SEC Releases New N&A Regulations

In an effort to improve retail voting results by educating shareholders, the SEC released new Notice and Access ("N&A") regulations that are designed to give issuers flexibility in formatting and selecting language to be used in the Notice. The new rules require that the Notice address certain topics, such as describing the matters to be considered, without specifying "boilerplate" descriptions to be included in the Notice. The new rules also permit issuers to include with the Notice a separate explanation of the N&A model. The explanation may give the reasons for using N&A, a description of the N&A process for receiving and reviewing proxy materials and voting under the N&A proxy rules.

The new rules also require issuers to indicate that the Notice is not a form of proxy for voting. The SEC did not prescribe a specific legend to be used for this purpose, again giving issuers the flexibility in designing this communication.

In the commentary prepared by the Commission, the SEC noted that, since issuers are required to reimburse the street ("intermediaries") for reasonable expenses related to the distribution of proxy materials, they are not requiring intermediaries to forward issuer explanatory materials. This is particularly interesting, since the preponderance of retail shareholders hold their stock in street name and the thrust of these regulations was to educate all shareholders to address falling retail voting levels. Perhaps the SEC is being sensitive to the fact that the street used N&A as a vehicle to inflict new fees on issuers without lowering processing fees to reflect the reduced enclosing requirements.

Issuers are still prohibited from including materials designed to persuade shareholders to vote in a particular manner or to change their method of delivery of proxy materials. Thus, issuers can describe the proposals and encourage shareholders to vote, but cannot recommend how they should vote.

The commentary also noted that the SEC is preparing a White Paper that will initiate a review of the street proxy mechanics - the process by which proxy materials are distributed and voting is solicited from beneficial holders. We expect that this is a far more complex set of issues that will take considerably more time to analyze and design improvements.

Director Voting Results: Decreases not Defeats

The very early results are in - we have seen a considerable reduction in the percentages of votes "for" directors for some (only some) companies. Where almost all companies used to receive between 95% and 99% of the shareholder votes in the "for directors" column, a few companies are garnering director approval totals in the 64% to 70% range and some in the 85% to 92% range. These same companies are still receiving 99.7% to 99.9% voting for auditors where discretionary voting is still permitted! This clearly indicates that the change to NYSE Rule 452, eliminating broker discretionary voting for directors, will really impact some companies. Overall, the results, to date, are only cosmetic - directors are getting fewer supporting votes, but are still being elected. Still, the perception could reflect poorly on some companies. It might be wise to alert your Board and senior officers to be prepared for potential questions or shareholders' comments on this new trend.

The "Going Green" Win x 5: Check Registers Now On-Line

In the continuing drive to reduce paper waste and improve both service and the security of shareholder personal information, R&T has discontinued printing paper check registers and is now providing this report as part of our on-line permanent report archives. Transfer journals and DRP statements were already added to this facility. These reports will remain on-line indefinitely and can be searched for any shareholder name or data string using the archive system search engine. This service is being provided at no additional charge and the out-of-pocket expenses relating to delivery and stationery expenses will be eliminated. When you think about this, it is really a win times 5 - environmental waste is reduced, out-of-pocket expenses are cut, personal information is more secure and bulky reports no longer have to be shipped by R&T or secured and stored by issuers. The staff at R&T will continue to seek ways to reduce environmental waste and cut your out-of-pocket expenses.

Thank you,
Thomas L. Montrone
Chairman of the Board,
President and CEO
Registrar and Transfer Company