November 30, 2023

SEC Clarifies Proxy Rules of the Road

5 min

On November 17, 2023, the Division of Corporation Finance of the Securities and Exchange Commission ("SEC") issued new and revised proxy-related compliance and disclosure interpretations ("CDIs") that provide guidance on the treatment of overvoted and undervoted universal proxy cards and the calculation of the 10-day waiting period between the filing of a preliminary proxy statement and the definitive proxy statement. The CDIs also address technical aspects of the disclosure of participants in a contested solicitation and certain disclosures in connection with matters not voted on by stockholders but related to the matters up for stockholder consideration. Below is a summary of certain of these CDIs and links to the full text of each CDI.

Universal Proxy Cards (Rule 14a-19)

Since August 31, 2022, Rule 14a-19 (the "Universal Proxy Rules") have mandated the use of universal proxy cards by management and stockholders soliciting votes in contested director elections. These universal proxy cards must list all persons nominated for election by management and the soliciting stockholder or stockholder group. As a result of listing both management and the soliciting stockholder's nominees, a universal proxy card will contain more nominees than there are directorships up for election. While the Universal Proxy Rules provide that each proxy card must clearly disclose the treatment of proxy cards that are (i) voted for more nominees than the number of director seats up for election (an "overvoted proxy card"), (ii) voted for fewer nominees than the number of director seats up for election (an "undervoted proxy card"), or (iii) voted for no nominees, questions have arisen as to what treatment the SEC will allow. The CDIs directly address these questions.


Question 139.07 provides that if a stockholder returns an overvoted proxy card, the soliciting party of the proxy must disregard all votes represented by that overvoted proxy card with respect to the director election proposal and may not use discretionary authority to vote the shares for director nominees in accordance with the soliciting party's recommendations. This CDI further explains that the shares represented by an overvoted proxy card can, however, be voted on other matters included on the universal proxy card for which there is no overvote and can be counted for purposes of determining a quorum. The SEC staff also indicates in this CDI that proxy service providers are not prohibited from the "helpful practice" of contacting stockholders to seek a correction of an overvoted proxy card before the meeting date.


Question 139.08 provides that an undervoted proxy card must be voted in accordance with the stockholder's specifications, and the soliciting party is not allowed to use discretionary authority to vote the shares represented by undervoted proxy cards for the remaining director seats up for election in accordance with the soliciting party's recommendation.

No Votes

Question 139.09 provides that if a stockholder has signed a proxy card but has not marked her choices as to any of the director nominees up for election, a soliciting party may use discretionary authority to vote the shares represented by that signed but unmarked proxy card in accordance with that soliciting party's voting recommendations. In connection with this CDI, the SEC staff notes that a universal proxy card is required to prominently disclose the "treatment and effect" of a proxy executed in a manner that does not grant authority to vote with respect to any nominees.

Voting Instruction Forms

The CDIs also provide that the treatment and effect of overvotes, undervotes, and no votes on a corresponding voting instruction form should be the same as the universal proxy card.

Preliminary Proxy Statements (Rule 14a-6)

Rule 14a-6(a) of Regulation 14A sets forth the circumstances in which a preliminary proxy statement is required to be filed with the SEC. In such cases, Rule 14a-6(a) provides that preliminary proxy statements and proxy cards are required to be filed at least 10 calendar days prior to the date definitive proxy statements and proxy cards are first given or sent to the public company's stockholders. The calculation of such deadline is important because the SEC is not required to (and in most circumstances does not) notify the filer if the SEC decides not to review the preliminary proxy statement.

Revised Question 126.03 clarifies that the method of calculating the 10-calendar day period specified in Rule 14a-6(a) assumes that the preliminary proxy statement was filed on or before 5:30 p.m., Eastern Time, which results in such filing date being day one of the period. If the preliminary proxy statement is filed after 5:30 p.m., Eastern Time, the 10-day period does not start until the next business day. The revised CDI seems to directly address the practice sometimes employed by activists in proxy contests of filing a preliminary proxy statement after 5:30 p.m. on a Friday to start the 10-day waiting period before the filing would become available on the SEC's EDGAR website on Monday morning.

Other Matters

The CDIs also address the disclosure of (i) information about participants in a contested solicitation in written solicitation materials delivered prior to furnishing a proxy statement (Question 132.03), and (ii) information regarding the prior acquisition of another company (which did not require stockholder approval) in the acquiring company's proxy statement used to solicit stockholder approval of the issuance of additional shares of common stock that would be issuable upon the conversion of the securities issued in connection with the acquisition (Question 151.02).

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