[Federal Register Volume 70, Number 240 (Thursday, December 15, 2005)]
[Proposed Rules]
[Pages 74598-74622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-24004]



[[Page 74597]]

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Part V





Securities and Exchange Commission





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17 CFR Parts 240, 249 and 274



Internet Availability of Proxy Materials; Proposed Rule

  Federal Register / Vol. 70, No. 240 / Thursday, December 15, 2005 / 
Proposed Rules  

[[Page 74598]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240, 249 and 274

[Release Nos. 34-52926; IC-27182; File No. S7-10-05]
RIN 3235-AJ47


Internet Availability of Proxy Materials

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: We are proposing amendments to the proxy rules under the 
Securities Exchange Act of 1934 that would provide an alternative 
method for issuers and other persons to furnish proxy materials to 
shareholders by posting them on an Internet Web site and providing 
shareholders with notice of the availability of the proxy materials. 
Copies would be available to shareholders on request, at no cost. The 
proposed amendments are intended to put into place processes that would 
provide shareholders with notice of, and access to, proxy materials 
while taking advantage of technological developments and the growth of 
the Internet and electronic communications. Issuers that rely on the 
proposed amendments would be able to lower costs of proxy solicitations 
that ultimately are borne by shareholders. The proposed amendments also 
would apply to a soliciting person other than the issuer, which we 
anticipate might reduce the costs of engaging in a proxy contest. 
Today's proposals would not apply to business combination transactions. 
These proposals also would not affect the availability of any existing 
method of furnishing proxy materials.

DATES: Comments must be received on or before February 13, 2006.

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed); or
     Send an e-mail to [email protected]. Please include 
File Number S7-10-05 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number S7-10-05. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's 
Internet Web site (http://www.sec.gov/rules/proposed). Comments also 
are available for public inspection and copying in the Commission's 
Public Reference Room, 100 F Street, NE., Washington, DC 20549. All 
comments received will be posted without change; we do not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Raymond A. Be, Special Counsel, Office 
of Rulemaking, Division of Corporation Finance, at (202) 551-3430, 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-3628.

SUPPLEMENTARY INFORMATION: The Commission today proposes amendments to 
Rules 14a-2,\1\ 14a-3,\2\ 14a-4,\3\ 14a-7,\4\ 14a-8,\5\ 14a-12,\6\ 14a-
13,\7\ 14b-1,\8\ 14b-2,\9\ 14c-2,\10\ 14c-3,\11\ 14c-5,\12\ 14c-7,\13\ 
Schedule 14A,\14\ Schedule 14C,\15\ Form 10-K,\16\ Form 10-KSB,\17\ 
Form 10-Q,\18\ Form 10-QSB,\19\ and Form N-SAR \20\ under the 
Securities Exchange Act of 1934.\21\
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    \1\ 17 CFR 240.14a-2.
    \2\ 17 CFR 240.14a-3.
    \3\ 17 CFR 240.14a-4.
    \4\ 17 CFR 240.14a-7.
    \5\ 17 CFR 240.14a-8.
    \6\ 17 CFR 240.14a-12.
    \7\ 17 CFR 240.14a-13.
    \8\ 17 CFR 240.14b-1.
    \9\ 17 CFR 240.14b-2.
    \10\ 17 CFR 240.14c-2.
    \11\ 17 CFR 240.14c-3.
    \12\ 17 CFR 240.14c-5.
    \13\ 17 CFR 240.14c-7.
    \14\ 17 CFR 240.14a-101.
    \15\ 17 CFR 240.14c-101.
    \16\ 17 CFR 249.310.
    \17\ 17 CFR 249.310a.
    \18\ 17 CFR 249.308a.
    \19\ 17 CFR 249.308b.
    \20\ 17 CFR 274.101.
    \21\ 15 U.S.C. 78a et seq.
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Table of Contents

I. Introduction
II. Background
III. Description of the Proposed Amendments
    A. Proposed ``Notice and Access'' Model for Furnishing of 
Internet Proxy Materials by an Issuer
    1. Notice of Internet Availability of Proxy Materials
    2. Mechanics of the Proposed ``Notice and Access'' Model
    i. Proxy Card
    ii. Internet Web Site Posting of Proxy Materials
    iii. Period of Reliance on the Proposed Model
    iv. State Law Notices
    v. Additional Soliciting Materials
    3. Requests for Copies of Proxy Materials
    B. The Role of Intermediaries
    1. Background
    2. Proposed Amendments
    C. Proposed ``Notice and Access'' Model for Furnishing of 
Internet Proxy Materials by Soliciting Persons Other Than the Issuer
    1. Mechanics of Proxy Solicitations by Persons Other Than the 
Issuer
    2. Timeframe for Sending Notice of Internet Availability of 
Proxy Materials
    3. Content of the Notice of Internet Availability of Proxy 
Materials of a Soliciting Person Other Than the Issuer
    4. Shareholder Lists and the Furnishing of Proxy Materials by 
the Issuer
    5. The Role of Intermediaries
    D. Business Combination Transactions
IV. Conforming and Correcting Revisions to the Proxy Rules
V. Paperwork Reduction Act
VI. Cost-Benefit Analysis
VII. Consideration of Burden on Competition and Promotion of 
Efficiency, Competition and Capital Formation
VIII. Initial Regulatory Flexibility Analysis
IX. Small Business Regulatory Enforcement Fairness Act
X. Statutory Basis and Text of Proposed Amendments

I. Introduction

    We are proposing amendments to the proxy rules to update our 
regulatory framework to take advantage of communications technology and 
provide an alternative proxy model that could reduce the printing and 
mailing costs associated with furnishing proxy materials to 
shareholders.\22\ The proposed amendments would provide an alternative 
method for furnishing proxy materials to shareholders based on a 
``notice and access'' model. Under the proposals, an issuer would be 
able to satisfy its obligations under the Commission's proxy rules by 
posting its proxy materials on a specified, publicly-accessible 
Internet Web site (other than the Commission's EDGAR Web site) and 
providing shareholders with a notice informing them that the materials 
are available and explaining how to access those materials.\23\ These 
proposals are

[[Page 74599]]

intended to establish procedures that would promote use of the Internet 
as a reliable and cost-efficient means of making proxy materials 
available to shareholders. The proposed amendments would provide a new 
alternative to existing methods of furnishing proxy materials, which 
would not be affected by the proposal.
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    \22\ For purposes of this release, the term ``proxy materials'' 
includes proxy statements on Schedule 14A, proxy cards, information 
statements on Schedule 14C, annual reports to security holders 
required by Rules 14a-3 and 14c-3 of the Exchange Act, notices of 
shareholder meetings, additional soliciting materials, and any 
amendments to such materials.
    \23\ An issuer also would have to continue to file its proxy 
materials on the Commission's EDGAR Web site and furnish its annual 
report to security holders to the Commission pursuant to Rules 14a-3 
and 14c-3. These proposed rules do not affect any current Commission 
filing requirement, except that a soliciting person following the 
proposed model would be required to file the proposed notice as 
additional soliciting material under Exchange Act Rule 14a-6(b) [17 
CFR 240.14a-6(b)].
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    Shareholders and other persons conducting their own proxy 
solicitations would be able to rely on the proposed amendments under 
requirements substantially similar to the requirements that would apply 
to issuers. As a result, these proposals also would give these 
shareholders and other persons an alternative method to furnish proxy 
materials that may have the effect of reducing the cost of engaging in 
a proxy contest. Because the proposed amendments provide an alternative 
method for furnishing proxy materials, they would not eliminate the 
ability of an issuer or other soliciting person to comply with existing 
methods of furnishing proxy materials. The proposed alternative would 
not be available to issuers or other soliciting persons in the context 
of a business combination transaction.
    The proposed amendments would require an issuer that is relying on 
the proposed ``notice and access'' model to provide a shareholder with 
a copy of the materials upon request (in paper or by e-mail, as 
requested). A soliciting person other than the issuer may choose not to 
provide a copy of its proxy materials to a requesting shareholder if 
the person is conducting a conditional ``electronic only'' proxy 
solicitation and soliciting proxy authority only from shareholders 
willing to electronically access the soliciting person's proxy 
materials.\24\
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    \24\ An issuer would be unlikely to conduct such an ``electronic 
only'' proxy solicitation, as it would have an obligation to provide 
shareholders who are not being solicited with an information 
statement that complies with Regulation 14C [17 CFR 14c-1 through 
14c-101]. In addition, the rules of some trading markets require 
issuers to solicit proxies from all of their shareholders.
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    Under the proposed ``notice and access'' model, the issuer would be 
able to send a notice to shareholders (the ``Notice of Internet 
Availability of Proxy Materials'' or ``Notice'') at least 30 days 
before the meeting, or if no meeting is to be held, at least 30 days 
before the date the votes, consents, or authorizations may be used to 
effect a corporate action, indicating that the issuer's proxy materials 
are available on a specified Internet Web site and explaining how to 
access those proxy materials. The Notice also would explain the 
procedure for requesting a copy of the materials, if a shareholder 
desires such a copy.
    As proposed, an issuer or other soliciting person need not rely on 
the ``notice and access'' model with regard to all proxy-related 
materials. The amendments would permit a soliciting person to choose to 
rely on the proposed model as a means of furnishing some proxy-related 
documents to shareholders and use other means, such as paper documents, 
with regard to other proxy-related materials. For example, an issuer 
could choose to use the ``notice and access'' model for its proxy 
statement and to furnish its annual report to security holders 
(commonly referred to as the ``glossy annual report'') in paper through 
the U.S. mail. However, the proposed ``notice and access'' model would 
require a soliciting person to furnish the proxy card together with, 
and using the same medium as, either the Notice of Internet 
Availability of Proxy Materials or the proxy statement.\25\
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    \25\ In the proposed regulatory text at the end of this release, 
we refer to proxy cards as ``forms of proxy'' for consistency with 
existing Commission rules.
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II. Background

    We believe that continuing technological developments and the 
expanded use of the Internet now merit consideration of an alternative 
method for the dissemination of proxy materials. We also believe that 
our proposed alternative model could facilitate effective and cost-
efficient communications between issuers, shareholders, and 
intermediaries. We previously published extensive guidance regarding 
the electronic delivery of materials under the federal securities 
laws.\26\ We believe the proposed alternative model would address the 
possibility, as identified by market participants, that a significant 
portion of the difficulties that issuers have encountered in 
implementing our existing guidance to date has stemmed from 
shareholders' inattention to requests for consent to electronic 
delivery rather than an unwillingness to receive documents 
electronically.\27\
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    \26\ Release No. 33-7233 (Oct. 6, 1995) [60 FR 53458] (the 
``1995 Interpretive Release'') provided guidance on electronic 
delivery of prospectuses, annual reports to security holders and 
proxy solicitation materials under the Securities Act of 1933 [15 
U.S.C. 77a et seq.], the Securities Exchange Act of 1934, and the 
Investment Company Act of 1940 15 U.S.C. 80a-1 et seq.]. Release No. 
33-7288 (May 9, 1996) (the ``1996 Interpretive Release'') provided 
guidance on electronic delivery of required information by broker-
dealers and transfer agents under the Securities Act, the Exchange 
Act, and the Investment Company Act. Release No. 33-7856 (Apr. 28, 
2000) [65 FR 25843] (the ``2000 Interpretive Release'') provided 
guidance on the use of electronic media to deliver documents under 
the federal securities laws, an issuer's liability for Web site 
content, and basic legal principles that issuers and market 
intermediaries should consider in conducting online offerings.
    \27\ See, for example, the third Q&A in Section J: Which Issuers 
Are Using Electronic Delivery, in FAQ on Electronic Delivery, 
available at www.realcorporatelawyer.com/faqs/ed.html.
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    In 2000, we discussed an ``access equals delivery'' model and an 
implied consent model as possible alternatives to the existing 
electronic delivery conditions. In our 2000 Interpretive Release, we 
described the ``access equals delivery'' model as one under which 
``investors would be assumed to have access to the Internet, thereby 
allowing delivery to be accomplished solely by an issuer posting a 
document on the issuer's or a third party's Web site.'' \28\ In that 
release, we also described the ``implied consent'' model as one that 
would allow an issuer to rely on electronic delivery if intended 
recipients did not affirmatively object when notified of the issuer's 
or intermediary's intention to deliver documents in an electronic 
format.
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    \28\ We note that the ``notice and access'' model that we are 
proposing in this release would require both notice and posting of 
the materials on the Internet. Thus, it would not follow a pure 
``access equals delivery'' model, as described in the 2000 
Interpretive Release.
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    We did not take action regarding either of those models in 2000. 
With the passage of five years and the increased use of the Internet as 
a means to quickly, reliably, and inexpensively disseminate 
information, we think it is again appropriate to consider the effect 
that technological developments have had on making information 
available and propose an alternative model for furnishing proxy 
materials.
    More than 10.7 million beneficial shareholders already have given 
their consent to electronic delivery of proxy materials and 
approximately 85% of their shares were voted electronically or 
telephonically during the 2005 proxy season.\29\ Moreover, recent data 
indicates that up to 75% of Americans have access to the Internet in 
their homes, and that this percentage is increasing steadily among all 
age groups.\30\
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    \29\ According to data available on the Web site of Automatic 
Data Processing, Inc. See www.ics.adp.com/release11/public_site/about/stats.html.
    \30\ See Three Out of Four Americans Have Access to the 
Internet, Nielsen//NetRatings, March 18, 2004; Robyn Greenspan, 
Senior Surfing Surges, ClickZNetwork, Nov. 20, 2003 (citing 
statistics from Neilsen/NetRatings and Jupiter Research). In 
addition, there is evidence suggesting that the ``digital divide'' 
is narrowing. See, for example, Kristen Fountain, Antennas Sprout, 
and a Bronx Neighborhood Goes Online, The N.Y. Times, June 10, 2004 
at G8; Steve Lohr, Libraries Wired, and Reborn, The N.Y. Times, Apr. 
22, 2004 at G1. However, studies have varied. One study concluded 
that only 63% of Americans age 18 or older had Internet access in 
2004, and that only 25% of persons over the age of 65 had Internet 
access in the same year. See Trends 2005 by the Pew Research Center. 
Nonetheless, these percentages are significantly higher than the 
approximately 15% of Americans estimated to have Internet access in 
1995 and the 48% in 2000. Id.

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[[Page 74600]]

    In connection with our recent Securities Offering Reform effort, we 
adopted new Securities Act Rule 172,\31\ which implements an ``access 
equals delivery'' model in the context of final prospectus 
delivery.\32\ Under Rule 172, a final prospectus is deemed to precede 
or accompany a security for sale for purposes of Securities Act Section 
5(b)(2) \33\ so long as the company offering the security files with 
the Commission a final prospectus meeting the requirements of 
Securities Act Section 10(a) \34\ as part of the registration statement 
pursuant to Securities Act Rule 424.\35\ Investors will be able to 
access the electronically filed final prospectus on EDGAR, but no 
longer will receive a copy unless they request one.\36\ Two commenters 
on the Securities Offering Reform proposing release suggested that we 
consider proposing similar ``access equals delivery'' amendments in the 
context of the proxy rules.\37\
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    \31\ 17 CFR 230.172.
    \32\ See Release No. 33-8591 (July 19, 2005) [70 FR 44721].
    \33\ 15 U.S.C. 77e(b)(2).
    \34\ 15 U.S.C. 77j(a).
    \35\ 17 CFR 230.424.
    \36\ See Securities Act Rule 173(d) [17 CFR 230.173(d)].
    \37\ See comment letters on Release No. 33-8501 (Nov. 3, 2004) 
[69 FR 67392] from the Society of Corporate Secretaries and 
Governance Professionals and Intel Corporation, available at http://www.sec.gov/rules/proposed/s73804.shtml.
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Request for Comment

     Has Internet access become sufficiently widespread to make 
a ``notice and access'' model for furnishing proxy materials a viable 
model?
     Is the means by which most shareholders access the 
Internet sufficient to access lengthy documents such as annual reports, 
proxy statements, and information statements? Would investors be 
excessively burdened by having to download and print these documents?
     As technology has progressed, so has the amount of content 
that can be transmitted electronically. Many Internet Web sites 
currently use advanced formatting that may not be compatible with, or 
may substantially slow, dial-up connections. Do shareholders need 
broadband technology to efficiently download lengthy documents such as 
annual reports, proxy statements, and information statements? If so, do 
shareholders have sufficient access to broadband technology to make the 
proposal described in this release feasible?
     As part of the ``notice and access'' model, should we 
require issuers and other soliciting persons to make their proxy 
materials available in a format that can be readily downloaded by 
shareholders over dial-up connections? Should we require issuers and 
other soliciting persons to provide, where available, links to third-
party Web sites from which shareholders would be able to download, free 
of charge, any software necessary to view the documents?
     Do issuers have sufficient bandwidth on their Internet Web 
sites to handle any anticipated increased traffic? What actions would 
issuers have to take to ensure that their Internet Web sites have 
sufficient capacity to handle the increased traffic?
     Should the proposed model instead be based on obtaining a 
shareholder's consent? If so, what type of consent should be required 
(e.g., should a shareholder's affirmative consent, implied consent, or 
other type of consent be required?) and should any disclosure be 
required in connection with the request for consent? If so, what 
disclosure should be required?

III. Description of the Proposed Amendments

A. Proposed ``Notice and Access'' Model for Furnishing of Internet 
Proxy Materials by an Issuer

    The proposed amendments would permit an alternative means for an 
issuer to furnish proxy materials to all of its shareholders. These 
proxy materials include:
     Notices of shareholder meetings; \38\
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    \38\ The notice of a shareholder meeting typically is required 
under state law. However, issuers traditionally deliver the notice 
together with the proxy materials. Because we intend for our 
proposed rules to have no impact on state corporation law 
obligations, the proposed rules would not permit use of the proposed 
alternative model if the law in the state in which an issuer is 
incorporated would not permit reliance on the alternative model.
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     Schedule 14A proxy statements and consent solicitation 
statements;
     Proxy cards;
     Schedule 14C information statements;
     Annual reports to security holders; \39\
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    \39\ The requirement to furnish annual reports in Rules 14a-3 
and 14c-3 under the Exchange Act does not apply to registered 
investment companies. See 17 CFR 240.14a-3(b) and 240.14c-3(a). The 
proposals in this release do not apply to the requirement for every 
registered investment company, at least semi-annually, to transmit 
reports to shareholders under Section 30(e) of the Investment 
Company Act of 1940 [15 U.S.C. 80a-29(e)] and the rules thereunder.
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     Additional soliciting materials; \40\ and
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    \40\ Our rules permit, but do not require, delivery of 
additional soliciting materials. See Rule 14a-6(b).
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     Any amendments to such materials that are required to be 
furnished to shareholders.
    With regard to solicitations other than those in connection with 
business combination transactions, the proposed amendments would permit 
all issuers to use the ``notice and access'' model for all 
shareholders. The availability of the ``notice and access'' model would 
not be determined by any characteristics of either the issuer or the 
shareholder.

Request for Comment

     Should the ``notice and access'' model be available with 
respect to all shareholders of all issuers, or should there be 
limitations on its use?
     Should the availability of the ``notice and access'' model 
depend on the nature of the issuer? For example, should the ``notice 
and access'' model be available for all issuers or should its 
availability depend on the issuer's Securities Act registration 
statement form eligibility (e.g., Form S-3 eligibility) or the issuer's 
Exchange Act reporting history (e.g., only those issuers that are 
current in their Exchange Act reporting)?
     Should the availability of the ``notice and access'' model 
depend on the nature of the issuer's investors? For example, should the 
``notice and access'' model be equally available with respect to all 
shareholders (e.g., institutional versus individual shareholders, more 
financially sophisticated shareholders versus less financially 
sophisticated shareholders)?
     Should mutual funds, closed-end funds, business 
development companies, and other investment companies be permitted to 
use the ``notice and access'' model?
     In addressing each of the questions above, commenters are 
asked to address differences in the degree to which different 
categories of investors in particular types of issuers have access to, 
and are prepared to use, the Internet in receiving communications from 
the issuer.

[[Page 74601]]

1. Notice of Internet Availability of Proxy Materials
    To notify shareholders of the availability of the proxy materials 
on the specified Internet Web site, an issuer relying on the proposed 
``notice and access'' model would have to send a Notice of Internet 
Availability of Proxy Materials to shareholders 30 days or more in 
advance of the shareholder meeting date or, if no meeting is to be 
held, 30 days or more in advance of the date that votes, consents, or 
authorizations may be used to effect the corporate actions to be voted 
on.\41\ The 30-day period is to provide shareholders with sufficient 
time to receive the Notice, request copies of the materials, if 
desired, and review the proxy materials prior to voting.\42\ We would 
view the Notice as additional soliciting material that would have to be 
filed with the Commission pursuant to Rule 14a-6(b) no later than the 
date it is first sent or given to shareholders.
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    \41\ This Notice could be sent electronically under existing 
permitted methods.
    \42\ If these proposals are adopted, the Commission staff 
intends to review its Exchange Act Rule 14a-8 [17 CFR 240.14a-8] 
shareholder proposal internal processing procedures and timetables, 
and revise them if necessary, to ensure that issuers are able to 
comply with the proposed 30-day deadline.
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    The proposed Notice of Internet Availability of Proxy Materials and 
the notice of a shareholder meeting required under state corporation 
law could be combined together into a single document, unless 
prohibited by state law. The Notice could not be combined with any 
document other than the state law meeting notice. We believe that it is 
important for the Notice to be furnished in a way that brings it to 
each shareholder's attention. Therefore, whether or not combined with 
the state law meeting notice, the Notice of Internet Availability of 
Proxy Materials must be sent separately from other types of shareholder 
communications and may not accompany any materials other than the proxy 
card and return envelope.\43\
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    \43\ As discussed in more detail later in this release, in the 
case of an intermediary forwarding proxy materials to beneficial 
owners, a request for voting instructions from the intermediary is 
the functional equivalent to a proxy card and would be permitted to 
accompany the Notice.
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    The Notice of Internet Availability of Proxy Materials would have 
to include the following information in clear and understandable terms:
     A prominent legend in bold-face type that states:

    ``Important Notice Regarding the Availability of Proxy Materials 
for the Shareholder Meeting to Be Held on [insert meeting date].\44\
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    \44\ Appropriate changes may be made if the issuer is providing 
an information statement pursuant to Regulation 14C or seeking to 
effect a corporate action by written consent.
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     This communication presents only an overview of the 
more complete proxy materials that are available to you on the 
Internet. We encourage you to access and review all of the important 
information contained in the proxy materials before voting.
     The [proxy statement] [information statement] [annual 
report to shareholders] [proxy card] are available at [Insert Web 
site address].
     If you want to receive a paper or e-mail copy of these 
documents, you must request one. There is no charge to you for 
requesting a copy. Please make your request for a copy as instructed 
below on or before [Insert a date that is two weeks or more before 
the meeting date] to facilitate timely delivery. If you hold your 
shares through a broker, bank, or other intermediary, you may 
request delivery of a copy of the proxy materials through that 
intermediary, but it likely will take longer to receive your 
materials through an intermediary than directly from the company.''

     The date, time, and location of the meeting or, if 
corporate action is to be taken by written consent, the earliest date 
on which the corporate action may be effected;
     A clear and impartial identification of each separate 
matter intended to be acted upon and the issuer's recommendations 
regarding those matters, but no supporting statements;
     A list of the materials being made available at the 
specified Web site; and
     (1) A toll-free telephone number, and (2) an e-mail 
address where the shareholder can request a copy of the proxy 
materials.
    Only the information specified above and, if it is being combined 
with the state law meeting notice, any information required by state 
law, could be included in the Notice. To ensure that the Notice is 
clear and understandable, it would have to meet substantially the same 
plain English principles as apply to key sections of Securities Act 
prospectuses pursuant to Securities Act Rule 421(d).\45\
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    \45\ 17 CFR 230.421(d).
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    As proposed, an issuer would be permitted to furnish its proxy 
materials to shareholders by timely furnishing the Notice of Internet 
Availability of Proxy Materials to them and posting its proxy materials 
on a publicly accessible Web site. The issuer would have to post its 
proxy materials on the Web site on or before the time that shareholders 
receive the Notice. The proxy materials would have to remain accessible 
on the Web site free of charge through the time of the shareholder 
meeting to which the proxy materials relate, as discussed below.\46\ As 
noted below, the proposals would impose a separate obligation under the 
proxy rules on an issuer using the ``notice and access'' model to 
provide a copy of the proxy materials to shareholders upon request.\47\
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    \46\ See proposed Rule 14a-3(g). If revised proxy materials are 
required to be furnished to shareholders and the issuer wishes to 
rely on the proposed alternative model to furnish those revised 
materials, the issuer would have to furnish another Notice to inform 
shareholders that those revised proxy materials are available on the 
specified Web site.
    \47\ See proposed Rule 14a-3(g)(7).
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    The proposed alternative model would permit an issuer to 
``household'' the Notice of Internet Availability of Proxy Materials 
pursuant to Rule 14a-3(e),\48\ as we propose to amend it. Accordingly, 
an issuer could send a single copy of the Notice of Internet 
Availability of Proxy Materials to one or more shareholders residing at 
the same address if the issuer satisfies all of the Rule 14a-3(e) 
conditions.\49\ The issuer would not have to re-solicit consent from 
shareholders that already have consented to householding of proxy 
materials to household the Notice of Internet Availability of Proxy 
Materials. However, the issuer would have to make available a separate 
proxy card to each shareholder at the shared address, as required by 
the current householding rule.\50\
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    \48\ 17 CFR 240.14a-3(e).
    \49\ If the Notice is sent via e-mail, the householding rules do 
not permit the sending of only one copy. See Rule 14a-
3(e)(1)(ii)(B)(4) [17 CFR 240.14a-3(e)(1)(ii)(B)(4)].
    \50\ Issuers also are required to share a listing of the 
shareholders that have consented to householding with soliciting 
shareholders, or afford the benefit of such consents to a soliciting 
shareholder if the issuer is mailing proxy materials on the 
shareholder's behalf. See Rule 14a-7(a)(2) [17 CFR 240.14a-7(a)(2)].
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Request for Comment

     Is it appropriate to provide issuers with the alternative 
of using the ``notice and access'' model to furnish annual reports and 
proxy statements or information statements, as proposed? Should we 
modify the proposed ``notice and access'' model in any way? If so, how?
     The proposed requirement that an issuer choosing to rely 
on the ``notice and access'' model would have to send the Notice of 
Internet Availability of Proxy Materials to shareholders 30 days or 
more in advance of the shareholder meeting date is designed to provide 
sufficient time for a shareholder to request a copy of the proxy 
materials, if desired, and to review the materials prior to voting. 
Would the proposed 30-

[[Page 74602]]

day period achieve this objective? Would a shorter or longer period be 
more appropriate? If so, please specify the length of the period that 
would be more appropriate and explain why.
     Are the proposed means by which a shareholder can request 
a copy of the proxy materials appropriate? Should the issuer's 
provision of an e-mail address from which shareholders can request 
copies be optional? Should the rules expressly reference other 
appropriate means by which shareholders can request a copy of the proxy 
materials? Should the rules specifically require that the issuer 
provide shareholders with a postage-paid, pre-addressed reply card to 
request a copy of the materials?
     Should we permit issuers to household the Notice of 
Internet Availability of Proxy Materials, as proposed? If not, why not?
     Should we require or permit additional information in the 
Notice of Internet Availability of Proxy Materials? For example, if the 
issuer is aware that a proxy contest is being effected, should it be 
required to indicate in the Notice that such a contest exists? Also, if 
the issuer recommends a vote in opposition to a shareholder proposal, 
should it be required to state that the proxy statement contains the 
shareholder's statement in support of the proposal? Should we permit 
the Notice to include a request for the shareholder's affirmative 
consent to future electronic delivery of the Notice?
     We have proposed that the Notice contain ``a clear and 
impartial identification'' of matters to be acted upon. This language 
mirrors language currently found in Rule 14a-4 related to the proxy 
card to indicate that such identification should be as brief as it 
currently is on proxy cards. We also propose that a soliciting party 
may not include a supporting statement. We have included these 
proposals because we do not intend the Notice to become a means of 
persuading shareholders how to vote. Should the rules be more specific 
regarding the brief and factual nature that we intend for the 
identification of matters to be acted upon?
     Is the language of the proposed legend appropriate? If 
not, what should be changed and why?
     Should we permit materials in addition to the proxy card 
and a return envelope to accompany the Notice of Internet Availability 
of Proxy Materials? If so, what types of materials should we permit? 
For investment companies, should we permit a copy of the company's 
current prospectus or profile to accompany the proxy card and Notice?
     Should we require issuers to apply plain English 
principles to the Notice of Internet Availability of Proxy Materials, 
as proposed? If so, should we apply requirements similar to those in 
Rule 421(d) or Rule 421(b) \51\ under the Securities Act? Should we 
establish different plain English standards for the Notice? If so, 
what? Is it unnecessary to apply plain English principles to the 
Notice, given the brevity of the Notice and factual nature of the 
information to be included in the Notice?
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    \51\ 17 CFR 230.421(b). Rule 421(b) contains plain English 
requirements that are less stringent than those in Rule 421(d).
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     Is it appropriate to impose a separate obligation on the 
issuer under Section 14(a) to provide a copy of the proxy materials to 
requesting shareholders? If not, are there other options that we should 
consider to ensure that copies are available to shareholders that 
desire them? Should an issuer or other soliciting person be permitted 
to charge a requesting shareholder for a paper copy of the proxy 
materials?
     Should the proposed rules instead indicate that an issuer 
does not satisfy its requirement to furnish a proxy or information 
statement to a shareholder requesting a copy until it provides that 
copy to the shareholder?
     Should we require the Notice to be filed with the 
Commission under Rule 14a-6(b), as proposed? Should we create a new 
EDGAR form type for filing the Notice? Should a special EDGAR form type 
be created for a Notice regarding the availability of a Schedule 14C 
information statement? Would it cause confusion if such a Notice is 
filed under a Regulation 14A rule?
     As noted above, the proposed rules would require a second 
Notice if revised proxy materials are required to be furnished to 
shareholders and the issuer wishes to rely on the proposed model to do 
so. Are there other situations in which an issuer should be required to 
furnish a second Notice?
2. Mechanics of the Proposed ``Notice and Access'' Model
i. Proxy Card
    Under the proposed rules, an issuer would be permitted, but not 
required, to furnish the proxy card together with the Notice of 
Internet Availability of Proxy Materials, by means of the same delivery 
medium.\52\ Although the proposed rules would not require the proxy 
card and the Notice of Internet Availability of Proxy Materials to be 
furnished together through the same medium, the proxy card would have 
to either be:
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    \52\ An issuer could use existing permitted methods to furnish 
both the Notice and the proxy card to shareholders electronically.
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     Furnished together with, and through the same medium as, 
the Notice of Internet Availability of Proxy Materials; or
     Furnished together with, and through the same medium as, 
the proxy statement.\53\
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    \53\ The furnishing of the proxy card together with the proxy 
statement could be accomplished through posting them both on the 
Internet Web site in accordance with the proposed model.
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Request for Comment

     Should the rules, as proposed, permit an issuer to furnish 
a proxy card and the Notice of Internet Availability of Proxy Materials 
to shareholders separately and through the use of different media, 
subject to the proposed limitations? If not, why not?
     Would it be more appropriate to require that the proxy 
card always be furnished together with and through the same delivery 
means as the Schedule 14A proxy statement and the annual report to 
shareholders? For example:

     If the proxy card was furnished electronically, the 
proxy statement and annual report to shareholders also would have to 
be furnished together with the proxy card electronically, regardless 
of the means by which the Notice of Internet Availability of Proxy 
Materials was furnished; or
     If the proxy card was furnished in paper, the proxy 
statement and annual report to shareholders also would have to be 
furnished together with the proxy card in paper, regardless of the 
means by which the Notice of Internet Availability of Proxy 
Materials was furnished.

    Conversely, should we require that the proxy card always accompany 
the Notice, regardless of the manner in which the proxy statement and/
or the annual report to shareholders was furnished? Please provide 
support for your position.
     Exchange Act Rule 14a-6 requires the preliminary filing of 
the proxy statement and the proxy card.\54\ That rule provides an 
exclusion from the preliminary filing requirement for so-called ``plain 
vanilla'' proxy materials that relate to a meeting of security holders 
at which only a specified list of common matters are to be 
considered.\55\

[[Page 74603]]

Those proxy materials may be filed in definitive form only. Would it be 
more appropriate to require that the proxy card be furnished together 
with and by the same means as the proxy statement and the annual report 
to shareholders, regardless of the means by which the Notice of 
Internet Availability of Proxy Materials is furnished, unless Rule 14a-
6 would permit the proxy materials to be filed in definitive form only, 
or unless the meeting addresses only those matters listed in Rule 14a-
6, notwithstanding the exclusion in that rule regarding solicitations 
in opposition? In either of those situations, would it be appropriate 
to permit or require the Notice of Internet Availability of Proxy 
Materials and the proxy card to be furnished together and by the same 
means even if the proxy materials and/or the annual report to 
shareholders were furnished separately and/or through a different means 
(for example, the Notice of Internet Availability of Proxy Materials 
and proxy card furnished together in paper and the proxy statement and/
or the annual report to shareholders posted on an Internet Web site)?
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    \54\ 17 CFR 240.14a-6.
    \55\ Exchange Act Rule 14a-6 provides that proxy materials fall 
within the exclusion if the only matters to be voted on at the 
meeting are: (1) The election of directors; (2) the election, 
approval or ratification of accountant(s); (3) a security holder 
proposal submitted pursuant to Exchange Act Rule 14a-8; (4) the 
approval or ratification of a plan as defined in Item 402(a)(7)(ii) 
of Regulation S-K [17 CFR 229.402(a)(7)(ii)]; (5) with respect to an 
investment company registered under the Investment Company Act of 
1940, or a business development company, a proposal to continue, 
without change, any advisory or other contract or agreement that 
previously has been the subject of a proxy solicitation for which 
proxy material was filed with the Commission; and/or (6) with 
respect to an open-end investment company registered under the 
Investment Company Act of 1940, a proposal to increase the number of 
shares authorized to be issued. This exclusion from the filing 
requirement does not apply if the registrant comments upon or refers 
to a solicitation in opposition in connection with the meeting in 
its proxy material.
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     Would a shareholder be more or less likely to access and 
review the proxy statement and annual report before voting if these 
documents were posted electronically on the Internet Web site, but the 
proxy card was delivered to shareholders in paper with the Notice?
     Would the proposed model increase issuers' dependency on 
discretionary broker voting? \56\ Would it increase the amount of 
discretionary voting? Are there circumstances in which brokers or other 
intermediaries might be uncertain as to their ability to cast 
discretionary votes (e.g., if a shareholder requests delivery of the 
proxy materials but has not sent voting instructions 10 days prior to 
the meeting)? What might be the consequences of such uncertainty? 
Should there be increased or more prominent disclosure regarding how 
those discretionary broker votes operate? If so, what added disclosure 
should be required? Where should such disclosure appear (e.g., on the 
Notice)?
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    \56\ See NYSE Rule 452. This rule permits a broker, in specified 
circumstances, to vote on behalf of a beneficial owner if it has 
furnished proxy soliciting materials to the beneficial owner and has 
not received voting instructions.
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     Much shareholder voting currently is tabulated through the 
use of machine readers to identify and verify a shareholder's position. 
If an issuer posts its proxy card on the Internet Web site along with 
other proxy materials and permits shareholders to print out the proxy 
card and return it to the tabulator, should we adopt rules that would 
require the printout to include bar codes or other identification 
conducive to the automated processing of votes? Do we need to provide 
for the ability to include such codes on the Notice?
     If an issuer chooses to post its proxy card on an Internet 
Web site, what, if any, technological difficulties would this present 
for voting the proxies? In this regard, please discuss the technology 
that is available, or may be developed, for posting proxy cards and 
voting through Internet Web sites. Are additional rule changes 
necessary to facilitate the use of this technology?
     If an issuer chooses not to send a proxy card with its 
Notice, should an intermediary be allowed to decide whether to send out 
a request for voting instructions with the Notice?
     A beneficial owner cannot, in most cases,\57\ execute a 
valid proxy because a beneficial owner is not the holder of record 
under state law. Instead, a beneficial owner typically submits voting 
instructions to its intermediary. If an issuer chose to post its proxy 
card on a Web site with other proxy materials, should the rules require 
the intermediary to establish its own Internet Web site to post its 
request for voting instructions? Should the proxy materials be placed 
on that Internet Web site as well? Should the intermediary be required 
to create its own Notice, or use some other means, to clarify to 
beneficial owners that they cannot execute the proxy available on the 
issuer's Web site? Should issuers adopt some means to prevent persons 
other than holders of record from being able to print or download the 
proxy card from its Web site?
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    \57\ A beneficial owner could execute a proxy directly if the 
intermediary (the holder of record) has appointed the beneficial 
owner as its proxy with respect to the beneficial owner's shares.
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     If an intermediary creates its own Notice and directs 
beneficial owners to its own Internet Web site to obtain proxy 
materials and the request for voting instructions, should the proxy 
rules be amended to provide that an issuer would not be required to 
send copies of its Notice to the intermediaries pursuant to Rule 14a-
13? When and how should the intermediary notify the issuer that it will 
create its own Notice?
ii. Internet Web Site Posting of Proxy Materials
    All proxy materials to be furnished through the ``notice and 
access'' model, other than additional soliciting materials, would have 
to be posted on a specified Internet Web site by the time the issuer 
sends the Notice of Internet Availability of Proxy Materials to 
shareholders. These materials would have to remain on that Web site and 
be accessible to shareholders through the time of the related 
shareholder meeting, at no charge to the shareholder. As discussed 
above, the Notice must clearly identify the Internet Web site address 
at which the materials are available. The Internet Web site address 
must be specific enough to lead shareholders directly to the proxy 
materials, rather than to the home page or other section of the Web 
Site on which the proxy materials are posted, so that shareholders do 
not have to browse the Web site to find the materials. The Internet Web 
site that an issuer uses to electronically furnish its proxy materials 
to shareholders must be a publicly accessible Internet Web site other 
than the Commission's EDGAR Web site.\58\
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    \58\ Issuers still would be required to file their proxy 
materials on the Commission's EDGAR system, except that the annual 
report to shareholders would continue to be furnished to the 
Commission. This filing, and the furnishing of the annual report to 
shareholders, would have to be accomplished by the time the issuer 
posts the materials on the Web site.
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    There are two primary reasons why we propose not to allow use of 
the EDGAR Web site for this purpose. First, issuers are not required to 
furnish their glossy annual reports to the Commission using the EDGAR 
system.\59\ Most issuers, therefore, furnish paper copies of these 
annual reports to the Commission. Even with respect to the issuers that 
choose to furnish the annual report to the Commission via EDGAR, they 
generally omit graphics included in the paper version, such as charts 
and tables, from their EDGAR submissions.\60\ Second, it is our view 
that electronically posted proxy materials should be presented on the 
Internet Web site in a format that provides a substantially identical 
version of those materials, including all charts, tables, graphics, and 
similarly

[[Page 74604]]

formatted information, as otherwise furnished to shareholders in a 
different medium such as paper. Currently, the EDGAR system accepts 
documents only in ASCII \61\ or HTML \62\ format. Further, documents 
filed on EDGAR may omit or describe, but generally do not replicate, 
some disclosures, including charts and graphs.\63\ As a result, merely 
hyperlinking from the specified publicly accessible Internet Web site 
to the filing on the Commission's EDGAR system would not satisfy the 
requirement.\64\
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    \59\ Our rules permit, but do not require, issuers to submit the 
annual report to shareholders electronically on EDGAR. See Rule 
101(b)(1) of Regulation S-X [17 CFR 232.101(b)(1)].
    \60\ Item 304 of Regulation S-T [17 CFR 232.304] requires a 
registrant that omits graphic material to provide a narrative 
description of the omitted material.
    \61\ ASCII stands for ``American Standard Code for Information 
Interchange.''
    \62\ HTML stands for ``hypertext markup language.''
    \63\ The EDGAR system accepts only unofficial copies in PDF 
format.
    \64\ This requirement is therefore different from the provisions 
regarding Web site posting of Form 10-K annual reports and materials 
that are incorporated by reference into certain Securities Act 
registration statement forms.
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Request for Comment

     Should the issuer be able to make its proxy materials 
electronically available only on the EDGAR Web site? If so, how would 
it make the glossy annual report electronically available to 
shareholders?
     Should we require issuers following the proposed model to 
post all of their proxy materials on the Internet Web site so that 
those materials would be readily accessible in one place? Should we 
require companies to electronically post on the Web site any soliciting 
materials that are disseminated prior to furnishing a proxy statement 
pursuant to Rule 14a-12? \65\
---------------------------------------------------------------------------

    \65\ 17 CFR 240.14a-12.
---------------------------------------------------------------------------

     Should the rules, as proposed, require proxy materials 
posted on an Internet Web site to be presented in a format that is 
substantially identical in appearance to the format used in paper 
copies of the materials? Are there any advantages to requiring or 
permitting the proxy materials to be posted electronically in HTML or 
ASCII format (e.g., would this lessen concerns about the ability of 
shareholders to easily download the materials or speed the downloading 
process)? Should issuers have to post their proxy materials in both PDF 
and HTML formats?
     Should there be additional specified requirements 
regarding the Internet Web site posting of information? For example, 
should the alternative model specifically prohibit or require: Pre-
registration by shareholders at the Web site before they are granted 
access to the proxy materials; the issuer's use of third-party Web 
sites to host the issuer's proxy materials; or the issuer's use of 
disclaimers of liability or responsibility for the information? \66\
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    \66\ See our existing guidance on such matters (e.g., Release 
No. 33-8518 (Dec. 22, 2004) [70 FR 1505] and Release No. 33-8128 
(Sept. 5, 2002) [67 FR 58480]).
---------------------------------------------------------------------------

     Should we require annual reports to security holders to be 
filed, or furnished, on EDGAR?
iii. Period of Reliance on the Proposed Model
    The proposed alternative model for making proxy materials 
electronically available to shareholders would be effective only with 
respect to a particular meeting. An issuer's choice to rely on the 
``notice and access'' model for one meeting therefore would not affect 
its determination of whether to rely on the model for subsequent 
meetings. Similarly, a shareholder that does not request a copy of the 
proxy materials for one meeting would not be bound by that decision 
with respect to any other shareholder meeting. Each time that an issuer 
chooses to rely on the proposed ``notice and access'' model for a 
shareholder meeting, it would have to comply anew with all of the 
requirements under that model, including delivery of the Notice and the 
30-day notice period.

Request for Comment

     Should a shareholder and/or the issuer be bound by the 
shareholder's initial decision as to whether or not to request a copy 
of the proxy materials in subsequent proxy seasons? If so, should the 
issuer be subject to the 30-day notice period regarding delivery of the 
Notice of Internet Availability of Proxy Materials in subsequent proxy 
seasons only with respect to shareholders who made an initial decision 
to request a copy of the proxy materials (with the result that the 
issuer could, for example, deliver the Notice to other shareholders 25 
days rather than 30 days before the new meeting date)?
     Should an adjournment of a shareholder meeting require the 
issuer to deliver a second Notice of Internet Availability of Proxy 
Materials? If so, should the issuer have to deliver that Notice to 
shareholders at least 30 days before the adjourned meeting date?
     Should an issuer be required to deliver an additional 
Notice of Internet Availability of Proxy Materials to shareholders 
whenever state law requires the delivery of a shareholder meeting 
notice?
iv. State Law Notices
    State business and corporation laws typically include shareholder 
meeting requirements, including meeting notice and voting requirements. 
The proposed rules are not intended to affect any applicable state law 
requirement concerning the delivery of any document related to an 
annual meeting or proxy solicitation. Thus, to the extent that state 
law requires a notice of shareholder meeting or proxy materials to be 
delivered by a particular means, the proposed rules would not alter 
those requirements.\67\ For example, if the state in which an issuer is 
incorporated requires notices of shareholder meetings or proxy 
materials to be transmitted directly to shareholders in paper, the 
proposed rules would not provide an issuer with an option to satisfy 
its state law obligations by posting those materials on an Internet Web 
site.
---------------------------------------------------------------------------

    \67\ Issuers typically include the meeting notices required by 
state law at the beginning of their proxy statements. The proposal 
would permit any information necessary to meet such a state law 
requirement to be combined with the Notice.
---------------------------------------------------------------------------

Request for Comment

     Would the proposed rules create any problems or conflicts 
with state law? If so, how should those problems be resolved?
v. Additional Soliciting Materials
    Rules 14a-3, 14c-2 and 14c-3, as we propose to amend them, would 
require an issuer to post any additional soliciting materials on the 
same Internet Web site on which the proxy materials are posted no later 
than the day on which the additional soliciting materials are first 
sent to shareholders or made public.\68\ Beyond the posting of the 
additional soliciting materials on the Internet Web site, issuers would 
continue to be able to decide which additional means, if any, would be 
most effective for disseminating these materials (e.g., direct mailing, 
e-mail, newspaper publication, etc.).
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    \68\ Exchange Act Rule 14a-6 currently requires an issuer or 
other soliciting person choosing to deliver additional soliciting 
materials to file them with the Commission in the same form as the 
materials that are sent to shareholders, no later than the date that 
they are first sent or given to shareholders.
---------------------------------------------------------------------------

Request for Comment

     Under current rules, issuers are required to file with the 
Commission additional soliciting materials used after furnishing the 
proxy statement, but issuers are not required to otherwise furnish them 
to shareholders. We propose that, under the alternative model, these 
additional materials be filed with us and posted on the specified 
Internet Web site. Given an issuer's general interest in seeing that 
such materials are publicized, would such proposed steps be sufficient, 
or would it also be appropriate to require

[[Page 74605]]

a public notice of additional soliciting materials, such as a press 
release?
3. Requests for Copies of Proxy Materials
    Although an issuer could satisfy its requirement to furnish proxy 
materials through the ``notice and access'' model, it would have a 
separate requirement under proposed Rule 14a-3(g)(7) to deliver a copy 
of the proxy materials to a requesting shareholder.\69\ Upon receipt of 
a request from a shareholder for a copy of the proxy materials from the 
issuer, the issuer would have to send a copy (in paper or by e-mail, as 
requested) of the proxy materials to the shareholder within two 
business days after receiving the request, even if the request is made 
after the date of the shareholder meeting or corporate action to which 
the proxy materials relate. When the issuer provides a paper copy of 
the proxy materials in response to a shareholder request, the issuer 
would be required to use first class mail or other reasonably prompt 
means of delivery.
---------------------------------------------------------------------------

    \69\ See proposed Rule 14a-3(g)(7).
---------------------------------------------------------------------------

    The proposed requirements that an issuer deliver the Notice of 
Internet Availability of Proxy Materials at least 30 days before the 
annual meeting date and respond to a request for a copy of the proxy 
materials within two business days are designed to provide 
approximately two weeks for a shareholder to request a copy, receive 
it, and still have approximately two weeks to review the proxy 
materials and make an informed voting decision. Under the proposals, 
however, it is incumbent on the shareholder to request a copy in 
sufficient time to receive the copy of the proxy materials, review that 
copy, and vote.
    Under the proposals, the shareholder may request its intermediary 
to obtain and forward a copy of the proxy materials from the issuer on 
the shareholder's behalf. These procedures are discussed more fully in 
Section III.B of this release concerning duties of intermediaries.

Request for Comment

     As proposed, it would be the responsibility of a 
shareholder desiring a copy of the proxy materials to request one in 
sufficient time to receive the materials before the meeting. Is this 
appropriate? Should the Notice of Internet Availability of Proxy 
Materials state a date by which a shareholder desiring a copy must 
request it a specified number of days in advance of the meeting date 
(e.g., a shareholder must request a copy no later than 10 or 15 days 
before the meeting date)? If so, how far in advance of the meeting date 
should the shareholder have to request a copy? Establishing a deadline 
by which shareholders must request copies might increase the likelihood 
that a shareholder will receive materials before the meeting, but also 
would reduce the amount of time that shareholders have to make the 
request. Which of these competing interests, if any, is more important?
     Alternatively, should the proposed rules mandate a minimum 
period of time after receipt of the Notice of Internet Availability of 
Proxy Materials during which a shareholder could request a copy of the 
proxy materials? If so, how long should this period be? Should that 
period be 15 days, 10 days, or a shorter or longer period?
     Should an issuer have to respond to a request for a copy 
of the proxy materials made after the annual meeting date, as proposed? 
If not, why not? If so, should there be any limit on the period after 
the annual meeting date during which an issuer must respond to a 
request for a copy?
     Is the proposed two-business-day requirement an 
appropriate period of time for the issuer to respond to a shareholder's 
request for a copy of the proxy materials? Should the issuer be 
required to do so in one business day? Would the issuer need more time, 
such as three or four business days? If a longer period of time is 
provided, should the 30-day minimum period between the sending of the 
Notice and the meeting also be lengthened? If not, why not?
     Is the proposed requirement that an issuer provide 
requested paper copies by first class mail or other reasonably prompt 
means appropriate? Should an issuer have to provide the requested paper 
copy by more expedited means, such as overnight or two-day delivery? 
Should an issuer have more time to respond to requests for copies if it 
sends the Notice more than 30 days prior to the meeting?
     Should the proposed rules provide a mechanism for a 
shareholder that requests a copy of the proxy materials to indicate 
that he or she wants to continue receiving a copy of the issuer's proxy 
materials for every subsequent meeting where the issuer relies on the 
``notice and access'' model until the shareholder subsequently advises 
the issuer otherwise? For example, should the rules require an issuer 
and/or intermediary to develop a list of shareholders who always want 
their materials in paper? If so, why? If not, why not? How would such a 
system work?
     At the time the proxy materials are being prepared and 
printed, the issuer is unlikely to have a reliable estimate regarding 
the number of shareholders that will request copies of the proxy 
materials, particularly in the issuer's first year of reliance on the 
``notice and access'' model. The issuer would have to maintain or 
prepare a sufficient supply of paper copies to satisfy all shareholder 
requests for paper copies. Thus, at least in the first year, when the 
issuer does not have previous experience with this model, it may have 
to print an excessive number of paper copies. Should we consider any 
procedures to mitigate this possibility? If so, what types of 
procedures would be appropriate?

B. The Role of Intermediaries

1. Background
    The process of distributing proxy materials to beneficial owners is 
considerably more complicated than direct delivery of the materials by 
an issuer to its record holders.\70\ The proxy rules contain three 
rules, Exchange Act Rule 14a-13, Rule 14b-1 and Rule 14b-2, referred to 
collectively as the ``shareholder communications rules,'' that impose 
obligations on issuers and intermediaries to ensure that beneficial 
owners receive proxy materials and are given the opportunity to vote. 
Basically, these rules require issuers to send their proxy materials to 
intermediaries for forwarding to the beneficial owners.
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    \70\ The discussion in this section of ``beneficial owners'' 
refers to beneficial owners whose names and addresses do not appear 
directly in issuers' stock registers because they hold their stock 
through a broker, bank, trustee, or similar intermediary.
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    Exchange Act Rule 14b-1 sets forth the obligations of registered 
brokers and dealers in connection with the prompt forwarding of certain 
issuer communications to beneficial owners. Rule 14b-2 sets forth 
similar obligations of banks, associations, and other entities that 
exercise fiduciary powers. Under these rules, upon request by the 
issuer, these intermediaries are required to indicate to the issuer 
within seven business days of receiving the request:
     The approximate number of customers of the intermediary 
that are beneficial owners of the issuer that are held of record by the 
intermediary;
     If the issuer has indicated pursuant to Rule 14a-13(a) 
\71\ or 14c-7(a) \72\ that it will distribute the annual report to 
security holders to beneficial owners who have not objected to 
disclosure to the issuer of their names, addresses, and securities 
positions, the number of

[[Page 74606]]

beneficial owners who have objected to such disclosure; \73\ and
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    \71\ 17 CFR 240.14a-13(a).
    \72\ 17 CFR 240.14c-7(a).
    \73\ In the case of bank intermediaries, Rule 14b-2 requires a 
bank to disclose the number of customers with accounts opened on or 
before December 28, 1986, who gave affirmative consent to disclosure 
to the issuer and the number of customers with accounts opened after 
December 28, 1986, who did not object to such disclosure.
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     The identity of any agents of the intermediary acting on 
the intermediary's behalf to fulfill its obligations under the rule.
    Pursuant to Rules 14b-1 and 14b-2, within five business days of 
receiving proxy materials from the issuer, the intermediary must 
forward the materials to its beneficial owner customers who will not 
receive those materials directly from the issuer pursuant to Rule 14a-
13(c) \74\ or Rule 14c-7(c).\75\ Beneficial owners typically do not 
execute proxy cards because, under most state laws, only the record 
owner (i.e., the intermediary) has the authority to vote on matters 
before the shareholders. As a result, intermediaries forward the proxy 
materials along with a request for voting instructions. The request for 
voting instructions is similar to the proxy card, but is prepared by 
the intermediary instead of the issuer and the beneficial owner returns 
his or her voting instructions to the intermediary rather than to the 
issuer or independent vote tabulator. The intermediary is required to 
vote the beneficial owner's shares in accordance with the owner's 
voting instructions when formally executing the proxy card.\76\ The 
intermediary then returns the proxy card to the issuer or independent 
vote tabulator.
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    \74\ 17 CFR 240.14a-13(c).
    \75\ 17 CFR 240.14c-7(c).
    \76\ See Rule 14b-2(b)(3) [17 CFR 240.14b-2(b)(3)].
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2. Proposed Amendments
    Under the proposed amendments, an intermediary may follow the 
``notice and access'' model only if the issuer requests it to do so 
and, in such cases, must follow that model. The proposed amendments 
would revise Rules 14b-1 and 14b-2 to require brokers, banks, and 
similar intermediaries, at the request of an issuer, to furnish proxy 
materials, including the Notice of Internet Availability of Proxy 
Materials, to beneficial owners of the issuer's securities based on the 
``notice and access'' model.\77\
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    \77\ See proposed amendments to Exchange Act Rules 14b-1 and 
14b-2. If an issuer does not request intermediaries to follow the 
proposed ``notice and access'' model, an intermediary could, on its 
own initiative, continue to rely on any existing permitted method of 
furnishing proxy materials to its beneficial owner customers.
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    An issuer or other soliciting person relying on the ``notice and 
access'' model would have to deliver a sufficient number of copies of 
its Notice of Internet Availability of Proxy Materials to 
intermediaries at least five business days prior to the proposed 
deadline for furnishing the Notice of Internet Availability of Proxy 
Materials.\78\ Thereafter, the process for forwarding the Notice by 
intermediaries to their beneficial owner customers would be similar to 
the current process by which intermediaries forward proxy materials to 
beneficial owners. The intermediary would be required to forward the 
Notice to beneficial owners within five business days after receipt of 
the Notice from the issuer or other soliciting person.
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    \78\ For issuers, this deadline would be 30 days prior to the 
shareholder meeting. For soliciting persons other than the issuer, 
this deadline would be the later of 30 days prior to the shareholder 
meeting or 10 days after the registrant first sends out its proxy 
solicitation.
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    At its option, the intermediary may either include its request for 
voting instructions with the Notice of Internet Availability of Proxy 
Materials being furnished to the beneficial owners or post that request 
on an Internet Web site.\79\ If the intermediary chooses to post the 
request for voting instructions on its own Web site, the intermediary 
would need to post the issuer's proxy statement, and all other proxy-
related material from the issuer's Web site other than the proxy card, 
on its own Web site so that shareholders would have access to those 
materials when they access the request for voting instructions. The 
intermediary also would need to direct beneficial owners to that Web 
site rather than the issuer's Web site. It could do so either by 
supplementing the issuer's Notice to inform beneficial owners how to 
access the Web site or by replacing the issuer's Notice with its own 
Notice. If the intermediary replaces the issuer's Notice, it would have 
to make sure that all of the information required to appear in the 
Notice is included in its own Notice, with appropriate modifications 
(e.g., references to the request for voting instructions rather than 
the proxy card). The intermediary would need to make it clear to its 
beneficial owner customers in its own Notice or in its supplement to 
the issuer's Notice that they should return voting instructions to the 
intermediary, rather than execute a proxy card and return it to the 
issuer or tabulator.
---------------------------------------------------------------------------

    \79\ See proposed amendments to Exchange Act Rules 14b-1 and 
14b-2.
---------------------------------------------------------------------------

    Conversely, the same version of the Notice of Internet Availability 
of Proxy Materials generally could be delivered to both registered 
holders and beneficial owners, if the proxy card is delivered together 
with the Notice to registered holders and a request for voting 
instructions is delivered together with the Notice to beneficial 
owners. This would avoid the need for the intermediary to either 
prepare its own tailored Notice for delivery to its beneficial owner 
customers, or supplement the issuer's Notice.
    In summary, the proposed amendments would impose the following 
responsibilities on intermediaries that are requested to follow the 
``notice and access'' model:
     The intermediary would have to forward the issuer's Notice 
of Internet Availability of Proxy Materials to beneficial owners, 
unless it prepares its own Notice;
     If the issuer posts its proxy card on the Web site, the 
intermediary would have to supplement the issuer's Notice of Internet 
Availability of Proxy Materials or create and send its own Notice to 
clarify how beneficial owners can return their voting instructions;
     If the intermediary chooses to post its request for voting 
instructions on an Internet Web site, it would have to maintain an 
Internet Web site for posting that request for voting instructions, as 
well as the issuer's proxy materials, other than the proxy card;
     If the intermediary chooses not to post its request for 
voting instructions on an Internet Web site, it would have to prepare 
and send, with the Notice, a copy of the intermediary's request for 
voting instructions; and
     The intermediary would have to request and forward a copy 
of the proxy materials from the issuer in response to requests from its 
beneficial shareholder customers.
    Under the proposed ``notice and access'' model, a beneficial owner 
could request delivery of a copy of the proxy materials from either the 
company or the intermediary, at the beneficial owner's option. A 
concern that may stem from a shareholder requesting the materials 
directly from the issuer is that a beneficial owner who has objected 
to, or not consented to, disclosure of his or her identity to the 
issuer (commonly referred to as an ``objecting beneficial owner'' or 
``OBO'') would have to reveal his or her identity to the issuer in 
connection with a request for a copy of the proxy materials. Therefore, 
under the proposed rules, a beneficial owner could request a copy of 
the proxy materials from his or her intermediary, rather than the 
issuer. If a beneficial owner requests his or her intermediary to 
obtain copies of the materials, the intermediary would be required to 
request such copies from the issuer

[[Page 74607]]

within two business days of receiving the request from the beneficial 
owner. The intermediary also would have to forward the materials to the 
beneficial owners within two days after receipt from the issuer. As 
proposed, the intermediary would be allowed to charge the issuer the 
cost of forwarding such materials.

Request for Comment

     Should the proposed alternative model be limited to the 
furnishing of proxy materials by issuers to their record holders? Is it 
appropriate to allow the issuer to compel the intermediary to undertake 
the obligations that would be required under the proposed model? Are 
there practical problems with an issuer's reliance on the proposed 
``notice and access'' model in connection with the furnishing of proxy 
materials and requests for voting instructions to beneficial owners?
     Should intermediaries or their agents be allowed to use 
the ``notice and access'' model regardless of whether the issuer 
chooses to furnish documents to its record shareholders in reliance on 
the proposed model? If so, should the issuer have to supply copies of 
the proxy materials to intermediaries for forwarding to beneficial 
owners who request them?
     Should intermediaries be able to use e-mail addresses that 
they have obtained from their customers for electronic delivery of the 
Notice of Internet Availability of Proxy Materials even if their 
customers have not specifically consented to the electronic delivery of 
proxy materials?
     Is the proposed requirement that the issuer or soliciting 
party deliver a sufficient number of copies of its Notice of Internet 
Availability of Proxy Materials to intermediaries at least five 
business days prior to the proposed deadline for furnishing the Notice 
of Internet Availability of Proxy Materials appropriate? Would this 
proposed requirement present special difficulties for a soliciting 
person other than the issuer, given the differences in the timing 
requirements for delivery of the Notice if the soliciting person is 
reacting to the issuer's solicitation?
     Is it appropriate to require the issuer to send copies of 
the proxy materials to beneficial owners who request copies directly 
from the issuer? Should the intermediary be required to estimate the 
number of copies that it is likely to need to satisfy requests from its 
beneficial owner customers? If so, would the intermediary have a 
reasonable basis to make such an estimate? Would the flow of copies 
from issuer to intermediary to beneficial owner be overly time-
consuming? Should intermediaries be allotted less time to forward e-
mail copies of the proxy materials?
     The issuer might be able to trace the identity of anyone 
accessing the Web site on which the proxy materials are posted through 
the use of ``cookies'' or other technology. Should the rules require 
that the proxy materials to be accessed by beneficial owners be posted 
on a Web site that protects the confidentiality of an OBO's identity? 
If so, should this Web site be separate from the issuer's Web site? Are 
there other ways to protect the identities of OBOs without placing an 
excessive burden on issuers or intermediaries?
     Should issuers be permitted to request proof of a person's 
status as a beneficial owner when they receive requests for copies of 
their proxy materials? Should we require issuers to provide copies to 
all persons requesting copies? Keeping in mind that only shareholders 
would receive the Notice, is there a possibility that the issuer would 
be unduly burdened by excessive requests for copies?
     Is there a concern that beneficial owners may erroneously 
attempt to execute a proxy card if the issuer posts its proxy card on 
the same Internet Web site as the proxy statement? Should the rules 
separate the voting mechanisms for registered holders and beneficial 
owners to prevent confusion? Should we require intermediaries to 
establish their own Web sites to post proxy materials to help prevent 
any such confusion? Is it likely that intermediaries or third parties 
will develop Web sites to facilitate use of the ``notice and access'' 
model?
     Is it appropriate to permit intermediaries to charge the 
issuer for forwarding copies? If so, what would be an appropriate fee? 
Should the beneficial owner desiring to maintain anonymity bear this 
cost? Should the beneficial owner's intermediary instead bear this 
cost? Is it reasonable for intermediaries (or their agents) to continue 
to collect an incentive fee from issuers for each set of proxy 
materials that they deliver electronically rather than in paper if the 
Commission adopts the proposed ``notice and access model''? \80\ Should 
the incentive fee be a one-time charge (assessed only the first time a 
paper copy is suppressed) or a recurring fee?
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    \80\ For example, the NYSE and some other self-regulatory 
organizations maintain a schedule of fees that issuers must pay for 
forwarding of their proxy materials by their member brokers to the 
brokers' beneficial owner customers. As an example, the NYSE's 
schedule includes an incentive fee that brokers may collect for 
eliminating the need to send materials in paper format. For proxy 
materials, this fee is $0.25 per account for issuers whose shares 
are held in at least 200,000 beneficial owners' accounts and $0.50 
per account for issuers whose shares are held in fewer than 200,000 
beneficial owners' accounts. See NYSE Rule 451. Other self-
regulatory organizations have adopted similar rules.
---------------------------------------------------------------------------

     Should the self-regulatory organizations establish new 
fees that an intermediary may charge as reasonable for services 
rendered to an issuer when the issuer relies on the proposed ``notice 
and access'' model, if adopted? If so, what type of fee schedule would 
be appropriate?

C. Proposed ``Notice and Access'' Model for Furnishing of Internet 
Proxy Materials by Soliciting Persons Other Than the Issuer

    Under the proposed rules, a person other than the issuer who 
undertakes his or her own proxy solicitation also would be able to rely 
on the proposed ``notice and access'' model.\81\ This situation 
typically would occur in the context of a proxy contest between a 
shareholder or other party and management. We anticipate that the 
proposed rules, if adopted, could provide an alternative that may 
significantly decrease the cost of a proxy solicitation, given the 
potential decrease in printing and mailing costs. We also believe that 
the same arguments that support modifying the existing framework to 
facilitate an alternative dissemination option for issuers apply 
equally to soliciting persons other than issuers. There are, however, 
several important differences in the way the proposed rules would 
affect soliciting persons other than the issuer that are described 
below.
---------------------------------------------------------------------------

    \81\ See proposed Rule 14a-3(g)(8).
---------------------------------------------------------------------------

Request for Comment

     Should soliciting persons other than the issuer be able to 
take advantage of the ``notice and access'' model? Why or why not?
1. Mechanics of Proxy Solicitations by Persons Other Than the Issuer
    The current proxy rules treat persons other than the issuer 
differently from the issuer in a significant respect regarding the 
provision of information to shareholders about intended corporate 
actions. Specifically, an issuer must furnish either a proxy statement, 
if the issuer is soliciting proxies or consents from shareholders, or 
an information statement pursuant to Section 14(c) of the Exchange Act 
\82\ regarding shareholder meetings where

[[Page 74608]]

corporate action is to be taken but no proxy authority or consent is 
sought.
---------------------------------------------------------------------------

    \82\ 15 U.S.C. 78n(c).
---------------------------------------------------------------------------

    Soliciting persons other than the issuer are not subject to the 
requirements of Section 14(c). Thus, unlike the issuer, they have no 
obligation to furnish an information statement to persons from whom no 
proxy authority is sought. Soliciting persons may use this mechanism to 
limit the cost of a solicitation by soliciting proxies only from a 
select group of shareholders with large holdings. These distinctions 
from the manner in which issuers must conduct proxy solicitations lead 
to a variety of possible ways that a person other than the issuer may 
conduct a proxy contest, some of which are not available to an issuer.
    As proposed, a soliciting person other than the issuer may follow 
the same procedures as the issuer. In particular, it may furnish a 
Notice and post the proxy statement on an Internet Web site. It also 
would have the choice of either furnishing the proxy card with the 
Notice or posting the proxy card with the proxy statement. However, 
because such a person is not obligated to solicit everyone, it may 
revise its Notice to clearly explain that it will not provide a copy to 
any shareholder that requests a copy. In this case, the Notice must 
clearly state that the person is soliciting only shareholders who are 
willing to access the proxy materials via the Internet Web site 
posting.
    A soliciting person other than the issuer also could choose to not 
furnish a Notice to any shareholder. Rather, it may simply post its 
proxy materials, including the proxy card, on a publicly accessible 
Internet Web site and direct persons to that Web site by means of 
communications under Rule 14a-12. Under this scenario, all persons 
accessing the proxy card also would have accessed the Internet Web site 
on which the proxy statement was located.
    In summary, if we were to adopt the proposed alternative model, a 
person other than the issuer could conduct a proxy contest in the 
following manners:
     Furnish a proxy statement and proxy card under existing 
permitted methods;
     Furnish a Notice and proxy card together, and through the 
same medium, and post the proxy statement on a Web site;
     Furnish a Notice and post the proxy statement and proxy 
card together on a Web site; or
     Do not furnish a Notice and post the proxy statement and 
proxy card together on a Web site.
    A soliciting person may use any combination of these options and 
may rely on Rule 14a-12 to issue soliciting materials prior to 
furnishing a proxy statement under any of these scenarios. Under the 
last three options, a soliciting person other than the issuer may 
either undertake to furnish shareholders with copies upon request, or 
it may clearly indicate in the Notice, or in the last case, on the 
Internet Web site, that it will not provide copies upon request and 
that the solicitation is conditioned on a shareholder accepting the 
proxy materials via Internet Web site access.
    As noted above, such person may effect a solicitation prior to 
furnishing a proxy statement pursuant to Rule 14a-12. However, if a 
soliciting person uses a medium such as a press release under Rule 14a-
12, it would incur an obligation to furnish a proxy statement at the 
time a proxy card is provided. In view of the fact that such a person 
is not obligated to solicit all persons receiving that communication, 
delivery of a Notice would be required only if the soliciting person 
sends a proxy card to a shareholder that is not accompanied by a proxy 
statement. With respect to shareholders not receiving a proxy card from 
the soliciting person, but who are directed to the Internet Web site by 
the Rule 14a-12 communication and choose to execute a proxy in favor of 
the soliciting person, the proxy statement would have accompanied, or 
preceded, the proxy card. A person receiving such a request from a 
shareholder may assume that the shareholder has had access to the proxy 
statement.\83\ Thus, a soliciting person, other than the issuer, could 
effect a widespread solicitation of proxies without delivering any 
Notices at all, provided that it does not furnish or provide a means of 
obtaining a proxy card except on the Web site where its proxy materials 
are posted.
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    \83\ However, if the press release contains information on how 
to obtain a proxy card by a means other than at the Web site where 
the proxy statement will be located along with the proxy card, the 
soliciting person must ensure that a shareholder is furnished with 
the proxy statement concurrently, either by furnishing the proxy 
statement with the proxy card or by posting the proxy statement on a 
publicly accessible Web site and furnishing the Notice of Internet 
Availability of Proxy Materials with the proxy card.
---------------------------------------------------------------------------

Request for Comment

     Should the rules, as proposed, permit a soliciting person 
to furnish a proxy card and the Notice of Internet Availability of 
Proxy Materials to shareholders separately and through the use of 
different media, subject to the proposed limitations? If not, why not?
     Would it be more appropriate to require that the proxy 
card always be furnished together with and through the same delivery 
means as the Schedule 14A proxy statement? For example:

     If the proxy card was furnished electronically, the 
proxy statement also would have to be furnished together with the 
proxy card electronically, regardless of the means by which the 
Notice of Internet Availability of Proxy Materials was furnished; or
     If the proxy card was furnished in paper, the proxy 
statement also would have to be furnished together with the proxy 
card in paper, regardless of the means by which the Notice of 
Internet Availability of Proxy Materials was furnished.

    Conversely, should we require that the proxy card always accompany 
the Notice, regardless of the manner in which the proxy statement was 
furnished? Please provide support for your position.
     Would it be more appropriate to require that the proxy 
card be furnished together with and by the same means as the proxy 
statement, regardless of the means by which the Notice of Internet 
Availability of Proxy Materials is furnished, unless Rule 14a-6 would 
permit the proxy materials to be filed in definitive form only, or 
unless the meeting addresses only those matters listed in Rule 14a-6, 
notwithstanding the exclusion in that rule regarding solicitations in 
opposition? In either of those situations, would it be appropriate to 
permit or require the Notice of Internet Availability of Proxy 
Materials and the proxy card to be furnished together and by the same 
means even if the proxy materials were furnished separately and/or 
through a different means (for example, the Notice of Internet 
Availability of Proxy Materials and proxy card furnished together in 
paper and the proxy statement posted on an Internet Web site)?
     Under the proposed model, how would a shareholder that is 
not solicited directly but goes to the soliciting person's Web site 
vote his or her shares? Should the soliciting person be required, upon 
request from such shareholder, to provide the shareholder with a means 
for voting, for example, by providing the shareholder with a personal 
identification number or similar unique identifier and form to submit a 
proxy or voting instructions? Should we adopt rules addressing such 
voting systems to promote more accurate voting results?
     Under certain exchange rules,\84\ a broker is precluded 
from exercising its voting discretion for shares for which no voting 
instructions are received (commonly referred to as ``broker non-
votes'') on several types of non-routine

[[Page 74609]]

matters listed in the rules. Matters that are the subject of a contest 
are considered non-routine. Staff at the exchanges determine whether a 
contest exists for purposes of the discretionary broker voting rule 
based on exchange rules and interpretations. For example, a NYSE 
interpretation suggests that a person other than the issuer must 
solicit at least 50% of the issuer's shareholders for a contest to 
exist under its discretionary broker voting rule. Should the widespread 
accessibility of a soliciting person's proxy statement and card affect 
current exchange interpretations?
---------------------------------------------------------------------------

    \84\ See, e.g., NYSE Rule 452.
---------------------------------------------------------------------------

     Should the proposed rules permit, as the current rules do, 
a soliciting person other than the issuer to limit its proxy 
solicitation to shareholders that are willing to access the proxy 
materials electronically, thus eliminating any need for the soliciting 
shareholder to send copies? Is this concept of a conditional proxy 
solicitation feasible? Should such conditional solicitations be limited 
only to instances where the soliciting person posts the proxy card on 
an Internet Web site and does not send a copy of the proxy card with 
the Notice, to ensure that only shareholders who can access the proxy 
materials can vote?
2. Timeframe for Sending Notice of Internet Availability of Proxy 
Materials
    Currently, soliciting persons generally have no required timeframe 
regarding the furnishing of proxy materials other than the time 
necessary to ensure staff review of those materials.\85\ As we stated 
earlier, the proposed 30-day timeframe for the Notice is designed to 
provide sufficient time for a shareholder to request a copy of the 
proxy materials, receive that copy, and review it before voting. 
However, because soliciting persons other than the issuer need not 
furnish proxy materials to all shareholders, the 30-day timeframe is 
unnecessary if that soliciting person is conducting an electronic-only 
solicitation. Thus, provided that the soliciting person complies with 
all other proxy timing rules, it need not comply with the 30-day 
timeframe requirement in order to effect an electronic-only proxy 
solicitation.
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    \85\ An exception to this rule applies when a company is 
incorporating information by reference from another filing in a 
joint proxy statement-prospectus, in which case the prospectus must 
be sent to shareholders no later than 20 business days prior to the 
meeting. See General Instruction A.2 to Form S-4.
---------------------------------------------------------------------------

    If the soliciting person chooses to undertake to provide copies of 
the proxy materials to shareholders upon request, shareholders should 
have sufficient time to request, receive, and review those materials 
prior to voting. However, a solicitation in opposition to the issuer's 
proposals at a shareholder meeting often is initiated in response to 
the issuer's proxy statement. As a result, we believe that it may be 
unfair to impose the same 30-day timeframe on soliciting persons other 
than the issuer. Therefore, we are proposing that a soliciting person 
other than the issuer that is following the ``notice and access'' 
model, but not conducting an electronic-only solicitation, must send 
out its Notice prior to the later of (1) 30 days prior to the meeting; 
or (2) ten days after the issuer first sends out its proxy 
solicitation.

Request for Comment

     A proxy contest often involves a number of communications 
from both the issuer and the other soliciting person and time may be at 
a premium in such situations. Would the proposed model provide 
sufficient time for shareholders who desire copies to obtain materials 
from a soliciting person other than the issuer in the context of a 
proxy contest? We note that it would take more time for the delivery of 
proxy materials to beneficial owners through intermediaries than for 
delivery of the materials directly by the soliciting person to record 
owners.
     Should a soliciting person other than the issuer 
conducting an electronic-only solicitation be required to comply with a 
specified timeframe for sending its materials? If so, what should that 
timeframe be?
     Should a soliciting person other than the issuer that is 
following the ``notice and access'' model, but not conducting an 
electronic-only solicitation, be required to provide the materials to 
solicited shareholders within the proposed timeframe? Would ten days 
after the issuer first sends its solicitation be sufficient time for a 
soliciting person other than the issuer to prepare its soliciting 
materials? Would a shorter period, such as five days or five business 
days, be sufficient?
3. Content of the Notice of Internet Availability of Proxy Materials of 
a Soliciting Person Other Than the Issuer
    The content of the Notice of Internet Availability of Proxy 
Materials sent by a soliciting person other than the issuer could be 
different from that of the issuer. First, if a soliciting person other 
than the issuer chooses to conduct an electronic-only solicitation, it 
need not provide instructions on how to obtain a copy. In lieu of such 
disclosure, the legend on the Notice must clearly state that the proxy 
solicitation is contingent on the shareholder being willing to accept 
access to the proxy statement electronically.
    Also, a solicitation in opposition may be launched before the 
issuer has sent its own proxy statement. Thus, the full agenda may not 
be known at the time that the opposing person sends its Notice. In such 
a case, the person soliciting in opposition would be required to 
include the agenda items in the Notice only to the extent known.
    Finally, there may be circumstances in which the person soliciting 
in opposition may provide a partial proxy card, that is, a proxy card 
soliciting proxy authority only for the agenda items in which the 
soliciting person is interested. Typically, such a proxy would revoke 
any previous proxy granted and, as is the case today, the shareholder 
may lose his or her ability to vote on matters other than those 
presented on the soliciting person's card. To prevent a shareholder 
from unknowingly invalidating his or her vote on those other matters, a 
person soliciting in opposition that sends such a card would be 
required to indicate clearly on its proxy card that execution of that 
card may invalidate the shareholder's earlier vote on the other matters 
reflected on the issuer's proxy card.

Request for Comment

     Are there other instances when the Notice of a soliciting 
person other than the issuer should differ from the issuer's Notice?
     Should the rule require specific language that a 
soliciting person other than the issuer must insert in its Notice under 
these conditions? If so, what language would be appropriate?
     If the soliciting person is not aware of the full agenda 
for the meeting when it sends its Notice, should it be required to 
disclose on the Notice that the proxy card and Notice may not contain 
all matters to be acted upon? Should we require such a soliciting 
person to amend its proxy card to contain all items in the agenda?
     Is there another way to ensure that shareholders learn 
that executing a partial proxy card would invalidate their votes on 
other matters? If so, what additional requirements would be necessary?
4. Shareholder Lists and the Furnishing of Proxy Materials by the 
Issuer
    Exchange Act Rule 14a-7 sets forth the obligation of issuers either 
to provide a shareholder list to a requesting shareholder or to send 
the shareholder's proxy materials on the shareholder's behalf. That 
rule provides

[[Page 74610]]

that the issuer has the option to provide the list or send the 
shareholder's materials, except when the issuer is soliciting proxies 
in connection with a going-private transaction or a roll-up 
transaction.\86\ As proposed, if the issuer is providing its 
shareholder list to a soliciting person, the issuer would be required 
to include any electronic delivery information that it already has 
obtained from shareholders, including information about shareholders 
that have affirmatively consented to electronic delivery as well as 
shareholders that have requested copies of the issuer's proxy materials 
if the issuer is relying on the ``notice and access'' model.\87\
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    \86\ See Exchange Act Rule 14a-7(b) [17 CFR 240.14a-7(b)]. If 
the issuer is soliciting proxies in connection with a going-private 
transaction or a roll-up transaction, the shareholder has the option 
to request the shareholder list or have the issuer send its 
materials.
    \87\ See proposed Note 3 to Exchange Act Rule 14a-7.
---------------------------------------------------------------------------

    If the issuer is sending the soliciting person's proxy materials, 
the proposed amendments would require the issuer to share the benefit 
of any affirmative consent to electronic delivery of proxy statements 
that it has obtained from shareholders. If the soliciting person 
requests that the issuer follow the ``notice and access'' model, the 
soliciting person would be responsible for providing the issuer with 
copies of its proxy card and/or Notice of Internet Availability of 
Proxy Materials, if the soliciting person chooses to deliver the proxy 
card and/or the Notice in paper. In that case, the issuer would have to 
send the soliciting person's proxy card and/or Notice of Internet 
Availability of Proxy Materials with reasonable promptness after 
receipt from the soliciting person. An issuer could not decide on its 
own whether to send a soliciting person's materials in paper or 
electronically.

Request for Comment

     Under the ``notice and access'' model, should the issuer 
be required to share affirmative consents to electronic delivery that 
the issuer already has obtained from its shareholders with persons 
conducting their own proxy solicitations? Under the ``notice and 
access'' model, should the issuer be required to share information with 
soliciting persons regarding shareholders who have requested copies?
     If the issuer chooses to send proxy materials on behalf of 
a soliciting person, should the soliciting person have the right to 
direct the issuer to comply with a particular means of doing so, such 
as the ``notice and access'' model?
     If the issuer relied on the ``notice and access'' model in 
a previous proxy season, should it be required to share information 
with a soliciting person about the number of shareholders who requested 
copies in a past season?
5. The Role of Intermediaries
    Intermediaries generally furnish proxy materials to beneficial 
owners on behalf of soliciting persons other than the issuer under the 
conditions set forth in Exchange Act Rules 14b-1 and 14b-2.\88\ 
Although intermediaries historically have transmitted a soliciting 
person's proxy materials in reliance on the procedures set forth in 
Rules 14b-1 and 14b-2, these two rules do not explicitly address an 
intermediary's obligations with respect to the forwarding of a 
soliciting person's proxy materials. The proposed amendments would 
clarify that intermediaries are obligated to send proxy materials on 
behalf of soliciting persons other than the issuer.
---------------------------------------------------------------------------

    \88\ See Randall S. Thomas & Catherine T. Dixon, Aranow & 
Einhorn on Proxy Contests for Corporate Control, at Sec.  8.03(C) 
(3d ed. 2001).
---------------------------------------------------------------------------

Request for Comment

     Should we revise Rules 14b-1 and 14b-2 to explicitly 
require intermediaries to send proxy or other soliciting materials on 
behalf of soliciting persons other than issuers? Are such revisions 
necessary or appropriate even if we do not adopt the ``notice and 
access'' proposal?

D. Business Combination Transactions

    We are proposing that the ``notice and access'' model not be 
available with regard to proxy materials related to a business 
combination transaction, which includes transactions covered by Rule 
165 under the Securities Act,\89\ as well as transactions for cash 
consideration requiring disclosure under Item 14 of Schedule 14A. 
Business combination transactions constitute highly extraordinary 
events for some companies and frequently involve an offering of 
securities that must be registered under the Securities Act and require 
delivery of the prospectus.\90\ They also typically involve proxy 
statements of considerable length and complexity. Thus, we are 
proposing that the rules would not apply in connection with a business 
combination transaction.
---------------------------------------------------------------------------

    \89\ 17 CFR 230.165. This prohibition would extend to persons 
who solicit proxies that are not parties to the transaction and any 
proxy materials in opposition to the transaction.
    \90\ Such transactions were excluded from the provisions in our 
securities offering reform initiative. See Release No. 33-8591 (July 
19, 2006) [70 FR 44271].
---------------------------------------------------------------------------

Request for Comment

     Should the proposed ``notice and access'' model be 
available for transactions involving business combination transactions? 
Why or why not?
     Business combination transactions sometimes are the object 
of a proxy contest. Would this prohibition unnecessarily harm the 
ability of persons opposed to the transaction to undertake an efficient 
contest?
     Exchange Act Rule 13e-3 \91\ imposes certain requirements 
on issuers that are undertaking what are commonly referred to as 
``going-private transactions'' or ``Rule 13e-3 transactions.'' Should 
the ``notice and access'' model not be available with regard to proxy 
materials related to those transactions?
---------------------------------------------------------------------------

    \91\ 17 CFR 240.13e-3.
---------------------------------------------------------------------------

     Should the ``notice and access'' model not be available in 
other types of transactions? For example, should it apply to roll-up 
transactions, liquidations of assets, or reverse stock splits?
     Are there other matters to which the proposed ``notice and 
access'' model should not apply? For registered investment companies, 
are there any types of matters (e.g., changes in investment adviser or 
management and distribution fee increases) to which the proposed model 
should not apply?

IV. Conforming and Correcting Revisions to the Proxy Rules

    The proposed rules reflect numerous amendments to terms used in the 
current proxy rules to explicitly accomodate the ``notice and access'' 
model. The changes are as follows:
     We propose to substitute the term ``send'' and other 
tenses of the verb for the term ``mail'' and its other tenses to avoid 
any misunderstanding that ``mail'' means only paper delivery through 
the U.S. mail system.\92\
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    \92\ Proposed Rules 14a-4(c)(1), 14a-8(e)(2), 14a-8(c)(3), 14a-
8(m)(3), 14a-13(a)(5), 14a-13(c), 14b-1(c)(2)(ii), 14b-2(c)(2)(ii), 
14c-5(a) and 14c-7(a)(5). Also Note 2 to proposed Rule 14a-13(a), 
Instruction 2 to paragraph (d)(2)(ii)(L) of Item 7 of proposed Rule 
14a-101, Note 2 to proposed Rule 14c-7(a) and Instruction 1 to Item 
4 of proposed Rule 14c-101.
---------------------------------------------------------------------------

     We propose to clarify that the term ``address'' includes 
an electronic mail address.\93\
---------------------------------------------------------------------------

    \93\ Proposed Rules 14a-7(f), 14a-13(e), 14b-1(a)(2) and 14b-
2(a)(4).
---------------------------------------------------------------------------

    Furthermore, we propose to clarify the use of the term ``annual 
report(s)'' in the proxy rules by changing all references to either 
``annual report(s) to

[[Page 74611]]

security holders'' or ``annual report(s) on Form 10-K and/or Form 10-
KSB,'' as appropriate.\94\ Finally, we are proposing to update Rule 
14a-2 and Forms 10-Q, 10-QSB, 10-K, 10-KSB, and N-SAR to update 
outdated references to Exchange Act Rule 14a-11, which the Commission 
rescinded in 1999.\95\
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    \94\ Proposed Rules 14a-3(b)(1), 14a-3(b)(10), 14a-3(b)(13), 
14a-3(e)(1)(i), 14a-3(e)(1)(i)(A), 14a-3(e)(1)(i)(B), 14a-
3(e)(1)(i)(C), 14a-3(e)(1)(i)(E), 14a-3(e)(1)(ii)(A), 14a-
3(e)(1)(ii)(B)(2), 14a-3(e)(1)(ii)(B)(2)(ii), 14a-
3(e)(1)(ii)(B)(2)(iii), 14a-3(e)(1)(ii)(B)(3), 14a-3(e)(1)(iii), 
14a-3(e)(2), 14a-3(e)(2)(i), 14a-3(e)(2)(ii), 14a-12(c)(1), 14b-
1(b)(2), 14b-1(c)(2)(ii), 14b-1(c)(3), 14b-2(b)(3), 14b-2(c)(2)(ii), 
14b-2(c)(4), 14c-2(a)(2), 14c-3(a)(1) and 14c-3(c). Also Note to 
paragraph (e)(1)(i)(B) of proposed Rule 14a-3, Note D(3) to proposed 
Rule 14a-101, Note G(1) to proposed Rule 14a-101, Instruction 1 to 
paragraph (d)(2)(ii)(L) of Item 7 of proposed Rule 14a-101, 
paragraph (e)(2) of Item 14 of proposed Rule 14a-101, Item 23 of 
proposed Rule 14a-101, paragraph (a), (b), (c) and (d) of Item 23 to 
proposed Rule 14a-101, Note 1 to paragraph (b)(2) of proposed Rule 
14b-1, Note 1 to paragraph (b)(3) of proposed Rule 14b-2, section 
heading to proposed Rule 14c-3, Item 5 of proposed Rule 14c-101 and 
paragraph (a), (b), (c) and (d) of Item 5 of proposed Rule 14c-101.
    \95\ See Release No. 33-7760 (Oct. 22, 1999) [64 FR 61408].
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V. Paperwork Reduction Act

A. Background

    The proposed amendments contain ``collection of information'' 
requirements within the meaning of the Paperwork Reduction Act of 
1995.\96\ We are submitting the proposals to the Office of Management 
and Budget for review in accordance with the PRA.\97\ The proposals 
would not affect existing collections of information. The proposed 
Notice of Internet Availability of Proxy Materials, if adopted, would 
constitute a new collection of information under the Exchange Act to be 
used by issuers and other persons soliciting proxies to provide notice 
to shareholders that they are relying on the ``notice and access'' 
model with regard to the proxy materials referenced in the Notice.
---------------------------------------------------------------------------

    \96\ 44 U.S.C. 3501 et seq.
    \97\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

    The rules regarding the Notice would be adopted pursuant to the 
Exchange Act. The hours and costs associated with preparing, filing, 
and sending the Notice would constitute reporting and cost burdens 
imposed by that collection of information. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid OMB control number.

B. Summary of Proposed Amendments

    The proposed rules would apply only if an issuer or other 
soliciting person voluntarily chooses to furnish its proxy materials to 
shareholders electronically in reliance on the proposed alternative 
model. We do not know the number of issuers and other soliciting 
persons that will choose to take advantage of this alternative. 
However, in light of the significant cost savings that an issuer or 
other soliciting person may realize by furnishing its proxy materials 
under the alternative model, we expect that the alternative model would 
be used for most proxy solicitations. In addition, because we think 
that the proposals may reduce the cost of effecting a proxy contest, we 
expect that more persons may conduct proxy contests. We do not know the 
extent to which the number of proxy contests may increase if these 
amendments are adopted. We request comment and supporting empirical 
data, for purposes of the PRA, on the number of issuers and other 
persons that would choose to furnish their proxy materials in reliance 
on the proposed ``notice and access'' model.
    Compliance with the proposed requirements would be mandatory only 
if an issuer chooses to use the proposed ``notice and access'' model to 
furnish its proxy materials to shareholders. There would be no 
mandatory retention period for the information disclosed, and responses 
to the disclosure requirements would not be kept confidential. Also, 
under the proposals, a person other than the issuer has the option to 
effect a proxy solicitation under the ``notice and access'' model 
without preparing a Notice of Internet Availability of Proxy Materials, 
so long as the soliciting person does not deliver a proxy card or 
request for voting instructions to shareholders. We request comment on 
the extent to which soliciting persons other than the issuer would 
choose to conduct solicitations in this manner.
    The proposed Notice of Internet Availability of Proxy Materials is 
required to include the following prominent legend in bold-face type 
and other information described below:

    ``Important Notice Regarding the Availability of Proxy Materials 
for the Shareholder Meeting to Be Held on [insert meeting date].\98\
---------------------------------------------------------------------------

    \98\ Appropriate changes may be made if the issuer is providing 
an information statement pursuant to Regulation 14C or seeking to 
effect a corporate action by written consent.
---------------------------------------------------------------------------

     This communication presents only an overview of the 
more complete proxy materials that are available to you on the 
Internet. We encourage you to access and review all of the important 
information contained in the proxy materials before voting.
     The [proxy statement] [information statement] [annual 
report to shareholders] [proxy card] are available at [Insert Web 
site address].
     If you want to receive a paper or e-mail copy of these 
documents, you must request one. There is no charge to you for 
requesting a copy. Please make your request for a copy as instructed 
below on or before [Insert a date that is two weeks or more before 
the meeting date] to facilitate timely delivery. If you hold your 
shares through a broker, bank, or other intermediary, you may 
request delivery of a copy of the proxy materials through that 
intermediary, but it likely will take longer to receive your 
materials through an intermediary than directly from the company.''

     The date, time, and location of the meeting or, if 
corporate action is to be taken by written consent, the earliest date 
on which the corporate action may be effected;
     A clear and impartial identification of each separate 
matter intended to be acted upon and the issuer's recommendations 
regarding those matters, but no supporting statements;
     A list of the materials being made available at the 
specified Web site; and
     (1) A toll-free telephone number and (2) an e-mail address 
where the shareholder can request a copy of the proxy materials.
    All of this information is information that the issuer or other 
soliciting person would have readily available because it determines 
matters such as the date of the shareholder meeting and information 
that shareholders can use to request copies of the proxy materials. The 
Notice may be combined with any notice of shareholder meeting required 
by state law. We estimate the annual burdens that would be required to 
prepare and transmit a Notice of Internet Availability of Proxy 
Materials to be approximately 1.5 reporting hours. We estimate that 75% 
of the burden is prepared by the company and that 25% of the burden is 
prepared by outside counsel retained by the company at an average cost 
of approximately $300 per hour.\99\ We received 7,301 filings on 
Schedule 14A and 681 filings on Schedule 14C during our 2005 fiscal 
year. These numbers include filings related to annual and special 
meetings prepared by issuers and other soliciting persons, but not 
those related to business combination transactions because the 
proposals exclude those transactions. Assuming that all issuers

[[Page 74612]]

and other soliciting persons elected to follow the proposed ``notice 
and access'' model, we would expect 7,982 Notices of Internet 
Availability of Proxy Materials to be filed annually.\100\ We estimate 
that the total annual reporting burden would be approximately 8,979 
hours \101\ and that the annual cost would be approximately $897,900 
\102\ for the services of outside professionals.
---------------------------------------------------------------------------

    \99\ For convenience, the estimated PRA hour burdens have been 
rounded to the nearest whole number, and the estimated PRA cost 
burdens have been rounded to the nearest $100. In connection with 
other recent rulemakings, we have had discussions with several 
private law firms to estimate an hourly rate of $300 as the cost of 
outside professionals that assist issuers and security holders (or 
security holder groups) in preparing these disclosures.
    \100\ 7,301 notices for 14A filers + 681 notices for 14C filers 
= 7,982 total notices.
    \101\ 7,982 notices x 1.5 hours per notice x .75 = 8,980 hours.
    \102\ 7,982 notices x $300/hr x 1.5 hr/notice x .25 = $897,975.
---------------------------------------------------------------------------

    The above estimates are conservative because there is no reliable 
way to predict how many issuers or other soliciting persons will choose 
to furnish proxy materials pursuant to the proposed amendments. We 
request comment and supporting empirical data on the number of issuers 
and other soliciting persons that would choose to furnish proxy 
materials using the proposed ``notice and access'' model and the burden 
and cost of preparing and sending the Notices necessary to comply with 
the proposed model. We also request comment and supporting empirical 
data on the current cost of sending copies of proxy materials, the cost 
savings expected as a result of furnishing proxy materials under the 
proposed alternative model, and the number or percentage of 
shareholders who would request copies of these materials. Finally, we 
request comment on the expected increase, if any, of the number of 
proxy contests that would be conducted by soliciting persons other than 
the issuer if the Commission adopts the proposals.

C. Solicitation of Comment

    Pursuant to 44 U.S.C. 3506(c)(2)(B), we solicit comments to: (1) 
Evaluate whether the proposed collection of information is necessary 
for the proper performance of the functions of the agency, including 
whether the information would have practical utility; (2) evaluate the 
accuracy of our estimate of the burden of the proposed collection of 
information; (3) determine whether there are ways to enhance the 
quality, utility and clarity of the information to be collected; and 
(4) evaluate whether there are ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of automated collection techniques or other forms of 
information technology.
    Persons submitting comments on the collection of information 
requirements should direct the comments to the Office of Management and 
Budget, Attention: Desk Officer for the Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Washington, 
DC 20503, and should send a copy to Jonathan G. Katz, Secretary, 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-9303, with reference to File No. S7-10-05. Requests for materials 
submitted to OMB by the Commission with regard to these collections of 
information should be in writing, refer to File No. S7-10-05, and be 
submitted to the Securities and Exchange Commission, Records 
Management, Office of Filings and Information Services, 100 F Street, 
NE., Washington, DC 20549. OMB is required to make a decision 
concerning the collection of information between 30 and 60 days after 
publication of this release. Consequently, a comment to OMB is best 
assured of having its full effect if OMB receives it within 30 days of 
publication.

VI. Cost-Benefit Analysis

A. Background

    We are proposing revisions to the proxy rules under the Exchange 
Act to enable issuers to take advantage of technological advances in 
recent years to more efficiently furnish proxy materials to 
shareholders. We expect that these proposals, if adopted, may lead to 
significant cost reduction for proxy solicitations. The costs of issuer 
solicitations ultimately are borne by shareholders.

B. Summary of Proposals

    The proposals provide an alternative ``notice and access'' model 
that would permit an issuer to furnish proxy materials by posting them 
on a specified, publicly-accessible Internet Web site (other than the 
Commission's EDGAR Web site) and providing shareholders with a notice 
informing them that the materials are available and explaining how to 
access them. Under this alternative model, shareholders may request 
copies of the proxy materials from the issuer.
    Issuers would be able to request intermediaries to follow similar 
procedures to forward proxy materials to beneficial owners. In 
addition, shareholders and other persons conducting their own proxy 
solicitations may follow the alternative model, permitting them to rely 
on the amendments under the same general requirements that would apply 
to issuers.

C. Benefits

    Possible benefits of the proposed amendments include the following: 
(1) More rapid dissemination of proxy information to shareholders over 
the Internet; (2) reduced printing and mailing costs for issuers and 
their shareholders; and (3) reduced costs for other soliciting parties 
engaging in proxy contests. We expect potential cost reductions in 
printing and mailing and a possible decrease in the costs associated 
with proxy contests to be the most significant economic benefits.
    Automatic Data Processing, Inc. (``ADP'') handles the vast majority 
of proxy mailings to beneficial owners.\103\ During the 2005 proxy 
season, ADP handled 3,596 distributions of proxy materials to 
shareholders, representing a total of approximately 152.3 million items 
of proxy material processed. Currently, issuers typically prepare and 
print paper copies to accommodate all record and beneficial holders who 
do not consent to electronic delivery. For each paper copy, we 
understand that average postage is approximately $0.95 and average 
printing and paper costs are approximately $5.00.
---------------------------------------------------------------------------

    \103\ Because mailings to record holders are handled by a wide 
variety of parties including transfer agents and issuers themselves, 
we do not have an aggregated estimate of the number of mailings to 
record holders during 2005. However, we expect savings per mailing 
would roughly correspond to savings with respect to beneficial 
owners.
---------------------------------------------------------------------------

    ADP estimates that, during the 2005 proxy season,\104\ over 62.3 
million proxy material mailings were suppressed through a variety of 
means, including householding and existing electronic delivery methods. 
During the 2005 proxy season, this resulted in a savings of almost $371 
million to issuers. During that season, ADP mailed 90 million paper 
proxy items to beneficial owners. Based on this number, we estimate 
that issuers and other soliciting persons spent, in the aggregate, 
$535.5 million in postage and printing fees alone to distribute paper 
proxy materials.\105\ These numbers reflect the cost of approximately 
one-third of all mailings conducted by ADP in 2005. The data we have 
reflects only 3,596, or 30%, of the total 12,304 proxy mailings 
processed by ADP from May 1, 2004 through May 1, 2005. We do not have 
data on the size of the mailings performed outside of the 2005 proxy 
season.
---------------------------------------------------------------------------

    \104\ According to ADP data, the proxy season extends from 
February 15 to May 1, during which time nearly one-third of all 
proxy solicitations are conducted.
    \105\ 90 million mailings x $5.95/mailing = $535.5 million.

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[[Page 74613]]

    Although we expect the savings to be significant, the full 
potential for savings would be reduced by several factors. First, some 
issuers and other soliciting persons might not elect to follow the 
proposed model. Second, to the extent that some shareholders do not 
have access to the Internet or receive paper copies of proxy materials 
from the company, the savings in printing and mailing costs would be 
reduced.
    Third, issuers likely will project the number of paper copies they 
need to print before all shareholders must decide whether they want to 
receive copies under the proposed rule. The requirement that issuers 
supply requesting shareholders with copies within two business days 
would limit issuers' ability to reduce printing costs by causing them 
to have to maintain inventories of paper copies. We expect that, in the 
first year after adoption of the proposed amendments, issuers would 
face the highest level of uncertainty about the continued use of paper 
proxy materials. We expect that, as issuers gain familiarity with the 
continued use of paper materials and as shareholders become more 
comfortable with receiving disclosures via the Internet, the number of 
paper copies will decline, as will issuers' tendency to print more 
copies than ultimately are requested. We do not currently have 
estimates for the number of paper copies of the proxy materials that 
would have to be furnished to shareholders, but we invite comments that 
would be useful in constructing such estimates.
    Issuers may be able to use additional information about shareholder 
voting to reduce uncertainty about shareholder demand for paper 
materials. During the 2005 proxy season, only 44% of accounts were 
voted by beneficial owners. Thus, 56%, or 84.8 million accounts, did 
not return requests for voting instructions. However, shareholders not 
voting represented a disproportionately low percentage (31.5%) of 
shares held beneficially. These accounts represent a cost of 
approximately $504.6 million in postage and printing costs. In light of 
the fact that these shareholders chose not to vote, we suspect that a 
significant number of them would not request copies of the proxy 
materials. We further expect that issuers would take such data into 
account to increase cost savings beginning in the first year that they 
follow the proposed model.
    The proposed amendments may reduce costs of persons other than the 
issuer conducting their own proxy solicitations. Under the proposed 
amendments, persons other than the issuer also could rely on the 
``notice and access'' model but, unlike issuers, may not be required to 
deliver a Notice of Internet Availability of Proxy Materials to 
shareholders. Furthermore, persons other than the issuer would be able 
to limit the scope of proxy solicitations to shareholders who are 
willing to access proxy materials electronically. We expect that the 
flexibility afforded to persons other than the issuer under the 
proposed amendments would substantially reduce what has traditionally 
been viewed as the high cost of engaging in proxy contests, thereby 
increasing the effectiveness and efficiency of proxy contests as a 
corporate control mechanism.
    Some of the benefits from the proposed amendments may arise from a 
reduction in the environmental costs of the proxy solicitation process. 
Currently, proxy solicitation involves the use of a significant amount 
of paper and printing ink. Paper production and consumption can 
adversely affect the environment, such as through its use of chemicals 
such as bleaching agents, printing ink (which contains toxic metals), 
and cleanup washes. To the extent that paper producers internalize 
these costs and the costs are reflected in the price of paper and other 
materials consumed during the proxy solicitation process, our 
evaluation of the benefits reflects the elimination of adverse 
environmental consequences under the proposed amendments.
    The benefits from reducing the use of paper in the proxy 
solicitation process also depend on the extent to which shareholders 
choose to print their own paper copies of proxy materials after 
accessing them over the Internet. We invite comments and data to shed 
light on the extent to which the tendency of investors to request paper 
or print out their own paper copies may affect the benefits from 
reducing printing and paper usage under the proposal.

D. Costs

    Issuers and other persons soliciting proxies will have to follow 
the proposed amendments, if adopted, only if they elect to furnish 
proxy materials pursuant to the ``notice and access'' model. No issuer 
or person soliciting a proxy will be required to furnish proxy 
materials under the ``notice and access'' model. Furthermore, under the 
proposed amendments, shareholders can request copies of the proxy 
materials. We expect that the availability of multiple options for 
furnishing proxy materials will limit the costs of the proposed 
amendments to issuers and shareholders by enabling such parties to 
avoid relatively expensive alternatives and to choose ones that are 
most efficient under particular circumstances.
    Savings to issuers and other soliciting persons would be reduced by 
the cost of printing and sending Notices. If Notices are sent by mail, 
the mailing costs may vary widely among parties. Postage rates likely 
would vary from $0.0012 to $0.37 per Notice mailed, depending on 
numerous factors. Shareholders obtaining proxy materials online would 
incur any necessary costs associated with navigating to the Web site on 
which the materials are posted and locating the materials on the Web 
site. In addition, some shareholders may choose to print out the posted 
materials, which will entail paper and printing costs. We request 
comment on the magnitude of these potential costs and whether there are 
any other additional potential costs, including whether any such costs 
would affect different classes of shareholders differently.
    The proposed amendments will require an intermediary such as a 
bank, broker-dealer, or other association to follow the ``notice and 
access'' model if an issuer so requests. An intermediary that follows 
the ``notice and access'' model will be required to forward the 
issuer's Notice of Internet Availability of Proxy Materials to 
beneficial owners, but it will be able to include the Notice along with 
a request for voting instructions. Since intermediaries already incur 
costs from delivering requests for voting instructions, we do not 
expect the involvement of intermediaries in forwarding the Notice to 
significantly affect the costs associated with the rule.
    Under certain circumstances, an intermediary may need to post proxy 
materials and requests for voting instructions on its own Internet Web 
site and prepare its own notification to instruct beneficial owners to 
respond to the request for voting instructions rather than responding 
to the issuer via a proxy card. These undertakings may increase the 
costs to intermediaries. We solicit comment on the magnitude of such 
costs.
    Under the ``notice and access'' model, a beneficial owner could 
request a copy of proxy materials from an intermediary rather than from 
the issuer. The costs to an intermediary of collecting and processing 
requests from beneficial owners may be significant, particularly if the 
intermediary receives the requests of beneficial owners associated with 
many different issuers that specify different methods of furnishing the 
proxy. We expect that these processing costs will be highest in the 
first year after the proposal adoption but will subsequently decline as 
intermediaries

[[Page 74614]]

develop the necessary systems and procedures and as beneficial owners 
increasingly become comfortable with accessing proxy materials online. 
We invite comments on the nature and magnitude of these processing 
costs and on whether smaller broker-dealers will be unable to take 
advantage of economies of scale in processing.
    The proposed model would require only minimal added disclosures in 
the form of a Notice of Internet Availability of Proxy Materials to 
shareholders, informing them that the proxy materials are available at 
a specified Internet Web site. For purposes of the PRA, we estimate 
that the total added cost for the amendments, assuming every soliciting 
person, including issuers, elected to follow the proposed procedures, 
would be approximately $2,020,475.\106\
---------------------------------------------------------------------------

    \106\ For purposes of the PRA, we estimate that issuers would 
spend a total of $897,975 on outside professionals to prepare this 
disclosure. We also estimate that issuers would spend a total of 
8,980 hours of issuer personnel time preparing this disclosure. We 
estimate the average hourly cost of issuer personnel time to be 
$125, resulting in a total cost of $1,122,500 for issuer personnel 
time. This results in a total cost of $2,020,475 for all issuers.
---------------------------------------------------------------------------

E. Request for Comments

    We seek comments and empirical data on all aspects of this Cost-
Benefit Analysis. Specifically, we ask the following:
     Would issuers be willing to furnish proxy materials 
pursuant to the proposed alternative model? If so, what proportion of 
issuers would be expected to follow the proposed alternative model?
     Would soliciting persons other than issuers be willing to 
furnish proxy materials pursuant to the proposed alternative model? If 
so, what proportion of these persons would be expected to follow the 
proposed alternative model?
     What added costs would issuers incur if they choose to 
follow the proposed alternative model? Of those costs, which would be 
one-time costs and which would be annual costs?
     What cost savings would issuers realize if they choose to 
follow the proposed alternative model? Of those savings, which would be 
one-time savings and which would be annual savings?
     Are there any other one-time or annual costs or benefits 
that we should consider?
     What proportion of shareholders would be expected to 
request paper copies? What proportion of beneficial owners would likely 
request paper copies from intermediaries rather than from issuers?
     What costs would intermediaries incur as a result of 
processing objecting beneficial owners' requests for proxy materials? 
Would smaller broker-dealers be precluded from taking advantage of 
economies of scale in processing such requests?
     Does the requirement that issuers provide copies of the 
proxy materials give rise to inefficiencies? Specifically, because 
requests for proxy materials might come over time, a bulk mailing 
method may not be available to issuers. Furthermore, under the 
proposals, issuers would have to deliver copies of the proxy materials 
by first class mail or equivalent means of delivery. To what degree 
would this increase the per-unit cost to the issuer?
     To what degree would the cost of proxy contests be reduced 
by these proposals? What are the other costs of such contests?
     What effect might these proposals have on shareholder 
participation in the proxy process? Would reducing the financial 
barriers to conducting proxy contests lead to improved corporate 
governance? Conversely, might parties use the proposals to conduct 
nuisance contests?
     Will the proposed amendments likely affect the ease of 
investor communications? What evidence related to this issue should we 
consider in evaluating the net benefit of the proposals?
     Would the proposals increase, reduce, or have no effect on 
the voting returns from shareholders? Would issuers be more dependent 
on discretionary broker votes? Should there be increased or more 
prominent disclosure regarding how those discretionary broker votes 
operate? What added disclosure should be required? Where should such 
disclosure appear (e.g., on the Notice)?
     The rules do not require shareholders to print out copies 
of the proxy materials. However, shareholders may incur costs if they 
choose to print out the materials. We solicit comment on the costs that 
may be associated with shareholders choosing to print out copies.

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

    Section 23(a)(2) of the Exchange Act \107\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition. In addition, Section 23(a)(2) 
prohibits us from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act. The proposed rules are intended to provide an 
alternative for issuers and other soliciting persons that could reduce 
the cost of soliciting proxies and sending information statements 
regarding shareholder meetings. Currently, under our rules, a public 
company subject to Section 14 of the Exchange Act must furnish 
shareholders with an annual report and proxy statement, or an 
information statement if proxy authority is not being solicited. The 
primary means for satisfying this obligation historically has been the 
mailing of paper copies of the proxy materials.
---------------------------------------------------------------------------

    \107\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    Section 3(f) of the Exchange Act \108\ and Section 2(c) of the 
Investment Company Act of 1940 \109\ require us, when engaging in 
rulemaking that requires us 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.
---------------------------------------------------------------------------

    \108\ 15 U.S.C. 78c(f).
    \109\ 15 U.S.C. 80a-2(c).
---------------------------------------------------------------------------

    We anticipate that the proposed rules, if adopted, would increase 
efficiency at public companies. Currently, many issuers must devote a 
significant amount of time and resources to proxy mailings. However, 
the proposed rules may impose added burdens on intermediaries to 
respond to requests for copies of the proxy materials and, under 
certain circumstances, to maintain their own Internet Web sites on 
which to post their request for voting instructions.
    We request comment regarding the degree to which our proposed 
amendments would have competitively harmful effects on public 
companies, and how we could best minimize those effects. We also 
request comment on any disproportionate cross-sectional burdens among 
the firms affected by our proposals that could have anti-competitive 
effects.

VIII. Initial Regulatory Flexibility Analysis

    This Initial Regulatory Flexibility Analysis has been prepared in 
accordance with 5 U.S.C. 603. It relates to proposed revisions to the 
rules and forms under the Exchange Act that would provide an 
alternative model for issuers and other persons soliciting proxies to 
satisfy certain of their obligations under the Commission's proxy 
rules. The proposed alternative is intended to put into place processes 
that

[[Page 74615]]

would ensure notice and access to proxy materials while taking 
advantage of technological developments and the growth of the Internet 
and electronic communications. The alternative that would be provided 
by the proposed amendments also could lower the costs of proxy 
solicitations that ultimately are borne by shareholders.

A. Reasons for the Proposed Action

    The cost of conducting a proxy solicitation often is significant. 
As Internet access and computer usage have increased throughout the 
nation, the Commission believes it is time to propose rules that would 
provide issuers with an alternative model for meeting their proxy 
disclosure requirements in a manner that facilitates use of modern 
Internet and computer technologies.

B. Objectives

    The primary objective of the proposed amendments is to improve the 
ability of issuers and other soliciting persons to take advantage of 
modern technologies to furnish proxy materials to shareholders. The 
increased use of such technologies holds the promise of reducing the 
costs of soliciting proxies. Under the Exchange Act, issuers generally 
must furnish either a proxy statement or an information statement and 
annual report to shareholders in advance of shareholder meetings. The 
costs of such distributions ultimately are borne by shareholders. In 
addition, extension of the proposed alternative model to soliciting 
persons other than the issuer would reduce the cost of conducting 
solicitations in opposition to the issuer's proxy solicitation.
    The proposals could lower the cost to issuers and other soliciting 
persons while improving the ability of shareholders to participate 
meaningfully in the proxy process. These decreased costs may improve 
corporate governance by increasing management's accountability and 
responsiveness and providing shareholders with increased power to 
direct corporate policy. This may, in turn, enhance the value of 
shareholders' investments.

C. Legal Basis

    We are proposing amendments to the forms and rules under the 
authority set forth in Sections 3(b), 10, 13, 14, 15, 23(a), and 36 of 
the Securities Exchange Act of 1934, as amended, and Section 20(a), 30, 
and 38 of the Investment Company Act of 1940, as amended.

D. Small Entities Subject to the Proposed Rules

    The proposals would affect issuers that are small entities. 
Exchange Act Rule 0-10(a) \110\ defines an issuer to be a ``small 
business'' or ``small organization'' for purposes of the Regulatory 
Flexibility Act if it had total assets of $5 million or less on the 
last day of its most recent fiscal year. We estimate that there are 
approximately 2,500 public companies, other than investment companies, 
that may be considered small entities.
---------------------------------------------------------------------------

    \110\ 17 CFR 240.0-10(a).
---------------------------------------------------------------------------

    For purposes of the Regulatory Flexibility Act, an investment 
company is a small entity if it, together with other investment 
companies in the same group of related investment companies, has net 
assets of $50 million or less as of the end of its most recent fiscal 
year.\111\ Approximately 175 registered investment companies meet this 
definition. Moreover, approximately 65 business development companies 
may be considered small entities.
---------------------------------------------------------------------------

    \111\ See Rule 0-10 under the Investment Company Act of 1940 [17 
CFR 270.0-10].
---------------------------------------------------------------------------

    We request comment on the number of small entities that would be 
impacted by our proposals, including any available empirical data.

E. Reporting, Recordkeeping and Other Compliance Requirements

    No issuer would be required to follow the proposed ``notice and 
access'' model. However, we expect that many issuers would choose to 
follow the proposed model because of the substantial cost savings that 
an issuer may realize. These issuers likely would include many small 
issuers.
    If an issuer chooses to follow the model, it would be required to 
prepare, file, and disseminate a Notice of Internet Availability of 
Proxy Materials. The required disclosure in the Notice is information 
that would be readily available to the issuer. An issuer would be 
required to provide copies of the proxy materials to requesting 
shareholders and maintain a Web site on which to post the proxy 
materials.

F. Duplicative, Overlapping or Conflicting Federal Rules

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

G. Significant Alternatives

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish the stated objective, while 
minimizing any significant adverse impact on small entities. In 
connection with the proposed amendments, we considered the following 
amendments:
     The establishment of differing compliance or reporting 
requirements or timetables that take into account the resources 
available to small entities;
     The clarification, consolidation or simplification of 
disclosure for small entities; and
     An exemption for small entities from coverage under the 
proposals.
    The Commission has considered a variety of reforms to achieve its 
regulatory objectives. We believe that the current proposals are the 
most cost-effective approach for all public companies, including small 
entities.
    The proposed amendments, if adopted, would provide an alternative 
model that would reduce the burden on all issuers, including small 
entities, that choose to employ the alternative. They are designed to 
permit issuers and other soliciting persons to minimize the cost of a 
proxy solicitation in a manner that is consistent with investor 
protection. We believe that, at this time, requiring less than the 
proposed amendments require would significantly increase the likelihood 
that shareholders may become disenfranchised from the voting process. 
Therefore, we do not believe it would be appropriate to make special 
provisions to further ease the burden on small entities.
    Because the proposed amendments are designed to provide an 
alternative means that would reduce the burden on all issuers, an 
exemption from the proposed amendments or separate requirements for 
small entities would not be beneficial to small entities. The 
establishment of any differing compliance or reporting requirements or 
timetables or any exemptions for small business issuers may not be in 
keeping with the objectives of the proposed rules or the purposes of 
Section 14 of the Exchange Act.

H. Solicitation of Comment

    We encourage comments with respect to any aspect of this Initial 
Regulatory Flexibility Analysis. In particular, we request comments 
regarding:
     The number of small entities that may be affected by the 
proposals;
     The existence or nature of the potential impact of the 
proposals on small entities discussed in the analysis; and
     How to quantify the impact of the proposed rules.
    Commenters are asked to describe the nature of any impact and 
provide empirical data supporting the extent of the impact. Such 
comments will be considered in the preparation of the

[[Page 74616]]

Final Regulatory Flexibility Analysis, if the proposals are adopted, 
and will be placed in the same public file as comments on the proposed 
amendments themselves.

IX. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996,\112\ a rule is ``major'' if it has resulted, or is likely 
to result in:
---------------------------------------------------------------------------

    \112\ Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment or 
innovation.
    We request comment on whether our proposals would be a ``major 
rule'' for purposes of SBREFA. We solicit comment and empirical data 
on:
     The potential effect on the U.S. economy on an annual 
basis;
     Any potential increase in costs or prices for consumers or 
individual industries; and
     Any potential effect on competition, investment or 
innovation.

X. Statutory Basis and Text of Proposed Amendments

    The amendments are proposed pursuant to Sections 3(b), 10, 13, 14, 
15, 23(a), and 36 of the Securities Exchange Act of 1934, as amended, 
and Sections 20(a), 30, and 38 of the Investment Company Act of 1940, 
as amended.

List of Subjects

17 CFR Parts 240 and 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

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

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

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, and 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless 
otherwise noted.
* * * * *
    2. Amend Sec.  240.14a-2 by:
    a. Removing the period and adding a semicolon at the end of 
paragraph (b)(3)(ii); and
    b. Revising paragraph (b)(3)(iv).
    The revision reads as follows:


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

* * * * *
    (b) * * *
    (3) * * *
    (iv) The proxy voting advice is not furnished on behalf of any 
person soliciting proxies or on behalf of a participant in an election 
subject to the provisions of Sec.  240.14a-12(c); and
* * * * *
    3. Amend Sec.  240.14a-3 by:
    a. Revising paragraphs (a), (e)(1)(i), the introductory text of 
paragraphs (e)(1)(ii)(A) and (e)(1)(ii)(B)(2), paragraphs 
(e)(1)(ii)(B)(2)(ii), (e)(1)(ii)(B)(2)(iii), (e)(1)(ii)(B)(3), 
(e)(1)(iii), and (e)(2);
    b. Revising the term ``annual report'' to read ``annual report to 
security holders'' in paragraph (b)(13), and
    c. Adding paragraphs (e)(3) and (g).
    The revisions and additions read as follows:


Sec.  240.14a-3  Information to be furnished to security holders.

    (a) No solicitation subject to this regulation shall be made unless 
each person solicited is concurrently furnished or has previously been 
furnished with:
    (1) A publicly-filed preliminary or definitive written proxy 
statement containing the information specified in Schedule 14A (Sec.  
240.14a-101);
    (2) A publicly-filed preliminary or definitive proxy statement, in 
the form and manner described in paragraph (g) of this section, 
containing the information specified in Schedule 14A (Sec.  240.14a-
101); or
    (3) A preliminary or definitive written proxy statement included in 
a registration statement filed under the Securities Act of 1933 on Form 
S-4 or F-4 (Sec.  239.25 or Sec.  239.34 of this chapter) or Form N-14 
(Sec.  239.23 of this chapter) and containing the information specified 
in such Form.
* * * * *
    (e)(1)(i) A registrant will be considered to have delivered an 
annual report to security holders, proxy statement or Notice of 
Internet Availability of Proxy Materials to all security holders of 
record who share an address if:
    (A) The registrant delivers one annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials, 
as applicable, to the shared address;
    (B) The registrant addresses the annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials, 
as applicable, to the security holders as a group (for example, ``ABC 
Fund [or Corporation] Security Holders,'' ``Jane Doe and Household,'' 
``The Smith Family''), to each of the security holders individually 
(for example, ``John Doe and Richard Jones'') or to the security 
holders in a form to which each of the security holders has consented 
in writing;


    Note to paragraph (e)(1)(i)(B): Unless the company addresses the 
annual report to security holders, proxy statement or Notice of 
Internet Availability of Proxy Materials to the security holders as 
a group or to each of the security holders individually, it must 
obtain, from each security holder to be included in the householded 
group, a separate affirmative written consent to the specific form 
of address the company will use.


    (C) The security holders consent, in accordance with paragraph 
(e)(1)(ii) of this section, to delivery of one annual report to 
security holders, proxy statement or Notice of Internet Availability of 
Proxy Materials, as applicable;
    (D) With respect to delivery of the proxy statement, the registrant 
delivers, together with or subsequent to delivery of the proxy 
statement, a separate proxy card for each security holder at the shared 
address; and
    (E) The registrant includes an undertaking in the proxy statement 
to deliver promptly upon written or oral request a separate copy of the 
annual report to security holders, proxy statement or Notice of 
Internet Availability of Proxy Materials, as applicable, to a security 
holder at a shared address to which a single copy of the document was 
delivered.
    (ii) Consent. (A) Affirmative written consent. Each security holder 
must affirmatively consent, in writing, to delivery of one annual 
report to security holders, proxy statement or Notice of Internet 
Availability of Proxy Materials, as applicable. A security holder's 
affirmative written consent will only be considered valid if the 
security holder has been informed of:
* * * * *
    (B) * * *
    (2) The registrant has sent the security holder a notice at least 
60 days before the registrant begins to rely on this section concerning 
delivery of annual reports to security holders, proxy statements or 
Notices of Internet Availability of Proxy Materials to that security 
holder. The notice must:
* * * * *
    (ii) State that only one annual report to security holders, proxy 
statement or Notice of Internet Availability of Proxy

[[Page 74617]]

Materials, as applicable, will be delivered to the shared address 
unless the registrant receives contrary instructions;
    (iii) Include a toll-free telephone number, or be accompanied by a 
reply form that is pre-addressed with postage provided, that the 
security holder can use to notify the registrant that the security 
holder wishes to receive a separate annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials;
* * * * *
    (3) The registrant has not received the reply form or other 
notification indicating that the security holder wishes to continue to 
receive an individual copy of the annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials, 
as applicable, within 60 days after the registrant sent the notice; and
* * * * *
    (iii) Revocation of consent. If a security holder, orally or in 
writing, revokes consent to delivery of one annual report to security 
holders, proxy statement or Notice of Internet Availability of Proxy 
Materials to a shared address, the registrant must begin sending 
individual copies to that security holder within 30 days after the 
registrant receives revocation of the security holder's consent.
* * * * *
    (2) Notwithstanding paragraphs (a) and (b) of this section, unless 
state law requires otherwise, a registrant is not required to send an 
annual report to security holders or proxy statement to a security 
holder if:
    (i) An annual report to security holders and a proxy statement for 
two consecutive annual meetings; or
    (ii) All, and at least two, payments (if sent by first class mail) 
of dividends or interest on securities, or dividend reinvestment 
confirmations, during a twelve month period, have been mailed to such 
security holder's address and have been returned as undeliverable. If 
any such security holder delivers or causes to be delivered to the 
registrant written notice setting forth his then current address for 
security holder communications purposes, the registrant's obligation to 
deliver an annual report to security holders or a proxy statement under 
this section is reinstated.
    (3) A consent to household the annual report to shareholders and 
proxy statement shall be deemed to be a consent to household a Notice 
of Internet Availability of Proxy Materials pursuant to paragraph 
(e)(1)(ii) of this section.
* * * * *
    (g)(1) A registrant may furnish a proxy statement pursuant to 
paragraph (a) of this section, or an annual report to security holders 
pursuant to paragraph (b) of this section, to a security holder by 
sending the security holder a Notice of Internet Availability of Proxy 
Materials 30 days or more prior to the shareholder meeting date, or if 
no meeting is to be held, 30 days or more prior to the date the votes, 
consents or authorizations may be used to effect the corporate action, 
and complying with all other requirements of this paragraph (g). All 
proxy materials identified in the Notice of Internet Availability of 
Proxy Materials must be publicly accessible, free of charge, at the Web 
site address specified in the Notice of Internet Availability of Proxy 
Materials on the date that the Notice of Internet Availability of Proxy 
Materials is sent to the security holder and such materials must remain 
available on that Web site until the time of the meeting of security 
holders; provided, however, that any additional soliciting materials 
sent to security holders or made public after the Notice of Internet 
Availability of Proxy Materials has been sent must be made publicly 
accessible at the specified Web site address no later than the day on 
which such materials are first sent to security holders or made public. 
The Web site address relied upon for compliance under this paragraph 
(g) may not be on the Commission's EDGAR system. The publicly 
accessible proxy materials must be substantially identical to the 
copies of such proxy materials, including all graphics, charts and 
tables, that would otherwise be furnished pursuant to this section.


    Note to paragraph (g)(1): If the registrant chooses to have an 
intermediary forward its Notice of Internet Availability of Proxy 
Materials to beneficial owners pursuant to Sec.  240.14a-1 or Sec.  
240.14a-2, it must provide that intermediary with copies of the 
Notice of Internet Availability of Proxy Materials at least five 
business days prior to the deadline by which it must furnish such 
notices to the registrant's holders of record.


    (2) The Notice of Internet Availability of Proxy Materials must 
contain the following:
    (i) A prominent legend in bold-face type that states:

    ``Important Notice Regarding the Availability of Proxy Materials 
for the Shareholder Meeting to Be Held on [insert meeting date].
    1. This communication presents only an overview of the more 
complete proxy materials that are available to you on the Internet. 
We encourage you to access and review all of the important 
information contained in the proxy materials before voting.
    2. The [proxy statement] [information statement] [annual report 
to shareholders] [proxy card] [is/are] available at [Insert Web site 
address].
    3. If you want to receive a paper or e-mail copy of these 
documents, you must request one. There is no charge to you for 
requesting a copy. Please make your request for a copy as instructed 
below on or before [Insert a date that is two weeks or more before 
the meeting date] to facilitate timely delivery. If you hold your 
shares through a broker, bank, or other intermediary, you may 
request delivery of a copy of the proxy materials through that 
intermediary, but it likely will take longer to receive your 
materials through an intermediary than directly from the company.'';

    (ii) The date, time, and location of the meeting, or if corporate 
action is to be taken by written consent, the earliest date on the 
corporate action may be effected;
    (iii) A clear and impartial identification of each separate matter 
intended to be acted upon and the soliciting person's recommendations 
regarding those matters, but no supporting statements;
    (iv) A list of the materials being made available at the specified 
Web site; and
    (v)(A) A toll-free number; and
    (B) An e-mail address where the security holder can request a copy 
of the proxy materials.
    (3) The Notice of Internet Availability of Proxy Materials may not 
be incorporated into, or combined with, another document, except that 
it may be incorporated into or combined with a notice of shareholder 
meeting required under state law. Whether or not combined with the 
state law meeting notice, the Notice of Internet Availability of Proxy 
Materials must be sent separately from other types of shareholder 
communications and may not accompany any materials other than the proxy 
card and return envelope. The Notice of Internet Availability of Proxy 
Materials may contain only the information required by paragraph (g)(2) 
of this section and any additional information that is required by 
state law to be included in a notice of shareholders meeting; provided 
that, if the registrant is conducting a consent solicitation, it may 
revise the information required in the Notice of Internet Availability 
of Proxy Materials to reflect that fact.
    (4) Plain English. (i) To enhance the readability of the Notice of 
Internet Availability of Proxy Materials, the registrant must use plain 
English principles in its organization, language, and design.

[[Page 74618]]

    (ii) The registrant must draft the language in the Notice of 
Internet Availability of Proxy Materials so that at a minimum it 
substantially complies with each of the following plain English writing 
principles:
    (A) Short sentences;
    (B) Definite, concrete, everyday words;
    (C) Active voice;
    (D) Tabular presentation or bullet lists for complex material, 
whenever possible;
    (E) No legal jargon or highly technical business terms; and
    (F) No multiple negatives.
    (iii) In designing the Notice of Internet Availability of Proxy 
Materials, the registrant may include pictures, logos, charts, or other 
design elements so long as the design is not misleading and the 
required information is clear.
    (5) The registrant may, at its discretion, choose to furnish some 
proxy materials in paper and other proxy materials electronically 
pursuant to this paragraph (g). The registrant may send the Notice of 
Internet Availability of Proxy Materials and the form of proxy together 
through the same delivery medium. The form of proxy may not be 
furnished pursuant to this paragraph (g) except by:
    (i) Being furnished together through the same delivery medium with 
the Notice of Internet Availability of Proxy Materials; or
    (ii) Being furnished together through the same delivery medium with 
the proxy statement complying with Schedule 14A (Sec.  240.14a-101) 
(which can be accomplished through posting on the Internet Web site in 
accordance with this paragraph (g)).
    (6) The Notice of Internet Availability of Proxy Materials shall be 
filed with the Commission pursuant to Sec.  240.14a-6(b) no later than 
the date it is first sent or given to shareholders.
    (7) Obligation to provide copies. (i) The registrant must send, at 
no cost and by U.S. First Class mail or other reasonably prompt means, 
a paper copy of the proxy materials to any shareholder requesting such 
a copy within two business days after receiving a request for a paper 
copy.
    (ii) The registrant must send, at no cost and via e-mail, an 
electronic copy of the proxy materials to any shareholder requesting 
such a copy within two business days after receiving a request for an 
electronic copy via e-mail.
    (8) A person other than the registrant may solicit proxies pursuant 
to the conditions imposed on registrants by this paragraph (g) 
provided:
    (i) A soliciting person other than the registrant need not send a 
Notice of Internet Availability of Proxy Materials to anyone other than 
security holders to whom that person sends a form of proxy, if any.
    (ii) If a soliciting person other than the registrant intends to 
provide copies of the soliciting materials by any means other than Web 
site access, any Notice of Internet Availability of Proxy Materials 
must be sent by the later of:
    (A) 30 days prior to the shareholder meeting date or, if no meeting 
is to be held, 30 days prior to the date the votes, consents, or 
authorizations may be used to effect the corporate action; or
    (B) 10 days after the registrant first sends its proxy 
solicitation.
    (iii) If a soliciting person other than the registrant intends to 
furnish copies of the soliciting materials only by posting the 
materials on an Internet Web site, any Notice on Internet Availability 
of Proxy Materials must state clearly that the soliciting person will 
not provide copies of the soliciting materials and that the 
solicitation is conditioned on the security holder agreeing to access 
the soliciting materials via the specified Web site.
    (iv) Content of Notice of Internet Availability of Proxy Materials 
in certain situations. (A) If a soliciting person other than the 
registrant conditions its proxy solicitation on the security holder 
agreeing to access the soliciting materials via the specified Web site, 
the Notice need not contain instructions regarding how to request 
copies.
    (B) If, at the time the Notice is sent, a soliciting person other 
than the registrant is not aware of all matters intended to be acted 
upon, the Notice must provide a clear and impartial identification of 
each separate matter to the extent known by the soliciting person at 
the time that the Notice is first sent to security holders and a clear 
statement that there may be additional agenda items of which the 
soliciting party is not aware.
    (C) If a soliciting person other than the registrant sends a form 
of proxy not containing all matters intended to be acted upon, the 
Notice must clearly state that execution of the form of proxy may 
invalidate a security holder's prior vote on matters not presented on 
the form of proxy.
    (9) This paragraph (g) shall not apply to a proxy solicitation in 
connection with a business combination transaction, as defined in Sec.  
230.165 of this chapter.
    (10) This paragraph (g) provides a non-exclusive alternative by 
which an issuer or other person may furnish a proxy statement pursuant 
to paragraph (a) of this section or an annual report to security 
holders pursuant to paragraph (b) of this section to a security holder. 
This paragraph (g) does not affect the availability of any other means 
by which an issuer or other person may furnish a proxy statement 
pursuant to paragraph (a) of this section or an annual report to 
security holders pursuant to paragraph (b) of this section to a 
security holder.


Sec.  240.14a-4  [Amended]

    4. Amend Sec.  240.14a-4 by:
    a. Removing the authority citation following the section;
    b. Revising the word ``mailed'' to read ``sent'' in the first 
sentence of paragraph (c)(1); and
    c. Revising the word ``mails'' to read ``sends'' in the last 
sentence of paragraph (c)(1).
    5. Amend Sec.  240.14a-7 by:
    a. Revising paragraph (a)(2)(i) and (a)(2)(ii); and
    b. Adding paragraphs (a)(2)(iii) and (f) and Note 3 to Sec.  
240.14a-7.
    The revisions and additions read as follows:


Sec.  240.14a-7  Obligations of registrants to provide a list of, or 
mail soliciting material to, security holders.

* * * * *
    (a) * * *
    (2) * * *
    (i) Send copies of any proxy statement, form of proxy, or other 
soliciting material, including a Notice of Internet Availability of 
Proxy Materials (as defined in Sec.  240.14a-3(g)), furnished by the 
security holder to the record holders, including banks, brokers, and 
similar entities, designated by the security holder. A security holder 
may designate only record holders who have not requested copies of the 
registrant's soliciting materials. A sufficient number of copies must 
be sent to the banks, brokers, and similar entities for distribution to 
all beneficial owners designated by the security holder. If the 
registrant has received affirmative written or implied consent to 
deliver a single proxy statement to security holders at a shared 
address in accordance with the procedures in Sec.  240.14a-3(e)(1), a 
single copy of the proxy materials furnished by the security holder 
shall be sent to that address. Upon request by a soliciting security 
holder, the registrant must send the proxy materials furnished by the 
security holder electronically to all record holders designated by the 
security holder who have provided the registrant with an affirmative 
consent to electronic delivery of proxy materials

[[Page 74619]]

via means permitted by such consent. The registrant shall send the 
security holder material with reasonable promptness after tender of the 
material to be sent, envelopes or other containers therefore, postage 
or payment for postage and other reasonable expenses of effecting such 
distribution. The registrant shall not be responsible for the content 
of the material; or
    (ii) Deliver the following information to the requesting security 
holder within five business days of receipt of the request:
    (A) A reasonably current list of the names, addresses and security 
positions of the record holders, including banks, brokers and similar 
entities holding securities in the same class or classes as holders 
which have been or are to be solicited on management's behalf, or any 
more limited group of such holders designated by the security holder if 
available or retrievable under the registrant's or its transfer agent's 
security holder data systems;
    (B) The most recent list of names, addresses and security positions 
of beneficial owners as specified in Sec.  240.14a-13(b), in the 
possession, or which subsequently comes into the possession, of the 
registrant;
    (C) The names of security holders at a shared address that have 
consented to delivery of a single copy of proxy materials to a shared 
address, if the registrant has received written or implied consent in 
accordance with Sec.  240.14a-3(e)(1);
    (D) The names of security holders who have consented to electronic 
delivery of proxy materials and the information related to such consent 
that enables the requesting security holder to deliver the proxy 
materials electronically; and
    (E) The names of security holders who, on the date that the 
registrant receives the request, have requested copies of the proxy 
materials, pursuant to Sec.  240.14a-3(g)(7).
    (iii) All security holder list information shall be in the form 
requested by the security holder to the extent that such form is 
available to the registrant without undue burden or expense. The 
registrant shall furnish the security holder with updated record holder 
information on a daily basis or, if not available on a daily basis, at 
the shortest reasonable intervals; provided, however, the registrant 
need not provide beneficial or record holder information more current 
than the record date for the meeting or action.
* * * * *
    (f) Definition of address. Unless otherwise indicated, for purposes 
of this section, address means a street address, a post office box 
number, an electronic mail address, a facsimile telephone number or 
other similar destination to which paper or electronic documents are 
delivered, unless otherwise provided in this section.
    Notes to Sec.  240.14a-7.
* * * * *
    3. If the registrant is sending the requesting security holder's 
materials under Sec.  240.14a-7, and if the requesting security holder 
requests that the materials be sent electronically, the registrant 
shall send copies of those materials electronically pursuant to the 
requirements of Sec.  240.14a-3(g); provided, however, that the 
requesting security holder's materials comply with all the requirements 
of Sec.  240.14a-3(g).


Sec.  240.14a-8  [Amended]

    6. Amend Sec.  240.14a-8 by revising the word ``mail'' to read 
``send'' in the last sentence of paragraph (e)(2) and in paragraph 
(e)(3) and the word ``mails'' to read ``sends'' in the introductory 
text of paragraph (m)(3).


Sec.  240.14a-12  [Amended]

    7. Amend Sec.  240.14a-12 by revising the term ``annual report'' to 
read ``annual report to security holders'' in the heading of paragraph 
(c)(1) and the first sentence of paragraph (c)(1).
    8. Amend Sec.  240.14a-13 by:
    a. Revising the word ``mailing'' to read ``sending'' in paragraph 
(a)(5) and the word ``mail'' to read ``send'' in Note 2 following 
paragraph (a) and in paragraph (c), each time it appears; and
    b. Adding paragraph (e).
    The addition reads as follows:


Sec.  240.14a-13  Obligation of registrants in communicating with 
beneficial owners.

* * * * *
    (e) Definition of address. Unless otherwise indicated, for purposes 
of this section, address means a street address, a post office box 
number, an electronic mail address, a facsimile telephone number or 
other similar destination to which paper or electronic documents are 
delivered, unless otherwise provided in this section.


Sec.  240.14a-101  [Amended]

    9. Amend Sec.  240.14a-101 by:
    a. Revising the term ``annual report'' to read ``annual report on 
Form 10-K or Form 10-KSB'' in Instruction 1 to paragraph (d)(2)(ii)(L) 
of Item 7;
    b. Revising the word ``mail'' to read ``send'' in Instruction 2 to 
paragraph (d)(2)(ii)(L) of Item 7;
    c. Revising the term ``annual report'' to read ``annual report to 
security holders'' in the introductory text and paragraphs (a), (b), 
and (c) of Item 23; and
    d. Revising the term ``annual reports'' to read ``annual reports to 
security holders'' in paragraph (d) of Item 23 each time it appears.
    10. Amend Sec.  240.14b-1 by:
    a. Revising the last sentence of the introductory text of paragraph 
(a), paragraphs (a)(1), (a)(2), (b)(2) before the Note, and (c)(2)(i);
    b. Revising the term ``annual reports'' to read ``annual reports to 
security holders'' in paragraphs (c)(2)(ii) and (c)(3);
    c. Revising the term ``annual report'' to read ``annual report to 
security holders'' in paragraph (c)(2)(ii);
    d. Revising the word ``mail'' to read ``send'' in paragraph 
(c)(2)(ii); and
    e. Adding paragraph (d).
    The revisions and additions read as follows:


Sec.  240.14b-1  Obligation of registered brokers and dealers in 
connection with the prompt forwarding of certain communications to 
beneficial owners.

    (a) Definitions. * * * In addition, as used in this section, the 
following definitions apply:
    (1) Registrant. The issuer of a class of securities registered 
pursuant to section 12 of the Act (15 U.S.C. 78l) or an investment 
company registered under the Investment Company Act of 1940 (15 U.S.C. 
80a-1 et seq.).
    (2) Address. A street address, a post office box number, an 
electronic mail address, a facsimile telephone number or other similar 
destination to which paper or electronic documents are delivered, 
unless otherwise provided in this section.
    (b) * * *
    (2) The broker or dealer shall, upon receipt of the Notice of 
Internet Availability of Proxy Materials, proxy, other proxy soliciting 
material, information statement, and/or annual reports to security 
holders from the registrant or other soliciting person, forward such 
materials to its customers who are beneficial owners of the 
registrant's securities no later than five business days after receipt 
of the proxy material, information statement or annual reports to 
security holders.
* * * * *
    (c) * * *
    (2) * * *
    (i) Its obligations under paragraphs (b)(2), (b)(3) and (d) of this 
section if the registrant or other soliciting person, as applicable, 
does not provide assurance of reimbursement of the broker's or dealer's 
reasonable expenses, both direct and indirect, incurred in connection 
with performing the

[[Page 74620]]

obligations imposed by paragraphs (b)(2), (b)(3) and (d) of this 
section; or
* * * * *
    (d) If a registrant or other soliciting person has provided the 
broker or dealer with copies of a Notice of Internet Availability of 
Proxy Materials which provide instructions on requesting copies of the 
soliciting materials for forwarding to its beneficial owner customers, 
upon receipt of such request from a beneficial owner customer, the 
broker or dealer shall:
    (1) Request a copy of the soliciting materials from the registrant, 
in the form requested by the beneficial owner customer, within two 
business days after receiving the customer's request; and
    (2) Forward a copy of the soliciting materials to the beneficial 
owner customer, in the form requested by the beneficial owner customer, 
within two business days after receiving the materials from the 
registrant.
    11. Amend Sec.  240.14b-2 by:
    a. Adding paragraphs (a)(4) and (d);
    b. Revising the introductory text of paragraph (b)(3) and paragraph 
(c)(2)(i);
    c. Revising the term ``annual reports'' to read ``annual reports to 
security holders'' in paragraph (c)(2)(ii) and (c)(4);
    d. Revising the term ``annual report'' to read ``annual report to 
security holders'' in paragraph (c)(2)(ii); and
    e. Revising the word ``mail'' to read ``send'' in paragraph 
(c)(2)(ii).
    The additions and revisions read as follows:


Sec.  240.14b-2  Obligation of banks, associations and other entities 
that exercise fiduciary powers in connection with the prompt forwarding 
of certain communications to beneficial owners.

    (a) * * *
    (4) The term address means a street address, a post office box 
number, an electronic mail address, a facsimile telephone number or 
other similar destination to which paper or electronic documents are 
delivered, unless otherwise provided in this section.
    (b) * * *
    (3) Upon receipt of the Notice of Internet Availability of Proxy 
Materials, proxy, other proxy soliciting material, information 
statement, and/or annual reports to security holders from the 
registrant or other soliciting person, the bank shall forward such 
materials to each beneficial owner on whose behalf it holds securities, 
no later than five business days after the date it receives such 
material and, where a proxy is solicited, the bank shall forward, with 
the other proxy soliciting material and/or the annual report to 
security holders, either:
* * * * *
    (c) * * *
    (2) * * *
    (i) Its obligations under paragraphs (b)(2), (b)(3), (b)(4) and (d) 
of this section if the registrant or other soliciting person, as 
applicable, does not provide assurance of reimbursement of its 
reasonable expenses, both direct and indirect, incurred in connection 
with performing the obligations imposed by paragraphs (b)(2), (b)(3), 
(b)(4) and (d) of this section; or
* * * * *
    (d) If a registrant or other soliciting person has provided the 
bank with copies of a Notice of Internet Availability of Proxy 
Materials which provide instructions on requesting copies of the 
soliciting materials for forwarding to its beneficial owner customers, 
upon receipt of such request from a beneficial owner customer, the bank 
shall:
    (1) Request a copy of the soliciting materials from the registrant, 
in the form requested by the beneficial owner customer, within two 
business days after receiving the customer's request; and
    (2) Forward a copy of the soliciting materials to the beneficial 
owner customer, in the form requested by the beneficial owner customer, 
within two business days after receiving the materials from the 
registrant.
    12. Amend Sec.  240.14c-2 by:
    a. Revising paragraph (a); and
    b. Adding paragraph (d).
    The revision and addition read as follows:


Sec.  240.14c-2  Distribution of information statement.

    (a)(1) In connection with every annual or other meeting of the 
holders of the class of securities registered pursuant to section 12 of 
the Act or of a class of securities issued by an investment company 
registered under the Investment Company Act of 1940 that has made a 
public offering of securities, including the taking of corporate action 
by the written authorization or consent of security holders, the 
registrant shall transmit to every security holder of the class that is 
entitled to vote or give an authorization or consent in regard to any 
matter to be acted upon and from whom proxy authorization or consent is 
not solicited on behalf of the registrant pursuant to Section 14(a) of 
the Act:
    (i) A written information statement containing the information 
specified in Schedule 14C (Sec.  240.14c-101);
    (ii) A publicly-filed information statement, in the form and manner 
described in Sec.  240.14c-3(d), containing the information specified 
in Schedule 14C (Sec.  240.14c-101); or
    (iii) A written information statement included in a registration 
statement filed under the Securities Act of 1933 on Form S-4 or F-4 
(Sec.  239.25 or Sec.  239.34 of this chapter) or Form N-14 (Sec.  
239.23 of this chapter) and containing the information specified in 
such Form.
    (2) Notwithstanding paragraph (a)(1) of this section:
    (i) In the case of a class of securities in unregistered or bearer 
form, such statements need to be transmitted only to those security 
holders whose names are known to the registrant; and
    (ii) No such statements need to be transmitted to a security holder 
if a registrant would be excused from delivery of an annual report or a 
proxy statement under Rule 14a-3(e)(2) (240.14a-3(e)(2)) if such 
section were applicable.
* * * * *
    (d) A registrant may transmit an information statement to security 
holders pursuant to paragraph (a) of this section by satisfying the 
requirements set forth in Sec.  240.14a-3(g); provided, however, that 
the registrant may revise the information required in the Notice of 
Internet Availability of Proxy Materials to reflect the fact that the 
registrant is not soliciting proxies for the meeting. This paragraph 
(d) provides a non-exclusive alternative by which a registrant may 
transmit an information statement pursuant to paragraph (a) of this 
section to a security holder. This paragraph (d) does not affect the 
availability of any other means by which a registrant may transmit an 
information statement pursuant to paragraph (a) of this section to a 
security holder.
    13. Amend Sec.  240.14c-3 by:
    a. Removing the authority citation following this section;
    b. Revising paragraphs (a)(1) and (c), and
    c. Adding paragraph (d).
    The revisions and addition read as follows:


Sec.  240.14c-3  Annual report to be furnished security holders.

    (a) * * *
    (1) The annual report to security holders shall contain the 
information specified in paragraphs (b)(1) through (b)(11) of Sec.  
240.14a-3.
* * * * *
    (c) A registrant will be considered to have delivered a Notice of 
Internet Availability of Proxy Materials, annual report to security 
holders or information statement to security holders of record who 
share an address if the

[[Page 74621]]

requirements set forth in Sec.  240.14a-3(e)(1) are satisfied with 
respect to the Notice of Internet Availability of Proxy Materials, 
annual report to security holders or information statement, as 
applicable.
    (d) A registrant may furnish an annual report to security holders 
pursuant to paragraph (a) of this section by satisfying the 
requirements set forth in Sec.  240.14a-3(g). This paragraph (d) 
provides a non-exclusive alternative by which a registrant may furnish 
an annual report pursuant to paragraph (a) of this section to a 
security holder. This paragraph (d) does not affect the availability of 
any other means by which a registrant may furnish an annual report 
pursuant to paragraph (a) of this section to a security holder.
* * * * *


Sec.  240.14c-5  [Amended]

    14. Amend Sec.  240.14c-5 by revising the word ``mailed'' to read 
``sent'' in the second sentence of the introductory text of paragraph 
(a).
    15. Amend Sec.  240.14c-7 by revising paragraph (a)(5) before the 
Note and the word ``mail'' to read ``send'' in Note 2 following 
paragraph (a).
    The revision reads as follows:


Sec.  240.14c-7  Providing copies of material for certain beneficial 
owners.

    (a) * * *
    (5) Upon the request of any record holder or respondent bank that 
is supplied with Notices of Internet Availability of Proxy Materials, 
information statements and/or annual reports to security holders 
pursuant to paragraph (a)(3) of this section, pay its reasonable 
expenses for completing the sending of such material to beneficial 
owners.
* * * * *


Sec.  240.14c-101  [Amended]

    16. Amend Sec.  240.14c-101 by revising:
    a. The word ``mailing'' to read ``sending'' in Item 4, Instruction 
1;
    b. The phrase ``annual report'' to read ``annual report to security 
holders'' in the introductory text and paragraphs (a), (b), and (c) of 
Item 5 each time it appears; and
    c. The phrase ``annual reports'' to read ``annual reports to 
security holders'' in paragraph (d) of Item 5 each time it appears.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    17. The authority citation for Part 249 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a et seq., 7202, 7233, 7241, 7262, 7264, 
and 7265; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *
    18. Amend Item 4 to ``Part II--Other Information'' of Form 10-Q 
(referenced in Sec.  249.308a) by revising paragraph (d) to read as 
follows:


    Note: The text of Form 10-Q does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-Q

* * * * *

Part II--Other Information

* * * * *

Item 4. Submission of Matters to a Vote of Security Holders

* * * * *
    (d) A description of the terms of any settlement between the 
registrant and any other participant (as defined in Instruction 3 to 
Item 4 of Schedule 14A (Sec.  240.14a-101)) terminating any 
solicitation subject to Sec.  240.14a-12(c), including the cost or 
anticipated cost to the registrant.
* * * * *
    19. Amend Item 4 to ``Part II--Other Information'' of Form 10-QSB 
(referenced in Sec.  249.308b) by revising paragraph (d) to read as 
follows:


    Note: The text of Form 10-QSB does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-QSB

* * * * *

Part II--Other Information

* * * * *

Item 4. Submission of Matters to a Vote of Security Holders

* * * * *
    (d) A description of the terms of any settlement between the 
registrant and any other participant (as defined in Instruction 3 to 
Item 4 of Schedule 14A (Sec.  240.14a-101)) terminating any 
solicitation subject to Sec.  240.14a-12(c), including the cost or 
anticipated cost to the registrant.
* * * * *
    20. Amend Item 4 to Part I of Form 10-K (referenced in Sec.  
249.310) by revising paragraph (d) to read as follows:


    Note: The text of Form 10-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-K

* * * * *

Part I

* * * * *

Item 4. Submission of Matters to a Vote of Security Holders

* * * * *
    (d) A description of the terms of any settlement between the 
registrant and any other participant (as defined in Instruction 3 to 
Item 4 of Schedule 14A (Sec.  240.14a-101)) terminating any 
solicitation subject to Sec.  240.14a-12(c), including the cost or 
anticipated cost to the registrant.
* * * * *
    21. Amend Item 4 to Part I of Form 10-KSB (referenced in Sec.  
249.310b) by revise paragraph (d) to read as follows:


    Note: The text of Form 10-KSB does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-KSB

* * * * *

Part I

* * * * *

Item 4. Submission of Matters to a Vote of Security Holders

* * * * *
    (d) A description of the terms of any settlement between the 
registrant and any other participant (as defined in Instruction 3 to 
Item 4 of Schedule 14A (Sec.  240.14a-101)) terminating any 
solicitation subject to Sec.  240.14a-12(c), including the cost or 
anticipated cost to the registrant.
* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

    22. The authority citation for Part 274 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise 
noted.
* * * * *
    23. Amend Sub-Item 77C to ``Instructions to Specific Items'' of 
Form N-SAR (referenced in Sec. Sec.  249.330 and 274.101) by revising 
paragraph (d) to read as follows:


    Note: The text of Form N-SAR does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form N-SAR

* * * * *

Instructions to Specific Items

* * * * *

[[Page 74622]]

SUB-ITEM 77C: Submission of matters to a vote of security holders

* * * * *
    (d) Describe the terms of any settlement between the registrant and 
any other participant (as defined in Instruction 3 to Item 4 of 
Schedule 14A (Sec.  240.14a-101)) terminating any solicitation subject 
to Sec.  240.14a-12(c), including the cost or anticipated cost to the 
registrant.
* * * * *

    By the Commission.
    Dated: December 8, 2005.
Jonathan G. Katz,
Secretary.
[FR Doc. 05-24004 Filed 12-14-05; 8:45 am]
BILLING CODE 8010-01-P