E-Proxy Rules for Online Annual Reports

May 2009

On June 20, 2007, the United States Securities and Exchange Commission voted to require all public companies to make their annual meeting materials available online. Final rules were issued on July 26, 2007, in the form of amendments to the proxy rules promulgated pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act"). The final rules required compliance by large accelerated filers beginning on January 1, 2008, and by all other filers (including registered investment companies) beginning on January 1, 2009.

Under the "e-proxy" rules there are two methods by which issuers may deliver their proxy materials, the "notice only" option or the "full set" option. Under the notice only option, the issuer must post all of its proxy materials on a website, and send shareholders a notice that the materials are available online. This notice must be mailed at least forty (40) calendar days before the shareholder meeting.

The notice must contain the following information:

The date, time, and location of the meeting or, if corporate action is to be taken by written consent, the earliest date on which the corporate action may be effected;
A clear and impartial identification of each separate matter intended to be acted on, and the issuer's recommendations, if any, regarding those matters, but no supporting statements;
A list of the materials being made available at the specified Web site;
(1) A toll-free telephone number; (2) an e-mail address; and (3) an Internet Web site address where the shareholder can request a copy of the proxy materials, for all meetings and for the particular meeting to which the Notice relates;
Any control/identification numbers that the shareholder needs to access his or her proxy card;
Instructions on how to access the proxy card, provided that such instructions may not enable a shareholder to execute a proxy without having access to the proxy statement; and
Information about attending the shareholder meeting and voting in person.

The website where the materials are to be posted must comply with guidelines set forth in the e-proxy rules. Among other requirements, the materials must be made available in a format convenient for both online reading and printing on paper. The issuer must also provide shareholders with a means to execute proxies at the time the notice is sent to the shareholders. These methods can include an electronic voting platform (which is merely an option, it is not required), a toll-free telephone number, or a printable or downloadable proxy card. If a telephone number is provided for voting, it may appear on the website, but may not be included in the notice.

Any shareholder may request paper copies of the proxy materials, and the website must include a toll-free telephone number and an email address where shareholders can make such a request. The website must be maintained in a manner that protects the anonymity of any person accessing the website, and the issuer must provide shareholders with the opportunity to make a permanent election with respect to receiving proxy materials electronically or by the traditional method. The specific requirements as to the form of the notice, the information to be included and the website requirements are set forth in Rule 14a-16 promulgated under the Exchange Act.

Under the full set option, an issuer will follow substantially the traditional delivery procedures for paper materials (the proxy statement and annual report). However, the information described above on the notice must be included in the proxy statement and proxy card, and the issuer must post the proxy materials on a publicly available website that meets the requirements described above.

Issuers should consider issues of timing, convenience and cost when deciding which method to use. For example, the notice only option will likely be less expensive for issuers, but the materials must be posted on the website significantly earlier than proxy materials traditionally had been provided. Issuers should also consider whether its shareholders are more likely to respond to electronic or paper communications when deciding which method to use.

For additional information on this topic, please do not hesitate to contact Mark J. Tarallo or any other member of the Public Company practice group.

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