On January 27, 2025, the staff of the US Securities and Exchange Commission updated its Compliance and Disclosure Interpretations (“C&DIs”) for Proxy Rules and Schedules 14A/14C with respect to notices of exempt solicitations under Rule 14a-6(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Rule 14a-2(b)(1) of the Exchange Act exempts solicitations made “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 person who furnishes or requests, a form of revocation, abstention, consent or authorization” from certain requirements under the federal proxy rules, with certain exceptions.  For example, an investor may send a letter to other shareholders expressing the investor’s opinion on a particular issue or proposal, such as a proposed merger.  As long as the investor does not ask for authority to vote on behalf of other shareholders or request any form of revocation, abstention, consent or authorization that would give them the power to vote or take action on another shareholder’s behalf, this communication would be considered an exempt solicitation under Rule 14a-2(b)(1).

Under Rule 14a-6(g), a person who engages in an exempt solicitation under Rule 14a-2(b)(1) and beneficially owns over $5 million of the class of securities that is the subject of the solicitation is required to mail or furnish to the SEC, not later than three days after the date the written solicitation is first sent or given to any security holder, five copies of the Notice of Exempt Solicitation (Form PX14A6G), attaching all written soliciting materials as an exhibit.

The updated and new C&DIs are summarized below.  Also as a new and exciting (for securities lawyers) feature, the updated C&DIs on the SEC’s website are now accompanied with links to markups showing the revisions from the prior version.

Revised Question 126.06: Voluntary Submissions

The Notice of Exempt Solicitation is required for persons engaged in solicitations owning over $5 million of the class of securities that is the subject of the solicitation.  However, the SEC allows soliciting persons who own $5 million or less of the securities they are soliciting to voluntarily submit a Notice of Exempt Solicitation with their written materials, as long as they indicate their ownership level and the voluntary nature of the notice.

Revised Question 126.07: Cover Page

A Notice of Exempt Solicitation is designed to be a cover page to which previously disseminated written soliciting materials are attached.  Therefore, the notice must follow the format of Rule 14a-103, which requires the soliciting person’s name and address to appear before any written soliciting materials that are attached to, but not included in, the notice.

New Question 126.08: Previously Disseminated Written Soliciting Materials

A person cannot use EDGAR to distribute written soliciting materials to security holders under a Notice of Exempt Solicitation; the notice only informs the public of the materials that have been sent or given by other means.  The Notice of Exempt Solicitation is a way to disclose soliciting activity that is exempt from proxy rules under Rule 14a-2(b)(1), not a way to conduct the solicitation itself.  The notice requirement was introduced to prevent “secret” solicitation campaigns by large shareholders who rely on the Rule 14a-2(b)(1) exemption.

New Question 126.09: Constituting a “Solicitation”

Only written communications that constitute a “solicitation” under the Rule 14a-2(b)(1) exemption should be submitted on EDGAR under the cover of a Notice of Exempt Solicitation, because Rule 14a-6(g) only applies to solicitations made pursuant to the Rule 14a-2(b)(1) exemption.  Under Rule 14a-1(l)(1)(iii)(A), a “solicitation” for purposes of Regulation 14A is any proxy voting advice that recommends how a security holder should vote on a specific matter.  For example, a written communication solely about matters that are not the subject of a solicitation by the registrant or a third party for an upcoming shareholder meeting generally would not be viewed as a solicitation and, therefore, should not be submitted under the cover of a Notice of Exempt Solicitation.

New Question 126.10: Rule 14a-9 Liability

Rule 14a-9, which prohibits false or misleading statements in proxy solicitations, still applies to written soliciting materials filed under a Notice of Exempt Solicitation, even if they are exempt from other proxy rules under Rule 14a-2(b)(1). Therefore, written solicitation materials attached to a Notice of Exempt Solicitation are subject to liability under Rule 14a-9.

The notes to Rule 14a-9 provide the following examples of what, in certain circumstances, may be deemed misleading:

  • Predictions as to specific future market values.
  • Materials that directly or indirectly impugn character, integrity or personal reputation, or directly or indirectly make charges concerning improper, illegal or immoral conduct or associations, without factual foundation.
  • Failure to so identify a proxy statement, form of proxy and other soliciting materials as to clearly distinguish them from the soliciting materials of any other person or persons soliciting for the same meeting or subject matter.
  • Claims made prior to a meeting regarding the results of a solicitation.