SEC Bars Filing of Exempt Solicitations on EDGAR for All But the Largest Shareholders

Late last week, the SECʼs Division of Corporation Finance updated its Compliance and Disclosure Interpretations to advise that, going forward, the staff will object to using the SECʼs EDGAR filing platform to file Rule 14a-2(b) Notices of Exempt Solicitation by any shareholder holding less than $5 million in shares of the company to which the exempt solicitation relates.  (See SEC Compliance and Disclosure Interpretations, Question 126.6).  Though the filing rule (Rule 14a-6) mandates that Notices be filed on Edgar if the shareholder owns $5 million in shares of the company, the staff has previously accepted voluntary filings by those shareholders with holdings under that threshold amount.

This change will prevent the vast majority of shareholders from filing their Notices of Exempt Solicitation on the EDGAR platform, a vehicle via which shareholders have been able to communicate with other shareholders regarding recommendations either in support of or against resolutions put forth for a vote in a company’s proxy statement.  It will deprive investors of valuable information needed to evaluate long-term risks and opportunities for their companies.

This gratuitous SEC action represents yet another attack on shareholder rights, in particular censoring the ability of all but the very largest shareholders to have an ownership voice in the companies that they hold.  It is part of a larger pattern at the current SEC of privileging management and issuer power over the rights of the very investors the SEC was charged by Congress to protect, eroding transparency and sound corporate governance.  It is also part of a larger push by political opponents to reduce or eliminate corporate accountability mechanisms that provide sensible guardrails on corporate conduct. ICCR will work with allies to push back on this latest action by the SEC.  We are advising all members to continue to draft exempt proxy solicitations to support their resolutions filed, as planned.  We will work with our allies to ensure that these proxy solicitations are dispersed to the broadest group of investors as possible, as well as to proxy advisors and other key stakeholders.  This is a time for courage, creativity and collaboration and those values will continue guiding our efforts in the weeks and months ahead.