SEC Adopts Rules Requiring Online Proxy Materials

Washington, DC, August 2, 2007 - The Securities and Exchange Commission has adopted amendments to the Securities Exchange Act of 1934 that require issuers and other soliciting persons to make proxy materials available to shareholders on the Internet and to notify shareholders of the Internet availability of the materials.

Background
Under  the new amendments, if the issuer or other soliciting person chooses to furnish paper copies of the proxy materials, the only new obligations created by the amendments are simply making proxy materials available online and notifying shareholders of the service. If, however, the issuer or other soliciting person sends only a notice of availability, and not the actual document, several other requirements also apply, including:

• copies of the proxy materials must be made available to shareholders upon request, free of charge;
• shareholders must be able to make a permanent election to receive paper or email copies of proxy materials in connection with future proxy solicitations;
• the notice to shareholders must be sent 40 or more calendar days in advance of the date of the shareholder meeting, or the date that consents or authorizations may be used to effect the corporate actions; and
• shareholders must have a means to execute their proxies as of the time the notice is first sent. An issuer may choose one option for certain shareholders and the other option for other shareholders.

Large “accelerated filers,” as defined under Rule 12b-2 of the Exchange Act, must comply with the amendments by January 1, 2008. All other filers, including registered investment companies, must comply with the amendments no later than January 1, 2009, and may comply with the amendments as of January 1, 2008.

ICI Position
In a  March 2007 comment letter,  ICI affirmed its support for ongoing SEC efforts to facilitate greater use of electronic media to better serve investors’ information needs and preferences. In particular, ICI expressed strong support for the agency’s decision to develop a new regulatory approach that will improve the usefulness of mutual fund disclosure by taking greater advantage of technology.

ICI expressed concerns with the SEC’s “notice and access” model for proxy materials, however. The voluntary model adopted by the agency differs from its initial proposal in ways that reduce the model’s benefits, increase its costs, and create practical difficulties. Based on ICI member feedback, ICI strongly recommend that the SEC not make the “notice and access” model mandatory.

Related Links
This site includes a section devoted disclosure issues that affects funds and their shareholders.