SEC Weighs In on Proxy Voting Advice

• Rule 14a-1(l) is amended to redefine the terms “solicit” and “solicitation” to include proxy voting advice.
• A new paragraph (A) will be inserted to Rule 14a-1(1)(iii) to specify the circumstances in which a person who furnishes proxy advice will be deemed to be engaged in a “solicitation” subject to the proxy rule.
• A new paragraph (v) will be added to Rule 14a-1(l)(2) to codify that proxy voting advice provided by a person who furnishes such advice only in response to an unprompted request will not be deemed to be a “solicitation.”

Under amendments to Rule 14a-2(b)(1) and Rule 14a-2(b)(3), in order for proxy voting advice businesses to rely on the exemption to the information and filing requirements of the proxy rules, they must satisfy additional conditions of a new Rule 14a-2(b)(9), including:

• Providing specified conflicts of interest disclosure in their proxy voting advice or in an electronic medium used to deliver the proxy voting advice; and
• Adopting and publicly disclosing written policies and procedures reasonably designed to ensure that:
  • Registrants that are the subject of proxy voting advice have such advice made available to them at or prior to the time when such advice is disseminated to the proxy voting advice business’s client; and
  • The proxy voting advice business provides its clients with a mechanism by which they can reasonably be expected to become aware of any written statements regarding its proxy voting advice by registrants who are the subject of such advice, in a timely manner before the security holder meeting.

The amendments also created new, non-exclusive safe harbors to give assurance to a proxy voting advice business that its written policies and procedures satisfy the requirements, including:

• A proxy voting advice business will be deemed to satisfy the requirements if its written policies and procedures are reasonably designed to provide registrants with a copy of its proxy voting advice, at no charge, no later than the time it is disseminated to the business’s clients. The safe harbor also specifies that such policies and procedures may include conditions requiring registrants to (i) file their definitive proxy statement at least 40 calendar days before the security holder meeting and (ii) expressly acknowledge that they will only use the proxy voting advice for their internal purposes and/or in connection with the solicitation and will not publish or otherwise share the proxy voting advice except with the registrant’s employees or advisers.
• A proxy voting advice business will be deemed to satisfy the requirements if its written policies and procedures are reasonably designed to provide notice on its electronic client platform or through email or other electronic means that the registrant has filed, or has informed the proxy voting advice business that it intends to file, additional soliciting materials setting forth the registrant’s statement regarding the advice (and includes an active hyperlink to those materials on EDGAR when available).