Universal Internet Availability of Proxy Materials, 4176-4188 [E7-1184]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 72, Number 18 (Monday, January 29, 2007)]
[Proposed Rules]
[Pages 4176-4188]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1184]



[[Page 4175]]

-----------------------------------------------------------------------

Part IV





Securities and Exchange Commission





-----------------------------------------------------------------------



17 CFR Part 240



Universal Internet Availability of Proxy Materials; Proposed Rule

Federal Register / Vol. 72, No. 18 / Monday, January 29, 2007 / 
Proposed Rules

[[Page 4176]]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release Nos. 34-55147; IC-27672; File No. S7-03-07]
RIN 3235-AJ79


Universal Internet Availability of Proxy Materials

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: We are proposing amendments to the proxy rules under the 
Securities Exchange Act of 1934 that would require issuers and other 
soliciting persons to furnish proxy materials to shareholders by 
posting them on an Internet Web site and providing shareholders with 
notice of the availability of the proxy materials. In a separate 
release, we concurrently are adopting rules that allow issuers and 
other soliciting persons to voluntarily furnish proxy materials to 
shareholders in this manner. The proposed amendments are intended to 
provide all shareholders with the ability to choose the means by which 
they receive proxy materials, to expand use of the Internet to 
ultimately lower the costs of proxy solicitations, and to improve 
shareholder communications.

DATES: Comments should be received on or before March 30, 2007.

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

Electronic Comments

     Use the Commission's Internet comment form https://
www.sec.gov/rules/proposed.shtml; or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number S7-03-07 on the subject line; or
     Use the Federal eRulemaking Portal https://
www.regulations.gov. Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number S7-03-07. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on its Internet Web site 
https://www.sec.gov/rules/proposed.shtml. Comments also are available 
for public inspection and copying in the Commission's Public Reference 
Room, 100 F Street, NE., Washington, DC 20549. All comments received 
will be posted without change; we do not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make publicly available.

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

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to 
Rules 14a-7,\1\ 14a-16,\2\ 14b-1,\3\ 14b-2,\4\ 14c-2,\5\ and 14c-3 \6\ 
under the Securities Exchange Act of 1934.\7\
---------------------------------------------------------------------------

    \1\ 17 CFR 240.14a-7.
    \2\ 17 CFR 240.14a-16.
    \3\ 17 CFR 240.14b-1.
    \4\ 17 CFR 240.14b-2.
    \5\ 17 CFR 240.14c-2.
    \6\ 17 CFR 240.14c-3.
    \7\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------

Table of Contents

I. Introduction
II. Description of the Proposed Amendments
    A. Universal Internet Availability Model for Issuers
    B. Implications of the Universal Internet Availability Model for 
Intermediaries
    C. Universal Internet Availability Model for Soliciting Persons 
Other Than the Issuer
    D. Option To Send Full Set of Proxy Materials With Notice Under 
the Universal Internet Availability Model
III. Compliance Dates
IV. General Request for Comment
V. Paperwork Reduction Act
VI. Cost-Benefit Analysis
    A. Background
    B. Summary of Proposals
    C. Benefits
    D. Costs
    E. Request for Comments
VII. Consideration of Burden on Competition and Promotion of 
Efficiency, Competition and Capital Formation
VIII. Initial Regulatory Flexibility Analysis
    A. Reasons for the Proposed Action
    B. Objectives
    C. Legal Basis
    D. Small Entities Subject to the Proposed Rules
    E. Reporting, Recordkeeping and Other Compliance Requirements
    F. Duplicative, Overlapping or Conflicting Federal Rules
    G. Significant Alternatives
    H. Solicitation of Comment
IX. Small Business Regulatory Enforcement Fairness Act
X. Statutory Basis and Text of Proposed Amendments

I. Introduction

    Currently, issuers decide whether to provide shareholders with the 
choice to receive proxy materials by electronic means. We are proposing 
amendments to the proxy rules that would require issuers and other 
soliciting persons to furnish proxy materials to shareholders by 
posting them on an Internet Web site and providing shareholders with 
notice of the availability of the proxy materials.\8\ The proposal, if 
adopted, would provide all shareholders with the ability to choose 
whether to receive proxy materials in paper, by e-mail or via the 
Internet. We believe that universal Internet availability of proxy 
materials has the potential to enhance significantly the ability of 
investors to make informed voting decisions regarding the securities 
that they hold. In a companion release, we are adopting an Internet 
availability model that issuers and other soliciting persons may follow 
on a voluntary basis.\9\ We are considering making the universal 
Internet availability amendments effective for large accelerated 
filers, not including registered investment companies, on January 1, 
2008,\10\ and for all other issuers, including registered investment 
companies, on January 1, 2009.
---------------------------------------------------------------------------

    \8\ For purposes of this release, the term ``proxy 
materials''includes proxy statements on Schedule 14A [17 CFR 
240.14a-101], proxy cards, information statements on Schedule 14C 
[17 CFR 240.14c-101], annual reports to security holders required by 
Rules 14a-3 [17 CFR 240.14a-3] and 14c-3 [17 CFR 240.14c-3] of the 
Exchange Act, notices of shareholder meetings, additional soliciting 
materials, and any amendments to such materials. For purposes of 
this release, the term does not include materials filed under Rule 
14a-12 [17 CFR 240.14a-12].
    \9\ Release No. 34-55146 (Jan. 22, 2007).
    \10\ A large accelerated filer, as defined in Exchange Act Rule 
12b-2 [17 CFR 240.12b-2], is an issuer that, as of the end of its 
fiscal year, has an aggregate worldwide market value of the voting 
and non-voting common equity held by its non-affiliates of $700 
million or more, as measured on the last business day of the 
issuer's most recently completed second fiscal quarter; has been 
subject to the requirements of Section 13(a) or 15(d) of the 
Exchange Act for a period of at least twelve calendar months; has 
filed at least one annual report pursuant to Section 13(a) or 15(d) 
of the Exchange Act; and is not eligible to use Forms 10-KSB and 10-
QSB for its annual and quarterly reports.
---------------------------------------------------------------------------

II. Description of Proposed Amendments

    Under the proposal, an issuer that is required to furnish proxy 
materials to shareholders under the Commission's proxy rules would have 
to satisfy this requirement by posting its proxy materials on a 
specified, publicly-accessible Internet Web site (other than the 
Commission's EDGAR Web site) and providing record holders with a notice

[[Page 4177]]

informing them that the materials are available and explaining how to 
access those materials. Issuers and intermediaries also would be 
required to follow the universal Internet availability model \11\ to 
furnish proxy materials to beneficial owners. Shareholders and other 
persons conducting their own proxy solicitations also would be required 
to follow the universal Internet availability model. Shareholders would 
retain the ability to request paper or e-mail copies for a particular 
meeting or to make a permanent request for proxy materials relating to 
all shareholder meetings.\12\ By requiring universal Internet 
availability of proxy materials, the proposed amendments are designed 
to enhance the ability of investors to make informed voting decisions 
and to expand use of the Internet to ultimately lower the costs of 
proxy solicitations.
---------------------------------------------------------------------------

    \11\ In this release, we are referring to the proposal as the 
``universal Internet availability'' model. This model is 
substantially similar to the ``notice and access'' model for 
electronically furnishing proxy materials referred to in Release No. 
34-55146 that issuers and other soliciting persons may follow on a 
voluntary basis.
    \12\ A shareholder may revoke a permanent election to receive 
paper or e-mail copies at any time.
---------------------------------------------------------------------------

A. Universal Internet Availability Model for Issuers

    Under the proposal, an issuer would be required to comply with the 
following requirements, which are substantially similar to the 
requirements that we are adopting under the voluntary model.\13\ First, 
the issuer would have to send a Notice of Internet Availability of 
Proxy Materials (``Notice'') to shareholders at least 40 calendar days 
before the shareholder meeting date, or if no meeting is to be held, at 
least 40 calendar days before the date that votes, consents, or 
authorizations may be used to effect a corporate action, indicating 
that the issuer's proxy materials are available on a specified Internet 
Web site and explaining how to access those proxy materials.
---------------------------------------------------------------------------

    \13\ See 17 CFR 240.14a-16 [17 CFR 240.14a-16].
---------------------------------------------------------------------------

    The Notice would have to contain the same information that is 
required under the voluntary model, including the following: \14\
---------------------------------------------------------------------------

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

     A prominent legend in bold-face type that states:

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

     This communication presents only an overview of the 
more complete proxy materials that are available to you on the 
Internet. We encourage you to access and review all of the important 
information contained in the proxy materials before voting.
     The [proxy statement] [information statement] [annual 
report to security holders] [is/are] available at [Insert Web site 
address].
     If you want to receive a paper or e-mail copy of these 
documents, you must request one. There is no charge to you for 
requesting a copy. Please make your request for a copy as instructed 
below on or before [Insert a date] to facilitate timely delivery.''

     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 
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 do not enable a shareholder to execute a proxy 
without having access to the proxy statement and annual report; and
     Information about attending the shareholder meeting and 
voting in person.
    The Notice would have to be written in plain English. The Notice 
may contain only the information specified by the rules and any other 
information required by state law, if the issuer chooses to combine the 
Notice with any shareholder meeting notice that State law may require. 
However, the Notice may contain a protective warning to shareholders, 
advising them that no personal information other than the 
identification or control number is necessary to execute a proxy. The 
issuer would have to file its Notice with the Commission pursuant to 
Rule 14a-6(b) \15\ no later than the date that it first sends the 
Notice to shareholders.
---------------------------------------------------------------------------

    \15\ 17 CFR 240.14a-6(b).
---------------------------------------------------------------------------

    An issuer would have to make all proxy materials identified in the 
Notice publicly accessible, free of charge, at the Web site address 
specified in the Notice on or before the date that the Notice is sent 
to the shareholder. The specified Web site may not be the Commission's 
EDGAR system. The issuer also would have to post any subsequent 
additional soliciting materials on the Web site no later than the date 
on which such materials are first sent to shareholders or made public. 
The materials would have to be presented on the Web site in a format, 
or formats, convenient for both reading online and printing on 
paper.\16\
---------------------------------------------------------------------------

    \16\ See Section II.A.3 of Release 34-55146.
---------------------------------------------------------------------------

    The proxy materials would have to remain available on that Web site 
through the conclusion of the shareholder meeting. An issuer also would 
have to provide shareholders with a method to execute proxies as of the 
time the Notice is first sent to shareholders. It may do so through a 
variety of methods, including providing an electronic voting platform 
or a toll-free telephone number for voting.\17\
---------------------------------------------------------------------------

    \17\ As noted above, such a telephone number may appear on the 
Web site, but not on the Notice.
---------------------------------------------------------------------------

    An issuer would be required to provide copies at no charge to 
requesting shareholders. It also would have to allow shareholders to 
make a permanent election to receive paper or e-mail copies of proxy 
materials distributed in connection with future proxy solicitations of 
the issuer. Further, the issuer would have to provide a toll-free 
telephone number, e-mail address, and Internet Web site address as a 
means by which a shareholder could request a copy of the proxy 
materials for the particular shareholder meeting referenced in the 
Notice or make a permanent election to receive copies of the proxy 
materials on a continuing basis with respect to all meetings. The 
issuer also may include a pre-addressed, postage-paid reply card with 
the Notice that shareholders could use to request a copy of the proxy 
materials.
    An issuer would not be permitted to send a proxy card to a 
shareholder until 10 calendar days or more after the date it sent the 
Notice to the shareholder, unless the proxy card is accompanied or 
preceded by a copy of the proxy statement and any annual report to 
security holders sent via the same medium. Issuers would be able to 
household the Notice and other proxy materials pursuant to Rule 14a-
3(e).\18\ An issuer would have to maintain the Internet Web site on 
which it posts its proxy materials in a manner that does not infringe 
on the anonymity of a person accessing that Web site.\19\ An issuer 
also could not use any e-mail address provided by a

[[Page 4178]]

shareholder solely to request a copy of proxy materials for any purpose 
other than to send a copy of those materials to that shareholder. The 
issuer also may not disclose a shareholder's e-mail address to any 
person other than the issuer's employee or agent to the extent 
necessary to send a copy of the proxy materials to a requesting 
shareholder. An issuer could not use the universal Internet 
availability model in the context of a business combination 
transaction.
---------------------------------------------------------------------------

    \18\ 17 CFR 240.14a-3(e).
    \19\ See Section II.A.1.b.iii of Release No. 34-55146.
---------------------------------------------------------------------------

Request for Comment
     What advantages would universal Internet availability of 
proxy materials have for investors, issuers and other soliciting 
persons? What disadvantages could the proposal have? How could any 
potential disadvantages be mitigated?
     Should we require issuers to follow the universal Internet 
availability model as proposed? If not, why not? Would requiring 
issuers to follow the universal Internet availability model impose 
significant costs on issuers? If so, what would they be? How could the 
proposal be modified to mitigate these costs? Would requiring issuers 
to follow the universal Internet availability model positively or 
negatively affect shareholder voting participation rates?
     Should we exempt certain types of issuers from the 
proposed universal Internet availability model? For example, should we 
exempt small business issuers? Should we require mutual funds, closed-
end funds, business development companies and other investment 
companies to follow the model? Should the model be equally applicable 
to all types of shareholders and/or all types of solicitations except 
those relating to business combination transactions?
     Under the voluntary model, an issuer may choose not to 
rely on the universal Internet availability model if it conflicts with 
state law. We are not aware of any state law conflicts. Are there any 
state laws that would conflict with the universal Internet availability 
model?
     Should we modify any aspects of the universal Internet 
availability model? If so, how should the model be modified and why? 
Should there be any changes to the timeframes for sending the Notice, 
the contents of the Notice or the types of materials that can be sent 
with the Notice? Should any revisions be made to the Web site posting 
requirements or the requirements to send copies upon request?
     Some proxy solicitations are not subject to the 
requirements of Section 14(a) of the Exchange Act, such as proxy 
solicitations with respect to foreign private issuers. However, we 
understand that proxy solicitations relating to foreign private issuers 
generally are processed and distributed in accordance with the same 
procedures set forth in our proxy rules because intermediaries and 
their agents are not able to apply cost-effectively different 
procedures to exempt proxy solicitations. Would a universal Internet 
availability model create a burden on those issuers who are not subject 
to Section 14(a)? If so, how can those burdens best be addressed?

B. Implications of the Universal Internet Availability Model for 
Intermediaries

    With respect to beneficial owners, the issuer or other soliciting 
person would have to provide each intermediary with the information 
necessary to prepare the intermediary's Notice in sufficient time for 
the intermediary to prepare and send its Notice to beneficial owners at 
least 40 calendar days before the shareholder meeting date.\20\ The 
intermediary's Notice would contain generally the same types of 
information as an issuer's Notice, but would be tailored specifically 
for beneficial owners.\21\ Intermediaries would be required to prepare 
and send this tailored Notice to beneficial owners. The intermediaries 
also would be required to forward paper or e-mail copies to beneficial 
owners upon request. Finally, intermediaries would have to post their 
requests for voting instructions on an Internet Web site, permit 
shareholders to make a permanent election to receive paper or e-mail 
copies of the proxy materials, keep records of those elections, and 
deliver copies of the proxy materials according to those elections.
---------------------------------------------------------------------------

    \20\ A soliciting person other than the issuer must provide 
intermediaries with such information in sufficient time for the 
intermediaries to prepare and send the intermediary's Notice by the 
later of: (1) 40 calendar days prior to the security holder meeting 
date or, if no meeting is to be held, 40 calendar days prior to the 
date the votes, consents, or authorizations may be used to effect 
the corporate action; or (2) 10 calendar days after the date that 
the registrant first sends its proxy statement or Notice of Internet 
Availability of Proxy Materials to security holders. See Rule 14a-
16(l)(2) [17 CFR 240.14a-16(l)(2)].
    \21\ For a more complete discussion of the content of the 
intermediary's Notice, see Section II.B.2 of Release No. 34-55146.
---------------------------------------------------------------------------

Request for Comment
     Should we make any modifications to the universal Internet 
availability model as it would apply to intermediaries if we adopt this 
proposal? If so, how should the model be modified and why? Should there 
be any changes to the timeframes for sending the intermediary's Notice, 
the contents of the intermediary's Notice or the types of materials 
that could be sent with the Notice? Should any revisions be made to the 
Web site posting requirements or the requirements to send copies upon 
request?

C. Universal Internet Availability Model for Soliciting Persons Other 
Than the Issuer

    A soliciting person other than the issuer also would be required to 
follow the universal Internet availability model. Consistent with the 
existing proxy rules and the voluntary model, the proposed rules treat 
such soliciting persons differently from the issuer in certain 
respects.
    First, a soliciting person is not required to solicit every 
shareholder. It may select the specific shareholders from whom it 
wishes to solicit proxies. Under the proposed universal Internet 
availability model, a soliciting person other than the issuer would be 
able to choose to send Notices only to those shareholders who have not 
previously requested paper copies.\22\
---------------------------------------------------------------------------

    \22\ Under Rule 14a-7 [17 CFR 240.14a-7], an issuer is required 
to either mail the Notice on behalf of the soliciting person, in 
which case the soliciting person can request that the issuer send 
Notices only to shareholders who have not requested paper copies, or 
provide the soliciting person with a shareholder list, indicating 
which shareholders have requested paper copies. For a more complete 
discussion of the interaction of the model with Rule 14a-7, see 
Section II.C.4 of Release No. 34-55146.
---------------------------------------------------------------------------

    Second, soliciting persons other than the issuer would be required 
to send a Notice to shareholders by the later of:
     40 calendar days prior to the shareholder meeting date or, 
if no meeting is to be held, 40 calendar days prior to the date that 
votes, consents, or authorizations may be used to effect the corporate 
action; or
     10 calendar days after the date that the issuer first 
sends its proxy materials to shareholders.
    Finally, if at the time the Notice is sent, a soliciting person 
other than the issuer is not aware of all matters on the shareholder 
meeting agenda, the Notice would have to provide a clear and impartial 
identification of each separate matter to be acted upon at the meeting, 
to the extent known by the soliciting person. The soliciting person's 
Notice also would have to include a clear statement that there may be 
additional agenda items that the soliciting person is unaware of, and 
that the shareholder cannot direct a vote for those items on the 
soliciting person's proxy card provided at that time. If a soliciting 
person other than the issuer sends a proxy card that does not reference 
all matters that shareholders will act upon at the meeting, the Notice 
would have

[[Page 4179]]

to clearly state whether execution of the proxy card would invalidate a 
shareholder's prior vote using the issuer's card on matters not 
presented on the soliciting person's proxy card.
Request for Comment
     Should we require soliciting persons other than the issuer 
to follow the universal Internet availability model? If not, why not? 
Would the universal Internet availability model impose significant 
costs on soliciting persons other than the issuer? If so, what would 
they be and how could they be mitigated?
     Rule 14a-2(a)(6) \23\ permits a soliciting person to 
solicit proxies without otherwise complying with Rules 14a-3 through 
14a-15 \24\ by placing a newspaper advertisement which does no more 
than inform shareholders of (1) a source from which they may obtain 
copies of a proxy statement, proxy card and other soliciting materials, 
(2) the name of the issuer, (3) the reason for the advertisement, and 
(4) the proposals to be acted upon by shareholders. Should the 
universal Internet availability model apply to such solicitations? If 
so, how should it apply? In light of the amendments, should we keep 
such a model available to soliciting persons?
---------------------------------------------------------------------------

    \23\ 17 CFR 240.14a-2(a)(6).
    \24\ 17 CFR 240.14a-3 through 240.14a-15.
---------------------------------------------------------------------------

     Should we make any revisions to Rule 14a-7 to accommodate 
the universal Internet availability model?
     If we adopt the universal Internet availability model, 
should we modify any aspects of the model as it relates to soliciting 
persons other than the issuer? If so, how should the proposed model be 
modified and why? Should there be any changes to the timeframes for 
sending the Notice, the contents of the Notice or the types of 
materials that can be sent with it? Should any revisions be made to the 
Web site posting requirements or the requirements to send copies upon 
request?

D. Option To Send Full Set of Proxy Materials With Notice Under the 
Universal Internet Availability Model

    Under the voluntary model that we are adopting, issuers or other 
soliciting persons are obligated to provide a paper or e-mail copy of 
the proxy materials upon request to a shareholder to whom they have 
provided a Notice. Issuers and other soliciting persons are not allowed 
to send the Notice with any document other than a notice of shareholder 
meeting required under state law and a pre-printed, postage-paid reply 
card for a shareholder to request a copy of the proxy materials.
    Under the proposed universal Internet availability model, a full 
set of proxy materials, including a proxy statement, annual report (if 
required), and proxy card or request for voting instructions could 
accompany the Notice that is sent to shareholders and beneficial 
owners.\25\ This would allow an issuer or other soliciting person that 
wants to furnish paper copies of the proxy materials to some or all of 
its shareholders in the first instance to do so in one delivery with 
the Notice. This is different from the voluntary notice and access 
model because presumably an issuer or soliciting person would not 
choose to rely on the model if it intended to furnish paper copies of 
the proxy materials to all of the shareholders it was soliciting. As 
this proposal would require an issuer to follow the universal Internet 
availability model, it is necessary to expressly provide a means for 
issuers that also wish to send paper copies of the proxy materials 
along with the Notice as part of the same delivery package to 
shareholders to do so under the model.
---------------------------------------------------------------------------

    \25\ The requirement in Exchange Act Rules 14a-3(b) and 14c-3(a) 
to furnish annual reports to security holders does not apply to 
registered investment companies [17 CFR 240.14a-3(b) and 240.14c-
3(a)]. A soliciting person other than the issuer also is not subject 
to this requirement.
---------------------------------------------------------------------------

    The proposal would not permit an issuer or other soliciting person 
to initially send the Notice with other proxy materials, unless it is 
accompanied by a full set of proxy materials.\26\ For example, an 
issuer or other soliciting person would not be permitted to send 
initially only the Notice and a proxy card to shareholders.\27\ 
Instead, it would have to send a full set of proxy materials with the 
Notice, or send only the Notice. An issuer or other soliciting person 
choosing to deliver a full set of proxy materials with the Notice would 
be permitted to revise its Notice to delete any reference to a 
shareholder's right to request copies of the materials because all 
required proxy materials already would have been sent to shareholders.
---------------------------------------------------------------------------

    \26\ A ``full set'' of proxy materials would contain (1) a proxy 
statement or information statement, (2) an annual report if one is 
required by Rule 14a-3(b) or Rule 14c-3(a), and (3) a proxy card or, 
in the case of a beneficial owner, a request for voting 
instructions, if proxies are being solicited.
    \27\ However, it may send the Notice and proxy card together 10 
calendar days or more after it initially sends the Notice. See Rule 
14a-16(h) [17 CFR 240.14a-16(h)].
---------------------------------------------------------------------------

    If an issuer or other soliciting person sends a full set of the 
proxy materials with the Notice, it need not comply with the deadlines 
in Rule 14a-16 for sending the Notice. Thus, if an issuer is unable or 
unwilling to meet the 40-day deadline, it still may begin its 
solicitation after that deadline provided that it accompanies its 
Notice with a full set of the proxy materials. Similarly, a soliciting 
person other than the issuer that fails to send its Notice by the later 
of 40 calendar days before the meeting date or 10 calendar days after 
the issuer first sends it proxy materials could begin its solicitation 
after that deadline if it accompanies its Notice with a full set of 
proxy materials.
    We also propose to permit a registered investment company to send 
its prospectus and/or report to shareholders together with the Notice, 
with or without the proxy statement and form of proxy. While the proxy 
rules do not require registered investment companies to furnish annual 
reports to security holders with their proxy materials, under the 
Investment Company Act of 1940, registered investment companies are 
required to transmit a report to shareholders at least semi-
annually.\28\ In addition, many mutual funds send their prospectuses to 
their existing shareholders annually in order to meet prospectus 
delivery obligations with respect to additional share purchases. 
Without our proposal for registered investment companies, they would be 
required to deliver both their prospectuses and shareholder reports 
separately from the Notice, which could result in increased costs to 
fund shareholders.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 80a-29(e).
---------------------------------------------------------------------------

Request for Comment
     Should issuers and other soliciting persons be allowed to 
accompany the Notice with a full set of proxy materials?
     Is there potential for confusion if issuers and other 
soliciting persons choose to deliver to shareholders a full set of 
proxy materials in paper, but also send a Notice to them? If an issuer 
chooses to send a full set of the proxy materials with the Notice to a 
shareholder under this option, should the rules permit the issuer to 
incorporate the information required in the Notice into the proxy 
statement or some other document, rather than prepare a separate 
Notice?
     Should issuers, soliciting persons and intermediaries be 
permitted to remove the right to request copies if a full set of the 
proxy materials is included with the Notice, as proposed?
     Should registered investment companies be permitted to 
accompany the Notice with a prospectus and/or report to shareholders? 
If so, should they be permitted to do this without also including a 
proxy statement and

[[Page 4180]]

form of proxy? Is there any other category of issuer for which a 
similar accommodation would be appropriate?
     The proposed deadlines for sending the Notice are intended 
to provide shareholders with sufficient time to request copies. If an 
issuer or other soliciting person is unable to meet the deadlines under 
the universal Internet availability model, should either be permitted 
to begin its solicitation after those deadlines have passed if a full 
set of proxy materials accompanied the Notice, as proposed?
     If an issuer or other soliciting person elected to send a 
full set of proxy materials with the Notice, should it be permitted to 
include additional soliciting materials with the Notice as well?
     Are there any complications that might arise with respect 
to intermediaries by providing issuers and other soliciting persons the 
option to provide a full set of proxy materials? If so, how could these 
complications be addressed?

III. Compliance Dates

    Issuers and other soliciting persons may begin complying with the 
voluntary model on July 1, 2007. We are soliciting comment on 
compliance dates for the universal Internet availability model. If 
adopted, we are considering making the universal Internet availability 
model effective for large accelerated filers, not including registered 
investment companies, on January 1, 2008, and for all other issuers, 
including registered investment companies, on January 1, 2009. Such a 
tiered compliance regime may lessen any burden imposed by requiring 
smaller companies to follow the model.
    In determining an appropriate compliance date for the universal 
Internet availability model, we are considering the extent to which we 
will be able to study the implementation of the voluntary model before 
adopting the universal Internet availability model. The industry's 
experience with these models will provide information on whether the 
rules are achieving their intended purposes. We welcome information 
from issuers and all other parties involved in the proxy distribution 
process. This information would include:
     The ability of issuers to provide shareholders with 
qualitatively better disclosure using the additional features available 
on the Internet, including XBRL, graphical, comparative and interactive 
features;
     The extent to which issuers and other soliciting persons 
avail themselves of opportunities to exploit other linked data and 
resources, and make these available to shareholders in ways that are 
not possible with printed material;
     The impact on shareholder understanding of complex 
material;
     The effect of the model on proxy voting;
     The impact on costs of proxy solicitation;
     Shareholder voting data before and after adoption, 
including data on shareholder voting participation rates;
     The number of paper copies of proxy materials requested by 
shareholders;
     Any problems encountered with implementing the program, 
including problems encountered by smaller issuers; and
     Shareholder satisfaction with their choices of ways to 
communicate with the company.
Request for Comment
     What compliance dates would be appropriate for the 
universal Internet availability model? Should we permit at least one 
proxy season under the voluntary model to pass before requiring use of 
the universal Internet availability model? What compliance dates would 
give us and the market sufficient time to examine the performance of 
the voluntary model if we decide to convert to the universal Internet 
availability model after January 1, 2008?
     Should we adopt a tiered system of compliance dates for 
compliance with the universal Internet availability model, as we are 
considering doing? For example, should we require that some class of 
issuer, such as large accelerated filers, comply with the universal 
Internet availability model initially, and that other filers comply at 
a later date? If so, what should those dates be and which category of 
filers should go first?
     If we were to adopt a tiered system of compliance dates, 
how many tiers should there be? What would be the appropriate classes 
(e.g., large accelerated filers, accelerated filers, or small business 
issuers) for each tier? Should we divide issuers differently?
     What compliance dates would be appropriate for mutual 
funds, closed-end funds, business development companies, and other 
investment companies?
     Should there be a different compliance date for soliciting 
persons other than issuers? If so, why and what compliance dates would 
be appropriate?

IV. General Request for Comment

    We request and encourage any interested person to submit comments 
regarding:
    (1) The proposed changes that are the subject of this release,
    (2) Additional or different changes, or
    (3) Other matters that may have an effect on the proposals 
contained in this release.

With regard to any comments, we note that such comments are of greatest 
assistance to our rulemaking initiative if accompanied by supporting 
data and analysis of the issues addressed in those comments.

V. Paperwork Reduction Act

    Certain provisions of the amendments contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA''), including preparation of Notices, 
maintaining Web sites, maintaining records of shareholder preferences, 
and responding to requests for copies. The titles for the collections 
of information are: \29\
---------------------------------------------------------------------------

    \29\ In connection with the proposing release for the voluntary 
model, we described the proposed Notice of Internet Availability of 
Proxy Materials as a new collection of information, rather than a 
part of our existing collections of information related to 
Regulations 14A and 14C. However, we subsequently submitted to OMB a 
PRA analysis based on revisions to the Regulation 14A and Regulation 
14C collections. Although we did not revise our burden estimates 
associated with the Notice, the collection of information approved 
by OMB related to revisions to existing collections of information 
(Regulations 14A and 14C) and therefore we refer to those 
collections of information in this PRA discussion.
---------------------------------------------------------------------------

    Regulation 14A (OMB Control No. 3235-0059)
    Regulation 14C (OMB Control No. 3235-0057)
    We requested public comment on these collections of information in 
the release proposing the notice and access model as a voluntary model 
for disseminating proxy materials,\30\ and submitted them to the Office 
of Management and Budget (``OMB'') for review in accordance with the 
PRA. We received approval for the collection of information. We are 
submitting a revised PRA analysis to OMB in conjunction with the 
release adopting the notice and access model as a voluntary model. In 
that release, we assumed conservatively that all issuers and other 
persons soliciting proxies would follow the voluntary model because the 
proportion of issuers and other soliciting persons that would elect to 
follow the model was uncertain.
---------------------------------------------------------------------------

    \30\ Release No. 34-52926 (Dec. 8, 2005) [70 FR 74597].
---------------------------------------------------------------------------

    The proposed rules would require all issuers and other soliciting 
persons to follow the model. Therefore, our preliminary estimate is 
that the rule amendments that we are proposing in this release will not 
impose any new recordkeeping or information collection requirements 
beyond those described in

[[Page 4181]]

the release adopting the voluntary model, or necessitate revising the 
burden estimates for any existing collections of information requiring 
OMB's approval. Further, our preliminary estimate is that the one 
significant modification to the notice and access model we are 
proposing for the universal Internet availability model, the option to 
provide a full set of proxy materials with the Notice, does not require 
us to modify our burden estimates for the Regulation 14A and 14C 
collections of information. We solicit comment on the accuracy of our 
estimate that no additional recordkeeping or information collection 
requirements or changes to existing collection requirements would 
result from the proposed amendments.

VI. Cost-Benefit Analysis

A. Background

    We are proposing revisions to the proxy rules under the Exchange 
Act to require issuers and other soliciting persons to follow the 
universal Internet availability model for furnishing proxy materials. 
The proposed amendments are intended to provide all shareholders with 
the ability to choose the means by which they receive proxy materials, 
to expand use of the Internet to ultimately lower the costs of proxy 
solicitations, and to improve shareholder communications.

B. Summary of Proposals

    The proposals would provide a universal Internet availability model 
that would require issuers and other soliciting persons to furnish 
proxy materials by posting them on a specified, publicly-accessible 
Internet Web site (other than the Commission's EDGAR Web site) and 
providing shareholders with a notice informing them that the materials 
are available and explaining how to access them. Under this model, 
shareholders may request copies of the proxy materials from the issuer. 
Shareholders receiving a Notice from a soliciting person other than the 
issuer may also request copies from that person. However, neither an 
issuer nor a soliciting person other than the issuer would have to 
provide copies on request if it chooses to send a full set of proxy 
materials, including the proxy statement, annual report (if required) 
and proxy card, with the Notice. The proposals also would require 
intermediaries to follow similar procedures to provide beneficial 
owners with access to the proxy materials.

C. Benefits

    Currently, issuers decide whether to provide shareholders with the 
choice to receive proxy materials by electronic means. The proposed 
amendments are intended to provide all shareholders with the ability to 
choose the means by which they receive proxy materials, to expand use 
of the Internet to lower the costs of proxy solicitations, and to 
improve shareholder communications. The proposed amendments, if 
adopted, would provide all shareholders with the ability to choose 
whether to receive proxy materials in paper, by e-mail or via the 
Internet. As technology continues to progress, accessing the proxy 
materials on the Internet should increase the utility of our disclosure 
requirements to shareholders. Information in electronic documents is 
often more easily searchable than paper documents. Users are better 
able to go directly to any section of the document that they believe to 
be the most important. They also permit users to more easily manipulate 
data and enter data into analytical tools such as spreadsheet programs. 
Such tools enable users to compare relevant data about several 
companies more easily.
    In addition, encouraging shareholders to use the Internet in the 
context of proxy solicitations may encourage improved shareholder 
communications in other ways. Electronic innovations such as Internet 
chat rooms and bulletin boards may enhance shareholders' ability to 
communicate not only with management, but with each other. Such direct 
access may improve shareholder relations to the extent shareholders 
feel that they have enhanced access to management. Centralizing an 
issuer's disclosure on a Web site may facilitate shareholder access to 
other important information, such as research reports and news 
concerning the issuer. We believe that migrating proxy disclosure to 
the Internet and uniform use of the Internet for that purpose could 
ultimately lower the cost of soliciting proxies for all issuers.
    In terms of paper processing alone, the benefits of the rule 
amendments are limited by the volume of paper processing that would 
occur otherwise. As we note in the companion adopting release, 
Automatic Data Processing, Inc. (ADP) handles the vast majority of 
proxy mailings to beneficial owners.\31\ ADP publishes statistics that 
provide useful background for evaluating the likely consequences of the 
rule amendments. ADP estimates that, during the 2006 proxy season,\32\ 
over 69.7 million proxy material mailings were eliminated through a 
variety of means, including householding and existing electronic 
delivery methods. During that season, ADP mailed 85.3 million paper 
proxy items to beneficial owners. ADP estimates that the average cost 
of printing and mailing a paper copy of a set of proxy materials during 
the 2006 proxy season was $5.64. We estimate that issuers and other 
soliciting persons spent, in the aggregate, $481.2 million in postage 
and printing fees alone to distribute paper proxy materials to 
beneficial owners.\33\ Approximately 50% of all proxy pieces mailed by 
ADP in 2005 were mailed during the proxy season.\34\ Therefore, we 
estimate that issuers and other persons soliciting proxies from 
beneficial owners spent approximately $962.4 million in 2006 in 
printing and mailing costs.\35\
---------------------------------------------------------------------------

    \31\ We expect savings per mailing to record holders to roughly 
correspond to savings per mailing to beneficial owners.
    \32\ According to ADP data, the 2006 proxy season extended from 
February 15, 2006 to May 1, 2006.
    \33\ 85.3 million mailings x $5.64/mailing = $481.2 million.
    \34\ According to ADP, in 2005, 90,013,175 of 179,833,774, or 
50%, of proxy pieces were mailed during the 2005 proxy season.
    \35\ $481.2 million/50% = $962.4 million. *COM019*
---------------------------------------------------------------------------

    In the companion adopting release, we based our estimates on an 
assumption that issuers representing between 10% and 50% of proxy 
mailings would follow the notice and access model. Under our proposed 
universal Internet availability model, we estimate that the paper-
related savings would be similar for firms that choose to mail full 
sets of proxy materials only to those investors who request them. 
Issuers that choose to mail full sets of proxy materials with the 
Notice would not realize any paper-related savings. Based on the 
assumption that 19% of shareholders would choose to have paper copies 
sent to them when an issuer relies on the notice and access model, we 
estimate that the proposal could produce annual paper-related savings 
ranging from $48.3 million (if issuers who are responsible for 10% of 
all proxy mailings choose to mail proxy materials only to those who 
request them) to $241.4 million (if issuers who are responsible for 50% 
of all proxy mailings choose to mail proxy materials only to those who 
request them).\36\ This

[[Page 4182]]

estimate excludes the effect of the provision of the amendments that 
would allow shareholders to make a permanent request for paper copies. 
That provision would enable issuers and other soliciting persons to 
take advantage of bulk printing and mailing rates for those requesting 
shareholders, and therefore should reduce the on-demand costs reflected 
in these calculations.
---------------------------------------------------------------------------

    \36\ This range of potential cost savings depends on data on 
proxy material production, home printing costs, and first-class 
postage rates provided by Lexecon and ADP, and supplemented with 
modest 2006 USPS postage rate discounts. The fixed costs of notice 
and proxy material production are estimated to be $2.36 per 
shareholder. The variable costs of fulfilling a paper requests, 
including handling, paper, printing and postage, are estimated to be 
$6.11 per copy requested. Assumptions about percentages of 
shareholders requesting paper copies are derived from Forrester 
survey data furnished by ADP and adjusted for the reported 
likelihood that an investor will take extra steps to get proxy 
materials. Our estimate of the total number of shareholders is based 
on data provided by ADP and SIA. According to SIA's comment letter, 
78.49% of shareholders held their shares in street name. We estimate 
that the total number of proxy pieces mailed equals the number of 
pieces mailed to beneficial shareholders by ADP in 2005 divided by 
78.49%, which equals 179,833,774 / 78.49%, or 229,116,797.
---------------------------------------------------------------------------

    We estimate that approximately 19% of shareholders would request 
paper copies. Commenters on the initial Internet availability proposal 
provided alternate estimates. For example, Computershare, a large 
transfer agent, estimated that less than 10% of shareholders would 
request paper copies.\37\ According to a survey conducted by Forrester 
Research for ADP, 12% of shareholders report that they would always 
take extra steps to get their proxy materials, and as many as 68% of 
shareholders report that they would take extra steps to get their proxy 
materials in paper at least some of the time. The same survey also 
finds that 82% of shareholders report that they look at their proxy 
materials at least some of the time. These survey results suggest that 
shareholders may review proxy materials even if they do not vote. 
During the 2005 proxy season, only 44% of accounts were voted by 
beneficial owners. Put differently, 56%, or 84.8 million accounts, did 
not return requests for voting instructions. Our estimate that 19% of 
shareholders would request paper copies reflects the diverse estimates 
suggested by the available data.
---------------------------------------------------------------------------

    \37\ See letter from Computershare.
---------------------------------------------------------------------------

    Although we expect the savings to be significant, the actual paper-
related benefits would be influenced by several factors that we 
estimate would become less important over time. First, to the extent 
that some shareholders request paper copies of the proxy materials, the 
benefits of the amendments in terms of savings in printing and mailing 
costs would be reduced. Issuers are concerned that the cost per paper 
copy would be significantly greater if they have to mail copies of 
paper proxy materials to shareholders on an on-demand basis, rather 
than mailing the paper copies in bulk. Thus, if a significant number of 
shareholders request paper, the savings would be substantially reduced. 
Second, issuers may face a high degree of uncertainty about the number 
of requests that they may get for paper proxy materials and may 
maintain unnecessarily large inventories of paper copies as a 
precaution. As issuers gain experience with the number of sets of paper 
materials that they need to supply to requesting shareholders, and as 
shareholders become more comfortable with receiving disclosures via the 
Internet, the number of paper copies is likely to decline, as would 
issuers' tendency to print many more copies than ultimately are 
requested. This would lead to growth in paper-related savings from the 
rule amendments over time.
    Additional benefits would accrue from reductions in the costs of 
proxy solicitations by persons other than the issuer. Under the 
proposal, persons other than the issuer also can rely on the notice and 
access model, but would be able to limit the scope of their proxy 
solicitations to shareholders who have not requested paper copies of 
the proxy materials. We expect that the flexibility afforded to persons 
other than the issuer under the proposal ultimately would reduce the 
cost of engaging in proxy contests, thereby increasing the 
effectiveness and efficiency of proxy contests as a source of 
discipline in the corporate governance process.
    The effect of the amendments of lessening the costs associated with 
a proxy contest would be limited by the persistence of other costs. One 
commenter on the proposed voluntary model noted that a large percentage 
of the costs of effecting a proxy contest go to legal, document 
preparation, and solicitation fees, while a much smaller percentage of 
the costs is associated with printing and distribution of 
materials.\38\ However, other commenters suggested that the paper-
related cost savings that can be realized from the rule amendments are 
substantial enough to change the way many contests are conducted.\39\
---------------------------------------------------------------------------

    \38\ See letter from ADP.
    \39\ See letters from CALSTRS, Computershare, ISS, and 
Swingvote.
---------------------------------------------------------------------------

    Finally, some benefits from the proposal may arise from a reduction 
in what may be regarded as the environmental costs of the proxy 
solicitation process.\40\ Specifically, proxy solicitation involves the 
use of a significant amount of paper and printing ink. Paper production 
and distribution can adversely affect the environment, due to the use 
of trees, fossil fuels, chemicals such as bleaching agents, printing 
ink (which contains toxic metals), and cleanup washes. To the extent 
that paper producers internalize these costs and the costs are 
reflected in the price of paper and other materials consumed during the 
proxy solicitation process, our dollar estimates of the paper-related 
benefits reflect the elimination of these adverse environmental 
consequences under the proposed amendments.
---------------------------------------------------------------------------

    \40\ See letter from American Forests.
---------------------------------------------------------------------------

D. Costs

    An issuer's compliance with the proposed model, if adopted, would 
introduce several new costs into the process of proxy distribution for 
issuers that otherwise would choose not to follow the notice and access 
model voluntarily and their shareholders, including the following: (1) 
The cost of posting proxy materials on an Internet Web site and 
providing a means to vote on that Web site; (2) the cost of preparing, 
producing, and sending the Notice to shareholders; (3) the cost of 
processing shareholders' requests for copies of the proxy materials and 
maintaining their permanent election preferences; and (4) the cost to 
shareholders of printing proxy materials at home that would otherwise 
be printed by issuers.
    Under the proposed rules, issuers and other soliciting persons 
would be required to post their materials on an Internet Web site and 
provide a means to vote on that Web site. We believe the cost of 
obtaining a Web site and posting materials on it would be minimal to 
issuers and other soliciting persons. The rules do not require 
elaborate Web site design. Posting a document on such a Web site and 
providing a means to vote, such as posting a telephone number on that 
Web site for voting, is a fairly simple and inexpensive process. We 
believe the costs of these requirements would be minimal.
    A soliciting person, including an issuer, would be required to 
provide a means to vote on the Internet Web site. Although, as noted 
above, posting a telephone number on a Web site would impose minimal 
cost, the soliciting person would have to have a means for collecting 
those votes. Thus, at a minimum, the soliciting person would have to 
provide an automated system for collecting votes, either over the 
Internet or by telephone, or have people staffing telephones to receive 
the votes. We are soliciting comment on the cost of establishing such 
mechanisms for

[[Page 4183]]

accepting votes. An issuer would also have to maintain records of 
shareholders who have requested paper or e-mail copies for all future 
solicitations. In the companion release adopting the voluntary notice 
and access model, we estimated that this cost to issuers and 
intermediaries would be approximately $9,977,500.\41\
---------------------------------------------------------------------------

    \41\ In that release, we estimated that issuers and 
intermediaries would spend a total of 79,820 hours of issuer and 
intermediary personnel time maintaining these records. We estimated 
the average hourly cost of issuer and intermediary personnel time to 
be $125, resulting in a total cost of $9,977,500 for issuer and 
intermediary personnel time. See Release No. 34-55146.
---------------------------------------------------------------------------

    Under the proposed rules, intermediaries would be required to 
follow similar requirements as would issuers, including preparing 
Notices, providing a means to vote and maintaining records of 
shareholders who have requested paper or e-mail copies for future 
solicitations. We are soliciting comment on those costs as well.
    As we stated in the companion adopting release, the paper-related 
savings to issuers and other soliciting persons discussed under the 
benefits section above are adjusted for the cost of printing and 
sending Notices. If Notices are sent by mail, then the mailing costs 
may vary widely among parties. Postage rates likely would vary from 
$0.14 to $0.39 per Notice mailed, depending on numerous factors. In our 
estimates of the paper-related benefits above, we assume that each 
Notice costs a total of $0.13 to print and $0.29 to mail. Based on data 
from ADP and SIA, we estimate that issuers and other soliciting persons 
send a total of 229,116,797 accounts processed per year.\42\ In the 
companion release, we assume that only those firms that choose to adopt 
the notice and access model would incur these printing and mailing 
costs. Under the proposed universal Internet availability model, all 
issuers would be required to furnish each of its shareholders with a 
copy of the Notice. Firms that choose to mail full sets of proxy 
materials only to those investors who request them would incur the 
printing cost and cost of mailing the Notice separately from the proxy 
materials. Firms that choose to mail full sets of proxy materials with 
the Notice would incur the printing costs, but not the additional 
mailing cost. These printing costs represent the incremental cost of 
moving to universal Internet availability from the model in the 
companion adopting release. If issuers who are responsible for 10% of 
all current proxy mailings choose to mail full sets of proxy materials 
only to those investors who request them, the remaining 90% of issuers 
would incur the total cost of $26.8 million to print the Notice. If 
issuers who are responsible for 50% of all current proxy mailings 
choose to mail full sets of proxy materials only to those investors who 
request them, the remaining 50% of issuers would incur the total cost 
of $14.9 million to print the Notice.\43\
---------------------------------------------------------------------------

    \42\ See www.ics.adp.com/release11/public_site/about/stats.html 
stating that ADP handled 179,833,774 in fiscal year 2005 and letter 
from SIA stating that beneficial accounts represent 78.49% of total 
accounts.
    \43\ 90% x 229,116,797 x $0.13 = $26.8 million; 50% x 
229,116,797 x $0.13 = $14.8 million; We assume that the additional 
cost of mailing the Notice together with the full set of proxy 
materials is negligible.
---------------------------------------------------------------------------

    The universal Internet availability model also requires minimal 
added disclosures in the form of a Notice to shareholders, informing 
them that the proxy materials are available at a specified Internet Web 
site. In the companion adopting release, we assumed, for purposes of 
the PRA, that all issuers and other soliciting persons would elect to 
follow the procedures, resulting in a total estimated cost to prepare 
the Notice of approximately $2,020,475.\44\ Based on the percentage of 
issuers that we estimated would adopt the notice and access model, 
these costs could range between $1,010,238 (if 50% of issuers adopted 
the notice and access model) and $1,818,432 (if 10% of issuers adopted 
the notice and access model). The proposal also would require issuers 
and intermediaries to maintain records of shareholders who have 
requested paper and e-mail copies for future proxy solicitations. We 
estimate that this total cost to all issuers and intermediaries would 
be approximately $9,977,500,\45\ with an incremental cost due to the 
proposals of $4,988,750 (if 50% of issuers adopted the notice and 
access model voluntarily), and $8,977,500 (if 10% of issuers adopted 
the notice and access model voluntarily).
---------------------------------------------------------------------------

    \44\ In the companion adopting release, we estimated, for PRA 
purposes, that issuers would spend a total of $897,975 on outside 
professionals to prepare this disclosure. We also estimated that 
issuers would spend a total of 8,980 hours of issuer personnel time 
preparing this disclosure. We estimated the average hourly cost of 
issuer personnel time to be $125, resulting in a total cost of 
$1,122,500 for issuer personnel time. This results in a total cost 
of $2,020,475 for all issuers. The costs for posting the materials 
on a Web site are included in this calculation.
    \45\ In the companion adopting release, we estimated, for PRA 
purposes, that issuers and intermediaries would spend a total of 
79,820 hours of issuer and intermediary personnel time maintaining 
these records. We estimated the average hourly cost of issuer and 
intermediary personnel time to be $125, resulting in a total cost of 
$9,977,500 for issuer and intermediary personnel time.
---------------------------------------------------------------------------

    Issuers and their intermediaries would incur additional processing 
costs if the proposal is adopted. The proposal would require an 
intermediary such as a bank, broker-dealer, or other association to 
follow the proposed model if an issuer so requests. An intermediary 
that follows the proposed model would be required to prepare its own 
Notice to beneficial owners, along with instructions on when and how to 
request paper copies and the website where the beneficial owner can 
access his or her request for voting instructions. Since issuers 
reimburse intermediaries for their reasonable expenses of forwarding 
proxy materials and intermediaries and their agents already have 
systems to prepare and deliver requests for voting instructions, we do 
not expect the involvement of intermediaries in sending their Notices 
to significantly affect the costs associated with the proposal.
    Under the proposed model, a beneficial owner would be required to 
request a copy of proxy materials from its interme