxy voting advice have such advice made available to
them at or prior to the time when such advice is disseminated to PVABs'
clients. Additionally, the amendments will reduce the direct costs of
satisfying the requirement of Rule 14a-2(b)(9)(ii)(B) that PVABs adopt
and publicly disclose written policies and procedures reasonably
designed to ensure that PVABs provide clients with a mechanism by which
they can reasonably be expected to become aware of a registrant's
written statements about the proxy voting advice in a timely manner
before the shareholder meeting or, if no meeting, before the votes,
consents, or authorizations may be used to effect the proposed action.
Under the safe harbor in Rule 14a-2(b)(9)(iv), a PVAB could satisfy
this requirement by providing notice to its clients that the registrant
has filed or has informed the PVAB that it intends to file additional
soliciting materials and include an active hyperlink to those materials
on EDGAR when available either: (i) on its electronic client platform;
or (ii) through email or other electronic means. Both mechanisms for
informing clients could involve initial set-up costs as well as ongoing
costs.
---------------------------------------------------------------------------

    \278\ The compliance date for the Rule 14a-2(b)(9)(ii)
conditions was Dec. 1, 2021. On June 1, 2021, the Division of
Corporation Finance issued a statement that it would not recommend
enforcement action based on the Interpretive Release or the 2020
Final Rules during the period in which the Commission is considering
further regulatory action in this area. Division of Corporation
Finance, Statement on Compliance with the Commission's 2019
Interpretation and Guidance Regarding the Applicability of the Proxy
Rules to Proxy Voting Advice and Amended Rules 14a-1(1), 14a-2(b),
14a-9, U.S. Securities and Exchange Commission, available at https://www.sec.gov/news/public-statement/corp-fin-proxy-rules-2021-06-01.
This staff statement did not alter the Dec. 1, 2021 compliance date
for the Rule 14a-2(b)(9)(ii) conditions, and thus we recognize that
PVABs may have already incurred certain costs to modify their
systems or otherwise ensure that the conditions of the exemption are
met. Even so, the elimination of these conditions will eliminate any
ongoing costs or other costs of the conditions that have not yet
been incurred. To the extent a PVAB has not yet incurred any direct
costs from the Rule 14a-2(b)(9)(ii) conditions, the amendments will
eliminate or avoid potential future costs.
---------------------------------------------------------------------------

    One commenter asserted that it is speculative to assume that PVABs
would realize cost savings as a result of the proposed amendments.\279\
According to this commenter, because PVABs have voluntarily adopted
practices regarding registrant interaction, they likely have already
absorbed any such costs. The same commenter also expressed concern that
the Commission could not quantify these costs. We acknowledge, as the
Commission did in the 2021 Proposing Release, that any benefits from
the amendments in the form of savings in initial set-up costs may be
limited to the extent that PVABs either already had similar systems in
place to meet the requirements of the Rules 14a-2(b)(9)(ii) conditions
or have made changes to come into compliance with those
conditions.\280\ Similarly, ongoing cost savings may be limited to the
extent PVABs retain similar systems. We also acknowledge that we are
unable to quantify the full range of PVABs' costs resulting from the
2020 Final Rules, which would vary depending on each PVAB's current
practices and how they implement the new conditions.\281\ In the 2020
Adopting Release, for purposes of the Paperwork Reduction Act of 1995
(``PRA''),\282\ the Commission estimated that each PVAB would incur
2,845 burden hours to satisfy Rule 14a-2(b)(9)(ii)(A) and 2,845 burden
hours to satisfy Rule 14a-2(b)(9)(ii)(B).\283\ The Commission also
estimated that each PVAB would incur a burden of between 50 and 5,690
hours per year associated with securing an acknowledgment or other
assurance that the proxy voting advice would not be disclosed.\284\ We
believe that the amendments will, at a minimum, eliminate these
estimated PRA burdens, which took into consideration that some PVABs
may have systems and practices in place that could substantially
mitigate any overall burden increases.
---------------------------------------------------------------------------

    \279\ See letter from BIO.
    \280\ See 2021 Proposing Release at 67386-87.
    \281\ While some commenters on the 2021 Proposed Rules provided
cost estimates (e.g., letter from ISS), we do not find those
estimates persuasive because they were based on the 2019 Proposed
Rules, which were different than the 2020 Final Rules.
    \282\ 44 U.S.C. 3501 et seq.
    \283\ See 2020 Adopting Release at Section V.B.1.
    \284\ See id.
---------------------------------------------------------------------------

    While there could be various ways a PVAB could comply with the Rule
14a-2(b)(9)(ii) conditions currently, to rely on the safe harbor in
Rule 14a-2(b)(9)(iii), a PVAB must provide registrants with a copy of
the proxy voting advice at no charge. By eliminating the Rule 14a-
2(b)(9)(ii) conditions (and, by extension, the Rule 14a-2(b)(9)(iii)
safe harbor), the amendments could lead to an increase in PVABs
choosing to charge registrants for access to their proxy voting advice,
potentially leading to increased revenues for PVABs.
    Some commenters expressed concern that the Commission's discussion
of the benefits and costs of the proposed amendments focused primarily
on the impact on PVABs, ignoring the impact of the amendments on the
market more broadly.\285\ Contrary to the commenter's suggestion, we
have considered the impact of the amendments on other parties,
including registrants and investors generally.\286\ For example, below,
we discuss the potential effects of the amendments on registrants,
clients of PVABs, and the investors whose interests these clients
represent.
---------------------------------------------------------------------------

    \285\ See letters from CCMC II; Prof. Verret.
    \286\ See infra Section IV.B.2.
---------------------------------------------------------------------------

    The amendments may also benefit other parties. PVABs may pass
through a portion of the costs of modifying, developing, or maintaining
systems to satisfy the Rule 14a-2(b)(9)(ii) conditions to their clients
through higher fees for proxy voting advice. To the extent that
rescinding the Rule 14a-2(b)(9)(ii) conditions also eliminates such
costs, the cost savings could be passed on to, and therefore could
benefit, clients of PVABs. One commenter, however, stated that it is
speculative to assume that PVABs' costs would be passed on to clients
given the duopolistic nature of the PVAB market.\287\
---------------------------------------------------------------------------

    \287\ See letter from BIO.

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

    PVABs, their clients, and investors in general could also benefit
to the extent that the final amendments eliminate the possible adverse
effects of the Rule 14a-2(b)(9)(ii) conditions on the independence of
proxy voting advice.\288\ Proxy voting advice that is independent may
provide clients of PVABs and other investors, who become aware of such
recommendations, with information that would not otherwise have
appeared in the proxy or information statement. This could help clients
of PVABs and other investors make better voting and investment
decisions. One commenter expressed the view that the proposed
amendments would strengthen the independence of PVABs.\289\ Another
commenter, however, stated that the 2021 Proposing Release did not
provide evidence that the 2020 Final Rules negatively affected the
independence of proxy voting advice.\290\ While we are unable to
quantify such negative effects for the reasons discussed in more detail
above, we believe that the risks posed by the Rule 14a-2(b)(9)(ii)
conditions to the cost, timeliness, and independence of proxy voting
advice are sufficiently significant such that it is appropriate to
rescind the conditions now to limit any burdens that PVABs and their
clients may experience.\291\ In making this judgment, we have
considered that the vast majority of PVABs' clients and investors that
expressed views on the Rule 14a-2(b)(9)(ii) conditions continue to be
concerned about the risks those conditions pose.
---------------------------------------------------------------------------

    \288\ See supra note 118.
    \289\ See letter from CII.
    \290\ See letter from BIO.
    \291\ See supra Section II.A.3.
---------------------------------------------------------------------------

    Finally, one commenter asserted that the Commission did not
articulate any real benefits of deleting Note (e).\292\ As stated in
the 2021 Proposing Release, we do not expect that the deletion of Note
(e) will generate any significant benefits other than avoiding any
misperception that its adoption purported to determine or alter the law
governing Rule 14a-9's application and scope, including its application
to statements of opinion. Deleting Note (e) may reduce any increased
litigation risk or costs to PVABs that such a misperception may have
caused. Notwithstanding this deletion, a PVAB may, depending on the
particular facts and circumstances, be subject to liability under Rule
14a-9 for a material misstatement in, or an omission of material fact
from, proxy voting advice covered by Rule 14a-1(l)(1)(iii)(A),
including with regard to its methodology, sources of information, or
conflicts of interest. \293\ Thus, we expect that this amendment will
not have any significant economic effect.
---------------------------------------------------------------------------

    \292\ See letter from BIO.
    \293\ See supra Section II.B.3.
---------------------------------------------------------------------------

2. Costs
    The amendments may impose costs on the clients of PVABs--and,
thereby, ultimately the investors they serve--by potentially reducing
the overall mix of information available to those clients as they
assess proxy voting advice and make determinations about how to cast
their votes. Requiring PVABs to provide registrants with proxy voting
advice no later than the time that they disseminate such information to
their clients could allow registrants to more effectively determine
whether they wish to respond to a recommendation by publishing
additional soliciting materials and to do so in a timely manner before
shareholders cast their votes. Registrants may wish to do so for a
variety of reasons, including, for example, because they may identify
what they perceive to be factual errors or methodological weaknesses in
a PVAB's analysis or have a different or additional perspective with
respect to the advice. In either case, clients of PVABs, and
registrants' investors in general, might have benefited from the
availability of additional information on which to base their voting
decisions. Clients of PVABs often must make voting decisions in a
compressed time period. Timely access to registrant responses to proxy
voting advice could facilitate a client's evaluation of the advice by
highlighting disagreements regarding facts and data, differences of
opinion, or additional perspectives before the client casts its votes.
To the extent that the amendments reduce this type of information and
it is valuable to investors, the amendments may make it more costly for
investors to obtain such information and make timely voting decisions.
One commenter took the position that eliminating the Rule 14a-
2(b)(9)(ii) conditions would create a substantial risk to registrants
that they would be unable to timely correct errors and
mischaracterizations in PVABs' proxy voting advice before the annual
meeting.\294\ According to this commenter, companies must pay close
attention to proxy voting advice and address any errors before
investors have completed voting because, once investors have voted, it
is often too late to make changes. The longer the time period between
when a registrant identifies an error and responds to it, the commenter
maintained, the less likely the error is to receive the investor's full
attention. The same commenter also argued that the costs of correcting
errors creates disincentives for PVABs to acknowledge them. To the
extent that the rescission of the Rule 14a-2(b)(9)(ii) conditions limit
a registrant's ability to timely identify errors and
mischaracterizations in proxy voting advice, the rescission could
increase costs to investors and registrants. We note, however, that the
error rate in proxy voting advice appears to be low. For example, the
commenter cites the ACCF study that identified instances during 2021 in
which registrants filed supplemental proxy materials to dispute the
data or analysis in proxy voting advice that represented less than one
percent of the proxy materials filed by registrants that year.\295\
Additionally, as mentioned above, we believe that the perpetuation of
material errors in proxy voting advice would reduce the quality and
usefulness of such advice, which, in the long-term, would reduce a
PVAB's credibility in the market and its competitiveness. As such, we
believe that PVABs are financially motivated to address errors in their
advice.
---------------------------------------------------------------------------

    \294\ See letter from CEC.
    \295\ As noted in Section IV.A.1.c, approximately 5,565
registrants filed proxy materials with the Commission during
calendar year 2021.
---------------------------------------------------------------------------

    Additionally, to the extent that a PVAB might have relied on the
safe harbor of Rule 14a-2(b)(9)(iii), which requires PVABs to provide
registrants with their proxy voting advice for no charge, the
amendments may cause some registrants to incur costs in the form of
fees or the purchase of additional PVAB services in order to obtain and
respond to proxy voting advice. Investors ultimately will bear any such
costs.
    The potential cost associated with the amendments may be mitigated,
however, by the practices and standards that PVABs have voluntarily
adopted to help improve the basis of their proxy voting advice. For
example, some PVABs have voluntarily adopted practices aimed at
enabling feedback from certain registrants before and after they
disseminate proxy voting advice to their clients.\296\ Additionally,
the BPPG's principles and the Oversight Committee's role in assessing
compliance with those principles could address some of the concerns
underlying the Rule 14a-2(b)(9)(ii) conditions. Moreover, because PVABs
voluntarily adopted these practices, we believe that they are less
likely to adversely affect the independence, cost, and timeliness of
proxy voting advice than any additional measures that

PVABs may have needed to implement to satisfy the Rule 14a-2(b)(9)(ii)
conditions. One commenter noted that the Commission's analysis assumed
that such voluntary practices would remain in place even if the Rule
14a-2(b)(9)(ii) conditions are rescinded.\297\ While we cannot know for
sure whether these voluntary practices will continue, we agree with the
commenters that asserted that PVABs have market-based incentives to
maintain these practices, and we also believe the industry-wide
standards of BPPG's principles and the role of the Oversight Committee
provide further incentives for PVABs to do so. Moreover, as noted
above, we will continue to monitor the PVAB market to help ensure that
investors are adequately protected and have ready access to information
that allows them to make informed voting decisions.
---------------------------------------------------------------------------

    \296\ See 2021 Proposing Release at 67386-87.
    \297\ See letter from Prof. Verret.
---------------------------------------------------------------------------

    One commenter asserted that registrants and clients of PVABs may
have incurred costs in preparing for the 2020 Final Rules, such as
amending proxy voting back-office functions for shareholder engagement,
designing new bylaws or charter provisions that govern relationships
with shareholders, or amending proxy voting policies.\298\ To the
extent that registrants and PVABs' clients have taken such steps,
rescinding the Rule 14a-2(b)(9)(ii) conditions would render them
unnecessary and may lead to their reversal, resulting in costs for both
registrants and PVABs' clients. But commenters have presented no
specific examples of entities that have actually taken action or
incurred costs in reliance on the Rule 14a-2(b)(9)(ii) conditions, nor
have commenters provided evidence that would allow us to quantify those
costs or that give reason to believe that they are significant. At the
same time, we expect that the amendments will result in costs savings
for PVABs in the form of some initial costs, ongoing direct costs, and
potential indirect costs they would have incurred to comply with the
Rule 14a-2(b)(9)(ii) conditions.\299\
---------------------------------------------------------------------------

    \298\ See id.
    \299\ Similar to registrants and PVABs' clients, PVABs may have
incurred certain initial costs in preparing for compliance with the
Rule 14a-2(b)(9)(ii) conditions.
---------------------------------------------------------------------------

    One commenter asserted that the Commission's economic analysis
failed to appreciate the potential for conflicts of interest that exist
between PVABs and the institutional investors that use their services,
as well as between the managers of institutional investor funds and the
investors whose interests they represent.\300\ While we agree that
potential conflicts of interest may exist between PVABs and their
institutional clients, we do not believe that the Rule 14a-2(b)(9)(ii)
conditions are necessary to address that concern, or that rescinding
the Rule 14a-2(b)(9)(ii) conditions will exacerbate it. Rather, the
2020 Final Rules address such conflicts through Rule 14a-2(b)(9)(i),
which requires PVABs to provide their clients with certain conflicts of
interest disclosures in connection with their proxy voting advice. The
current rulemaking does not amend Rule 14a-2(b)(9)(i). Additionally,
PVABs may, depending on the particular facts and circumstances, be
subject to liability under Rule 14a-9 for a material misstatement in,
or omission of material fact from, proxy voting advice covered by Rule
14a-1(l)(1)(iii)(A), including with regard to their methodology,
sources of information, or conflicts of interest. As to potential
conflicts between managers of institutional investor funds and the
investors whose interests they represent, we believe that such
conflicts are directly addressed in other regulations.\301\
---------------------------------------------------------------------------

    \300\ See id.
    \301\ See, e.g., Commission Interpretation Regarding Standard of
Conduct for Investment Advisers, Release No. IA-5248 (June 5, 2019)
[84 FR 33669, 33671 (July 12, 2019)] (discussing how an investment
adviser's duty of loyalty under its fiduciary duty requires, amongst
other things, that it must eliminate or make full and fair
disclosure of all conflicts of interest which might incline an
investment adviser--consciously or unconsciously--to render advice
which is not disinterested such that a client can provide informed
consent to the conflict); see also Rule 206(4)-6 under the
Investment Advisers Act of 1940, 17 CFR 275.206(4)-6 (prohibiting an
investment adviser to exercise voting authority with respect to
client securities, unless the adviser (i) has adopted and
implemented written policies and procedures that are reasonably
designed to ensure that the adviser votes proxies in the best
interest of its clients, which procedures must include how the
investment adviser addresses material conflicts that may arise
between the adviser's interests and interests of their clients; (ii)
discloses to clients how they may obtain information from the
investment adviser about how the adviser voted with respect to their
securities; and (iii) describes to clients the investment adviser's
proxy voting policies and procedures and, upon request, furnishes a
copy of the policies and procedures to the requesting client).
---------------------------------------------------------------------------

    Finally, just as we do not expect the deletion of Note (e) to
generate any significant benefits, we do not expect that its deletion
will create any significant costs for PVABs, investors, or registrants.
Given that this amendment will not alter a PVAB's potential liability
under Rule 14a-9, we expect that its economic impact will be minimal.
One commenter took the position that, in addition to deleting Note (e),
the Commission also should exempt certain portions of proxy voting
advice from Rule 14a-9 liability to provide investors with additional
comfort that they will not indirectly bear the costs of litigation on
the basis of mere disagreements regarding a PVAB's analysis,
methodology, or sources of information.\302\ We believe that this
approach is not appropriate for the reasons discussed in Section
IV.D.2.
---------------------------------------------------------------------------

    \302\ See letter from CII.
---------------------------------------------------------------------------

C. Effects on Efficiency, Competition, and Capital Formation

    As discussed in Section IV.A, PVABs perform a variety of functions
for their clients, including analyzing and making voting
recommendations on matters presented for shareholder votes in
registrants' proxy statements as an alternative or supplement to their
clients' own internal resources. Rather than using these services,
PVABs' clients could instead solely rely upon internal resources to
research, analyze, and execute proxies.\303\ Given the costs of
researching and voting proxies, the services offered by PVABs may offer
economies of scale relative to their clients performing these functions
themselves. For example, a GAO study found that among 31 institutions,
including mutual funds, pension funds and asset managers, large
institutions rely less than small institutions on the research and
recommendations offered by PVABs.\304\ Small institutional investors
surveyed in the study indicated they had limited resources to conduct
their own research.\305\
---------------------------------------------------------------------------

    \303\ PVABs' clients may also rely on some combination of
internal and external analysis.
    \304\ See U.S. Gov't Accountability Office, GAO-07-765, Report
to Congressional Requesters, Corporate Shareholder Meetings: Issues
Relating to the Firms that Advise Institutional Investors on Proxy
Voting, 2 (2007), available at https://www.gao.gov/new.items/d07765.pdf (``2007 GAO Report''). See generally letter in response
to the 2019 Proposing Release from Business Roundtable (Feb. 3,
2020) (stating that because many institutional investors face voting
on a large number of corporate matters every year but lack personnel
and resources for managing such activities, they outsource tasks to
proxy advisors); letters in response to the SEC Staff Roundtable on
the Proxy Process from BlackRock (Nov. 16, 2018) (stating that
``BlackRock's Investment Stewardship team has more than 40
professionals responsible for developing independent views on how we
should vote proxies on behalf of our clients''); NYC Comptroller
(Jan. 2, 2019) (stating that we ``have five full-time staff
dedicated to proxy voting during peak season, and our least-tenured
investment analyst has 12 years' experience applying the NYC Funds'
domestic proxy voting guidelines'').
    \305\ See 2007 GAO Report, supra note 304, at 2; see also letter
in response to the SEC Staff Roundtable on the Proxy Process from
Ohio Public Retirement (Dec. 13, 2018) (``OPERS also depends heavily
on the research reports we receive from our proxy advisory firm.
These reports are critical to the internal analyses we perform
before any vote is submitted. Without access to the timely and
independent research provided by our proxy advisory firm, it would
be virtually impossible to meet our obligations to our members.'');
Transcript of SEC Roundtable on the Proxy Process at 194 (Nov. 15,
2018), available at https://www.sec.gov/files/proxy-round-table-transcript-111518.pdf (comments of Mr. Scot Draeger, stating that:
``If you've ever actually reviewed the benchmarks, whether it's ISS
or anybody else, they're very extensive and much more detailed than
small firm[s] like ours could ever develop with our own independent
research.'').

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

    To the extent that the 2020 Final Rules increase compliance costs
and costs related to litigation risk for PVABs that could be passed on
to clients, the amendments would reverse those increases along with any
related decrease in demand for PVABs' advice. If PVABs offer economies
of scale relative to their clients performing certain functions
themselves, increased demand for, and reliance on, PVABs' services
could lead to greater efficiencies in the proxy voting process.
    To the extent that the Rule 14a-2(b)(9)(ii) conditions impair the
independence of proxy voting advice or reduce the diversity of thought
in the market for proxy voting advice (e.g., by PVABs erring on the
side of caution in complex or contentious matters), eliminating those
conditions could reverse those effects, resulting in advice from PVABs
that contributes to more informed proxy voting decisions by their
clients. If clients perceive the amendments as positively affecting
PVABs' objectivity and independence, demand for proxy voting advice
could increase, and the proxy voting process may become more
efficient.\306\
---------------------------------------------------------------------------

    \306\ As noted above, we do not have financial data about PVABs,
including financial data by services provided or by client type.
This makes assessments on a quantitative basis difficult.
---------------------------------------------------------------------------

    On the other hand, the amendments could make the proxy voting
process less efficient if they reduce the overall mix of information
available to PVABs' clients and investors in general and the
information lost is valuable to investors. For example, rescinding the
Rule 14a-2(b)(9)(ii) conditions, may limit prompt registrant responses
to proxy voting advice and investor access to such responses, which
could make it more costly for investors to obtain such information and
make timely voting decisions.
    In addition, any reduction in costs for PVABs due to the rescission
of the Rule 14a-2(b)(9)(ii) conditions could increase competition for
proxy voting advice compared to the current baseline, which includes
the effect of the 2020 Final Rules. In particular, if PVABs pass costs
incurred to comply with the conditions on to their clients, the
reduction of these costs due to the amendments could encourage some
investors to retain the services of PVABs, which could reduce the use
of internal resources for voting. Also, any improvement in the
independence of proxy voting advice that preserves investors'
confidence in the integrity of such advice could cause PVABs to compete
more on this dimension. Finally, any reduction in compliance costs and
costs related to litigation risk, if large enough, may increase
competition among PVABs by encouraging entry into the market for proxy
voting advice.\307\ However, given the fact that there are only three
major PVABs in the United States, we do not expect that the amendments
would significantly increase the likelihood of new entry into this
market.
---------------------------------------------------------------------------

    \307\ See letter in response to the 2019 Proposing Release from
Minerva Analytics (Feb. 22, 2020), available at https://www.sec.gov/comments/s7-22-19/s72219-6615792-202950.pdf. In its comment letter,
Minerva, a PVAB in the U.S. market prior to 2010, stated that the
threat of litigation for ``errors'' is a factor influencing its
views on whether to reenter the U.S. market. Id.
---------------------------------------------------------------------------

    If the amendments facilitate the ability of PVABs' clients to make
informed voting determinations, investment outcomes could improve for
investors, which could lead to a greater allocation of resources to
investment. To the extent that the amendments lead to more investment,
we could expect greater demand for securities, which could, in turn,
promote capital formation. Overall, given the many factors that can
influence the rate of capital formation, we expect any effect of the
amendments on capital formation to be small.
    In addition, we do not expect the deletion of Note (e) to have any
significant economic effect on efficiency, competition, and capital
formation.
    Finally, one commenter stated that the Commission had properly
characterized the effects of the proposed amendments on efficiency,
competition, and capital formation.\308\ Another commenter expressed
concern regarding the duopolistic nature of the PVAB market and
asserted that the proposed amendments would constitute an anti-
competitive stance by the Commission.\309\ We disagree with such an
assessment. As noted above, any reduction of compliance costs due to
the amendments could encourage some investors to retain the services of
PVABs, and any improvement in the independence of proxy voting advice
that preserves investors' confidence in the integrity of such advice
could increase competition in the PVAB market.
---------------------------------------------------------------------------

    \308\ See letter from CII.
    \309\ See letter from BIO.
---------------------------------------------------------------------------

D. Reasonable Alternatives

1. Interpretive Guidance Regarding Whether Systems and Processes
Satisfy the Rule 14a-2(b)(9)(ii) Conditions
    As an alternative to rescinding the Rule 14a-2(b)(9)(ii)
conditions, we could issue interpretive guidance regarding whether the
systems and processes that PVABs have in place satisfy the Rule 14a-
2(b)(9)(ii) conditions, which could reduce compliance costs and address
concerns regarding the independence of proxy voting advice. This
approach could reduce PVABs' initial or ongoing costs of complying with
these conditions if we determine that their current systems and
processes already satisfy them to the extent that PVABs have not
already modified their existing business models. Such guidance also
could mitigate concerns that these conditions could impair the
independence of proxy voting advice by indicating that PVABs need not
modify their practices.
    However, this approach would only eliminate the potential adverse
effects associated with the Rule 14a-2(b)(9)(ii) conditions if we were
to determine that PVABs' pre-existing systems and processes already
fully satisfy the conditions. But, as discussed above, while we believe
that PVABs' current practices advance a number of the goals that
underlie the Rule 14a-2(b)(9)(ii) conditions and will mitigate any
adverse impact from their rescission, those practices do not replicate
the Rule 14a-2(b)(9)(ii) conditions in all respects. And PVABs'
consistent opposition to the 2020 Final Rules further supports that
conclusion.
2. Exempting Certain Portions of PVABs' Proxy Voting Advice From Rule
14a-9 Liability
    Rather than, or in addition to, deleting Note (e) to Rule 14a-9, we
could exempt certain portions of proxy voting advice from Rule 14a-9
liability. For example, we could amend Rule 14a-9 to expressly state
that a PVAB would not be subject to liability under that rule for any
subjective determinations it makes in formulating its recommendations,
including its decision to use a specific analysis, methodology or
information. Several commenters generally supported this
alternative.\310\ The benefit of this alternative could be that it may
give PVABs additional comfort that they will not be subject to
liability under Rule 14a-9 on the basis of mere

a disagreement regarding their analysis, methodology or sources of
information.
---------------------------------------------------------------------------

    \310\ See letters from ICGN; Ohio Public Retirement; CII.
---------------------------------------------------------------------------

    This alternative, however, could result in uncertainty and
litigation over the scope of any exemption from Rule 14a-9 liability.
Moreover, as discussed above, we believe that existing law regarding
the application of Rule 14a-9 to statements of opinion adequately
addresses the concerns that PVABs, their clients, and others have
expressed regarding the potential for perceived litigation risks to
impair the independence of proxy voting advice, particularly in
conjunction with our deletion of Note (e). Exempting all or parts of
proxy voting advice from Rule 14a-9 liability entirely could eliminate
liability even in the narrow circumstances considered in Omnicare and
Virginia Bankshares in which statements of opinion in such advice
contain a material misstatement or omission. We believe that it is
appropriate to continue to subject proxy voting advice to Rule 14a-9
liability for material misstatements or omissions to help ensure that
PVABs' clients are provided with the information they need to make
fully informed voting decisions and to mitigate some of the concerns
that opposing commenters raised in their comment letters.

V. Paperwork Reduction Act

A. Background

    Certain provisions of our rules, schedules and forms that will be
affected by the final amendments contain ``collection of information''
requirements within the meaning of the PRA. We published a notice
requesting comment on changes to these collection of information
requirements in the Proposing Release and submitted these requirements
to the Office of Management and Budget (``OMB'') for review in
accordance with the PRA.\311\ The hours and costs associated with
maintaining, disclosing, or providing the information required by the
final amendments constitute paperwork burdens imposed by such
collection of information. 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 OMB control number. The title for
the affected collection of information is: ``Regulation 14A (Commission
Rules 14a-1 through 14a-21 and Schedule 14A)'' (OMB Control No. 3235-
0059).
---------------------------------------------------------------------------

    \311\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
---------------------------------------------------------------------------

    We adopted existing Regulation 14A \312\ pursuant to the Exchange
Act. Regulation 14A and its related schedules set forth the disclosure
and other requirements for proxy statements, as well as the exemptions
therefrom, filed by registrants and other soliciting persons to help
investors make informed voting decisions.\313\ A detailed description
of the final amendments, including the need for the information and its
proposed use, as well as a description of the likely respondents, can
be found in Section II, and a discussion of the expected economic
effects of the final amendments can be found in Section IV.
---------------------------------------------------------------------------

    \312\ 17 CFR 240.14a-1 et seq.
    \313\ To the extent that a person or entity incurs a burden
imposed by Regulation 14A, it is encompassed within the collection
of information estimates for Regulation 14A. This includes
registrants and other soliciting persons preparing, filing,
processing and circulating their definitive proxy and information
statements and additional soliciting materials, as well as the
efforts of third parties such as PVABs whose proxy voting advice
falls within the ambit of the Federal rules and regulations that
govern proxy solicitations.
---------------------------------------------------------------------------

B. Summary of Comment Letters on PRA Estimates

    We did not receive any comment letters in response to the request
for comment on the PRA estimates and analysis included in the 2021
Proposing Release. We did, however, receive one comment letter stating
that ``the proposal requests comments on an array of complex issues
that cannot be addressed within 30 days,'' and noting that the 30-day
comment period on the 2021 Proposed Amendments ``also applies to
comments on the proposed burden analysis for the information
collections associated with the Proposal.'' \314\ That commenter
expressed concern that ``[t]here is no guarantee'' as to how quickly
the Commission's Office of FOIA Services will process requests for
materials submitted to OMB by the Commission regarding the collection
of information required by the 2021 Proposed Amendments. For the
reasons discussed above, we believe that the comment period provided
adequate opportunity for interested parties to share their views.\315\
---------------------------------------------------------------------------

    \314\ See letter from CCMC I.
    \315\ See discussion supra note 71.
---------------------------------------------------------------------------

C. Burden and Cost Estimates for the Final Amendments

    Below we estimate the incremental and aggregate effect on paperwork
burden as a result of the final amendments, which, as discussed in
Section II, we are adopting as proposed. Most, if not all, of the
effect on paperwork burden as a result of the final amendments derives
from the rescission of the Rule 14a-2(b)(9)(ii) conditions and the
related safe harbors set forth in Rules 14a-2(b)(9)(iii) and (iv), as
we expect those amendments will reduce the paperwork burden associated
with Rule 14a-2(b)(9).
    As discussed in Section II, we are adopting the 2021 Proposed
Amendments as proposed. Further, because we did not receive any comment
letters directly addressing the PRA estimates and analysis included in
the 2021 Proposing Release, we have not adjusted those estimates to
account for comments. In the 2021 Proposing Release, the Commission
noted that ``because Rule 14a-2(b)(9) has not yet become effective,
that rule has not yet resulted in any paperwork burden, and there is
nothing yet to reduce.'' \316\ As such, the PRA analysis in the 2021
Proposing Release ``instead set forth the estimated amount of paperwork
burden that the parties affected by Rule 14a-2(b)(9) would avoid as a
result of [the] proposed amendments to Rule 14a-2(b)(9).'' \317\
However, Rule 14a-2(b)(9) became effective on December 1, 2021, after
the Commission issued the 2021 Proposing Release. We have, therefore,
revised the PRA analysis to reflect our expectation that the final
amendments will reduce, rather than avoid, the burdens associated with
Rule 14a-2(b)(9).
---------------------------------------------------------------------------

    \316\ 2021 Proposing Release at 67396.
    \317\ Id.
---------------------------------------------------------------------------

1. Impact on Affected Parties
    As discussed in Section IV.A.1, the final amendments may directly
or indirectly affect a variety of parties. These parties include PVABs;
the clients to whom PVABs provide proxy voting advice; investors and
other groups on whose behalf the clients of PVABs make voting
determinations; registrants who are conducting solicitations and are
the subject of proxy voting advice; and the registrants' shareholders,
who ultimately bear the costs and benefits to the registrant associated
with the outcome of voting matters covered by proxy voting advice. Of
these parties, we expect that PVABs will experience some reduction in
paperwork burden as a result of the final amendments.\318\ As discussed
further

below, we believe that any incremental decrease in these burdens would
be attributable to the rescission of Rule 14a-2(b)(9)(ii). We do not
expect that the deletion of Note (e) to Rule 14a-9 will have a
significant economic impact because it will not change existing law
and, therefore, will not change respondents' legal obligations.\319\
Moreover, any impact arising from this amendment should not materially
change the average PRA burden hour estimates associated with Regulation
14A. Thus, we have not made any adjustments to our PRA burden estimates
as a result of the deletion of Note (e).
---------------------------------------------------------------------------

    \318\ The PRA requires that we estimate ``the total annual
reporting and recordkeeping burden that will result from the
collection of information.'' 5 CFR 1320.5(a)(1)(iv)(B)(5). A
``collection of information'' includes any requirement or request
for persons to obtain, maintain, retain, report or publicly disclose
information. 5 CFR 1320.3(c). OMB's current inventory for Regulation
14A, therefore, is an assessment of the paperwork burden associated
with such requirements and requests under the regulation, and this
PRA is an assessment of changes to such inventory expected to result
from these amendments. While other parties, such as the clients of
PVABs, may experience benefits and costs associated with the
amendments, see supra Section IV.B, only PVABs and registrants will
avoid any additional paperwork burden as a result of the amendments.
    \319\ The deletion of Note (e) may relieve PVABs of direct costs
to the extent that Note (e) prompted PVABs to provide additional
disclosure about the bases for their proxy voting advice. However,
we expect any such costs would be minimal because the adoption of
that Note neither represented a change to existing law nor broadened
the concept of materiality or created a new cause of action. See
2020 Adopting Release at 55146, n.685. Similarly, we expect that any
avoidance of incremental burdens associated with this amendment
would be minimal because our deletion of Note (e) does not alter the
application of Rule 14a-9 to proxy voting advice. See supra Section
II.B.3.
---------------------------------------------------------------------------

a. Proxy Voting Advice Businesses
    We expect that our amendments to Rule 14a-2(b)(9) will decrease the
paperwork burden for PVABs. Rule 14a-2(b)(9) applies to anyone relying
on the exemptions in Rules 14a-2(b)(1) or (b)(3) who furnishes proxy
voting advice covered by Rule 14a-1(l)(1)(iii)(A). The amount by which
a PVAB's burden will decrease depends on a number of factors that are
firm-specific and highly variable, which makes it difficult to provide
reliable quantitative estimates.\320\
---------------------------------------------------------------------------

    \320\ See generally supra Section IV.B.1 (discussing the
difficulty in providing quantitative estimates of the benefits to
PVABs associated with the amendments).
---------------------------------------------------------------------------

    Two components of the amendments to Rule 14a-2(b)(9) should
decrease PVABs' paperwork burden. First, under Rule 14a-2(b)(9)(ii)(A),
PVABs are required to adopt and publicly disclose written policies and
procedures reasonably designed to ensure that registrants that are the
subject of the proxy voting advice have such advice made available to
them at or prior to the time such advice is disseminated to the PVABs'
clients. Second, under Rule 14a-2(b)(9)(ii)(B), PVABs are required to
adopt and publicly disclose written policies and procedures reasonably
designed to ensure that PVABs provide their clients with a mechanism by
which they can reasonably be expected to become aware of a registrant's
written statements about the proxy voting advice in a timely manner
before the shareholder meeting. The final amendments will rescind both
of these rules, thereby relieving PVABs of the obligation to comply
with these requirements. The final amendments will also rescind the
non-exclusive safe harbors set forth in Rules 14a-2(b)(9)(iii) and (iv)
that PVABs may use to satisfy the Rule 14a-2(b)(9)(ii) conditions. We
address each of these components in turn.
    In the 2020 Adopting Release,\321\ the Commission estimated that
PVABs would incur an annual incremental paperwork burden to comply with
Rules 14a-2(b)(9)(ii), (iii) and (iv) as follows:
---------------------------------------------------------------------------

    \321\ 2020 Adopting Release at 55148-49.

------------------------------------------------------------------------
                                             PVAB estimated incremental
                Requirement                   annual compliance burden
------------------------------------------------------------------------
Rule 14a-2(b)(9)(ii)(A)--Notice to          Increase in paperwork burden
 Registrants and Rule-14a 2(b)(9)(iii)       corresponding to:
 Safe Harbor.
------------------------------------------------------------------------
The PVAB has adopted and publicly           To the extent that the
 disclosed written policies and procedures   PVAB's current practices
 reasonably designed to ensure that          and procedures are not
 registrants who are the subject of proxy    already sufficient:
 voting advice have such advice made        [cir] Developing new or
 available to them at or prior to the time   modifying existing systems,
 the advice is disseminated to clients of    policies and methods, or
 the PVAB.                                   developing and maintaining
Safe Harbor--The PVAB has written policies   new systems, policies and
 and procedures that are reasonably          methods to ensure that it
 designed to provide a registrant with a     has the capability to
 copy of the PVAB's proxy voting advice,     timely provide each
 at no charge, no later than the time it     registrant with information
 is disseminated to the PVAB's clients.      about its proxy voting
 Such policies and procedures may include    advice necessary to satisfy
 conditions requiring that:                  the requirement in Rule 14a-
(A) The registrant has filed its             2(b)(9)(ii)(A) and/or the
 definitive proxy statement at least 40      safe harbor in Rule 14a-
 calendar days before the security holder    2(b)(9)(iii);
 meeting date (or if no meeting is held,    [cir] If applicable,
 at least 40 calendar days before the date   obtaining acknowledgments
 the votes, consents, or authorizations      or agreements with respect
 may be used to effect the proposed          to use of any information
 action); and                                shared with the registrant;
(B) The registrant has acknowledged that     and
 it will only use the copy of the proxy     [cir] Delivering copies of
 voting advice for its internal purposes     proxy voting advice to
 and/or in connection with the               registrants.
 solicitation and it will not be published  We estimate the increase in
 or otherwise shared except with the         paperwork burden to be
 registrant's employees or advisers.         8,535 hours per PVAB,
                                             consisting of 2,845 hours
                                             for system updates and
                                             5,690 hours for
                                             acknowledgments regarding
                                             sharing information.
------------------------------------------------------------------------
Rule 14a-2(b)(9)(ii)(B)--Notice to Clients  Increase in paperwork burden
 of Proxy Voting Advice Businesses and       corresponding to:
 Rule 14a-2(b)(9)(iv) Safe Harbor
------------------------------------------------------------------------

The PVAB has adopted and publicly           To the extent that the
 disclosed written policies and procedures   PVAB's current practices
 reasonably designed to ensure that the      and procedures are not
 PVAB provides clients with a mechanism by   already sufficient:
 which they can reasonably be expected to   Developing new or modifying
 become aware of any written statements      existing systems, policies
 regarding proxy voting advice by            and methods, or developing
 registrants who are the subject of such     and maintaining new
 advice, in a timely manner before the       systems, policies and
 shareholder meeting.                        methods capable of:
Safe Harbor--The PVAB has written policies  [cir] Tracking whether the
 and procedures that are reasonably          registrant has filed
 designed to inform clients who receive      additional soliciting
 the proxy voting advice when a registrant   materials;
 that is the subject of such voting advice  [cir] Ensuring that PVABs
 notifies the proxy voting advice business   provide clients with a
 that it intends to file or has filed        means to learn of a
 additional soliciting materials with the    registrant's written
 Commission setting forth the registrant's   statements about proxy
 statement regarding the voting advice,      voting advice in a timely
 by:                                         manner that satisfies the
(A) providing notice to its clients on its   requirement in Rule 14a-
 electronic client platform that the         2(b)(9)(ii)(B) and/or the
 registrant intends to file or has filed     safe harbor in Rule 14a-
 such additional soliciting materials and    2(b)(9)(iv).
 including an active hyperlink to those     If relying on the safe
 materials on EDGAR when available; or       harbor in Rule 14a-
(B) The PVAB providing notice to its         2(b)(9)(iv)(A) or (B), the
 clients through email or other electronic   associated paperwork burden
 means that the registrant intends to file   would include the time and
 or has filed such additional soliciting     effort required of the PVAB
 materials and including an active           to:
 hyperlink to those materials on EDGAR      [cir] provide notice to its
 when available.                             clients through the PVAB's
                                             electronic client platform
                                             or email or other
                                             electronic medium, as
                                             appropriate, that the
                                             registrant intends to file
                                             or has filed additional
                                             soliciting materials
                                             setting forth its views
                                             about the proxy voting
                                             advice; and
                                            [cir] include a hyperlink to
                                             the registrant's statement
                                             on EDGAR
                                            We estimate the increase in
                                             paperwork burden to be
                                             2,845 hours per PVAB.
                                           -----------------------------
    Total                                   11,380 hours per PVAB.
------------------------------------------------------------------------

    Altogether, the Commission estimated an annual total increase of
34,140 hours \322\ in compliance burden to be incurred by PVABs that
would be subject to Rules 14a-2(b)(9)(ii), (iii), and (iv).
Accordingly, we expect that the final amendments will decrease PVABs'
burdens by the same amount.
---------------------------------------------------------------------------

    \322\ This represented the annual total burden increase expected
to be incurred by PVABs (as an average of the yearly burden
predicted over the three-year period following adoption of the 2020
Final Rules) and was intended to be inclusive of all burdens
reasonably anticipated to be associated with compliance with the
Rule 14a-2(b)(9)(ii) conditions. We are aware of three PVABs in the
U.S. (i.e., Glass Lewis, ISS, and Egan-Jones) whose activities fall
within the scope of proxy voting advice constituting a solicitation
under amended Rule 14a-1(l)(1)(iii)(A). The Commission estimated
that each of these would have a burden of 11,380 hours per year
associated with Rules 14a-2(b)(9)(ii), (iii), and (iv). See 2020
Adopting Release at n.700. The Commission recognized that there
could be other PVABs, including both smaller firms and firms
operating outside the U.S., which may also be subject to those
rules. However, that number was expected to be small. Accordingly,
rather than increasing the estimate of the number of affected PVABs
beyond the three discussed above, the Commission increased the
annual total burden estimate by 500 hours to account for those
businesses. However, that 500 hour increase also accounted for the
burden imposed by Rule 14a-2(b)(9)(i), which is not affected by the
amendments. Because the Commission did not indicate, in the 2020
Adopting Release, what portion of that 500 hour increase would be
attributable to the various conditions in Rule 14a-2(b)(9), we do
not include that 500 hour increase in this PRA analysis in order to
avoid overestimating the amount of burden that PVABs would be
relieved of as a result of the amendments.
---------------------------------------------------------------------------

b. Registrants
    In addition to PVABs, we anticipate that the final amendments to
Rule 14a-2(b)(9) will decrease the paperwork burden for registrants. In
the 2020 Adopting Release, the Commission noted that registrants could,
as a result of the adoption of Rule 14a-2(b)(9), experience increased
burdens associated with coordinating with PVABs to receive proxy voting
advice, reviewing proxy voting advice, and preparing and filing
supplementary proxy materials in response to proxy voting advice, if
they choose to do so.\323\ Because Rule 14a-2(b)(9) does not require
registrants to engage with PVABs or take any action in response to
proxy voting advice, the Commission stated that it expected a
registrant would bear additional paperwork burden only if such
registrant anticipated the benefits of engaging with the PVABs would
exceed the costs of participation. The Commission noted that these
costs would vary depending upon the particular facts and circumstances
of the proxy voting advice and any issues identified therein, as well
as the resources of the registrant, which made it difficult to provide
a reliable quantifiable estimate of these costs.
---------------------------------------------------------------------------

    \323\ 2020 Adopting Release at 55149.
---------------------------------------------------------------------------

    Notwithstanding those difficulties, the Commission estimated an
average increase of 50 hours per registrant in connection with Rule
14a-2(b)(9) for a total annual increase of 284,500 hours, assuming that
a registrant's annual meeting of shareholders is covered by at least
two of the three major PVABs in the United States, and the registrant
has opted to review both sets of proxy voting advice and file
additional soliciting materials in response.\324\ Accordingly, we
expect that by rescinding the Rule 14a-2(b)(9)(ii) conditions, the
final amendments will decrease registrants' paperwork burdens by the
same amount.
---------------------------------------------------------------------------

    \324\ Id. at 55149-50. The Commission also noted that such
burden increase would be offset against any corresponding reduction
in burden resulting from the registrant forgoing other methods of
responding to the proxy voting advice (such as investor outreach)
that the registrant determines are no longer necessary or are less
preferable in light of Rule 14a-2(b)(9). Id. at 55150, n.705.
---------------------------------------------------------------------------

2. Aggregate Decrease in Burden
    Table 1 summarizes the calculations and assumptions used to derive
our estimates of the aggregate decrease in burden for all affected
parties due to our rescission of the Rule 14a-2(b)(9)(ii) conditions.

    PRA Table 1--Calculation of Aggregate Decrease in Burden Hours Resulting From Rescission of the Rule 14a-
                                 2(b)(9)(ii) Conditions and Related Safe Harbors
----------------------------------------------------------------------------------------------------------------
                                                                              Affected parties
                                                           -----------------------------------------------------
                                                               Proxy voting advice
                                                                    businesses                Registrants
                                                                                (A)                        (B)
----------------------------------------------------------------------------------------------------------------
Burden Hour Decrease......................................                     34,140                    284,500
                                                           -----------------------------------------------------
Aggregate Decrease in Burden Hours........................   [Column Total (A)] + [Column Total (B)] = [318,640]
----------------------------------------------------------------------------------------------------------------

3. Decrease in Annual Responses
    We believe that the final amendments will decrease the number of
annual responses \325\ to the existing collection of information for
Regulation 14A. In the 2020 Adopting Release, the Commission stated
that it did not expect registrants to file any different number of
proxy statements as a result of the 2020 Final Rules. The Commission
did state, however, that it anticipated that the number of additional
soliciting materials filed under 17 CFR 240.14a-6 may increase in
proportion to the number of times that registrants choose to provide a
statement in response to a PVAB's proxy voting advice as contemplated
by Rule 14a-2(b)(9)(ii)(B) or the safe harbor under Rule 14a-
2(b)(9)(iv). For purposes of the PRA analysis in that release, the
Commission estimated that there would be an additional 783 annual
responses to the collection of information as a result of the 2020
Final Rules.\326\ Accordingly, we expect that the final amendments will
decrease the number of annual responses to the collection of
information for Regulation 14A by the same amount.
---------------------------------------------------------------------------

    \325\ For purposes of the Regulation 14A collection of
information, the number of annual responses corresponds to the
estimated number of new filings that will be made each year under
Regulation 14A. When calculating PRA burden for any particular
collection of information, the total number of annual burden hours
estimated is divided by the total number of annual responses
estimated, which provides the average estimated annual burden per
response. The current inventory of approved collections of
information is maintained by the Office of Information and
Regulatory Affairs (``OIRA''), a division of OMB. The total annual
burden hours and number of responses associated with Regulation 14A,
as updated from time to time, can be found at https://www.reginfo.gov/public/do/PRAMain.
    \326\ 2020 Adopting Release at 55150, n.707.
---------------------------------------------------------------------------

4. Incremental Change in Compliance Burden for Collection of
Information
    PRA Table 2 below illustrates our estimated incremental change to
the total annual compliance burden for the Regulation 14A collection of
information in hours and in costs \327\ as a result of our rescission
of the Rule 14a-2(b)(9)(ii) conditions. The table sets forth the
percentage estimates we typically use for the burden allocation for
each response.
---------------------------------------------------------------------------

    \327\ For purposes of the PRA, the paperwork burden for the
information collection is to be allocated between internal burden
hours and outside professional costs. The Commission's estimates in
the 2020 Adopting Release assumed that 75% of the burden of
Regulation 14A would be borne internally by the company and 25%
would be outside professional costs. The Commission recognized that
the costs of retaining outside professionals may vary depending on
the nature of the professional services, but for purposes of the PRA
analysis, the Commission estimated that such costs would be an
average of $400 per hour. This estimate was based on consultations
with several registrants, law firms, and other persons who regularly
assist registrants in preparing and filing reports with the
Commission. See id. at 55150, n.708. We use these same estimates for
the final amendments.

           PRA Table 2--Decrease in Burden Hours Resulting From the Rescission of the Rule 14a-2(b)(9)(ii) Conditions and Related Safe Harbors
--------------------------------------------------------------------------------------------------------------------------------------------------------
   Number of estimated    Total decrease in burden  Decrease in burden hours    Decrease in internal          Decrease in              Decrease in
        responses                   hours                 per response                  hours              professional hours       professional costs
(A) [dagger]              (B) [dagger][dagger]                         (C) = (B)/((D) = (B) x 0.75          (E) = (B) x 0.25         (F) = (E) x $400
--------------------------------------------------------------------------------------------------------------------------------------------------------
               5,586                   318,640                        57                   238,980                    79,660              $31,864,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
[dagger] This number reflects an estimated decrease of 783 annual responses to the existing Regulation 14A collection of information as a result of the
  rescission of the Rule 14a-2(b)(9)(ii) conditions. The current OMB inventory for Regulation 14A reflects 6,369 annual responses.
[dagger][dagger] Calculated as the sum of annual burden increases estimated for PVABs (34,140 hours) and registrants (284,500 hours). See supra PRA
  Table 1.
[dagger][dagger][dagger] The estimated increases in Columns (C), (D), and (E) are rounded to the nearest whole number.

5. Program Change and Revised Burden Estimates
    PRA Table 3 summarizes the estimated change to the total annual
compliance burden of the Regulation 14A collection of information, in
hours and in costs, as a result of the rescission of the Rule 14a-
2(b)(9)(ii) conditions.

                                   PRA Table 3--Paperwork Burden as a Result of the Rescission of the Rule 14a-2(b)(9)(ii) Conditions and Related Safe Harbors
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Current burden                                           Program change                                             Revised burden
                             -------------------------------------------------------------------------------------------------------------------------------------------------------------------
          Reg. 14A               Current
                                 annual        Current      Current cost     Decrease in      Decrease in internal    Decrease in professional   Annual responses  Burden hours    Cost burden
                                responses   burden hours       burden         responses               hours                     costs
                                      (A)           (B)                (C) (D)    (E)        minus>                              (E)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                    6,369       778,802     $103,805,312              783                   238,980               $31,864,000              5,586       539,822      $71,941,312
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 See Column (A) in PRA Table 2 noting an estimated decrease of 783 annual responses to the Regulation 14A collection of information as a result of the rescission of the Rule 14a-
  2(b)(9)(ii) conditions.
 See Column (D) in PRA Table 2.
 From Column (F) in PRA Table 2.

VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``FRFA'') has been
prepared in accordance with the Regulatory Flexibility Act
(``RFA'').\328\ It relates to the amendments to the proxy solicitation
exemptions in Rule 14a-2(b) and the prohibition on false or misleading
statements in solicitations in Rule 14a-9 of Regulation 14A under the
Exchange Act. Specifically, we are amending Rules 14a-2 and 14a-9 to
rescind the Rule 14a-2(b)(9)(ii) conditions (as well as the related
safe harbors and exclusions set forth in Rules 14a-2(b)(9)(iii) through
(vi)) and to delete Note (e) to Rule 14a-9. An Initial Regulatory
Flexibility Analysis (``IRFA'') was prepared in accordance with the RFA
and included in the 2021 Proposing Release.
---------------------------------------------------------------------------

    \328\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

A. Need for, and Objectives of, the Final Amendments

    The intent of the final amendments is to avoid burdens on PVABs
that may impede and impair the timeliness and independence of their
proxy voting advice and avoid misperceptions regarding the application
of Rule 14a-9 liability to proxy voting advice, while also preserving
investors' confidence in the integrity of such advice. We discuss the
need for, and objectives of, these amendments in more detail in
Sections I and II. We address the economic impact of these amendments
in Sections IV and V.

B. Significant Issues Raised by Public Comments

    In the 2021 Proposing Release, the Commission requested comments on
the IRFA, including on the extent to which PVABs' current internal
policies and procedures would mitigate any costs imposed on PVABs'
clients as a result of the proposed amendments to Rule 14a-2(b)(9). The
Commission also requested comments on how the 2021 Proposed Amendments
may affect PVABs, their clients, and registrants.
    We did not receive comments on the IRFA or any comments that
directly responded to the Commission's requests for comments in the
IRFA. However, several commenters generally discussed PVABs' current
internal policies and procedures and the potential impact of the
amendments on PVABs, their clients, and registrants.\329\ In developing
the FRFA, we considered these comments as well as the other comments on
the 2021 Proposed Amendments.\330\
---------------------------------------------------------------------------

    \329\ See supra Sections II.A.2 and II.B.2.
    \330\ See supra Sections II, III, and IV.
---------------------------------------------------------------------------

C. Small Entities Subject to the Final Amendments

    The final amendments are likely to affect some small entities that
are either: (i) PVABs; or (ii) registrants conducting solicitations
that are the subject of proxy voting advice.
    The RFA defines ``small entity'' to mean ``small business,''
``small organization,'' or ``small governmental jurisdiction.'' \331\
For purposes of the RFA, under our rules, an issuer of securities or a
person, other than an investment company or an investment adviser, is a
``small business'' or ``small organization'' if it had total assets of
$5 million or less on the last day of its most recent fiscal year.\332\
An investment company, including a BDC, is considered to be a ``small
business'' 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.\333\ An investment
adviser generally is a small entity if it: (1) has assets under
management having a total value of less than $25 million; (2) did not
have total assets of $5 million or more on the last day of the most
recent fiscal year; and (3) does not control, is not controlled by, and
is not under common control with another investment adviser that has
assets under management of $25 million or more, or any person (other
than a natural person) that had total assets of $5 million or more on
the last day of its most recent fiscal year.\334\ We estimate that
there are 772 issuers that file with the Commission, other than
investment companies and investment advisers, that may be considered
small entities.\335\ In addition, we estimate that, as of December
2021, there were 80 registered investment companies that would be
subject to the final amendments that may be considered small
entities.\336\ Finally, we estimate that, as of December 2021, there
were 594 investment advisers that may be considered small
entities.\337\ As discussed above, one of the three major PVABs in the
United States--ISS--is a registered investment adviser.\338\
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    \331\ 5 U.S.C. 601(6).
    \332\ See Exchange Act Rule 0-10(a) [17 CFR 240.0-10(a)].
    \333\ See Investment Company Act Rule 0-10(a) [17 CFR 270.0-
10(a)].
    \334\ See Advisers Act Rule 0-7(a) [17 CFR 275.0-7(a)].
    \335\ This estimate is based on staff analysis of issuers
potentially subject to the final amendments, excluding co-
registrants, with EDGAR filings on Form 10-K, or amendments thereto,
filed during the calendar year of Jan. 1, 2021 to Dec. 31, 2021.
This analysis is based on data from XBRL filings, Compustat, Ives
Group Audit Analytics, and manual review of filings submitted to the
Commission.
    \336\ This estimate is derived from an analysis of data obtained
from Morningstar Direct as well as data filed with the Commission
(Forms N-Q and N-CSR) for the last quarter of 2021.
    \337\ We based this estimate on registered investment adviser
responses to Items 5.F. and 12 of Form ADV.
    \338\ See supra Section IV.A.1.
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D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

    Because we are rescinding the Rule 14a-2(b)(9)(ii) conditions (as
well as the related safe harbors and exemptions set forth in Rules 14a-
2(b)(9)(iii) through (vi)) and deleting Note (e) to Rule 14a-9, the
final amendments will not impose reporting, recordkeeping, or other
compliance requirements on entities of any size, including small
entities. To the contrary, the final amendments will alleviate the need
for entities of any size, including small entities, to incur any costs
needed to comply with the requirements of the rules that we are
rescinding.\339\ For example, as discussed in our PRA analysis, we
expect that the rescission of the Rule 14a-2(b)(9)(ii) conditions and
related safe harbors will decrease the paperwork burdens for PVABs and
registrants by the amounts that the Commission estimated that PVABs and
registrants would incur as a result of these rules when adopting
them.\340\ Accordingly, we believe that the final amendments will
reduce the reporting, recordkeeping, and other compliance requirements
applicable to small entities.
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    \339\ See supra Sections IV.B and V.
    \340\ See supra Section V.
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    The amendments could have other economic effects beyond simply
reducing compliance requirements. We refer to the discussion of the
final amendments' economic effects on all affected parties, including
small entities, in Sections IV and V.\341\ Consistent with that
discussion, we anticipate that the economic benefits and costs likely
would vary widely among small entities based on a number of factors,
including the nature and conduct of their businesses, which makes it
difficult to project the economic impact on small entities with
precision.\342\
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    \341\ In particular, we discuss the estimated benefits and costs
of the final amendments on affected parties in Section IV.B. We also
discuss the estimated compliance burden associated with the final
amendments for purposes of the PRA in Section V.
    \342\ See supra Section IV.C.
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    As a general matter, however, we recognize that any costs of the
final

amendments borne by the affected entities could have a proportionally
greater effect on small entities, as they may be less able to bear such
costs relative to larger entities. For example, as discussed in Section
IV.B.2, the final amendments to Rule 14a-2(b)(9) could potentially
reduce the overall mix of information available to PVABs' clients as
they assess proxy voting advice and make determinations about how to
cast votes. Further, as noted in Section IV.C, small institutions tend
to rely more heavily on PVABs' proxy voting advice than larger
institutions because those smaller institutions have more limited
resources to conduct their own research. As such, to the extent the
amendments to Rule 14a-2(b)(9) reduce the overall mix of information
available to PVABs' clients in connection with PVABs' proxy voting
advice, the costs associated by such reduction will be borne
disproportionately by smaller institutions. That said, as discussed in
Section IV.B.2, we expect that any such costs imposed on PVABs' clients
would be mitigated to the extent that PVABs currently have internal
policies and procedures aimed at enabling feedback from certain
registrants before they issue proxy voting advice.
    Although we do not expect that PVABs or registrants will incur
significant costs as a result of the final amendments, compliance with
the amended rules may require the use of professional skills, including
legal skills.

E. Agency Action To Minimize Effect on Small Entities

    As noted, the purpose of the final amendments is to avoid burdens
on PVABs that may impede and impair the timeliness and independence of
their proxy voting advice and avoid misperceptions regarding the
application of Rule 14a-9 liability to proxy voting advice, while also
preserving investors' confidence in the integrity of such advice. The
RFA directs us to consider alternatives that would accomplish our
stated objectives, while minimizing any significant adverse impact on
small entities. In connection with the final amendments, we considered
the following alternatives:
     Establishing different compliance or reporting
requirements that take into account the resources available to small
entities;
     Exempting small entities from all or part of the
requirements;
     Using performance rather than design standards; and
     Clarifying, consolidating, or simplifying compliance and
reporting requirements under the rules for small entities.
    As a primary matter, we do not expect that PVABs, investors, or
registrants of any size will incur significant costs as a result of the
deletion of Note (e) to Rule 14a-9. We recognize, however, that any
costs of rescinding the Rule 14a-2(b)(9)(ii) conditions borne by the
affected entities could have a proportionally greater effect on small
entities as they may be less able to bear such costs relative to larger
entities. While we acknowledge the potential costs that small entities
may bear due to the rescission of the Rule 14a-2(b)(9)(ii) conditions,
neither the above alternatives nor any other alternative to rescinding
the conditions would be as effective in accomplishing our objectives.
As discussed in more detail above, rescinding the Rule 14a-2(b)(9)(ii)
conditions is appropriate because we believe that the potential
informational benefits to investors of these conditions do not
sufficiently justify the risks they pose to the cost, timeliness, and
independence of proxy voting advice on which many investors rely.\343\
We also believe that deleting Note (e) is appropriate given our
conclusion that, rather than reducing legal uncertainty and confusion,
the addition of Note (e) has unnecessarily exacerbated it. We believe
that rescinding these rules is the best course of action to address
these concerns.
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    \343\ See supra Section II.A.3.
---------------------------------------------------------------------------

    Thus, the above alternatives are not relevant because we are
rescinding rules that imposed requirements (i.e., the Rule 14a-
2(b)(9)(ii) conditions) rather than adopting new requirements that
could be modified to account for their potential impact on small
entities. Our objectives, therefore, would not be served by
establishing different compliance or reporting requirements for small
entities, exempting small entities from all or part of the
requirements, or clarifying, consolidating or simplifying compliance
and reporting requirements for small entities. Similarly, because the
final amendments do not set forth any standards, our objectives would
not be served by establishing performance rather than design standards.

Statutory Authority

    We are adopting the rule amendments contained in this release under
the authority set forth in Sections 3(b), 14, 23(a) and 36 of the
Securities Exchange Act of 1934, as amended.

List of Subjects

17 CFR Part 240

    Brokers, Confidential business information, Fraud, Reporting and
recordkeeping requirements, Securities.

17 CFR Part 276

    Securities.

Text of Rule Amendments

    In accordance with the foregoing, we are amending title 17, chapter
II of the Code of Federal Regulations as follows:

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

0
1. The general authority citation for part 240 continues to read as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20,
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350;
Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106,
sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *

0
2. Amend Sec.  240.14a-2 by revising paragraph (b)(9) to read as
follows:

Sec.  240.14a-2  Solicitations to which Sec.  240.14a-3 to Sec.
240.14a-15 apply.

* * * * *
    (b) * * *
    (9) Paragraphs (b)(1) and (b)(3) of this section shall not be
available to a person furnishing proxy voting advice covered by Sec.
240.14a-1(l)(1)(iii)(A) (``proxy voting advice business'') unless the
proxy voting advice business includes in its proxy voting advice or in
an electronic medium used to deliver the proxy voting advice prominent
disclosure of:
    (i) Any information regarding an interest, transaction, or
relationship of the proxy voting advice business (or its affiliates)
that is material to assessing the objectivity of the proxy voting
advice in light of the circumstances of the particular interest,
transaction, or relationship; and
    (ii) Any policies and procedures used to identify, as well as the
steps taken to address, any such material conflicts of interest arising
from such interest, transaction, or relationship.

Sec.  240.14a-9  [Amended]

0
3. Amend Sec.  240.14a-9 by removing paragraph e. of the Note.

PART 276--INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT
ADVISERS ACT OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER

0
4. The authority citation for part 276 continues to read as follows:

    Authority: 15 U.S.C. 80b et seq.

0
5. Amend the table by removing the entry for ``Supplement to Commission
Guidance Regarding the Proxy Voting Responsibilities of Investment
Advisers''.

    By the Commission.
    Dated: July 13, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022-15311 Filed 7-18-22; 8:45 am]
BILLING CODE 8011-01-P