Proposed Rule2026-19259
Proxy Solicitation Modernization
Primary source
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Published
September 21, 2026
Effective
September 21, 2026
Issuing agencies
Securities and Exchange Commission
Abstract
The Securities and Exchange Commission ("Commission") is proposing amendments to modernize certain rules related to proxy solicitations. The proposed amendments would, among other things, eliminate the requirement that registrants deliver an annual report to security holders, eliminate the delivery deadline when documents are incorporated by reference into a proxy statement, eliminate the requirement to file soliciting material regarding certain exempt solicitations, and shorten the minimum broker search period for proxy solicitations. The proposed amendments are intended to update our rules to account for developments since their adoption or last amendment and to simplify compliance for registrants.
Full Text
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<title>Federal Register, Volume 91 Issue 181 (Monday, September 21, 2026)</title>
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[Federal Register Volume 91, Number 181 (Monday, September 21, 2026)]
[Proposed Rules]
[Pages 59852-59901]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19259]
[[Page 59851]]
Vol. 91
Monday,
No. 181
September 21, 2026
Part II
Securities and Exchange Commission
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17 Parts 200, 229, 230, et al.
Proxy Solicitation Modernization; Proposed Rule
Federal Register / Vol. 91, No. 181 / Monday, September 21, 2026 /
Proposed Rules
[[Page 59852]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 200, 229, 230, 232, 239, 240, 249, and 260
[Release Nos. 33-11439; 34-106385; 39-2566; File No. S7-2026-33]
RIN 3235-AN63
Proxy Solicitation Modernization
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
proposing amendments to modernize certain rules related to proxy
solicitations. The proposed amendments would, among other things,
eliminate the requirement that registrants deliver an annual report to
security holders, eliminate the delivery deadline when documents are
incorporated by reference into a proxy statement, eliminate the
requirement to file soliciting material regarding certain exempt
solicitations, and shorten the minimum broker search period for proxy
solicitations. The proposed amendments are intended to update our rules
to account for developments since their adoption or last amendment and
to simplify compliance for registrants.
DATES: This release was published in the Federal Register on September
21, 2026. Comments should be submitted on or before November 20, 2026.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/comments/s7-2026-33/proxy-solicitation-modernization">https://www.sec.gov/comments/s7-2026-33/proxy-solicitation-modernization</a>).
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a3d1d6cfc68ec0cccecec6cdd7d0e3d0c6c08dc4ccd5"><span class="__cf_email__" data-cfemail="4f3d3a232a622c2022222a213b3c0f3c2a2c61282039">[email protected]</span></a>. Please include
File Number S7-2026-33 on the subject line.
Paper Comments
<bullet> Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number S7-2026-33. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
submitted comments on the Commission's website (<a href="https://www.sec.gov/rules-regulations/public-comments/s7-2026-33">https://www.sec.gov/rules-regulations/public-comments/s7-2026-33</a>). Do not include
personally identifiable information in submissions; you should submit
only information that you wish to make available publicly. The
Commission may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on the Commission's website. To ensure direct
electronic receipt of such notifications, sign up through the ``Stay
Connected'' option at <a href="http://www.sec.gov">www.sec.gov</a> to receive notifications by email.
A summary of the proposal of not more than 100 words is posted on
the Commission's website (<a href="https://www.sec.gov/rules-regulations/2026/09/s7-2026-33">https://www.sec.gov/rules-regulations/2026/09/s7-2026-33</a>).
FOR FURTHER INFORMATION CONTACT: David M. Plattner, Special Counsel, or
Blake M. Grady, Special Counsel, Office of Mergers and Acquisitions,
Division of Corporation Finance, at (202) 551-3440, U.S. Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Commission is proposing to amend the
following rules and forms:
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\1\ 15 U.S.C. 77a et seq.
\2\ 15 U.S.C. 78a et seq.
\3\ 15 U.S.C. 77aaa et seq.
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[[Page 59853]]
[GRAPHIC] [TIFF OMITTED] TP21SE26.057
Table of Contents
I. Introduction
II. Discussion of Proposed Amendments
A. Elimination of Requirement To Deliver Annual Report to
Security Holders
1. Background
2. Proposed Amendments
B. Elimination of Delivery Deadline When Documents Are
Incorporated by Reference Into the Proxy Statement
1. Background
2. Proposed Amendments
C. Elimination of Requirement To Submit Notice of Exempt
Solicitation
1. Background
2. Proposed Amendments
D. Shortening the Minimum Broker Search Period
1. Background
2. Proposed Amendments
E. Requiring Contact Information on Proxy Statement and
Information Statement Cover Pages and Other Technical Proposed
Amendments
F. General Request for Comment
III. Other Matters
IV. Economic Analysis
A. Economic Baseline
1. Regulatory Baseline
2. Affected Entities
B. Economic Effects of Individual Provisions
1. Benefits and Costs of the Proposed Elimination of Requirement
To Deliver Annual Report to Security Holders
2. Benefits and Costs of the Proposed Elimination of the
Delivery Deadline
[[Page 59854]]
When Documents Are Incorporated by Reference Into the Proxy
Statement
3. Benefits and Costs of Proposed Elimination of Requirement To
Submit Notice of Exempt Solicitation
4. Benefits and Costs of Proposed Shortening of Minimum Broker
Search Period
5. Benefits and Costs of the Proposal To Require Contact
Information on Proxy Statement and Information Statement Cover Pages
6. Other Commission Proposals
7. Aggregate Monetized Benefits and Costs
C. Effects on Efficiency, Competition, and Capital Formation
1. Effects on Efficiency
2. Effects on Competition
3. Effects on Capital Formation
D. Reasonable Alternatives
1. Reduce Rather Than Eliminate the Minimum Period for Proxy
Statements Incorporating Documents by Reference
2. Disallow Only Voluntary Filing of Notices of Exempt
Solicitation
3. Treat Notices of Exempt Solicitation Similarly to Insider
Filings
4. Shorten the Broker Search Period to a Different Number of
Days
5. Shorten the Rule 14b-1 and Rule 14b-2 Response Periods in
Addition to the Proposed Amendments, and Consider Treating
Investment Companies Differently
E. Request for Comment
V. Paperwork Reduction Act
A. Summary of the Collections of Information
B. Summary of the Proposed Amendments' Estimated Effects on the
Collections of Information
C. Incremental and Aggregate Burden and Cost Estimates
D. Request for Comment
VI. Congressional Review Act
VII. Initial Regulatory Flexibility Act Analysis
A. Initial Regulatory Flexibility Act Analysis
1. Reasons for, and Objectives of, the Proposed Action
2. Legal Basis
3. Small Entities Subject to the Proposed Amendments
4. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
5. Duplicate, Overlapping, or Conflicting Rules
6. Significant Alternatives
B. Request for Comment
Statutory Authority
I. Introduction
We are proposing amendments to modernize rules related to aspects
of the proxy solicitation process. The proposed amendments are intended
to, among other things, account for developments since the rules'
adoption or last amendment, reduce compliance burdens for registrants,
and reduce investor confusion.
Our proposed amendments would:
<bullet> Eliminate the requirement that registrants deliver an
annual report to security holders; \4\
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\4\ See 17 CFR 240.14a-3(b).
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<bullet> Eliminate the requirement to send the proxy statement at
least 20 business days before the meeting date if it incorporates
information by reference; \5\
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\5\ See Note D.3 of Schedule 14A, General Instruction A.2 to
Form S-4 and General Instruction A.2 to Form F-4.
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<bullet> Eliminate the requirement \6\ to submit a notice \7\
regarding exempt solicitations; \8\
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\6\ See 17 CFR 240.14a-6(g).
\7\ See 17 CFR 240.14a-103.
\8\ See 17 CFR 240.14a-2(b)(1).
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<bullet> Reduce the minimum broker search period in connection with
proxy solicitations from 20 business days to five business days; \9\
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\9\ See 17 CFR 240.14a-13.
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<bullet> Require the inclusion of contact information on proxy
statement and information statement cover pages; and
<bullet> Revise various rules and forms to reflect such amendments,
as well as to correct errors that are technical in nature.
II. Discussion of Proposed Amendments
A. Elimination of Requirement To Deliver Annual Report to Security
Holders
1. Background
Under 17 CFR 240.14a-3(b) (``Rule 14a-3(b)''), if a proxy
solicitation relates to an annual meeting of shareholders, a special
meeting in lieu of an annual meeting, or written consent in lieu of
such meeting, at which directors are to be elected, the proxy statement
must be accompanied or preceded by an annual report to security
holders.\10\ The annual report to security holders must include, among
other items, financial statements, management's discussion and analysis
of financial condition and results of operations, business and segment
information, information about directors and officers, and information
about the market price of and dividends on the registrant's common
equity.\11\ In adopting the requirement to deliver financial
information to shareholders prior to their voting in the annual
election of directors, the Commission stated that the information was
important to enable investors ``to appraise the financial position and
results of operations of the issuer.'' \12\ The Commission has also
stated that the annual reports to security holders ``are readable
because they generally avoid legalistic and technical terminology and
present information in an understandable, and often innovative, form,''
and has encouraged registrants to deliver to shareholders an annual
report to security holders, rather than a Form 10-K.\13\
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\10\ The Rule 14a-3(b)-required annual report is different than
the annual report on Form 10-K, which is required to be filed with
the Commission but is not required to be mailed to shareholders. See
17 CFR 240.13a-1 (requiring registrants with a class of securities
registered under section 12 of the Exchange Act to file an annual
report); 17 CFR 240.15d-1 (requiring registrants that have filed a
registration statement under the Securities Act of 1933 to file an
annual report). Currently, registrants satisfy the Rule 14a-3(b)
requirement to deliver an annual report to security holders by
delivering (i) a ``glossy'' annual report, (ii) a ``Form 10-K
wrap,'' discussed below (see infra note 14 and related text), or
(iii) where the Rule 14a-3(b)-required annual report is prepared on
an integrated basis, as permitted under 17 CFR 240.14a-3(d) and
General Instruction H to Form 10-K, the Form 10-K. A ``glossy''
annual report is often printed on high-gloss paper, in a format
similar to that of a magazine, and is typically used as a tool to
communicate with shareholders and inform their voting decisions.
\11\ See 17 CFR 240.14a-3(b).
\12\ See Proxy and Stockholder Information Rules, Release No.
34-8000 (Dec. 5, 1966) [31 FR 15750, 15750 (Dec. 14, 1966)]. See
also Release No. 33-2887 (Dec. 18, 1942) [7 FR 10653, 10655 (Dec.
22, 1942)].
\13\ See Annual Reports, Release No. 34-11079 (Oct. 31, 1974)
[39 FR 40766, 40766-67 (Nov. 20, 1974)] (the ``1974 Release''). See
also Amendments to Annual Report Form, Related Forms, Rules,
Regulations, and Guides; Integration of Securities Act Disclosure
Systems, Release No. 33-6231 (Sept. 2, 1980) [45 FR 63630, 63630
(Sept. 25, 1980)].
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More recently, however, because nearly all the disclosure required
by Rule 14a-3(b) is also required by Form 10-K, many registrants have
adopted the practice of sending shareholders a Form 10-K or a Form 10-K
with limited additional disclosure (colloquially referred to as a
``Form 10-K wrap''),\14\ thereby greatly reducing any benefits
associated with readability. Information required in the Rule 14a-3(b)
annual report but not in the Form 10-K includes: (i) the stock
performance graph required by 17 CFR 229.201(e) (``Item 201(e) of
Regulation S-K''), which many registrants voluntarily include in the
Form 10-K; and (ii) disclosure required by 17 CFR 229.304(a) (``Item
304(a) of Regulation S-K'') regarding a change in a registrant's
certifying accountant, which registrants disclose pursuant to Item 4.01
of Form 8-K.\15\
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\14\ In addition, 17 CFR 240.14a-3(c) and 17 CFR 240.14c-3(b)
currently require registrants subject to these rules to
electronically submit their annual reports on EDGAR.
\15\ In addition, 17 CFR 240.14a-3(b)(8) requires that
registrants disclose in the annual report to security holders the
identity of ``each of the registrant's directors and executive
officers, and . . . the principal occupation or employment of each
such person and the name and principal business of any organization
by which such person is employed.'' Similar disclosure is also
required by Item 10 of Form 10-K, pursuant to 17 CFR 229.401(a) and
(b) (Item 401(a) and (b) of Regulation S-K). However, registrants
often do not provide such disclosure directly in their Forms 10-K.
In this respect, General Instruction G.(3) to Form 10-K permits
registrants to incorporate by reference the disclosure from the
registrant's definitive proxy statement (filed or required to be
filed pursuant to Regulation 14A) or definitive information
statement (filed or to be filed pursuant to Regulation 14C), which
involves the election of directors, if such definitive proxy
statement or information statement is filed with the Commission not
later than 120 days after the end of the fiscal year covered by the
Form 10-K.
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[[Page 59855]]
2. Proposed Amendments
We are proposing to amend Rule 14a-3 to eliminate the current
delivery requirement for annual reports to security holders and, for
registrants that have a Form 10-K already on file for their most recent
fiscal year, to eliminate altogether the need to comply with the
separate annual report disclosure requirements in Rule 14a-3. Instead,
proposed amended Rule 14a-3 would require that a proxy statement
relating to a shareholder meeting at which directors will be elected be
preceded by either (i) the filing of the registrant's Form 10-K for the
registrant's most recent fiscal year on the Commission's Electronic
Data Gathering, Analysis, and Retrieval system (``EDGAR'') in
satisfaction of its Form 10-K filing requirement, or (ii) the
furnishing of an annual report to security holders on EDGAR that meets
the requirements set out in the rule.\16\ The proposed content,
formatting, and submission requirements \17\ would be largely the same
as the current requirements.\18\ However, we propose to remove certain
requirements to eliminate disclosure in the annual report to security
holders that goes beyond what is required in the Form 10-K \19\ or that
would be available in a different registrant filing.\20\ We anticipate
that the vast majority of registrants will rely on a previously filed
Form 10-K to satisfy their Rule 14a-3(b) obligation, as proposed, given
that nearly all registrants will have a Form 10-K on file for the most
recent fiscal year when sending a proxy statement for their annual
meeting of shareholders.\21\
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\16\ See proposed Rule 14a-3(b). In addition, 17 CFR 240.14c-
3(a)(1) (``Rule 14c-3(a)(1)'') contains requirements for information
statements sent to shareholders from whom proxy authorization or
consent is not solicited. Rule 14c-3(a)(1) refers to the
requirements in Rule 14a-3(b). Accordingly, the proposed amendments
would also apply to such information statements.
\17\ See proposed Rule 14a-3(b)(2)(i)-(xi) and (c).
\18\ See 17 CFR 240.14a-3(b)(1)-(11) and (c).
\19\ See 17 CFR 240.14a-3(b)(9) (regarding the performance
graph).
\20\ See 17 CFR 240.14a-3(b)(4) and (b)(8). We are also
proposing related, incidental amendments to other rules, for example
to remove references to the annual report to security holders being
a document that must be delivered to shareholders.
\21\ See The Reynolds Ctr. for Bus. Journalism, Business Beats
Basics 231 (2024), available at <a href="https://businessjournalism.org/wp-content/uploads/2024/09/Business-Beats-Basics-The-Full-Guide-83mb.pdf">https://businessjournalism.org/wp-content/uploads/2024/09/Business-Beats-Basics-The-Full-Guide-83mb.pdf</a> (``[A]nnual proxy statements typically come out 30 to 60
days before the annual meeting and usually after the company has
filed its Form 10-K . . . .''); Broadridge, EDGAR Filing Calendar
2026, available at <a href="https://www.broadridge.com/_assets/pdf/edgarfilingcal_2026.pdf">https://www.broadridge.com/_assets/pdf/edgarfilingcal_2026.pdf</a>.
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In addition, we are proposing to remove, for all registrants other
than investment companies, the applicability of Item 201(e) of
Regulation S-K, which contains the requirements for the stock
performance graph that most \22\ registrants must currently include in
annual reports to security holders pursuant to 17 CFR 240.14a-3(b)(9)
(``Rule 14a-3(b)(9)''). The graph compares the yearly percentage change
in the registrant's cumulative total shareholder return on a class of
common stock registered under section 12 of the Exchange Act with: (i)
the cumulative total return of a relevant broad equity market index
(such as the S&P 500, which must be used if the registrant is a company
within the S&P 500); and (ii) the cumulative total return of a
published industry or line-of-business index or, if the registrant
discloses the basis for its selection, an index of peer companies
determined by the registrant. When the Commission adopted the
requirement in 1992, it stated that the purpose of the graph is to
provide ``a general depiction of one measure of corporate performance
to be used by shareholders in evaluating the quality of decisions made
by directors standing for re-election.'' \23\ Given technological
advancements since the rule's adoption, in particular the ease with
which investors can access stock performance information on the
internet, we believe that the requirement to provide a stock
performance graph is outdated and no longer necessary for these
registrants.\24\ Comments received in response to Chairman Paul S.
Atkins' Statement on Reforming Regulation S-K that specifically
referred to Item 201(e) have nearly universally agreed.\25\
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\22\ Smaller reporting companies, as defined by 17 CFR
229.10(f)(1), are not required to include the stock performance
graph in their annual reports to security holders. See Instruction 6
to Item 201(e) of Regulation S-K.
\23\ See Executive Compensation Disclosure, Release No. 33-6962
(Oct. 16, 1992) [57 FR 48126, 48127 (Oct. 21, 1992)].
\24\ The Commission has previously proposed to rescind Item
201(e). See Executive Compensation and Related Party Disclosure,
Release No. 33-8655 (Jan. 27, 2006) [71 FR 6542, 6547 (Feb. 8,
2006)] (stating that ``given the widespread availability of stock
performance information about companies, industries and indexes
through business-related websites or similar sources, we believe
that the requirement for the Performance Graph is outdated''). The
Commission ultimately retained the performance graph requirement in
response to public comment, although the Commission limited
disclosure of the graph to the annual report to security holders.
See Executive Compensation and Related Person Disclosure, Release
No. 33-8732A (Aug. 29, 2006) [71 FR 53158, 53168-69 (Sep. 8, 2006)].
\25\ See, e.g., letters in response to Statement on Reforming
Regulation S-K, CLL-15 (Jan. 13, 2026) from the American Bar
Association (May 1, 2026) (``In view of advances in technology and
the seamless integration of the internet into everyday commerce and
communication as well as its widespread availability, we believe the
`easy access' of a standardized source to compare a registrant's
corporate performance against the market and its peers is
unnecessary.''), Cravath, Swaine & Moore LLP (April 13, 2026)
(``Information produced as part of market information, holders, and
performance graph disclosures is outdated by the time the report is
publicly filed. Existing tools outside of public filings already
provide superior real-time data.''), Nasdaq, Inc. (April 13, 2026)
(recommending eliminating Item 201(e) because ``better sources of
information for informing investors about stock performance exist
via widely accessible tools on the internet''), and the City of New
York Comptroller (April 13, 2026) (``The five-year cumulative total
return chart is a candidate for elimination. Because this
information is widely available through third-party platforms, its
removal would not impair the structural integrity of the disclosure
system.''). The comment letters submitted in response to Chairman
Atkins' Statement on Reforming Regulation S-K are available at
<a href="https://www.sec.gov/rules-regulations/public-comments/cll-15">https://www.sec.gov/rules-regulations/public-comments/cll-15</a>.
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With respect to investment companies, business development
companies (``BDCs'') and face-amount certificate companies are subject
to Rule 14a-3(b) and therefore currently disclose the stock performance
graph required in Item 201(e) of Regulation S-K.\26\ While we are
proposing to remove the applicability of that item for other
registrants, we are proposing to retain it for investment
companies.\27\ We
[[Page 59856]]
propose to do so in order to maintain parity with other regulated
funds, which are subject to similar performance graph requirements.\28\
Because BDCs and registered investment companies share similar
characteristics, we believe it is beneficial to investors to maintain
the existing parity in performance graph disclosure requirements. This
would also be consistent with the Commission's recent proposal relating
to the simplification of filer status for reporting companies, where
the Commission proposed to retain this reporting item for investment
companies.\29\
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\26\ BDCs are a type of closed-end investment company that is
not registered under the Investment Company Act of 1940 (the
``Investment Company Act''). Face-amount certificate companies are a
type of registered investment company that are engaged or propose to
engage in the business of issuing face-amount certificates of the
installment type, or that have been engaged in such business and
have any such certificate outstanding. In general, other regulated
funds are subject to separate reporting requirements under the
Investment Company Act and are not affected by the proposed
Regulation S-K amendments.
\27\ We are proposing to remove current Instruction 7 to Item
201(e) of Regulation S-K, which will have the effect of requiring
that the stock performance graph for BDCs and face-amount
certificate companies be disclosed directly in the Form 10-K. We are
also proposing to revise Instruction 8 to Item 201(e) by adding the
last sentence of current Instruction 7 to the end of current
Instruction 8. In addition, we propose to correct a citation
reference in current Instruction 8 and to renumber current
Instruction 8 as Instruction 7. The proposed amendments would
maintain the current rule that the stock performance graph is not
deemed to be incorporated by reference into any filing under the
Securities Act or the Exchange Act, except to the extent that the
registrant specifically incorporates it by reference.
\28\ See Instruction 4.g to Item 24 of Form N-2; Item 27A(d)(2)
of Form N-1A.
\29\ See Enhancement of Emerging Growth Company Accommodations
and Simplification of Filer Status for Reporting Companies, Release
No. 33-11419 (May 19, 2026) [91 FR 30086, 30105 n.185 (May 21,
2026)].
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Our proposed amendments are intended to eliminate the redundancy
created by requiring registrants to comply with the separate annual
report disclosure requirements in Rule 14a-3 and Form 10-K, given that,
as discussed above, annual reports to security holders are required to
contain substantially the same information as is already required to be
included in Forms 10-K. Eliminating this redundancy would reduce costs
for registrants and remove duplicative filings that may cause investor
confusion. In addition, nothing in the proposed rules, if adopted,
would prevent registrants from voluntarily sending Rule 14a-3 annual
reports to security holders in connection with shareholder meetings,
provided that they also submit such reports on EDGAR, and such reports
would continue to fall outside the scope of section 18 liability under
the Exchange Act, since they will remain furnished, not filed.\30\
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\30\ See current 17 CFR 240.14a-3(c) and proposed Rule 14a-3(c).
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Request for Comment
1. The proposed amendments would remove the current requirement
that registrants deliver an annual report to security holders, although
registrants may choose to send shareholders an annual report to
security holders (e.g., a ``glossy'' annual report) voluntarily. Would
the removal of this delivery requirement raise investor protection
concerns? If so, how might the Commission address those concerns?
2. The proposed amendments would require a registrant, prior to
furnishing a proxy statement to shareholders, either to have filed its
Form 10-K or have submitted an annual report to security holders on
EDGAR. Should we instead only require that a Form 10-K has been filed
prior to furnishing a proxy statement to shareholders and remove the
alternative of an annual report to security holders having been
submitted on EDGAR? What are the potential advantages and disadvantages
of removing the alternative of an annual report to security holders
having been submitted on EDGAR?
3. In practice, in what circumstances would registrants satisfy
their Rule 14a-3(b) obligation, as proposed, by submitting an annual
report to security holders on EDGAR rather than filing a Form 10-K?
Please provide detailed examples if possible.
4. The proposed amendments would remove the alternative of an
annual report to security holders being prepared on an integrated basis
pursuant to 17 CFR 240.14a-3(d) and General Instruction H to Form 10-K,
whereby issuers may use their Form 10-K, without a ``wrap,'' to satisfy
their annual report requirements.\31\ We believe registrants would not
have a need to prepare an integrated report under the proposed
amendments. Should we, however, retain this alternative? If yes, why?
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\31\ See supra note 10 and associated text.
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5. The proposed amendments would eliminate, for all registrants
other than investment companies, the stock performance graph currently
required by Rule 14a-3(b)(9) and Item 201(e) of Regulation S-K. Should
we retain the requirement to disclose the stock performance graph for
investment companies? Why or why not? How do investors view the stock
performance graph in the context of an investment in an investment
company as opposed to other registrants? Alternatively, should we
instead retain the requirement for all registrants? If so, should we
require that this disclosure be provided in registrants' Forms 10-K or
in a different filing?
B. Elimination of Delivery Deadline When Documents Are Incorporated by
Reference Into the Proxy Statement
1. Background
Note D.3 to Schedule 14A requires registrants to send their proxy
statements to shareholders no later than 20 business days prior to the
date on which the meeting of such shareholders is held if a document or
portion of a document, other than an annual report to security holders,
is incorporated by reference into the proxy statement in the manner
permitted by Items 13(b) or 14(e)(1) of Schedule 14A. Alternatively, if
no meeting is held, proxy statements that incorporate information in
such a manner must be sent at least 20 business days prior to the date
that the votes, consents or authorizations may be used to effect the
corporate action. In proposing the 20-business-day requirement, the
Commission stated that the requirement ``is designed to address the
need for documents incorporated by reference . . . to be delivered to
security holders on a timely basis.'' \32\
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\32\ See Proxy Rules--Comprehensive Review, Release No. 33-6592
(July 1, 1985) [50 FR 29409, 29413 (July 19, 1985)] (the ``1985
Release''). See also Proxy Rules--Comprehensive Review, Release No.
33-6676 (Nov. 10, 1986) [51 FR 42048, 42051 (Nov. 20, 1986)]
(adopting such requirement).
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In addition, Form S-4 and Form F-4 contain a similar minimum 20-
business-day period requirement when sending a prospectus to security
holders prior to a security holder meeting if a registrant incorporates
by reference into the form information about the registrant or the
company being acquired.\33\ When adopting Form S-4, the Commission
stated that the ``time period is designed to address the need for
documents incorporated by reference to be delivered to security holders
on a timely basis.'' \34\
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\33\ See General Instruction A.2 to Form S-4 and General
Instruction A.2 to Form F-4.
\34\ See Business Combination Transactions; Adoption of
Registration Form, Release No. 33-6578 (Apr. 23, 1985) [50 FR 18990,
18992 (May 6, 1985)].
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2. Proposed Amendments
We are proposing to amend Schedule 14A to remove Note D.3 to
Schedule 14A.\35\ We are also proposing to amend Form S-4 and Form F-4
to eliminate the minimum 20-business-day period requirements in those
two forms.
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\35\ Because Item 1 of Schedule 14C states that Note D to
Schedule 14A is also applicable to Schedule 14C, our proposed
amendment would affect information statements in the same manner as
proxy statements.
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The requirements in Note D.3 of Schedule 14A and similar
requirements in Form S-4 and Form F-4 were adopted before the
establishment of EDGAR and the mandatory filing of nearly all
disclosure documents on EDGAR. The filings that are permitted to be
incorporated by reference into Schedule 14A, Form S-4, and Form F-4 are
now available to the investing public without charge on EDGAR,\36\
greatly reducing the need for investors
[[Page 59857]]
to request paper copies of the filings from registrants. Furthermore,
since the adoption of the current requirements, the Commission has
taken numerous steps to facilitate the electronic delivery of filings
to shareholders.\37\ To the extent that investors do request copies of
the filings incorporated by reference, registrants today have the means
to send such filings electronically. Notably, many investors appear to
not only increasingly expect, but also prefer, that regulatory
documents and reports under the Federal securities laws be delivered
electronically.\38\ These changes, along with technological
developments, have facilitated widespread access to the filings
incorporated by reference into Schedule 14A, Form S-4, and Form F-4,
obviating the need for the current 20-business-day requirement.
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\36\ In 1993, the Commission began mandating electronic filings
on EDGAR on a phased-in basis. See Rulemaking for EDGAR System,
Release No. 33-6977 (Feb. 23, 1993) [58 FR 14628 (Mar. 18, 1993)]
(``1993 EDGAR Adopting Release''). This phase-in culminated in all
corporate issuers becoming subject to electronic filing requirements
in 1996. See Rulemaking for EDGAR System, Release No. 33-7122 (Dec.
19, 1994) [59 FR 67752 (Dec. 30, 1994)].
\37\ See, e.g., Use of Electronic Media for Delivery Purposes,
No. 33-7233 (Oct. 6, 1995) [60 FR 53458, 53459 (Oct. 13, 1995)]
(``1995 Guidance'') (stating that the Commission believes that the
use of electronic media should be at least an equal alternative to
the use of paper-based media, and accordingly, issuer or third-party
information that can be delivered in paper under the Federal
securities laws may be delivered in electronic format); Use of
Electronic Media by Broker-Dealers, Transfer Agents, and Investment
Advisers for Delivery of Information, Release No. 33-7288 (May 9,
1996) [61 FR 24644 (May 15, 1996)] (``1996 Guidance''); Use of
Electronic Media, Release No. 33-7856 (Apr. 28, 2000) [65 FR 25843
(May 4, 2000)] (``2000 Guidance'') (1995 Guidance, 1996 Guidance,
and 2000 Guidance, collectively ``E-Delivery Guidance''); Electronic
Delivery of Information Under the Federal Securities Laws, Release
No. 33-11430 (July 16, 2026) [91 FR 45884 (July 21, 2026)].
\38\ See Holden, Schrass, Seligman, and Bogdan, Americans' Views
on E-Delivery of Financial Documents (2025) Washington, DC:
Investment Company Institute available at <a href="http://www.ici.org/system/files/2025-09/25-ici-paper-edelivery.pdf">www.ici.org/system/files/2025-09/25-ici-paper-edelivery.pdf</a> (survey designed by Investment
Company Institute staff and administered by NORC at the University
of Chicago of 1,132 U.S. individuals, including 400 mutual fund or
ETF investors); FINRA Investor Education Foundation, Investors in
the United States--A Report of the National Financial Capability
Study (4th Ed. Dec. 2025) available at <a href="https://www.finrafoundation.org/sites/finrafoundation/files/2025-11/NFCS_Investor_Survey_Report_White_Paper.pdf">https://www.finrafoundation.org/sites/finrafoundation/files/2025-11/NFCS_Investor_Survey_Report_White_Paper.pdf</a> (also finding that
comfort with electronic delivery as the default was high regardless
of age, education level, income level, and the amount of assets
held).
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Request for Comment
6. As an alternative to eliminating Note D.3 to Schedule 14A, as
well as eliminating General Instruction A.2 to Form S-4 and General
Instruction A.2 to Form F-4, should we reduce the 20-business-day
requirement in each to a shorter period? If yes, what period of time
should be required and why?
C. Elimination of Requirement To Submit Notice of Exempt Solicitation
1. Background
Certain types of solicitations are exempt from most of the Federal
proxy rules. Under 17 CFR 240.14a-2(b)(1) (``Rule 14a-2(b)(1)''), a
solicitation by any person who does not directly or indirectly seek
authority to act as proxy and does not furnish or request a form of
revocation, abstention, consent, or authorization is exempt from the
filing and informational requirements of the Federal proxy rules. Such
exempt solicitations remain subject to Rule 14a-9, the antifraud
provision of the Federal proxy rules.
17 CFR 240.14a-6(g) (``Rule 14a-6(g)'') sets forth a notice
requirement for an exempt solicitation conducted under Rule 14a-2(b)(1)
if it is (i) conducted by a person who beneficially owns more than $5
million of a registrant's securities at the commencement of a
solicitation (a ``large shareholder''), (ii) in writing, and (iii) not
already publicly available. Specifically, 17 CFR 240.14a-6(g)(1)
requires the soliciting person to furnish to the Commission a Notice of
Exempt Solicitation containing the information specified in 17 CFR
240.14a-103, which includes as an exhibit all written soliciting
materials sent to any security holder.
The Commission adopted Rule 14a-2(b)(1) in response to concerns
that shareholders could be ``deterred from discussing management and
corporate performance by the prospect of being found after the fact to
have engaged in a proxy solicitation.'' \39\ In adopting the notice
requirement in Rule 14a-6(g), the Commission sought to ensure that the
greater flexibility in shareholder communications permitted by Rule
14a-2(b)(1) was accompanied by disclosure of significant exempt
solicitations that might otherwise remain unseen under the more relaxed
shareholder communication regime.\40\
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\39\ See Regulation of Communications Among Shareholders,
Release No. 34-31326 (Oct. 16, 1992) [57 FR 48276, 48278 (Oct. 22,
1992)] (the ``1992 Adopting Release'').
\40\ See 1992 Adopting Release at 48280.
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2. Proposed Amendments
We are proposing to rescind Rule 14a-6(g) and the Notice of Exempt
Solicitation. As discussed above, the original purpose of the notice
was to provide registrants and other market participants with
visibility into otherwise non-public exempt solicitations by large
shareholders.\41\ We believe that Rule 14a-6(g) no longer plays a
meaningful role in alerting shareholders and registrants to relevant
exempt written solicitations conducted by large shareholders because
(i) the submissions have been predominantly made, in recent years, by
shareholders who do not beneficially own securities with a market value
of more than $5 million and therefore are filing on a voluntary
basis,\42\ (ii) such shareholders have alternative means to communicate
to other shareholders, and (iii) registrants often are alerted to these
solicitations through other means.
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\41\ 1992 Adopting Release.
\42\ The number of Notices of Exempt Solicitation in which the
filer disclosed that the submission was voluntary, because the filer
beneficially owned $5 million or less of the class of subject
securities, increased from approximately 67 (out of 169), or 40%, in
2018 to approximately 228 (out of 286), or 80%, in 2025.
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The vast majority of Notices of Exempt Solicitation submitted on
EDGAR in recent years appear to have been voluntary submissions--either
submissions made by shareholders who do not exceed the $5 million
threshold or submissions about information that is already publicly
available, such as press releases--and thus do not serve the original
purpose of the notice.\43\ In addition, the voluntary submission of
Notices of Exempt Solicitation permits submitting shareholders, whose
views do not necessarily represent the views of other shareholders, to
disseminate their views inexpensively and prominently on EDGAR, which
was not the intended purpose of Rule 14a-6(g). Instead, as discussed
above, the intended purpose of the rule was to alert registrants and
investors to non-public exempt solicitations by large shareholders,
about which registrants and investors therefore would not otherwise be
aware.\44\
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\43\ See supra note 42.
\44\ See supra note 40.
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Such voluntary notices also can be confusing to shareholders
because they appear on a registrant's EDGAR page but are not submitted
by the registrant, and they appear alongside filings required to be
made under our rules.\45\ Further, shareholders often submit multiple
Notices of Exempt Solicitation regarding
[[Page 59858]]
a single annual meeting, which may make it harder to locate the
registrant's required filings, as well as mandatory filings by third
parties, among the voluntary submissions on the registrant's dedicated
EDGAR page.
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\45\ This issue is compounded because shareholders can subscribe
to automated notification services, such as those delivered directly
through RSS feeds on EDGAR or through a registrant's investor
relations website, which often notifies shareholders when filings
are made on the registrant's EDGAR page. In addition, many
registrants use third-party services that automatically post EDGAR
filings, including voluntary Notices of Exempt Solicitation, on the
registrants' investor relations websites. Accordingly, the voluntary
notices are distributed automatically through multiple channels and
therefore often appear not only on registrants' EDGAR pages, but
also on registrants' websites, in electronic alerts received by
shareholders, and on other digital platforms that automatically pull
information from EDGAR.
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While we acknowledge that there may be some benefit to shareholders
being able to access the communications of other shareholders in a
centralized manner on the registrant's dedicated EDGAR page, permitting
the registrant's EDGAR page to serve as a repository for the
substantial number of such communications obscures mandatory reports,
statements and other disclosures on the registrant's EDGAR page.\46\
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\46\ EDGAR ``provides free public access to corporate
information, allowing [investors] to quickly research a company's
financial information and operations by reviewing registration
statements, prospectuses and periodic reports filed on Forms 10-K
and 10-Q.'' See EDGAR, available at <a href="https://www.investor.gov/introduction-investing/investing-basics/glossary/edgar">https://www.investor.gov/introduction-investing/investing-basics/glossary/edgar</a>; see 1993
EDGAR Adopting Release at 14658 (noting ``the value to security
holders and to the market of readily accessible information relating
to public registrants'').
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By eliminating these submissions altogether, the proposed
amendments are intended to reduce potential investor confusion \47\ and
improve the accessibility of information for investors on registrants'
EDGAR pages (and in the broader digital environment generally) by
eliminating a substantial number of voluntary filings and making the
filings that remain easier to find on the registrant's EDGAR page. The
proposed amendments would also reduce compliance burdens for large
shareholders engaging in exempt solicitations pursuant to Rule 14a-
2(b)(1), because such shareholders would no longer be required to
submit their exempt written soliciting material on EDGAR. Such large
shareholders also would no longer need to determine whether they
beneficially own securities with a market value over $5 million or
whether their exempt solicitations are already public.
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\47\ See, e.g., letter from Soc'y for Corp. Governance to The
Hon. Mark T. Uyeda dated January 30, 2025 (``These PX 14A6G filings,
many of which contain false or misleading statements, have caused
investor confusion . . . .''), available at <a href="https://higherlogicdownload.s3.amazonaws.com/GOVERNANCEPROFESSIONALS/a8892c7c-6297-4149-b9fc-378577d0b150/UploadedImages/Advocacy/Society_January_30_Letter_to_SEC_Acting_Chair.pdf">https://higherlogicdownload.s3.amazonaws.com/GOVERNANCEPROFESSIONALS/a8892c7c-6297-4149-b9fc-378577d0b150/UploadedImages/Advocacy/Society_January_30_Letter_to_SEC_Acting_Chair.pdf</a>.
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Further, following the elimination of Notices of Exempt
Solicitation, shareholders would still be able to notify other
shareholders of their exempt solicitations. In January 2026, the
Division of Corporation Finance updated its guidance to state that the
Commission staff will object to voluntary submissions of Notices of
Exempt Solicitation.\48\ In response, market participants have created
third-party websites that list and provide access to exempt
solicitations.\49\ Furthermore, shareholders often broadcast the
content of their exempt solicitations by press release or other public
announcement. Registrants may be alerted to exempt solicitations by
such public announcements, reducing the role of Rule 14a-6(g) in
alerting registrants to relevant exempt written solicitations conducted
by large shareholders.
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\48\ See Proxy Rules and Schedules 14A/14C Corporation Finance
Interpretation 126.06 (Jan. 23, 2026), available at <a href="https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/proxy-rules-schedules-14a14c">https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/proxy-rules-schedules-14a14c</a>. The staff position
discussed here, and any other staff guidance, statements, or
positions referenced in this release, represent the views of
Commission staff and are not a rule, regulation, or statement of the
Commission. The Commission has neither approved nor disapproved the
views reflected in these staff positions or the content of these
staff statements and, like all staff positions or statements, they
have no legal force or effect, do not alter or amend applicable law,
and create no new or additional obligations for any person.
\49\ For example, Proxy Open Exchange, created by As You Sow, is
an ``open, community-driven platform that provides shareholders with
a public venue to publish exempt solicitations for shareholder
proposals.'' See Proxy Open Exchange, available at <a href="https://proxyopenexchange.org/about">https://proxyopenexchange.org/about</a>; As You Sow, Shareholders Launch Proxy
Open Exchange (POE) in Response to SEC Restrictions on EDGAR Exempt
Solicitation Postings, available at <a href="https://www.asyousow.org/press-releases/2026/4/24/shareholders-launch-proxy-open-exchange-poe-in-response-to-sec-restrictions-on-edgar-exempt-solicitation-postingsnbsp">https://www.asyousow.org/press-releases/2026/4/24/shareholders-launch-proxy-open-exchange-poe-in-response-to-sec-restrictions-on-edgar-exempt-solicitation-postingsnbsp</a>. Similarly, the Interfaith Center on Corporate
Responsibility (ICCR) allows for ``members and allies who are
involved in and supportive of ICCR priority issues'' to request that
ICCR post exempt solicitations. See Vote Your Proxies--See 2026's
Proxy Memos and Exempt Solicitations, available at <a href="https://www.iccr.org/vote-your-proxies-see-2026s-proxy-memos-and-exempt-solicitations/">https://www.iccr.org/vote-your-proxies-see-2026s-proxy-memos-and-exempt-solicitations/</a>.
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Given that most Notices of Exempt Solicitation do not serve the
original purpose of Rule 14a-6(g) and the fact that shareholders have
alternative means to publish such notices, we propose to rescind the
rule.
Request for Comment
7. Does Rule 14a-6(g) continue to serve its original purpose such
that we should retain the rule? If so, please explain how the rule does
so, considering that written solicitations by large shareholders
currently are generally also made public through means unrelated to the
submission of a Notice of Exempt Solicitation on EDGAR.
8. As mentioned above, in January 2026, the Division of Corporation
Finance updated its guidance to state that the staff will object to
voluntary submissions of Notices of Exempt Solicitation, which has led
to a decline in their frequency, potentially addressing some of the
concerns discussed above. Accordingly, instead of rescinding the rule,
should we amend the rule to prohibit the submission of voluntary
Notices of Exempt Solicitation? For example, should shareholders
submitting Notices of Exempt Solicitation be required to certify that
they own the requisite amount of securities, with the appropriate
liability for such a certification, before they are permitted to submit
the Notice of Exempt Solicitation on EDGAR?
9. As an alternative to rescinding the Notice of Exempt
Solicitation submission requirement, should we consider adjusting the
$5 million ownership threshold that triggers the requirement? If so,
what ownership threshold should we adopt and why?
10. As an alternative to rescinding the Notice of Exempt
Solicitation submission requirement, should we instead create a filter
for Notices of Exempt Solicitation on the registrant's EDGAR page such
that the page by default would not display Notices of Exempt
Solicitation, but the page would provide an option for users to remove
the filter? As an alternative to an optional filter on the registrant's
EDGAR page, should we omit the notices from the list of filings on the
registrant's EDGAR page and instead add a selection for Notices of
Exempt Solicitation on the <a href="http://SEC.gov">SEC.gov</a> EDGAR Full-Text Search page such
that users could search specifically for such notices?
11. If the rule is rescinded, as proposed, should a shareholder
that engages in an exempt solicitation be required to provide the
shareholder's written soliciting material directly to the registrant,
to ensure that the registrant is aware of such solicitation? Why or why
not? Should such a notice requirement apply to all shareholders, or
only to shareholders who meet a certain ownership threshold, such as
the current $5 million threshold? Should there be specific requirements
regarding how such notices should be delivered?
D. Shortening the Minimum Broker Search Period
1. Background
Rule 14a-13 sets forth the requirements for registrants'
dissemination of proxy materials to beneficial owners, including a
requirement to supply proxy materials to record holders for
distribution to beneficial owners.\50\ Registrants are required,
pursuant to current Rule 14a-
[[Page 59859]]
13, to inquire of their record holders by means of a search card or
otherwise (commonly referred to as a ``broker search'') the number of
proxy materials needed by the record holders to forward to customers of
the record holders who are beneficial owners of the registrant.
Currently, the rule requires registrants to request this information at
least 20 business days prior to the record date for the annual or
special meeting.\51\
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\50\ Rule 14c-7 includes corresponding requirements for
information statements.
\51\ See 17 CFR 240.14a-13(a)(3). The request, which is sent via
a ``search card,'' must inquire regarding: (i) the number of
beneficial owners; (ii) the number of copies of the proxy and other
soliciting material and the annual report needed for forwarding by
the intermediaries to their beneficial owner customers; and (iii)
the name and address of any agent appointed by the intermediaries to
process a request for a list of beneficial owners. See 17 CFR
240.14a-13(a). If making the inquiry 20 business days prior to the
record date of a special meeting is impracticable, then the search
must be completed as many days before the record date of the special
meeting as is practicable. See 17 CFR 240.14a-13(a)(3)(i).
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In 1974, the Commission adopted then-titled Rule 14a-3(d), which
contained a broker search requirement but did not contain a deadline
before which the search must be conducted.\52\ In 1977, the Commission
adopted amendments that required a registrant to conduct the broker
search at least 10 calendar days before the record date for the
registrant's shareholder meeting, citing the need to ensure that
subsequent steps in the proxy transmittal process are carried out in a
timely manner.\53\ In 1983, the Commission increased the minimum broker
search period to 20 calendar days (the ``1983 Amendments'').\54\ These
amendments were intended to address delays, at that time, in
dissemination of proxy materials to beneficial owners, which were
attributed in part to ``the number of steps that must be taken prior to
the actual delivery of proxy material'' to intermediaries and then to
beneficial owners.\55\ In 1986, the Commission further lengthened the
broker search period to 20 business days (the ``1986 Amendments'') to
address delays associated with ``piggybacking'' of bank accounts, in
which one bank is record holder on behalf of other banks, which
themselves hold securities on behalf of multiple beneficial owners and
other respondent banks.\56\
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\52\ See the 1974 Release. See also Stockholder Information
Statements, Release No. 34-7774 (Dec. 30, 1965) [31 FR 262 (Jan. 8,
1966)] (adopting Regulation 14C, which included a broker search
requirement for information statements).
\53\ See Requirements for Dissemination of Proxy Information to
Beneficial Owners by Issuers and Intermediary Broker-Dealers,
Release No. 34-13719 (July 5, 1977) [42 FR 35953, 35954 (July 13,
1977)], (referring to Rule 14a-3(d), the precursor to Rule 14a-13).
\54\ See Facilitating Shareholder Communications Provisions,
Release No. 34-20021 (July 28, 1983) [48 FR 35082 (Aug. 3, 1983)].
\55\ See Facilitating Shareholder Communications, Release No.
34-19291 (Dec. 2, 1982) [47 FR 55491, 55493 (Dec. 10, 1982)].
\56\ See Shareholder Communications Facilitation, Release No.
34-23847 (Nov. 25, 1986) [51 FR 44267, 44268-70 (Dec. 9, 1986)]. A
respondent bank is a bank that holds securities through another bank
that is the record holder of those securities. See Facilitating
Shareholder Communications, Release No. 34-23276 (May 29, 1986) [51
FR 20504, 20506 (June 5, 1986)].
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2. Proposed Amendments
Given technological advancements, in particular widespread adoption
of the internet and related digital communication tools, which have led
to significantly more efficient coordination among the intermediaries
involved in the broker search process, the issues and concerns
addressed by the Commission in the 1983 Amendments and 1986 Amendments
appear no longer to be applicable. In this respect, we understand that
the broker search can now often be completed in as few as three
days.\57\ Accordingly, we are proposing to amend Rule 14a-13 to shorten
the minimum broker search period from 20 business days to five business
days.
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\57\ See, e.g., Davis Polk & Wardwell LLP, Proxy season alert--
Broker search shortened from 20 business days; 10 calendar days now
reasonable (``Proxy season alert''), available at <a href="https://www.davispolk.com/insights/client-update/proxy-season-alert-broker-search-shortened-20-business-days-10-calendar-days">https://www.davispolk.com/insights/client-update/proxy-season-alert-broker-search-shortened-20-business-days-10-calendar-days</a> (noting that
``the process for conducting a `broker search' is highly automated
and generally completed within three days'').
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The proposed amendment would shorten the broker search period in a
manner that better reflects market participants' current technological
capabilities, while reducing unnecessary delays, costs, and uncertainty
caused by the current broker search period. For many transactions
requiring shareholder approval, the 20-business-day broker search
period can increase the length of time necessary to consummate a
transaction because the record date may not be set earlier than 20
business days after the broker search.\58\ Such delays may increase
costs for registrants and their counterparties and introduce
uncertainty, given the additional time for external issues to arise
that could impact the potential transaction (e.g., market volatility or
regulatory changes). Similar issues may also arise in the context of
contested director elections or other proxy contests.\59\ By shortening
the broker search period, the proposed amendments are intended to
mitigate these issues and allow registrants to make better use of
current technology.
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\58\ See, e.g., Freshfields, SEC Adds Flexibility to M&A, Proxy,
and Tender Offer Rules with New Interpretations--Not All of the
Implications of Which Are Apparent on Their Face (Feb. 23, 2026),
available at <a href="https://www.freshfields.com/en/our-thinking/blogs/a-fresh-take/sec-adds-flexibility-to-ma-proxy-and-tender-offer-rules-with-new-interpretatio-102mk2q">https://www.freshfields.com/en/our-thinking/blogs/a-fresh-take/sec-adds-flexibility-to-ma-proxy-and-tender-offer-rules-with-new-interpretatio-102mk2q</a> (``The requirement to commence a
broker search at least 20 business days prior to the record date for
a shareholder meeting had, in certain situations, increased the time
required to hold a public company shareholder meeting. Companies
seeking to approve a business combination, or seeking urgent
approvals required because of company distress, have often found
that the 20-business day requirement caused delay for the matters
for which they sought approval.'').
\59\ During a proxy contest, a registrant generally prefers to
mail its proxy statement to shareholders as quickly as possible, and
in advance of when the contesting shareholder mails its own proxy
statement. The lengthy broker search period, which impacts the
registrant but not the contesting shareholder, may delay the
registrant from mailing its proxy statement, even after the
Commission staff has completed its review of the proxy statement.
---------------------------------------------------------------------------
Shortening the broker search period may negatively impact market
participants that learn of the record date for a shareholder meeting
via the broker search process before the registrant publicly discloses
the record date, which is typically not disclosed until the registrant
files its definitive proxy statement. For example, the proposed
amendments may reduce the amount of time for dissidents to acquire
shares of the registrant or coordinate with other investors in advance
of a record date, if the registrant elects to conduct the broker search
in fewer than the 20 business days required under current Rule 14a-13.
In addition, the proposed amendments may reduce the amount of time for
shareholders, including financial institutions, to recall shares on
loan, potentially increasing the risk that such institutions face
challenges in voting the shares in cases where the registrant elects to
conduct the broker search in the minimum period required.\60\
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\60\ See Proxy season alert, supra note 57. For further
discussion, see section IV.B.4.
---------------------------------------------------------------------------
We believe, however, that these potential negative impacts are
mitigated by the benefits that the proposed rule amendments would
create for registrants and their counterparties by reducing transaction
delays, costs, and uncertainty caused by the current broker search
period, as well as similar benefits in the context of contested
director elections or other proxy contests.\61\ Furthermore,
registrants may voluntarily disclose to investors a record date that
has not yet passed, allowing for additional time to recall or purchase
shares.
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\61\ See section IV.B.4.
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Request for Comment
12. Is five business days, as proposed, the appropriate minimum
period for conducting the broker search? Why or why not? Would 10
business days be a
[[Page 59860]]
more appropriate minimum period for conducting the broker search? Are
there specific circumstances that may require a longer period? Should
the proposed five-business-day minimum period (or any shortened minimum
period) be conditioned on a requirement that the registrant reasonably
believes that its proxy materials will be timely disseminated to
beneficial owners within the time period the registrant chooses?
13. Should we instead adopt a principles-based rule that does not
specify the minimum number of days but instead only requires that the
time period chosen by the registrant provide sufficient time for proxy
materials to be disseminated to beneficial owners? What are the
potential advantages and disadvantages of a principles-based rule for
broker searches?
14. Would financial institutions have sufficient time to recall
loaned shares in cases where the registrant elects to conduct the
broker search in five business days under proposed amended Rule 14a-13?
If not, how much time would be needed?
15. Are the potential benefits to dissident shareholders in terms
of visibility into the record date reason either not to shorten the
broker search period or to shorten the search period by fewer days than
we have proposed?
16. Alternatively, is the absence of public transparency regarding
the broker search process and the setting of a record date, and the
fact that dissident shareholders often appear to benefit from non-
public information, further justification for shortening the period?
17. Rule 14b-1 sets forth the obligations of registered brokers and
dealers, and Rule 14b-2 sets forth similar obligations of banks,
associations, and certain other entities, in connection with the prompt
forwarding of certain registrant communications to beneficial owners.
Under 17 CFR 240.14b-1(b)(1), brokers and dealers must respond to the
registrant no later than seven business days after the date they
receive a broker search inquiry with the approximate number of
customers of the broker-dealer who are beneficial owners of the
registrant's securities. Under 17 CFR 240.14b-2(b), banks must respond
to the registrant within one business day with the names and addresses
of all respondent banks and must respond within seven business days
with the approximate number of customers of the bank who are beneficial
owners of the registrant's securities. Should these time periods, or
any other time periods in Rule 14b-1 or Rule 14b-2, also be shortened
in connection with the proposed amendment? If so, what specific
revisions to the time periods would be appropriate and why? What would
be the associated costs and benefits of such revisions?
18. Are there considerations unique to investment companies
presented in these amendments we should consider? For example,
investment companies often have large, diffuse, and retail-oriented
shareholder bases,\62\ and are often organized in multiple classes and
series. In addition, many investment companies (including open-end
funds and unlisted closed-end funds) do not hold shareholder meetings
annually. Would the proposed changes to the minimum broker search
period have any particularized impact upon regulated fund solicitations
given this context? Would brokers be able to complete searches in the
context of investment companies in the proposed five days? If not,
should we have a different period for investment companies, and if so,
how long?
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\62\ See, e.g., Confronting Growing Burden of Fund Proxy
Campaigns, Investment Company Institute (Mar. 2026), available at
<a href="https://www.ici.org/system/files/2026-03/26-confronting-growing-burden-fund-proxy-campaigns.pdf">https://www.ici.org/system/files/2026-03/26-confronting-growing-burden-fund-proxy-campaigns.pdf</a>.
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E. Requiring Contact Information on Proxy Statement and Information
Statement Cover Pages and Other Technical Proposed Amendments
We are proposing to revise the cover pages of Schedule 14A and
Schedule 14C to require the inclusion of contact information--a name,
address, and telephone number--for a representative who can respond to
questions or comments regarding the filing. The address included may be
an electronic mail address.\63\ Such contact information is already
required in many filings made with the Commission, including
registration statements and tender offer statements.\64\ We believe
that requiring contact information will facilitate more timely
communication between the Commission staff and filers, which will
benefit filers, as it will facilitate communication with the Commission
staff member reviewing the filings.
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\63\ In line with this proposed amendment, we are proposing to
amend Item 23(c) of Schedule 14A, regarding householding, pursuant
to which a registrant currently must disclose ``the phone number and
mailing address to which a security holder can direct a notification
to 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, as applicable,
in the future.'' We are proposing to change ``mailing address'' to
``address,'' to reflect that the registrant may disclose an
electronic mail address. We are also proposing a parallel amendment
to Item 5(c) of Schedule 14C.
\64\ See, e.g., Form S-1, S-3, S-4, and S-8, as well as 17 CFR
240.14d-100 (Schedule TO) and 17 CFR 240.14d-101 (Schedule 14D-9).
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We are also proposing certain amendments that are technical in
nature, including removal of obsolete references to the mailing of sets
of materials to the staff of the Commission and correction of certain
typographical errors, that are not necessarily related to our other
proposed amendments.\65\
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\65\ The Commission recently proposed and is concurrently
proposing amendments to certain proxy rules in other Commission
proposing releases. See Electronic Delivery of Information Under the
Federal Securities Laws, Release No. 33-11430 (July 16, 2026) [91 FR
45884 (July 21, 2026)]; Rescission of Rule 14a-8's Federal
Regulation of Shareholder Proposals and Amendments to Rule 14a-4,
Release No. 34-106383 (September 16, 2026) [[<bullet>] FR [<bullet>]
([<bullet>], 2026)] (``Rule 14a-8 Proposal''). The discussion in
section II of the amendments we are proposing in this release does
not reflect the amendments to certain proxy rules proposed in other
Commission releases because they have not been adopted. Similarly,
the text of proposed amendments set forth in this release does not
reflect the amendments to certain proxy rules proposed in other
Commission releases because they have not been adopted.
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The table below describes each of our conforming amendments to
rules and forms in response to the proposed amendments discussed
herein.\66\
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\66\ Amendments recently proposed in other Commission proposing
releases, such as Registered Offering Reform, Release No. 33-11418
(May 19, 2026) [91 FR 31022 (May 26, 2026)], if adopted, may render
moot proposed amendments in this table and the following table.
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BILLING CODE 8011-01-P
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The table below describes each of the non-substantive, technical
amendments proposed in connection with the proposed amendments.
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\67\ We propose to exempt registered investment companies from
this requirement as those registrants are not subject to Rule 14a-
3(b)(10). See Item 22(a)(3)(iii) of Schedule 14A.
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[[Page 59863]]
[GRAPHIC] [TIFF OMITTED] TP21SE26.060
BILLING CODE 8011-01-C
Request for Comment
19. Should we make these conforming and technical amendments as
proposed?
F. General Request for Comment
We request and encourage any interested person to submit comments
on any aspect of the proposed amendments, other matters that might have
an impact on the proposed amendments, and any suggestions for
additional changes. With respect to any comments, we note that they are
of greatest assistance if accompanied by supporting data and analysis
of the issues addressed in those comments and by alternatives to our
proposals where appropriate.
III. Other Matters
This action is a significant regulatory action under section 3(f)
of Executive Order 12866 and has been reviewed by the Office of
Management and Budget, consistent with Executive Order 14215. This
action, if finalized as proposed, is expected to be an Executive Order
14192 deregulatory action.
IV. Economic Analysis
We are mindful of the costs imposed by, and the benefits obtained
from, our rules. Securities Act section 2(b) \68\ and Exchange Act
section 3(f) \69\ 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 would promote efficiency,
competition, and capital formation. In addition, Exchange Act section
23(a)(2) requires the Commission to consider the effects on competition
of any rules that the Commission adopts under the Exchange Act and
prohibits the Commission from adopting any rule that would impose a
burden on competition not necessary or appropriate in furtherance of
the purposes of the Exchange Act.\70\
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\68\ 15 U.S.C. 77b(b).
\69\ 15 U.S.C. 78c(f).
\70\ 15 U.S.C. 78w(a)(2).
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The proposed amendments are intended to modernize certain rules
related to proxy solicitations by updating requirements whose original
rationale has been substantially displaced by technological
developments, such as the establishment of EDGAR and the widespread
adoption of the internet and electronic communications. As discussed in
section II, multiple rules we propose to amend were adopted decades ago
to address specific informational and coordination problems arising
from the paper-based delivery system then in use. Since the adoption of
these requirements, the Commission established EDGAR, which makes
virtually all disclosure documents publicly available without charge,
and electronic delivery has become the predominant means by which
registrants communicate with shareholders. These developments have
changed the informational environment in which the existing
requirements operate. In some instances, technological developments
have rendered these requirements redundant while they continue to
impose compliance costs on registrants; in others, the requirements
have come to be used in ways that diverge from their original purpose
and generate unintended consequences.
In this context, the proposed amendments respond to four
identifiable inefficiencies in the current
[[Page 59864]]
regulatory framework. First, as discussed in section II.A, Rule 14a-
3(b) was adopted to provide shareholders with financial information
about the registrant prior to their voting in a director election. The
annual report required by the rule now substantially overlaps with the
Form 10-K, which registrants also must file on EDGAR. That overlap has
increased as many registrants currently elect to deliver an integrated
report (i.e., a Form 10-K prepared on an integrated basis and delivered
to shareholders in fulfillment of the annual report requirement) or a
Form 10-K wrap in lieu of a traditional ``glossy'' annual report. The
only substantive disclosures currently required in the annual report
but not in the Form 10-K are the stock performance graph required by
Item 201(e) of Regulation S-K--which provides information about stock
performance that is widely and freely available through online
sources--and disclosures concerning changes in certifying accountants
required by Item 304(a) of Regulation S-K, which are also required on
Form 8-K. The proposed amendment would eliminate this duplication by
removing the requirement to deliver an annual report to security
holders and allowing a registrant to satisfy Rule 14a-3(b) obligations
through a previously filed Form 10-K, while retaining the option to
furnish a separate annual report to security holders on EDGAR.
Second, as discussed in section II.B, Note D.3 to Schedule 14A and
parallel requirements in Form S-4 and Form F-4 were adopted to give
shareholders sufficient time to obtain and review documents
incorporated by reference before a meeting or vote. These documents are
now publicly available on EDGAR and accessible through hyperlinks in
the incorporating filing. The original delivery concern has therefore
been substantially mitigated, while the 20-business-day requirement
continues to impose delays, costs, and uncertainty on registrants and
transaction counterparties.
Third, as discussed in section II.C, Rule 14a-6(g) was adopted to
provide public visibility into written, non-public exempt solicitations
by large shareholders (i.e., those beneficially owning more than $5
million of securities). In recent years, however, most Notices of
Exempt Solicitation appear to have been submitted voluntarily, either
by shareholders below the ownership threshold or to reproduce
information already publicly available, such as press releases. These
voluntary submissions allow shareholders to disseminate their views
prominently and at a low cost through EDGAR, even though EDGAR was not
designed for that purpose and Rule 14a-6(g) was not intended to create
a general communications platform. Registrants also may learn of exempt
solicitations through public announcements and press releases rather
than through EDGAR filings, which may reduce the incremental role of
Rule 14a-6(g) in alerting registrants to relevant exempt written
solicitations.
Fourth, as discussed in section II.D, Rule 14a-13's 20-business-day
minimum broker search period was adopted to accommodate delays in the
paper-based, multi-step process for distributing proxy materials to
beneficial owners. Technological advancements have substantially
shortened that process, and the Commission understands that broker
searches can now often be completed in as few as three days. The
existing minimum period may therefore create unnecessary delay and
uncertainty for registrants and their counterparties without remaining
necessary to ensure timely delivery of proxy materials. The minimum
period also determines how long information about an upcoming record
date circulates among intermediaries and before public disclosure in
the registrant's definitive proxy statement. Shortening that interval
may reduce the opportunity for certain market participants, including
dissident shareholders and certain broker-clients, to obtain and act on
record-date information before public disclosure. It may also reduce
the time available for institutions that learn of the record date
through the broker search process to recall loaned shares in order to
vote.
In each case, the proposed amendments would update the regulatory
framework to reflect current technology and market practices and reduce
compliance costs associated with requirements whose original rationale
has been substantially displaced by technological developments. We
consider below the potential benefits and costs of the proposed rules
and their likely effects on efficiency, competition, and capital
formation. Many of the benefits and costs are difficult to quantify or
estimate with any degree of certainty. Where we are unable to quantify
the economic effects of the proposal, we provide a qualitative
assessment of the potential effects and encourage commenters to provide
data and information that would help quantify the benefits and costs of
the proposed rules, and the potential impacts of the proposed rules on
efficiency, competition, and capital formation.
A. Economic Baseline
The baseline against which we measure the benefits, costs, and
effects on efficiency, competition, and capital formation of the
proposed amendments consists of the current regulatory framework and
the current practices for proxy solicitations.\71\
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\71\ See, e.g., Nasdaq Stock Mkt. LLC v. SEC, 34 F.4th 1105,
1111-14 (D.C. Cir. 2022). This approach also follows SEC staff
guidance on economic analysis for rulemaking. See SEC Staff, Current
Guidance on Economic Analysis in SEC Rulemakings (Mar. 16, 2012),
available at <a href="https://www.sec.gov/divisions/riskfin/rsfi_guidance_econ_analy_secrulemaking.pdf">https://www.sec.gov/divisions/riskfin/rsfi_guidance_econ_analy_secrulemaking.pdf</a> (``The economic
consequences of proposed rules (potential costs and benefits
including effects on efficiency, competition, and capital formation)
should be measured against a baseline, which is the best assessment
of how the world would look in the absence of the proposed
action.''); id. at 7 (``The baseline includes both the economic
attributes of the relevant market and the existing regulatory
structure'').
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1. Regulatory Baseline
a. Current Regulatory Framework
Rule 14a-3(b) requires that, if a proxy solicitation relates to an
annual meeting of shareholders, a special meeting in lieu of an annual
meeting, or written consent in lieu of such meeting, at which directors
are to be elected, the proxy statement be accompanied or preceded by an
annual report to security holders.\72\ The annual report is intended to
provide information for evaluating the registrant's operations and
financial condition in a readable narrative and generally avoids
legalistic and technical terminology. The annual report to security
holders includes information about, among other matters, financial
statements, management's discussion and analysis of financial condition
and results of operations, business and segment information,
information about directors and officers, and information about the
market price of and dividends on the registrant's common equity.\73\
Most of this information is also required in the Form 10-K. The
principal disclosures required in the Rule 14a-3(b) annual report but
not in the Form 10-K include: (i) the stock performance graph required
by Item 201(e) of Regulation S-K, which many registrants voluntarily
include in the Form 10-K; and (ii) disclosure required by Item 304(a)
of Regulation S-K regarding a change in a registrant's certifying
accountant, which registrants disclose pursuant to Item 4.01 of Form 8-
K.\74\
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\72\ See supra note 10.
\73\ See 17 CFR 240.14a-3(b).
\74\ See supra note 15.
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[[Page 59865]]
Note D.3 to Schedule 14A requires registrants to send their proxy
statements to shareholders no later than 20 business days prior to the
shareholder meeting when documents are incorporated by reference. Forms
S-4 and F-4 impose a similar 20-business-day minimum when a prospectus
incorporating by reference information about the registrant or the
company being acquired is sent to shareholders prior to a shareholder
meeting.\75\
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\75\ See General Instruction A.2. to Form S-4 and General
Instruction A.2. to Form F-4.
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Rule 14a-2(b)(1) exempts from most Federal proxy regulations
``[a]ny solicitation by or on behalf of any person who does not, at any
time during such solicitation, seek directly or indirectly, either on
its own or another's behalf, the power to act as proxy for a security
holder and does not furnish or otherwise request, or act on behalf of a
person who furnishes or requests, a form of revocation, abstention,
consent or authorization.'' \76\ Rule 14a-6(g) sets forth a notice
requirement for an exempt solicitation conducted under Rule 14a-2(b)(1)
if it is (i) conducted by a large shareholder, (ii) in writing, and
(iii) not already publicly available.
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\76\ 17 CFR 240.14a-2(b)(1).
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This framework allows shareholders to communicate their views
without the requirement to comply with many of the preparation, filing,
and delivery requirements that apply to other solicitations. In
practice, shareholders have used exempt solicitations as a relatively
quick and lower-cost means of publicizing their views. One study shows
that exempt solicitations may be used by shareholders to support
shareholder proposals.\77\ Notices of Exempt Solicitation submitted
through EDGAR may also inform registrants about shareholder concerns
and assist them in responding. The Commission lacks data on the extent
to which registrants rely on these submissions, rather than on other
channels, to learn of exempt solicitations.
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\77\ Dipesh Bhattarai et al., Is There Power Outside the Proxy?
Evidence From Exempt Solicitations, unpublished working paper
(2026), available at <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4239979">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4239979</a> (``Bhattarai study'') (indicating
that approximately 50% of exempt solicitations are related to
shareholder proposals).
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Rule 14a-13 requires registrants to ask record holders how many
copies of proxy materials they will need to forward to beneficial
owners.\78\ Since the 1986 Amendments, registrants have been required
to make that inquiry at least 20 business days prior to the record
date.\79\ This requirement was intended to accommodate the multiple
steps then necessary to transmit paper proxy materials through
intermediaries to beneficial owners.\80\
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\78\ See supra note 51 for information about inquiries through
search cards.
\79\ If making the inquiry 20 business days prior to the record
date of a special meeting is impracticable, then the search must be
completed as many days before the record date of the special meeting
as is practicable. See 17 CFR 240.14a-13(a)(3)(i).
\80\ See supra note 53.
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Electronic record keeping and communications have substantially
accelerated this process. Widespread adoption of the internet and
related digital communication tools have led to significantly more
efficient coordination among the intermediaries involved in the broker
search process.\81\ Under Rule 14b-1(b)(1), a broker or dealer must
respond within seven business days with the approximate number of
customers that beneficially own the registrant's securities. Under Rule
14b-2(b), a bank or other intermediary must respond within one business
day with the names and addresses of any respondent banks and within
seven business days with the approximate number of beneficial-owner
customers. If securities are held through multiple respondent banks,
the registrant's inquiry may proceed through successive intermediaries,
each subject to its own response period. Rules 14b-1 and 14b-2 also
require intermediaries to forward proxy materials to beneficial owners
after receiving them from the registrant. Under the current 20-
business-day minimum, these responses are generally due before the
record date. The Commission understands that the broker search can now
often be completed in as few as three days.\82\
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\81\ We understand that registrants commonly use proxy-service
providers to conduct broker searches electronically, and to support
the digital distribution, and tracking of proxy materials. See e.g.,
Concept Release on the U.S. Proxy System, Release No. 34-62495 (July
14, 2010) [75 FR 42982, 42986-89 (July 22, 2010)] (describing the
role of intermediaries, including proxy service providers, in the
distribution and processing of proxy materials to beneficial
owners).
\82\ See supra section II.B.2 for information about broker
search duration. See also supra note 57.
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b. Other Proposed Commission Rulemakings
Concurrently with the proposed amendments outlined in this release,
the Commission is separately proposing to rescind Rule 14a-8 under the
Exchange Act, which governs when a company must include a proposal
submitted by a shareholder in the company's proxy materials for the
purposes of voting at shareholder meetings.\83\ In the same proposal,
the Commission is proposing to amend Rule 14a-4(c) under the Exchange
Act, which addresses a proxy holder's discretionary authority to vote
on behalf of a shareholder with respect to a matter that is not
included in the proxy materials.\84\ If adopted as proposed, (i)
rescinding Rule 14a-8 would leave determinations about the role of
shareholder proposals to State law and company governing documents and
(ii) amending Rule 14a-4(c) would provide companies with greater
flexibility, and shareholders with greater control, regarding
companies' use of discretionary voting authority for proposals that
companies receive outside the Rule 14a-8 process.\85\
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\83\ See Rule 14a-8 Proposal.
\84\ Id.
\85\ Id.
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2. Affected Entities
The proposed amendments could affect all registrants subject to the
Federal proxy rules. These include registrants with a class of equity
securities registered under section 12 of the Exchange Act \86\ and
certain non-section 12 registered companies that voluntarily file proxy
materials. Additionally, 17 CFR 270.20a-1 (``Rule 20a-1'') conditions
the solicitation of any proxy, consent, or authorization with respect
to the securities of a registered investment company upon compliance
with the Federal proxy rules that would be applicable to that
solicitation if it were made in respect to a security registered
pursuant to section 12.\87\
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\86\ We are not aware of any asset-backed issuers that have a
class of equity securities registered under section 12 of the
Exchange Act. Most asset-backed issuers are registered under section
15(d) of the Exchange Act and thus are not subject to the Federal
proxy rules with respect to solicitations of their own security
holders. 20 asset-backed issuers had a class of debt securities
registered under section 12 of the Exchange Act as of December 2025.
Because such securities are non-voting, they are not subject to the
Federal proxy rules. Foreign private issuers are not subject to the
Federal proxy rules with respect to solicitations of their own
security holders pursuant to 17 CFR 240.3a12-3(b).
\87\ Rule 20a-1 under the Investment Company Act requires
registered investment companies to comply with regulations adopted
pursuant to section 14(a) of the Exchange Act (15 U.S.C. 78n(a))
that would be applicable to a proxy solicitation if it were made in
respect of a security registered pursuant to section 12 of the
Exchange Act.
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As of December 31, 2025, we estimate that 5,357 companies had a
class of securities registered under section 12, including 142
BDCs.\88\ Of the 5,357
[[Page 59866]]
potentially affected companies, 4,527, or 85 percent, filed proxy
materials with the Commission during calendar year 2025.\89\ An
additional 74 companies filed proxy materials voluntarily in calendar
year 2025.\90\
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\88\ This figure is an upper-bound estimate because some of
these companies may not file proxy materials. We estimate the number
of companies other than asset-backed securities issuers and
registered investment companies with a class of securities
registered under section 12 of the Exchange Act by reviewing all
filers, by unique Central Index Key (CIK), of Forms 10-K and
amendments thereto filed during calendar year 2025. BDCs are a
category of closed-end investment companies that are not registered
under the Investment Company Act. 15 U.S.C. 80a-2(a)(48).
\89\ The proxy materials we consider in our analysis are
materials filed via EDGAR under submission types DEF 14A, DEF 14C,
DEFA14A, DEFC14A, DEFM14A, DEFM14C, DEFR14A, DEFR14C, DFAN14A, PRE
14A, PRE 14C, PREC14A, PREM14A, PREM14C, PRER14A, PRER14C, N-14, S-
4, and F-4. Forms N-14, S-4, and F-4 can be a registration statement
and/or proxy statement. For purposes of this economic analysis, we
have reviewed all Forms N-14, S-4, and F-4 filed during calendar
year 2025 with the Commission and excluded from our estimates above
Forms N-14, S-4, and F-4 that are exclusively registration
statements.
\90\ We identify companies that voluntarily file proxy materials
as companies reporting pursuant to section 15(d) of the Exchange Act
but not registered under section 12(b) or section 12(g) of the
Exchange Act, and foreign private issuers that filed any proxy
materials during calendar year 2025 with the Commission.
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As of December 31, 2025, 2,720 registered investment companies were
subject to the Federal proxy rules. These registered investment
companies were associated with the following funds: (i) 12,710 open-end
funds, out of which 4,194 were exchange-traded funds (``ETFs'')
registered as open-end funds or open-end funds that had an ETF share
class; (ii) 707 closed-end funds; (iii) 15 variable annuity separate
accounts registered as management investment companies; (iv) 414
variable annuity separate accounts registered as unit investment
trusts; (v) 239 variable insurance contracts registered as unit
investment trusts; (vi) 40 other unit investment trusts; and (vii) two
face-amount certificate companies.\91\ Out of the 2,720 potentially
registered investment companies mentioned above, 816 (30 percent) filed
proxy materials with the Commission during calendar year 2025.
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\91\ We estimated the number of unique registered investment
companies by reviewing all Forms N-CEN data for the reporting period
ending December 2025 with filings received through March 31, 2026.
Open-end funds are series of trusts registered on Form N-1A. Closed-
end funds are registered on Form N-2. Variable annuity separate
accounts registered as management companies are trusts registered on
Form N-3. Variable annuity separate accounts registered as unit
investment trusts are registered on Form N-4. Variable insurance
contracts registered as unit investment trusts are registered on
Form N-6. All other unit investment trusts in this time frame are
registered on Form N-8B-2. Face-amount certificates were found on
Form 10-K by manually reviewing non-BDC investment companies.
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The proposed rescission of Rule 14a-6(g) would also affect
shareholders that submit Notices of Exempt Solicitation. From 1997 to
2025, 311 unique filers submitted 3,376 notices of exempt solicitation
under submission type PX14A6G concerning 751 unique registrants. One
study of PX14A6G submissions from 1997 through 2019 found that
approximately 75 percent were made within 30 days prior to the meeting
date.\92\ Most of the filings were made by one of three categories of
shareholders: public pension funds (38.1 percent), union funds (24.9
percent), and hedge funds and institutional investors (22.5
percent).\93\
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\92\ See Bhattarai study supra note 77. According to this study,
approximately 36.3% of the exempt solicitation filings solicited
against management-sponsored directors, 29.3% solicited for
shareholder board-related proposals, such as separating the role of
CEO and Chair of the board, and 9.8% solicited for shareholder-
sponsored compensation proposals.
\93\ Bhattarai study supra note 77.
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The proposed amendments to Rule 14a-13 could also affect
participants in securities lending markets--including short sellers,
lenders of shares, and broker-dealers that facilitate share lending and
borrowing transactions--by shortening the minimum broker search period.
Short sellers generally transact through introducing broker-dealers. We
estimate that there were 614 introducing broker-dealers that originated
short-sale trades in equities in 2025.\94\ Additionally, introducing
broker-dealers usually rely on a clearing/carrying broker-dealer to do
the borrowing of shares. There were 201 clearing/carrying broker-
dealers in 2025.\95\ In 2025, there were 9,989 unique tickers of U.S.
common stocks that were subject to stock lending.\96\
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\94\ This is the number of unique broker-dealers that originated
a short-sale order that ultimately executed in a non-OTC or OTC
equity market during 2025, according to Consolidated Audit Trail
(``CAT'') data. From all top-of-lifecycle CAT records for short
sales, we retain those orders that ultimately executed and count the
number of unique broker-dealers associated with those original
orders.
\95\ Using data in Forms X-17A-5 (also known as ``FOCUS
reports''), we calculate this by counting the number of broker-
dealers that answered yes to either ``Respondent carries its own
public customer accounts'' or ``Respondent clears its public
customer and/or proprietary accounts'' on the year-end 2025 FOCUS
report.
\96\ Using security lending data from DataLend, we count the
number of unique tickers of common shares lent out from January 1,
2025, to December 31, 2025.
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B. Economic Effects of Individual Provisions
The proposed amendments would generate economic effects for
registrants and investors. We analyze below the likely benefits and
costs of the individual provisions of the proposed rules for investors
and registrants.
1. Benefits and Costs of the Proposed Elimination of Requirement To
Deliver Annual Report to Security Holders
As described in section II.A, the proposed amendments to Rule 14a-3
would eliminate the current delivery requirement for annual reports to
security holders and, for registrants that have a Form 10-K already on
file for their most recent fiscal year, would eliminate altogether the
need to comply with the separate annual report disclosure requirements
in Rule 14a-3. Registrants that do not have a Form 10-K on file would
satisfy their Rule 14a-3(b) obligation by furnishing an annual report
to security holders on EDGAR, without the need to deliver such report
to security holders.
Based on staff analysis, in calendar year 2025, registrants
submitted 3,157 annual reports to security holders. We estimate that 90
percent of registrants filing proxy statements on Schedule 14A and
information statements on Schedule 14C would rely on a previously filed
Form 10-K.\97\ Under that assumption, 2,841 respondents would avoid a
total of approximately $3.5 million in aggregate compliance costs.\98\
The estimated aggregate cost reduction would differ proportionally if a
different share of registrants elects this option. For example, if only
70 percent of registrants elected to rely on a previously filed Form
10-K, approximately 2,210 respondents would avoid compliance costs,
resulting in an estimated aggregate cost reduction of
[[Page 59867]]
approximately $2.7 million.\99\ Conversely, if 100 percent of eligible
registrants elected this option, all 3,157 respondents would avoid such
costs, yielding an estimated aggregate cost reduction of approximately
$3.9 million.\100\
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\97\ This estimate is based on the current prevalence of Form
10-K and Form 10-K wrap filings among registrants that currently
submit annual reports to security holders, as discussed in section
II.A, which suggests that the vast majority of registrants already
treat the Form 10-K as the primary vehicle for satisfying their Rule
14a-3(b) requirements. See supra section II.A.2 for information
about how registrants satisfy the requirements of Rule 14a-3(b).
\98\ We estimate the average cost savings per unit of annual
report to security holders submission to be approximately $1,237.50.
We estimate the aggregate cost savings to be $3,479,850 for 2,812
annual reports to security holders related to proxy statements on
Schedule 14A and $35,887 for 29 annual reports to security holders
related to information statements on Schedule 14C. See infra section
IV.B.7, Aggregate Monetized Benefits and Costs; infra note 175;
infra Economic Analysis Table 1 for information about the
calculation of aggregate monetized benefits. These estimates
represent averages that reflect the variety of ways registrants
currently satisfy the requirements of Rule 14a-3, whether by sending
a Form 10-K, a Form 10-K wrap, or a separately produced annual
report to security holders. Accordingly, we estimate the aggregate
cost savings for all 2,841 (2,812 + 29) annual reports to security
holders to be $3,515,737 ($3,479,850 + $35,887). When divided by the
2,841 annual reports to security holders, this would result in an
average cost savings of approximately $1,237.50 per unit.
\99\ We estimate this cost by multiplying the number of expected
submissions, 2,210 (0.7 x 3,157), by the average cost savings per
submission, $1,237.50.
\100\ We estimate this cost by multiplying the number of
expected submissions, 3,157, by the average cost savings per
submission, $1,237.50.
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For registrants opting to satisfy the requirements of Rule 14a-3(b)
by the submission of an annual report to security holders on EDGAR, the
proposed amendment would also eliminate the cost of delivering such
report to shareholders.\101\ The extent to which these delivery costs
are significant would vary across registrants depending on their size,
shareholder base, and current delivery practices.\102\ While we expect
there to be little marginal cost to delivering the annual report, the
Commission lacks comprehensive data on current delivery costs for these
registrants and invites commenters to provide data on their
magnitude.\103\
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\101\ Id.
\102\ Delivery costs under the current rule include printing,
mailing, and related logistics costs for registrants that deliver
annual reports in paper form, as well as costs associated with
electronic delivery for registrants that have transitioned to
electronic distribution. Recently, the Commission proposed
Regulation E-Delivery, which if adopted as proposed, would permit
covered entities to use electronic delivery as the default method of
delivery to covered recipients, subject to certain conditions, while
preserving the ability of covered recipients to receive paper copies
of covered information, free of charge, upon request. See Electronic
Delivery of Information Under the Federal Securities Laws, Release
No. 33-11430 (July 16, 2026) [91 FR 45884 (July 21, 2026)]. If
adopted as proposed, Regulation E-Delivery would generally supersede
the Commission's existing electronic delivery framework, including
the E-Delivery Guidance. See supra note 37.
\103\ Delivery costs would depend on the proportion of a
registrant's shareholders who have opted into electronic delivery,
the number of shareholders requesting paper copies, and the per-unit
cost of physical mailing and distribution, all of which are likely
to vary with the size and composition of the registrant's
shareholder base. See infra note 175. To the extent Regulation E-
Delivery is adopted as proposed and registrants choose to rely on it
to electronically deliver annual reports to shareholders under Rule
14a-3(b), the cost savings from printing and mailing anticipated
under this proposal may be diminished for those registrants with
respect to annual reports. See id.
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The proposed amendments would separately eliminate the stock
performance graph required by Item 201(e) of Regulation S-K for all
registrants other than investment companies,\104\ regardless of whether
such registrants rely on a previously filed Form 10-K or an annual
report furnished on EDGAR. As discussed in section II.A, the stock
performance graph compares the registrant's cumulative total
shareholder return with relevant indices over a five-year period. Since
the requirement was adopted in 1992, comparable stock performance
information has become readily accessible to investors through online
sources, reducing the incremental value of the mandatory graph.\105\ We
estimate that eliminating the requirement would reduce the aggregate
compliance costs by $3.9 million.\106\ The proposed amendments would
preserve the stock performance graph requirement only for investment
companies (specifically, BDCs and face-amount certificate companies)
and require these investment companies to place the graph in a Form 10-
K rather than an annual report to security holders. We estimate the
cost associated with this change for investment companies to be
approximately $64,000.\107\
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\104\ See supra section II.A.2 for information about
requirements for investment companies to disclose the stock
performance graph required in Item 201(e) of Regulation S-K.
\105\ Several online platforms provide free, interactive tools
that allow investors to chart and compare a company's total
shareholder return against selected market indices, peer groups, or
custom benchmarks over variable time horizons, offering greater
flexibility than the static five-year comparison required by Item
201(e) of Regulation S-K. In addition, many brokerage platforms
offer similar comparative charting tools to their account holders.
See, e.g., Yahoo Finance, <a href="https://finance.yahoo.com">https://finance.yahoo.com</a>; Total Real
Returns, <a href="https://totalrealreturns.com">https://totalrealreturns.com</a>; Morningstar, <a href="https://www.morningstar.com">https://www.morningstar.com</a>; and Nasdaq, <a href="https://www.nasdaq.com">https://www.nasdaq.com</a>.
\106\ See infra section IV.B.7. We estimate that approximately
3,157 respondents will no longer disclose the stock performance
graph in an annual report to security holders. See infra notes 177
and 178; infra Economic Analysis Table 1 for information about
aggregate monetized benefits of eliminating the requirement to
disclose the stock performance graph for Schedule 14A and Schedule
14C respondents.
\107\ Based on staff analysis, we estimate that 51 BDCs and no
face-amount certificate companies would disclose a stock performance
graph in a Form 10-K instead of an annual report to security
holders. The staff understands that the cost estimation does not
present an additional cost to BDCs because they currently but would
no longer incur the same cost by disclosing a stock performance
graph in an annual report to security holders. The proposed
amendments would shift this cost from being incurred when preparing
an annual report to security holders to when preparing a Form 10-K.
See infra note 179.
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While the proposed amendments would reduce compliance costs for
registrants, they may also impose costs on investors, including retail
investors, through three channels discussed below. First, the proposed
amendment, together with conforming amendments to Rule 14a-16, could
change how investors obtain the information contained in the annual
report to security holders. The annual report would no longer be
required to be delivered to security holders; the registrant's proxy
materials would no longer be required to explain how a security holder
may request a copy of the annual report; the annual report would no
longer be among the paper or electronic materials that registrants must
provide to record holders and respondent banks upon request; and the
annual report would no longer be part of the full set of proxy
materials delivered to security holders under Rule 14a-16(n). Investors
would instead obtain the registrant's Form 10-K, or an annual report
furnished on EDGAR, directly from EDGAR.\108\
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\108\ Many registrants also make their Form 10-K and annual
report to security holders available directly on their investor
relations websites, providing investors with an additional avenue of
access.
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As a result, the proposed amendments may increase search costs;
however, we expect these to be modest for most investors. EDGAR filings
are available without charge and contain search tools such that filings
can be located by company name and/or submission type.\109\ Registrant
financial information is also widely available through financial-data
providers, investor-relations websites, and brokerage platforms. The
effect may be greater for security holders who currently rely on paper
copies of proxy materials because the annual report would no longer be
among the documents registrants are required to furnish. The Commission
acknowledges uncertainty about the extent to which some investors are
familiar with EDGAR and able to navigate it effectively, and on how
many security holders request paper copies, and how much they rely on
the annual report. We invite commenters to provide data on this
question.
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\109\ For example, EDGAR contains search tools that allow
investors to search for filings by submission type (e.g., ``10-K''
or ``ARS'').
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Second, investors may lose direct access through the annual report
to certain information not required in the Form 10-K. Information about
a change in a registrant's certifying accountant would remain available
through disclosure under Item 4.01 of Form 8-K filed on EDGAR.
Investors seeking the information currently presented in the Item
201(e) stock performance graph would instead need to rely on
alternative sources, such as financial-data providers or registrant
websites. In addition, annual reports may also include CEO shareholder
letters, which can contain valuable information that may provide
investors with additional perspective on the registrant's performance,
strategy, or outlook. One
[[Page 59868]]
study suggests that the information contained in CEO shareholder
letters is used by investors to assess the quality of earnings and is
associated with firm performance measures including sales growth,
return on equity, and dividend changes.\110\ The magnitude of the cost
of losing direct access to information would depend on the extent to
which registrants continue to prepare and disseminate voluntary
content, the availability, accessibility, and cost of alternative
resources, which we expect to be modest given the ease of access to
these materials through EDGAR and other public sources. We invite
commenters to provide data or analysis on the prevalence of unique
content in current annual reports, the extent to which registrants are
likely to continue producing it voluntarily, and its value to
investors.
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\110\ See Eric Abraham and Eli Amir, The Information Content of
the President's Letter to Shareholders, 23, J. Bus. Fin. & Acc. 1157
(1996), available at: <a href="https://research.ebsco.com/c/4jkwrc/search/details/gdswbongmf/details?db=eoh&limiters=None&q=information+content+presidents+letter&searchMode=all">https://research.ebsco.com/c/4jkwrc/search/details/gdswbongmf/details?db=eoh&limiters=None&q=information+content+presidents+letter&searchMode=all</a>.
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Third, the Form 10-K may be less readable for some investors than a
well-prepared annual report. As noted in section II.A, the Commission
has historically encouraged registrants to deliver annual reports to
security holders rather than Forms 10-K to disclose financial
information in advance of annual meetings, in part because annual
reports to security holders may present financial and operational
information in a more accessible format and with less technical
language.
The magnitude of the costs and benefits discussed above for each
registrant and its shareholders would likely be greater for registrants
that currently satisfy the requirements of Rule 14a-3 by sending a
separate annual report to security holders and lower for registrants
who send a Form 10-K wrap or Form 10-K.\111\
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\111\ We estimate that approximately 12% of filings are likely
to represent separately produced annual reports, 77% are likely to
represent Form 10-K or Form 10-K wraps, and approximately 11% of
filings are unspecified. This estimate should be interpreted as
indicative rather than precise, given the reliance on rule-based
phrase matching in textual analysis, which may not fully capture the
range of language variations or contextual nuances present across
individual filings. We derived this estimate by reviewing DEF 14A
proxy statements filed in EDGAR in 2025, restricting the sample to
filings containing the phrase ``annual report'' (case-insensitive).
We then applied a set of regular-expression-based phrase matches to
classify each filing's disclosure language regarding whether the
annual report was prepared as a document separate from the Form 10-
K, or ``wrapped'' with (i.e., incorporated into) the Form 10-K.
Based on the phrase matching results, we categorized registrants
into those who furnish a separately produced annual report, or those
who use Form 10-K, Form 10-K wrap and those unspecified. We
classified as separate-annual-report if the analysis found phrases
such as ``separate annual report,'' ``annual report is enclosed,''
``mailed annual report,'' ``printed annual report,'' ``annual report
will be sent,'' ``annual report furnished,'' ``annual report
provided separately,'' and ``copy of the annual report.'' We
classified as Form 10-K or Form 10-K wrap if the analysis found
phrases such as ``annual report on Form 10-K,'' ``included in [this/
the] Form 10-K,'' ``part of our Form 10-K,'' ``we do not produce a
separate annual report,'' and ``annual report contained in.'' We
separately obtained CIK numbers for ARS (Annual Report to Security
Holders) submissions from EDGAR and matched them against the CIKs
identified in our proxy statement analysis, yielding 2,690 matched
CIKs. The number of matched CIKs is smaller than the total
population of CIKs associated with filed ARS forms, as our matching
procedure was limited to CIKs identified through the proxy statement
text analysis; consequently, our estimates may not be fully
representative of all ARS filers.
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2. Benefits and Costs of the Proposed Elimination of the Delivery
Deadline When Documents Are Incorporated by Reference Into the Proxy
Statement
As described in section II.B, the proposed amendments would
eliminate Note D.3 to Schedule 14A and the corresponding minimum 20-
business-day period requirements in Forms S-4 and F-4, which were
adopted to ensure timely delivery of incorporated documents to security
holders prior to a meeting or vote. Since the adoption of these
requirements, however, EDGAR has been established and nearly all
disclosure documents are now required to be filed on EDGAR, making them
publicly available without charge.\112\ The proposed amendments would
generate potential benefits for registrants and their counterparties
across all three affected documents. Removing the minimum 20-business-
day period for sending proxy materials and prospectuses would reduce
delays that may result from the current waiting period, during which
external issues (e.g., market volatility or regulatory changes) may
arise and increase the costs or risks associated with delays.
Mitigating such delays could lower costs for registrants and their
counterparties and decrease uncertainty surrounding the timing and
execution of a pending transaction or other corporate action. For
example, for Form S-4 and Form F-4, where the minimum period most
commonly applies in the context of a shareholder meeting to vote on a
business combination transaction, a shorter minimum period could reduce
the likelihood of market movement that affects the offer price or of a
new bidder emerging during such period, thus lessening any uncertainty
surrounding whether and when the transaction will be completed.\113\
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\112\ See supra section II.B.2 for more information about the
20-business-day requirement and EDGAR availability of documents
incorporated by reference in Forms S-4 and F-4.
\113\ Any realized effects would also be transaction-specific
factors and could depend on factors such as the extent of pre-
signing market checks or go-shop provisions, the likelihood of a
competing bid, and the size and characteristics of the target.
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Benefits from eliminating the Note D.3 requirement would also arise
in the context of routine annual meeting proxy statements and other
corporate actions in which documents are incorporated by reference,
though the magnitude of those benefits may be smaller than in the
transaction context. The Commission lacks data with which to quantify
these benefits, which would depend on the frequency and nature of
transactions and other corporate actions subject to the current
requirements, the magnitude of delays and associated costs attributable
to the current minimum period, the extent to which investors use the
full 20-business-day period to request, receive, and review
incorporated documents before voting, and the extent to which affected
registrants currently manage timing risk through other means.
The proposed amendments may impose costs on investors through three
channels. First, eliminating the minimum 20-business-day period would
permit registrants to shorten the period shareholders may request,
receive, and review a copy of documents incorporated by reference into
the proxy statement. A shorter period could reduce the quality of
voting decisions if investors have insufficient time to locate (or
request and receive from the registrant), review, and understand the
incorporated information.\114\ This cost may be greater for retail
investors, who may require more time to evaluate the information than
institutional investors. The extent to which this cost is significant
would depend on the extent to which investors use the full 20-business-
day period to review incorporated documents before voting. To the
extent that EDGAR availability and electronic delivery serve as
functional substitutes for the delivery that the 20-business-day period
was designed to facilitate, the investor protection cost of eliminating
the minimum period requirement is mitigated.
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\114\ The Commission acknowledges that the proposed amendments
could increase the risk that proxy statements are delivered closer
to the shareholder meeting date. However, because the timing of
proxy statement delivery is likely to be driven primarily by other
factors, including state law requirements and considerations,
transaction-specific timelines, and the time needed to solicit
sufficient support for any proposals, the Commission does not expect
this risk to be a meaningful concern in practice.
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[[Page 59869]]
Second, the proposed amendments may increase search costs for some
retail investors, because they would need to locate information
incorporated by reference in the registrant's proxy statement on EDGAR,
unless they request a copy of the incorporated information from the
registrant.\115\ This cost would fall primarily on investors who
currently rely on the delivery process to obtain incorporated
documents, rather than accessing them independently, and who may be
less familiar with navigating EDGAR. Factors that may limit the
magnitude of these search costs include the public availability of
incorporated documents on EDGAR without charge, the inclusion of active
hyperlinks to incorporated documents in the submission, the ability of
registrants to provide incorporated documents electronically upon
request, and technological developments that have facilitated
widespread access to issuer information.\116\ Because EDGAR has been in
place for over 30 years and nearly all disclosure documents are now
required to be filed on EDGAR, EDGAR availability and electronic
delivery now serve as functional substitutes.
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\115\ See supra section II.B.2 for more information about
different channels through which investors may access a copy of
incorporated information from the registrant.
\116\ See supra section II.B.2 for a discussion about how
technological developments have facilitated widespread access to
issuer information. See also supra note 37.
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Third, the proposed amendments may impose costs for shareholders in
the merger and business combination context. Shareholders voting on a
merger or business combination registered on a Form S-4 or Form F-4
registration statement may have less time to review financial
statements and other information about the registrant and the company
being acquired that is incorporated by reference into the form. The
magnitude of this cost would depend on the extent to which shareholders
are able to access incorporated documents on EDGAR, or request and
receive incorporated documents from the registrant, promptly and the
complexity of the information incorporated by reference in a given
transaction.
3. Benefits and Costs of Proposed Elimination of Requirement To Submit
Notice of Exempt Solicitation
As described in section II.C, the proposed amendments would rescind
Rule 14a-6(g), eliminating the requirement for large shareholders to
submit Notices of Exempt Solicitation on EDGAR.
The proposed amendments would create benefits for large
shareholders by reducing compliance burdens. Such large shareholders
would no longer need to submit their exempt written soliciting material
on EDGAR. Large shareholders would also no longer need to determine
whether they beneficially own securities with a market value over $5
million or whether their exempt solicitations are already public. Based
on the most recent number of Notices of Exempt Solicitation
submissions, we assume that the average number of submissions that
would be made on an annual basis under Rule 14a-6(g) absent the
proposed amendments is 286.\117\ This number includes both mandatory
and voluntary submissions, and we include both in our estimate of
aggregate compliance cost savings. As discussed in section II.C and the
introductory part of section IV, the vast majority of Notice of Exempt
Solicitation submissions appear to have been voluntary.\118\ While
voluntary filers choose to incur compliance costs because they believe
the benefits of submitting justify those costs, they nonetheless incur
a cost.
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\117\ See infra note 174. The 286 is the number of these
submissions in 2025.
\118\ Approximately 80% of these submissions in 2025 were made
voluntarily by filers who disclosed that they beneficially owned $5
million or less of the class of subject securities and therefore
were not subject to the mandatory submission requirement under Rule
14a-6(g). See supra note 42.
---------------------------------------------------------------------------
We estimate that the aggregate annual compliance cost savings from
eliminating the requirement to submit Notices of Exempt Solicitation is
approximately $280,000.\119\ Given the vast majority of current
submissions appear to have been voluntary, and because the Division of
Corporation Finance updated its guidance in January 2026 to state that
staff will object to voluntary submissions of Notices of Exempt
Solicitation,\120\ the actual cost savings attributable to the proposed
rescission may be lower than this estimate. To the extent that the
total number of Notices of Exempt Solicitation submissions is lower
than the assumed 286, the aggregate annual compliance cost savings from
eliminating the requirement could be correspondingly lower than this
estimate.
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\119\ See infra section IV.B.7 for information about the
aggregate monetized benefits of the proposed elimination of
requirements to submit Notices of Exempt Solicitation.
\120\ See supra note 48; supra section II.C.2 for a discussion
about the Division of Corporation Finance updated guidance related
to Notice of Exempt Solicitations. Approximately five voluntary
notices have been submitted after the issuance of the guidance.
---------------------------------------------------------------------------
The proposed amendments would also reduce costs for registrants to
the extent that registrants currently expend resources responding to
exempt solicitations and informing shareholders of their views on
issues raised in those solicitations.\121\ However, to the extent that
shareholders conducting exempt solicitations continue to broadcast
their solicitation information outside EDGAR following the rescission
of Rule 14a-6(g), this benefit would be largely offset, as registrants
would continue to bear the cost of responding to publicly available
solicitation information regardless of its source.
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\121\ Registrants are not obligated to respond to exempt
solicitations, but may choose to do so for various reasons,
including to rebut perceived misinformation, shape the narrative on
contentious issues, influence shareholder voting outcomes, and
demonstrate proactive shareholder engagement.
---------------------------------------------------------------------------
The proposed rulemaking may also generate some benefits for non-
soliciting investors. The removal of Notices of Exempt Solicitations
from registrants' EDGAR pages may simplify these pages and make it
easier for investors to identify and access registrants' required
filings and mandatory filings by third parties. The magnitude of this
benefit would depend on the extent to which the current volume of
Notice of Exempt Solicitation submissions impedes investors' ability to
navigate registrants' EDGAR pages efficiently and the extent to which
investors use EDGAR search functions to navigate to registrants'
required filings and mandatory filings by third parties.\122\
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\122\ See supra note 42 for statistics about the volume of
voluntary Notice of Exempt Solicitation submissions.
---------------------------------------------------------------------------
We expect that the proposed elimination of the requirement for
large shareholders to submit a Notice of Exempt Solicitation would
generate certain costs for both shareholders and registrants. Regarding
shareholders, it would remove a cost-efficient vehicle for large
shareholders to inform other shareholders about their exempt
solicitations on issues up for a vote or other areas of concern they
have related to the registrant. This cost is most directly applicable
to large shareholders who beneficially own more than $5 million of a
registrant's securities and who conduct non-public written exempt
solicitations--the population of filers for whom Rule 14a-6(g) was
originally designed.\123\ The rescission of Rule 14a-
[[Page 59870]]
6(g) would eliminate a convenient and low-cost communication channel on
EDGAR, though such filers would retain access to alternative channels
including third-party websites, press releases, direct outreach to
other shareholders and management, and independent proxy
solicitations.\124\
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\123\ As discussed in section II.C and the introductory part of
section IV, the vast majority of current Notice of Exempt
Solicitation submissions appear to have been voluntary--either made
by shareholders who do not meet the $5 million threshold or who are
submitting information that is already publicly available. However,
since the Division of Corporation Finance updated its guidance in
January 2026 to state that staff will object to voluntary
submissions of Notices of Exempt Solicitation, the cost of removing
a cost-efficient vehicle for generating publicity would be mainly
applicable to large shareholders. See supra note 48.
\124\ Following the elimination of Notices of Exempt
Solicitation, shareholders may choose to notify other shareholders
of their exempt solicitations through third-party websites that list
and provide access to such materials. See supra note 49 for
information about third-party websites through which shareholders
can submit exempt solicitations. See, e.g., As You Sow, Proxy Open
Exchange, <a href="https://proxyopenexchange.org">https://proxyopenexchange.org</a> (showing that from April 21,
2026, to May 27, 2026, a total of 126 exempt solicitations were
submitted by 33 filers); see supra section IV.A.2 for information
about statistics of Notice of Exempt Solicitation submissions on
EDGAR.
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In addition, to the extent that the information provided in the
form is credible and useful to shareholders' voting and investment
decisions, eliminating the form would have some cost to investors. For
example, one study \125\ finds a positive average stock price reaction
upon PX14A6G submission when this communication is first made public,
which is consistent with investors obtaining value-relevant information
from the submissions. The study also finds that most PX14A6G
submissions are viewed by investment banks and a leading financial
information platform,\126\ and that the number of downloads of PX14A6G
submissions is comparable to the number of downloads of proxy
statements, suggesting that the submissions are used by a range of
market participants.\127\
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\125\ See Bhattarai study supra note 77.
\126\ Id. The study shows that, between 2003 and 2016, exempt
solicitation submissions received an average of 580.28 views within
the first five trading days of the exempt solicitation submission
date, 76.2% of which are viewed by investment banks or Bloomberg.
\127\ See id. (showing that between 2012 and 2016 the average
Exempt Solicitation downloads increased to 858); see also Peter
Iliev et al., Investors' Attention to Corporate Governance, 34 Rev.
Fin. Stud. 5581 (2021), available at <a href="https://academic.oup.com/rfs/article/34/12/5581/6124373?guestAccessKey=">https://academic.oup.com/rfs/article/34/12/5581/6124373?guestAccessKey=</a> (showing that on average,
a firm's proxy statement is viewed 659 times).
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Registrants may bear costs as a result of the proposed rulemaking
because they may lose access to useful information on exempt
solicitations. If the filings of exempt written soliciting materials on
EDGAR offer valuable information and provide a cost-effective means for
management to gather perspectives of multiple shareholders on various
decisions and, based on this information, formulate responses to such
views, the elimination of these filings would impede management's
ability to timely access such information. The magnitude of this cost
depends on the degree to which EDGAR submissions provide registrants
with information that would not otherwise be available through
alternative channels. As noted in section IV.A.1, the Commission lacks
data on the extent to which registrants currently rely on EDGAR
submissions, rather than on other channels such as press releases and
public announcements, to learn of exempt solicitations.
4. Benefits and Costs of Proposed Shortening of Minimum Broker Search
Period
As described in section II.D, the proposed amendment would shorten
the minimum broker search period under Rule 14a-13 from 20 business
days to five business days.
The shortening of the minimum period would create certain benefits
for registrants and their counterparties. It would reduce the risk of
external issues (such as market volatility or regulatory changes)
arising during the search period that could be costly to the registrant
and its counterparties. For example, in votes on mergers, negative
market movement could depress the offer price or a new bidder could
emerge during the broker search period, thereby increasing uncertainty
surrounding whether and when the transaction will be completed. Similar
issues may also arise in the context of contested director elections or
other proxy contests. By shortening the broker search period, the
proposed amendment could mitigate such costs.\128\ In the case of
broker search periods for special meetings, Rule 14a-13 provides: ``If
such inquiry is impracticable 20 business days prior to the record date
of a special meeting, as many days before the record date of such
meeting as is practicable.'' \129\ To the extent that matters
susceptible to heightened external risk are voted on at special
meetings, and to the extent that registrants currently rely on this
provision to shorten the number of days between the broker search and
the meeting, the associated baseline costs discussed above are already
mitigated under the existing rule framework. Consequently, the proposed
amendment would generate limited incremental benefits in this
context.\130\
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\128\ As noted in section IV.A.1.a, and discussed further
section IV.D.5, the existing seven-business-day response periods for
brokers, dealers, and banks under Rules 14b-1 and 14b-2 exceed the
proposed five-business-day minimum broker search period. If
intermediaries were to respond within the maximum time currently
permitted, registrants would not receive responses before the record
date when conducting a broker search at the proposed five-business-
day minimum, which could limit the practical utility of the
shortened period for some registrants and their counterparties.
\129\ Rule 14a-13(a)(3)(i).
\130\ See supra note 51 for a discussion about the practice if
the inquiry 20 business-days prior to the record date of a special
meeting is impracticable.
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In addition, the proposed shortening of the broker search period
could generate benefits for various investors by reducing the window
during which non-public information about an upcoming shareholder
meeting record date may be obtained and traded upon by certain market
participants. Academic research provides evidence of informational
leakages from brokers to certain clients, enabling those clients to
obtain advance access to information ahead of public disclosure.\131\
By shortening the broker search period, the proposed amendment would
reduce the period during which such leakage can occur. To the extent
that such informational advantages erode investor confidence in the
fairness of the market,\132\ reducing the window for information
leakage could improve perceptions of market fairness, with potential
benefits for market participation and liquidity. Given, however, that
registrants may voluntarily disclose record dates in advance of the
broker search period, though the staff's experience suggests this is
rarely done in practice, the window during which non-public information
may be obtained and traded upon could be extended, partially offsetting
this benefit. The potential effects on capital formation are discussed
further in section IV.C.3. The Commission lacks data with which to
quantify the benefits described in this paragraph and the preceding
paragraph. The magnitude of these benefits would depend on the
frequency and nature of transactions and other corporate actions
subject to the current minimum period, the magnitude of transaction
delays and associated costs attributable to the current 20-business-day
period, the extent to which registrants voluntarily disclose record
dates in advance of broker search, and the extent to which information
leakage currently occurs during the broker search period.
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\131\ See Marco Di Maggio et al., The Relevance of Broker
Networks for Information Diffusion in the Stock Market, 134 J. Fin.
Econ. 419 (2019) (finding that the ``best clients'' of the broker
used by a filer, i.e., those generating a large share of the
broker's business, buy more of the target stock than other
institutional investors in the 10 days prior to a Schedule 13D
filing).
\132\ See, e.g., Luigi Guiso et al., Trusting the Stock Market,
63 J. Fin. 2557 (2008).
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The proposed amendment may also reduce opportunities for ``empty
[[Page 59871]]
voting.'' Under the current framework, the 20-business-day broker
search period creates a window during which some market participants
may learn of an upcoming record date and borrow shares before that
date, thereby acquiring voting rights while bearing little or no
economic exposure to the registrant. This decoupling of voting rights
from economic ownership may cause voting outcomes to reflect the
preferences of parties without a substantial economic interest in the
registrant.\133\ One study suggests that voting rights are actively
traded around record dates, and that such trading can affect corporate
governance outcomes.\134\
---------------------------------------------------------------------------
\133\ See, e.g., Henry T. C. Hu and Bernard Black, The New Vote
Buying: Empty Voting and Hidden (Morphable) Ownership, 79 S. Cal. L.
Rev. 811 (2006); Henry T. C. Hu and Bernard Black, Hedge Funds,
Insiders, and the Decoupling of Economic and Voting Ownership: Empty
Voting and Hidden (Morphable) Ownership, 13 J. Corp. Fin. 343
(2007); Alon Brav and Richmond D. Matthews, Empty Voting and the
Efficiency of Corporate Governance, 99 J. Fin. Econ. 289 (2011).
\134\ See Susan E.K. Christoffersen et. al., Vote Trading and
Information Aggregation, 62 J. Fin. 2897 (2007) (documenting that
voting rights are actively traded around record dates, with share
lending markets serving as a mechanism through which voting rights
can be separated from economic ownership).
---------------------------------------------------------------------------
Reducing the minimum broker search period from 20 to five business
days would shorten the interval during which market participants may
learn of a record date before public disclosure. This could reduce
opportunities to borrow shares strategically to acquire voting rights
and improve the alignment between voting outcomes and the preferences
of shareholders with a substantive economic interest in the registrant.
However, the magnitude of this benefit is uncertain. Empirical evidence
on the prevalence and economic significance of empty voting is mixed,
and some studies suggest that, although institutional investors have
the ability to engage in the practice, they may not do so
frequently.\135\ Given the mixed empirical evidence, we view reduced
empty voting as a potential benefit of the proposed amendment, though
its magnitude is uncertain.
---------------------------------------------------------------------------
\135\ Reena Aggarwal, Pedro A. C. Saffi and Jason Sturgess, The
Role of Institutional Investors in Voting: Evidence from the
Securities Lending Market, 70 J. Fin. 2309 (2015) (``Aggarwal
study'') (finding that while institutional investors in the
securities lending market have the capacity to engage in empty
voting, most institutional lenders prefer to recall lent shares
around record dates to reclaim voting rights rather than maintain
lending income, suggesting that empty voting may not be pervasive in
practice).
---------------------------------------------------------------------------
Reducing the minimum broker search period from 20 to five business
days could also impose costs on share lenders that seek to recall
loaned shares in order to vote.\136\ One study suggests that
institutional lenders, including pension funds and mutual funds,\137\
value voting rights and may restrict lending or recall shares around
important record dates.\138\ Under the current rule, a lender that
learns of a record date through the broker search process may have up
to 20 business days to initiate and complete a recall. Reducing the
minimum period to five business days would provide less time,\139\
limiting the lender's flexibility and increasing the possibility that
the shares are not returned before the record date.
---------------------------------------------------------------------------
\136\ See Haoyi (Leslie) Luo and Zijin (Vivian) Xu, Long-term
Value Versus Short-term Profits: When do Index Funds Recall Loaned
Shares for Voting?, 32 Corp. Governance: Int'l Rev. (2024),
available at <a href="https://onlinelibrary.wiley.com/doi/10.1111/corg.12576">https://onlinelibrary.wiley.com/doi/10.1111/corg.12576</a>;
see also Council of Institutional Investors, Securities Lending:
Everything You Ever Wanted to Know but Were Afraid to Ask (2011),
available at <a href="https://www.cii.org/files/publications/governance_basics/Primer_Securities_Lending_JUL2011.pdf">https://www.cii.org/files/publications/governance_basics/Primer_Securities_Lending_JUL2011.pdf</a>.
\137\ For mutual funds, this behavior may reflect fiduciary and
regulatory obligations to vote client proxies, rather than an
independent preference for exercising voting rights. See, e.g., 17
CFR 275.206(4)-6 (requiring registered investment advisers,
including mutual fund advisers, to adopt and implement policies and
procedures reasonably designed to ensure that client securities are
voted in the best interests of clients) and 17 CFR 270.30b1-4
(requiring registered investment companies to file their complete
proxy voting record annually on Form N-PX).
\138\ In addition, the study finds that lenders of shares place
a higher value on their vote than borrowers of shares, which
suggests that they would try to recall shares for important
meetings. See Aggarwal study supra note 135.
\139\ The Aggarwal study shows that the average and median
durations that loans remain outstanding are 16 days and one day,
respectively. Most loans have no fixed maturity and are simply
renewed each day on an open-ended basis. See id.
---------------------------------------------------------------------------
Borrowers could also face higher costs because they would have less
time to obtain replacement financing or purchase shares to satisfy a
recall. These costs may be limited because the current T+1 settlement
cycle generally provides time to complete a recall before the record
date, and borrowers would likely still have ample time to borrow or
purchase the shares without substantial market impact. The costs to
share lenders and borrowers may also be mitigated when registrants
publicly disclose record dates before beginning the broker search or
voluntarily conduct the broker search more than five business days
before the record date. We cannot estimate the magnitude of these
effects, which would depend on registrants' disclosure and broker
search practices, the frequency of share recalls, and the time
borrowers require to obtain replacement shares.
The proposed rulemaking may also impose costs on shareholders
seeking to accumulate shares or voting support before a shareholder
meeting. By shortening the period between the broker search and the
record date, the amendment could leave shareholders who learn of the
record date through that process less time to accumulate shares, recall
loaned shares, or coordinate with other investors.\140\ This could
increase the cost of shareholder campaigns and, at the margin, reduce
the frequency or likelihood of success. These constraints could also
affect other investors to the extent shareholder campaigns affect firm
value or governance outcomes that are relevant to them.\141\
---------------------------------------------------------------------------
\140\ See supra section II.D.2 for a discussion about how
shortening the broker search period may impact market participants.
\141\ See, e.g., Alon Brav et al., Governance by Persuasion:
Hedge Fund Activism and Market-Based Shareholder Influence, Oxf.
Rsch. Encyc. Econ. & Fin. (2022); Rui Albuquerque et al., Value
Creation in Shareholder Activism, 145 J. Fin. Econ. 153 (2022);
Robin Greenwood and Michael Schor, Investor Activism and Takeovers,
92 J. Fin. Econ. 362 (2009); Nicole Boyson et al., Activism Mergers,
126 J. Fin. Econ. 54 (2017); Edward Swanson et al., Are All
Activists Created Equal? The Effect of Interventions by Hedge Funds
and Other Private Activists on Long-Term Shareholder Value, 72 J.
Corp. Fin. 102144 (2022); Nicole M. Boyson and Robert M. Mooradian,
Corporate Governance and Hedge Fund Activism, 14 Rev. Derivatives
Rsch. (2011); Alon Brav et al., The Real Effects of Hedge Fund
Activism: Productivity, Asset Allocation, and Labor Outcomes, 28
Rev. Fin. Stud. 2723 (2015); Nickolay Gantchev et al., Activism and
Empire Building, 138 J. Fin. Econ. 526 (2020).
---------------------------------------------------------------------------
However, as discussed in section II.D, the current broker search
process is non-public and dissident shareholders that learn of a record
date through that process may have an informational advantage over
other investors. Shortening the period during which they can act on
that information could therefore reduce informational asymmetry, so a
cost to dissident shareholders may also represent a benefit to other
market participants. The Commission lacks data to quantify these
effects or related costs to share lenders and borrowers discussed
above. Their magnitude would depend on the time borrowers need to
purchase or borrow shares to satisfy recalls without materially
increasing transaction costs and the extent to which dissident
shareholders currently rely on advance knowledge of record dates to
accumulate shares or coordinate their activities.
We do not expect the proposed amendment to impose additional costs
on registrants by leaving insufficient time to complete the broker
search. As discussed in section II.D and section IV.A, technological
advancements, in particular the widespread adoption of the internet and
related digital
[[Page 59872]]
communication tools and the common use of proxy-service providers to
conduct broker searches electronically, have substantially accelerated
the broker search process. The Commission understands that the broker
searches can now often be completed within three days, which is shorter
than the proposed five-business-day minimum.\142\
---------------------------------------------------------------------------
\142\ See supra section IV.A and II.D.2 for information about
how technological advancements have facilitated the broker search
process.
---------------------------------------------------------------------------
5. Benefits and Costs of the Proposal To Require Contact Information on
Proxy Statement and Information Statement Cover Pages
As described in section II.E, the proposed amendment would require
the cover pages of Schedule 14A and Schedule 14C to identify a
representative who can respond to questions or comments regarding the
filing and provide that representative's name, address, and telephone
number. Unlike most of the other proposed amendments discussed in
section IV.B, this proposed amendment would impose a new compliance
requirement on registrants.
The proposed requirement would generate two categories of benefit.
First, it could facilitate communication between Commission staff and
filers and allow staff inquiries to be resolved more quickly.
Currently, the cover pages of Schedule 14A and Schedule 14C do not
require the identification of a specific contact representative, which
may require staff to identify appropriate contacts through other means.
To the extent delays in resolving staff inquiries impose costs on
registrants, including by potentially delaying the staff's review and
comment process for a filing or the scheduling of a shareholder
meeting, the proposed requirement could reduce those costs.
Second, publicly identifying an appropriate contact could also make
it easier for shareholders to direct questions to the filer. The
magnitude of this benefit would depend on how readily shareholders can
already obtain suitable information from other sources, including the
contact information already required in registration statements and
tender offer statements filed with the Commission.\143\ To the extent
that contact information for registrants is already widely available
through investor-relations websites and other sources, the incremental
benefit to shareholders from the proposed requirement may be modest.
---------------------------------------------------------------------------
\143\ We estimate that complying with the proposed requirement
to provide contact information on the cover page of every proxy and
information statement would increase the compliance cost by $62.50
per filing. See infra section IV.B.7 for information about monetized
compliance cost of adding contact information of a representative on
cover pages of proxy statement and information statement.
---------------------------------------------------------------------------
We estimate that adding a representative's contact information on
the cover page of Schedule 14A and Schedule 14C would generate a
compliance cost of approximately $63 per filing for approximately 6,111
Schedule 14A and Schedule 14C filings annually,\144\ resulting in
aggregate annual costs of approximately $380,000.\145\
---------------------------------------------------------------------------
\144\ The 6,111 filings comprise 5,757 Schedule 14A filings and
354 Schedule 14C filings, as reported in Economic Analysis Table 2.
The $62.50 per filing figure comes from section V) specifically from
PRA Table 1 (0.10 burden hours increase per response) and the
supporting calculations in PRA Table 2, using a $625 per hour figure
as the blended hourly rate.
\145\ See infra Economic Analysis Table 2 for more information
about aggregate annual monetized cost.
---------------------------------------------------------------------------
Public disclosure of a representative's name, address, and
telephone number on the cover page of Schedule 14A and Schedule 14C may
generate ancillary costs for some registrants, including the cost of
responding to unsolicited communications. These costs would likely vary
with the registrant's size and the volume of communications received.
The Commission invites commenters to provide data on these ancillary
costs.
6. Other Commission Proposals
In the Rule 14a-8 Proposal, the Commission has proposed to rescind
Rule 14a-8 in its entirety and to amend Rule 14a-4(c). If adopted as
proposed, the Federal proxy rules would (i) no longer require companies
to include in their proxy materials shareholder proposals that satisfy
certain procedural and substantive requirements established under
Federal law, (ii) companies would be provided with greater flexibility
to seek discretionary voting authority from shareholders, and
shareholders would be provided with greater control over when the
company may exercise that authority with respect to their individual
shares. The Rule 14a-8 Proposal, if adopted as proposed, could result
in an increase or a decrease in the number of exempt solicitations and
thus an increase or decrease to the benefits and costs discussed in
connection with the proposed amendments to Rule 14a-6.
The proposed rescission of Rule 14a-8 in conjunction with the
proposed amendments to Rule 14a-4(c) could reduce the number of
shareholder proposals that companies include in their proxy materials.
On one hand, exempt solicitations would remain available as an
alternative to the Rule 14a-8 submission process, and thus shareholders
may elect to use exempt solicitations for shareholder engagement.\146\
To the extent that shareholders would use exempt solicitations as an
alternative to Rule 14a-8 submissions, rescinding Rule 14a-8 in
conjunction with the proposed amendments to Rule 14a-4(c) may increase
the number of Notices of Exempt Solicitation submitted, thereby
increasing the benefits and costs discussed in connection with the
proposed amendments to Rule 14a-6(g).\147\
---------------------------------------------------------------------------
\146\ See Rule 14a-8 Proposal at section IV.D.1.b.i.
\147\ See supra section IV.A.1.b for information about the
Commission's proposal to rescind Rule 14a-8.
---------------------------------------------------------------------------
On the other hand, some Notices of Exempt Solicitation are
submitted in conjunction with the submission of shareholder
proposals.\148\ To the extent that the proposed rescission of Rule 14a-
8 in conjunction with the proposed amendments to Rule 14a-4(c) could
reduce the number of shareholder proposals that are submitted, the Rule
14a-8 Proposal would reduce the number of Notices of Exempt
Solicitation submitted, thereby diminishing the costs and benefits
stemming from the proposed amendments to Rule 14a-6(g).\149\ The net
effect of the proposed rescission of Rule 14a-8 in conjunction with the
proposed amendments to Rule 14a-4(c) on the volume of Notices of Exempt
Solicitation activity is therefore uncertain and depends on the
relative magnitudes of these substitution and complementarity effects,
which the available data do not allow us to quantify with confidence.
---------------------------------------------------------------------------
\148\ See e.g., Bhattarai study supra note 77.
\149\ See also note 77 for information about how exempt
solicitations may be related to shareholder proposals.
---------------------------------------------------------------------------
In addition, as discussed in section IV.B.4, shortening the broker
search period could leave shareholders who learn of the record date
through that process less time to accumulate shares, recall loaned
shares, or coordinate with other investors. This could increase the
cost of shareholder campaigns and, at the margin, reduce the frequency
or likelihood of success. To the extent that the proposed amendments to
Rule 14a-4(c) independently reduce the expected probability of success
of proposals submitted outside of Rule 14a-8, the proposed amendment to
Rule 14a-13 could compound that effect, further reducing the frequency
or likelihood of success of shareholder campaigns. These constraints
could also affect other investors to the extent shareholder
[[Page 59873]]
campaigns affect firm value or governance outcomes that are relevant to
them.
7. Aggregate Monetized Benefits and Costs
Throughout this economic analysis, we have estimated monetized
benefits and costs per filing and submission. In this section, we
present aggregate measures of these monetized effects. These totals
include only benefits and costs that are monetized in the economic
analysis and thus do not encompass all of the proposed amendments'
benefits and costs.
a. Annual Monetized Benefits and Costs
Economic Analysis Tables 1 and 2 report the benefits and costs,
respectively, that are monetized in this economic analysis, aggregated
across all affected entities and instances of filing and submission
each year. We are only able to quantify the direct benefits and costs
of the rule that are due to the compliance cost savings and increases,
respectively. To aggregate these monetized effects we use estimates of
the number of affected filings and burdens under the Paperwork
Reduction Act of 1995 \150\ (the ``PRA'') in section V. As a caveat,
these are averages, and individual registrants' costs and benefits may
differ, depending on their current status and relief already available
to them, the extent to which they elect to avail themselves of the
proposed compliance accommodation, and their existing compliance and
reporting practices and service providers and costs associated with
them.
---------------------------------------------------------------------------
\150\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
We estimate that the total aggregate annual monetized benefit is
approximately $7.7 million and the total aggregate annual monetized
cost is approximately $450,000. We discuss these estimates further in
sections IV.B.1, IV.B.3, and IV.B.5.
BILLING CODE 8011-01-P
[[Page 59874]]
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BILLING CODE 8011-01-C
[[Page 59876]]
b. Present Values and Annualized Values of Monetized Benefits and Costs
Consistent with the requirements of Executive Order 12866, the
Commission reports estimated total monetized benefits and costs for all
affected entities in two additional ways specified in OMB Circular A-
4.\151\ The two presentations are intended to address the fact that the
various benefits and costs of the proposed amendments would not accrue
at the same point in time; rather, benefits and costs that accrue
sooner are generally more valuable than those that occur later in
time.\152\ We report (1) the present values of expected benefits and
costs that are monetized in our Economic Analysis, aggregated across
all affected entities, over a 10-year time horizon, starting in 2026,
as well as (2) the annualized values over the same time horizon that
are derived from the present values. This time horizon represents the
period over which the principal benefits and costs that are monetized
in the Economic Analysis are expected to accrue.\153\ The present
values and annualized values account for the timing of benefits and
costs through discounting, which is a procedure that accounts for the
time value of money.\154\ Economic Analysis Table 3 reports the present
values of the aggregate monetized benefits and costs from Economic
Analysis Tables 1 and 2, respectively. The analysis uses annual real
discount rates of three percent and seven percent over a 10-year time
horizon, starting in 2026.\155\ We estimate that the present value of
total monetized benefits is approximately $67.1 million using a three
percent discount rate and $56.3 million using a seven percent discount
rate. We estimate that the present value of total monetized cost is
approximately $3.9 million using a three percent discount rate and $3.2
million using a seven percent discount rate.
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\151\ See E.O. 12866 (Sept. 30, 1993), 58 FR 51735, 51741 (Oct.
4, 1993) (requiring agencies to provide an analysis of benefits,
costs, and regulatory alternatives to OIRA for significant
regulatory actions); OMB, Circular A-4, at 31-34, 45 (Sept. 17,
2003) (providing guidance to agencies regarding compliance with E.O.
12866); see also E.O. 14215 (Feb. 18, 2025), 90 FR 10447, 10448
(Feb. 24, 2025) (requiring all Federal agencies, including the
Securities and Exchange Commission, to comply with E.O. 12866). In
addition, E.O. 14192 requires agencies to provide their best
approximation of the total costs or savings associated with each new
regulation or repealed regulation consistent with the analyses
required by E.O. 12866. See E.O. 14192 (Jan. 31, 2025), 90 FR 9065,
9066 (Feb. 6, 2025).
\152\ See Circular A-4, at 32.
\153\ See id. at 31 (stating that ``[t]he ending point should be
far enough in the future to encompass all the significant benefits
and costs likely to result from the rule''). For the purposes of
this analysis, we assume the effective date of the proposed
amendments, as well as the start year for the analysis's time
horizon, is the present year.
\154\ See id. at 32 (``The Rationale for Discounting'') and 45
(``Treatment of Benefits and Costs over Time''); see also OIRA,
Regulatory Impact Analysis: A Primer, at 11 (Aug. 15, 2011),
available at <a href="https://www.reginfo.gov/public/jsp/Utilities/circular-a-4_regulatory-impact-analysis-a-primer.pdf">https://www.reginfo.gov/public/jsp/Utilities/circular-a-4_regulatory-impact-analysis-a-primer.pdf</a> (``To provide an
accurate assessment of benefits and costs that occur at different
points in time or over different time horizons, an agency should use
discounting. Agencies should provide benefit and cost estimates
using both 3% and 7% annual discount rates expressed as a present
value as well as annualized.''); Harvey S. Rosen and Ted Gayer,
Public Finance 151 (8th ed. 2008) (defining present value as ``the
value today of a given amount of money to be paid or received in the
future'').
\155\ This approach is consistent with OMB Circular A-4. See
Circular A-4, at 31-34 (stating that, ``[f]or regulatory analysis,
[agencies] should provide estimates of net benefits using both 3%
and 7%'' discount rates and discussing why those rates are
reasonable default rates). Also, we use a mid-year discount rate.
See OMB, Circular A-94, at 21-22 (Oct. 19, 1992) (stating that,
``When costs and benefits occur in a steady stream, applying mid-
year discount factors is more appropriate.'').
[GRAPHIC] [TIFF OMITTED] TP21SE26.064
Economic Analysis Table 3 reports annualized aggregate monetized
benefits and costs using real discount rates of three percent and seven
percent over a 10-year horizon.\156\ The lump sum present values of
aggregate monetized benefits and costs reported in Economic Analysis
Table 3 are converted in Economic Analysis Table 4 into a constant
stream of annualized benefits and costs over a 10-year time horizon,
starting in 2026.\157\ Because the annual aggregated monetized benefits
and costs reported in Economic Analysis Tables 1 and 2, respectively,
are identical in every year of the 10-year time horizon and because
there are no initial benefits or costs at Time 0, the annualized
[[Page 59877]]
aggregate monetized benefits and costs in Economic Analysis Table 4 are
the same as the annual aggregate monetized benefits and costs in
Economic Analysis Tables 1 and 2, respectively.\158\ We estimate that
annualized total monetized benefits are approximately $7.7 million per
year using both a three percent discount rate and a seven percent
discount rate. We estimate that annualized total monetized costs are
approximately $445,000 per year using both a three percent discount
rate and a seven percent discount rate.
---------------------------------------------------------------------------
\156\ This approach is consistent with the recommended treatment
of benefits and costs over time in Circular A-4. See Circular A-4 at
45 (``You should present annualized benefits and costs using real
discount rates of 3 and 7%'').
\157\ For each discount rate, the annualized monetized benefits
(costs, respectively) in Economic Analysis Table 4 represent the
constant annual stream of benefits (costs, respectively) whose
present value over the time horizon equates the corresponding
present value in Economic Analysis Table 3. See infra note b,
Economic Analysis Table 4 for additional calculation details.
\158\ The annualized benefits and costs present these values
over the 10-year time horizon, starting in the present year.
[GRAPHIC] [TIFF OMITTED] TP21SE26.065
C. Effects on Efficiency, Competition, and Capital Formation
1. Effects on Efficiency
The proposed amendments could affect efficiency through several
channels. Several of the proposed amendments address requirements that
have remained unchanged while the need for them has evolved as a result
of technological developments. To the extent that eliminating or
shortening these requirements removes regulatory burden that is no
longer justified by the investor protection rationale that originally
motivated it, the proposed amendments would improve regulatory
efficiency. For instance, registrants relying on a previously filed
Form 10-K under amended Rule 14a-3 would no longer also need to comply
with separate requirements in Rule 14a-3(b) regarding disclosure
required in an annual report to security holders. Registrants would
also no longer need to observe minimum periods under Rule 14a-13, Note
D.3 to Schedule 14A, and the corresponding provisions of Forms S-4 and
F-4 that may exceed the time now required to complete the relevant
processes. To the extent investors would continue to receive
substantially the same information, these amendments would allow
disclosure to be produced and disseminated using fewer resources,
improving productive efficiency.
The proposed rescission of Rule 14a-6(g) presents a different case.
It would reduce the resources expended by shareholders preparing
Notices of Exempt Solicitation and, in some cases, by registrants
responding to them, but it would also eliminate a channel through which
information is disseminated to other shareholders. Its effect on
efficiency would therefore depend on the value of the information no
longer made available through EDGAR relative to the resources saved.
The rescission of Rule 14a-6(g) could also improve informational
efficiency if removing voluntary Notices of Exempt Solicitation makes
decision-useful information on registrants' EDGAR pages easier to
identify.\159\ However, it could simultaneously reduce informational
efficiency by making it more difficult for shareholders and registrants
to learn how large shareholders view and intend to vote on significant
matters, to the extent that information is not disseminated through
other channels. Exempt solicitations may also provide a relatively low-
cost means for shareholders to influence boards or attract third-party
bids when a proxy contest or shareholder exit is impractical.\160\ If
the Rule 14a-6(g) rescission causes shareholders to rely on more costly
alternatives, such as proxy contests, some efforts to influence
management at underperforming registrants may no longer occur,
potentially reducing allocative efficiency.\161\
---------------------------------------------------------------------------
\159\ See supra section IV.B.3 for information about benefits of
proposed elimination of requirement to submit Notices of Exempt
Solicitation.
\160\ See, e.g., Bhattarai study supra note 77.
\161\ See supra section IV.B.3 for information about the cost of
the proposed elimination of the requirement to submit Notices of
Exempt Solicitation.
---------------------------------------------------------------------------
The proposed requirement to include contact information on the
cover pages of Schedule 14A and Schedule 14C would impose a small
incremental compliance cost on registrants, partially offsetting these
productive efficiency gains.\162\ To the extent that the contact
information requirement reduces the time and resources required to
resolve staff inquiries, it could also generate modest efficiency gains
for the Commission and for registrants that benefit from more timely
resolution of those inquiries.
---------------------------------------------------------------------------
\162\ See supra section IV.B.5.
---------------------------------------------------------------------------
Shortening the minimum broker search period could also affect
informational efficiency through the securities-lending market. Stock
lenders may have less time to recall shares before a record date,
increasing the costs or reducing the flexibility associated
[[Page 59878]]
with lending. Because securities lending and short selling contribute
to price discovery,\163\ a sufficiently large reduction in lending or
short selling activity could reduce price efficiency,\164\ particularly
for securities of registrants expected to hold special meetings. As
discussed in section IV.B.4, these costs may be small as long as
borrowers still have sufficient time to manage their transaction costs
when they purchase or borrow shares to satisfy the recall. Any such
costs could also be mitigated to the extent that registrants
voluntarily disclose record dates in advance of the broker search or
elect to conduct the broker search more than five business days before
the record date.
---------------------------------------------------------------------------
\163\ See, e.g., Truong X. Duong et al., The Information Value
of Stock Lending Fees: Are Lenders Price Takers?, 21 Rev. Finance
2353 (2017).
\164\ Economic literature shows that short selling improves
price efficiency by allowing informed traders to trade on negative
information and incorporate it into prices. See, e.g., Jonathan M.
Karpoff and Xiaoxia Lou, Short Sellers and Financial Misconduct, 65
J. of Fin. 1879 (2010); Ekkehart Boehmer, Charles M. Jones and
Xiaoyan Zhang, Which Shorts Are Informed?, 63 J. of Fin. 491 (2008);
Lauren Cohen, Karl B. Diether and Christopher J. Malloy, Supply and
Demand Shifts in the Shorting Market, 62 J. of Fin. 2061 (2007). The
evidence on the effect of constraints on short selling on price
efficiency, however, is mixed. Some studies suggest that constraints
on short selling impede price efficiency by slowing or preventing
the incorporation of negative information into prices. See, e.g.,
Ekkehart Boehmer, Charles M. Jones and Xiaoyan Zhang, Shackling the
Short Sellers: The 2008 Shorting Ban, 26 Rev. of Fin. Studies 1363
(2013); Pedro A.C. Saffi and Kari Sigurdsson, Price Efficiency and
Short Selling, 24 Rev. of Fin. Studies 821 (2011). Other studies,
however, suggest that constraints need not result in overpricing, as
rational investors anticipate and incorporate such constraints into
prices. See e.g., Douglas W. Diamond and Robert E. Verrecchia,
Constraints on Short-Selling and Asset Price Adjustment to Private
Information, 18 J. of Fin. Econ. 277 (1987). See supra section
IV.B.4.
---------------------------------------------------------------------------
Shortening or eliminating the minimum periods under Note D.3 to
Schedule 14A and Forms S-4 and F-4 could reduce the window available
for a competing bidder to emerge, conduct diligence, and submit a
superior offer before the transaction closes. To the extent a longer
window would have allowed a higher-valuing acquirer to emerge or
increased consideration to target shareholders, narrowing it could
result in an efficiency cost. We cannot quantify this effect, which
would depend on the frequency of competing bids during the minimum
period and market participants' ability to pursue competing
transactions on a shorter timeline.
2. Effects on Competition
The Commission does not expect the proposed amendments to have a
substantial impact on competition overall, though it discusses below
certain marginal effects of these proposed amendments.
The elimination of the Notice of Exempt Solicitation requirement
could modestly affect the relative ability of different shareholders to
publicize their views to other shareholders at low cost. According to a
study,\165\ historically, filers of Notices of Exempt Solicitation have
been predominantly public pension funds, union funds, and hedge funds
or other institutional investors. Following rescission, filers that
currently rely on this low-cost channel would need to use direct
engagement, independent proxy solicitations, or other communication
channels, which may require greater resources than some of these filers
currently have available, while entities with greater existing
resources and established communication channels would be less
affected. The magnitude of this effect is uncertain and would depend,
in part, on the extent to which affected shareholders shift to
alternative communication channels and the relative effectiveness of
those channels following the rescission, as discussed in section
IV.B.3.
---------------------------------------------------------------------------
\165\ See supra note 77.
---------------------------------------------------------------------------
Shortening the broker search period could affect the relative
positions of incumbent management and shareholders seeking to influence
a registrant's governance. As discussed in section IV.B.4, the
amendment would reduce the time available for a shareholder that learns
of a record date through the broker search process to accumulate shares
or coordinate with other shareholders, while imposing no comparable
constraint on the registrant conducting the search. However, the non-
public nature of the current broker search process means that dissident
shareholders who learn of the record date through the broker search
currently possess an informational advantage that is not shared by
other investors. To the extent that the proposed amendment reduces this
informational asymmetry, what appears as a competitive cost to
dissident shareholders may simultaneously represent a competitive
benefit to other market participants.
The proposed amendments to Rule 14a-3, Note D.3 to Schedule 14A,
and the contact information requirement are not expected to generate
significant effects on competition among the registrants in the same
product market.\166\ These amendments reduce compliance burdens for
registrants and update procedural requirements whose original rationale
has been substantially displaced by technological developments. In
addition, smaller reporting companies would receive no benefit from
rescission of the stock-performance-graph requirement because they are
not currently subject to it, while savings from eliminating annual-
report delivery would depend on the size of the registrant's
shareholder base and its current delivery practices. The compliance-
cost reductions discussed in sections IV.B.1 and IV.B.2 would vary
across registrants. To the extent that compliance cost savings from
these amendments vary across registrants by size or shareholder base
composition, they could have modest effects on competition among
registrants in the product market, but we expect such effects to be
small.
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\166\ Some registrants compete with other registrants in product
markets, where they offer similar goods or services and compete for
customers through strategies such as pricing, quality, or other
product differentiation.
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3. Effects on Capital Formation
The Commission does not expect the proposed amendments to have a
substantial impact on capital formation overall, though it discusses
below certain marginal effects of these proposed amendments.
Shortening the minimum broker search period could impact capital
formation through several channels. It could reduce the period during
which intervening events create uncertainty for pending transactions
and reduce the opportunity for record-date information to be disclosed
selectively before public announcement. These effects could improve
perceptions of market fairness and support capital formation.\167\
Conversely, if the shorter period increases the costs or reduces the
flexibility of securities lending and short selling, it could weaken
price efficiency and adversely affect capital formation. As discussed
in sections IV.B.4 and IV.C.1, the magnitude of this effect would
depend on the extent to which share lenders rely on the broker search
process to learn of upcoming record dates, the flexibility available to
borrowers to obtain replacement financing within the shortened period,
and the overall significance of reduced lending and short selling
activity for price discovery in the affected securities.
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\167\ See supra section IV.B.4 for information about the
benefits of shortening the minimum broker search period.
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Similarly, the proposed elimination of the minimum 20-business-day
period in Forms S-4 and F-4 could affect capital formation through its
effects on transaction timing and cost. These forms register securities
issued in business combinations, and the current
[[Page 59879]]
requirement establishes a minimum period between when the prospectus is
sent and the shareholder vote. To the extent that this period delays
completion of a transaction, eliminating it could reduce the time and
cost associated with registering securities in business combinations.
As discussed in section IV.B.2, we cannot quantify this effect, which
would depend on factors including, but not limited to, the frequency
and nature of transactions and other corporate actions subject to the
current requirements, the magnitude of delays and associated costs
attributable to the current minimum period, the extent to which
investors use the full 20-business-day period to request, receive, and
review incorporated documents before voting, and the extent to which
affected registrants currently manage timing risk through other means.
The proposed amendments may also affect capital formation
positively or negatively by changing the costs of maintaining
reporting-company status and the information available to investors.
Reductions in recurring proxy-compliance costs (including compliance
cost reductions from eliminating the annual report delivery
requirement, the stock performance graph requirement, and the Notice of
Exempt Solicitation requirement) \168\ could marginally lower the cost
of becoming or remaining a reporting company, supporting capital
formation. At the same time, if the amendments to Rule 14a-3 and Note
D.3 to Schedule 14A reduce the information investors receive or
increase the cost of obtaining or evaluating it enough, investors may
require higher returns, which could increase registrants' cost of
capital on the margin. With respect to Rule 14a-3, as discussed in
section IV.B.1, some retail investors may find the Form 10-K less
readable than the annual report to security holders, which could affect
the quality of their investment and voting decisions. With respect to
Note D.3, as discussed in section IV.B.2, shareholders could have less
time to review incorporated documents before a vote, which could affect
their assessment of the transaction or corporate action being voted
upon. These effects would likely be marginal and their magnitude would
depend, among other things, on whether registrants choose to continue
voluntarily preparing annual reports to security holders in the absence
of a delivery requirement, the extent to which investors rely on those
reports rather than the Form 10-K and other filings, and the extent to
which incorporated documents are accessible to investors through EDGAR
and active hyperlinks in the incorporating submission.
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\168\ See supra sections IV.B.1, and IV.B.3.
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The proposed rescission of Rule 14a-6(g) could similarly affect
capital formation on the margin. The rescission could reduce the
frequency of efforts by large shareholders to influence management at
underperforming registrants, which could affect the quality of capital
allocation decisions at registrants where shareholder monitoring is
currently an important governance mechanism. We are unable to quantify
these effects because they depend on behavioral responses (e.g.,
changes in investor information-gathering practices, short-selling
activity, shareholder engagement, and transaction timing decisions)
that cannot be reliably estimated with available data. We invite
commenters to provide data on these effects.
The proposed contact information requirement is not expected to
generate significant capital formation effects. The compliance cost of
the requirement is modest, and any benefits from improved communication
efficiency between Commission staff and registrants are unlikely to
affect registrants' cost of capital in a material way.
D. Reasonable Alternatives
1. Reduce Rather Than Eliminate the Minimum Period for Proxy Statements
Incorporating Documents by Reference
The proposed amendments would eliminate Note D.3 to Schedule 14A
and the corresponding minimum-period requirements in General
Instruction A.2 to Forms S-4 and F-4. As an alternative, the Commission
could retain a shorter minimum period, such as ten business days.
This alternative would preserve a minimum period for security
holders to request, receive, and review documents incorporated by
reference into proxy statements or prospectuses before voting, while
reducing the potential delay, cost, and uncertainty associated with the
current 20-business-day period. A shorter fixed period would also
provide registrants and their counterparties with certainty about the
applicable requirement.
The economic effects of this alternative would depend on how the
registrant furnishes its proxy materials. Registrants delivering a full
set of proxy materials under Rule 14a-16(n) are not subject to Rule
14a-16(a)'s timing requirement and thus Note D.3 may factor into their
timing considerations. The difference between this alternative and the
proposal would thus be relevant to registrants that deliver full sets
of proxy materials and incorporate documents by reference, and among
transactions using Forms S-4 and F-4.
Compared to the proposed amendments, shortening (as opposed to
eliminating) the 20-business-day period would lead to smaller
reductions in the time and uncertainty associated with completing
transactions requiring shareholder approval,\169\ since some minimum
waiting period would remain. However, this approach would preserve more
time for security holders to request, receive, and review documents
incorporated by reference into proxy materials before voting.
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\169\ See supra section IV.C.2 (discussing how the current
minimum 20-business-day period may introduce transaction delays and
uncertainty).
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2. Disallow Only Voluntary Filing of Notices of Exempt Solicitation
The proposed amendments would rescind Rule 14a-6(g), thus
eliminating the requirement for large shareholders to submit Notices of
Exempt Solicitation. As an alternative, we could amend the existing
rule to prevent voluntary filings of Notices of Exempt Solicitation by
shareholders that do not meet the requirements of the large shareholder
definition. Such an alternative would allow the continued use of a
cost-efficient vehicle for some shareholders to inform other
shareholders about their exempt solicitations. Also, it could be
beneficial to registrants as it would allow them access to potentially
useful information on exempt solicitations. Like the proposed
amendments, such an alternative would also increase costs for
shareholders who now file such notices voluntarily because they would
otherwise be limited to other ways to communicate with other
shareholders. It would also increase costs for large shareholders who
would have to determine whether they do indeed meet the requirements of
the large shareholder definition. If such costs are large enough, large
shareholders may disclose exempt solicitations via other channels
(e.g., press releases).
3. Treat Notices of Exempt Solicitation Similarly to Insider Filings
Another alternative regarding the rescission of Rule 14a-6(g) would
be to modify the registrant's EDGAR page such that Notices of Exempt
Solicitation are displayed similarly to insider filings such as Form 3,
Form 4, and Form 5, thereby preventing the registrant's EDGAR page from
serving as a repository for a substantial number of
[[Page 59880]]
voluntary communications that obscure mandatory reports, statements,
and other disclosures. Under that alternative, a Notice of Exempt
Solicitation would not show up, by default, in a registrant's EDGAR
filings but would show up in the EDGAR filings of the shareholder
providing the notice. Under such an alternative, other shareholders and
investors that are interested in the information provided by such
notices would have to search for them under the filing shareholder's
EDGAR filings. The EDGAR Full-Text Search \170\ tool allows searches by
registrant and date range, as well as for specified categories of
filings, including but not limited to all annual, quarterly, and
current reports; beneficial ownership reports; exempt offerings;
registration statements and prospectuses. Such an alternative would
allow the continued use of a cost-efficient vehicle for some
shareholders to inform other shareholders about their exempt
solicitations. Also, it would benefit registrants by allowing them
access to potentially useful information on exempt solicitations. Such
an alternative could also marginally increase costs for shareholders
that are interested in the information as they now would have to search
for such notices in the EDGAR filings of multiple filers, instead of
the EDGAR filings of a single registrant.
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\170\ See EDGAR Full-Text Search, available at <a href="https://www.sec.gov/edgar/search/">https://www.sec.gov/edgar/search/</a>.
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4. Shorten the Broker Search Period to a Different Number of Days
The proposed amendments to Rule 14a-13 would shorten the minimum
broker search period from 20 business days to five business days. The
Commission could alternatively shorten the broker search period to a
different number of days. The magnitude of these economic effects
relative to the proposal depends on how much time is enough to mitigate
the costs while achieving the benefits.
Relative to the proposal, a broker search period longer than five
days but shorter than 20 days would have lower benefits than the
proposal. For example, the alternative would result in an increased
risk of external issues arising before the meeting, an increased risk
of trading on non-public information about the meeting, and increased
opportunities for empty voting. At the same time, such an alternative
could reduce the potential costs on share lenders and share borrowers
and could reduce the costs faced by dissident shareholders, which could
improve the likelihood of success in their campaigns. If these costs of
the proposal were to prove to be significant relative to an alternative
of a longer broker search period, registrants could always voluntarily
provide more than five days for the broker search.
Relative to the proposal, a broker search period shorter than five
days could have greater benefits than the proposal. The costs, however,
could also be greater. In particular, securities lenders would have
even less flexibility on timing their loan recalls and dissidents would
have even less time to build support for shareholder campaigns,
increasing the costs of shareholder campaigns and reducing the
likelihood of their success.
5. Shorten the Rule 14b-1 and Rule 14b-2 Response Periods in Addition
to the Proposed Amendments, and Consider Treating Investment Companies
Differently
The proposed amendment to Rule 14a-13 would shorten the minimum
broker search period from 20 business days to five business days. As a
related alternative, the Commission could also shorten the response
periods established under Rules 14b-1 and 14b-2, which govern the
obligations of brokers, dealers, banks, and other intermediaries to
respond to broker search inquiries and forward proxy materials to
beneficial owners.
Under current Rule 14b-1(b)(1), a registered broker or dealer must
respond to a registrant's broker search inquiry no later than seven
business days after receipt of the inquiry with the approximate number
of customers who are beneficial owners of the registrant's securities.
Under current Rule 14b-2(b), a bank or other intermediary must respond
within one business day with the names and addresses of any respondent
banks, and within seven business days with the approximate number of
beneficial-owner customers.
Under the proposed five-business-day minimum broker search period,
the existing seven-business-day response period for brokers and dealers
under Rule 14b-1(b)(1) and the seven-business-day response period for
banks under Rule 14b-2(b) would exceed the proposed minimum broker
search period itself. If intermediaries were to respond within the
maximum time currently permitted under Rules 14b-1 and 14b-2,
registrants would not receive responses before the record date when
conducting a broker search at the proposed five-business-day minimum.
This potential misalignment could limit the practical utility of the
shortened broker search period for registrants and their
counterparties.
To address this potential misalignment, the Commission could
shorten the response periods under Rules 14b-1 and 14b-2 in conjunction
with the proposed amendment to Rule 14a-13. For example, the Commission
could shorten the seven-business-day response period for brokers and
dealers under Rule 14b-1(b)(1) and the corresponding seven-business-day
response period for banks under Rule 14b-2(b) to a period consistent
with the proposed five-business-day minimum broker search period, such
as three business days. The one-business-day response period for banks
to provide the names and addresses of respondent banks under Rule 14b-
2(b) could be retained, as it already falls within the proposed minimum
broker search period.
This alternative would generate benefits by ensuring that the
shortened broker search period under Rule 14a-13 operates effectively
in practice and that intermediaries' response obligations are
consistent with the shortened timeframe. To the extent that the current
seven-business-day response periods under Rules 14b-1 and 14b-2 would
otherwise constrain registrants' ability to complete the broker search
process within the proposed five-business-day minimum period,
shortening those response periods would amplify the benefits of the
proposed Rule 14a-13 amendment, including reductions in transaction
delay, costs, and uncertainty, and a narrower window for information
leakage regarding upcoming record dates.
This alternative could also impose costs on brokers, dealers, and
banks. Shorter response periods would require intermediaries to
complete their internal processes for identifying beneficial owners and
compiling responses more quickly. Intermediaries that currently rely on
the full seven-business-day response period might have to invest in
operational infrastructure, personnel, or automated systems. These
costs may vary across intermediaries depending on their size,
technological capabilities, and the complexity of their beneficial-
owner records.\171\ The Commission lacks data with which to estimate
the magnitude of these costs and invites commenters to provide
information on this question.
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\171\ See supra section IV.A for information about current
practices of record holders.
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The Commission also recognizes that investment companies may
present distinct considerations in this context. As discussed in
section II.D, investment companies often have large, diffuse, and
retail-oriented shareholder bases and are
[[Page 59881]]
frequently organized in multiple classes and series. Many investment
companies, including open-end funds and unlisted closed-end funds, do
not hold shareholder meetings annually, and their beneficial-owner
records may be more complex than those of operating companies. These
characteristics could make it more challenging for brokers, dealers,
and banks holding investment company securities to compile and transmit
accurate beneficial-owner information within a shortened response
period. Accordingly, were the Commission to shorten the response
periods under Rules 14b-1 and 14b-2, the Commission could consider
retaining longer response periods for investment company solicitations.
The Commission could also consider adopting a different minimum broker
search period for investment companies under Rule 14a-13, as to which
we requested comment in section II.D. Introducing a different minimum
broker search period under Rule 14a-13 for investment companies, or
different response periods for investment companies under Rules 14b-1
and 14b-2, could create complexity. The appropriate periods, if
different, would depend on the time required for intermediaries to
accurately identify and report beneficial owners of investment company
securities, which may differ from the time required for operating
companies. We request comment and supporting data on whether investment
companies warrant different treatment under Rules 14a-13, 14b-1, and
14b-2, and if so, what specific periods would be appropriate.
E. Request for Comment
We request comments on all aspects of our economic analysis,
including the potential costs and benefits of the proposed amendments
and alternatives, and whether the proposed amendments, if adopted,
would promote efficiency, competition, and capital formation.
Commenters are requested to provide empirical data, estimation
methodologies, and other factual support for their views, in
particular, on the estimates of costs and benefits. In addition, we
request comments on the following:
20. Have we correctly characterized the baseline for the Proposed
Amendments? If not, what other baseline information is relevant to the
Proposed Amendments?
21. Have we correctly characterized the benefits and costs to
affected parties in the above analysis? Are there other effects that
should be considered? Please provide supportive data to the extent
available.
22. What would be the costs and benefits for a registrant of the
proposed elimination of the requirement to submit Notices of Exempt
Solicitation? For instance, to what extent do registrants currently
rely on Notices of Exempt Solicitation submitted on EDGAR, rather than
on other channels such as press releases and public announcements, to
learn of exempt solicitations conducted by large shareholders? Please
provide estimates where possible.
23. What would be the costs and benefits for investors of the
proposed elimination of the requirement to submit Notices of Exempt
Solicitation? Please provide estimates where possible.
24. What would be the costs and benefits for a registrant of the
proposed elimination of the requirement to send the proxy statement at
least 20 business days before the meeting date if it incorporates
information by reference? For instance, how frequently do investors use
the full 20-business-day period to request, receive, and review
incorporated documents before voting? Please provide estimates where
possible.
25. What would be the costs and benefits for investors of the
shortening of the minimum broker search period? Please provide
estimates where possible.
26. What would be the costs and benefits for securities lenders of
the shortening of the minimum broker search period? Please provide
estimates where possible.
27. What would be the costs and benefits for short sellers of the
shortening of the minimum broker search period? Please provide
estimates where possible.
28. What would be the costs and benefits for a registrant of the
proposed elimination of the requirement to furnish annual reports to
security holders? In particular, what are the current costs to
registrants of delivering annual reports to security holders, and how
do those costs vary depending on registrant size, shareholder base, the
propor
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