On January 27, 2025, the SEC’s Division of Corporation Finance issued new and revised Compliance and Disclosure Interpretations (“C&DIs”) that address the use of PX14A6G filings pursuant to Exchange Act Rule 14a-6(g). The interpretations appear here, as question and answer numbers 126.06 through 126.10. (Through a nifty new feature, the C&DI are accompanied by redlines that show the revisions made to Q&A 126.06 and 126.07, which are available here and here.)
Under Rule 14a-6(g), a PX14A6G filing is required whenever a shareholder owning more than $5 million of a company’s securities solicits other shareholders by recommending or encouraging other shareholders to vote in a particular way on a matter being voted on at a company’s meeting of shareholders. Rule 14a-6(g) was designed to address concerns that institutional investors and other large shareholders would conduct “secret” solicitations to encourage other shareholders to vote a particular way. However, in practice, these filings have primarily related to Rule 14a-8 shareholder proposals and have been filed on a “voluntary” basis by persons who do not own more than $5 million of the securities of the company that is the subject of their solicitation. The Society for Corporate Governance has reported that during the SEC’s most recent fiscal year, there were 424 filings, a 65% increase from the 2020-21 fiscal year, when 257 filings were made, and many have been non-compliant with SEC rules. For additional information regarding trends in PX14A6G filings and other shareholder proposal developments during the 2024 proxy season, please see our annual client alert on shareholder proposal developments, the most recent of which is available here.
The new C&DIs address the following topics:
- Voluntary Filings Permitted With Appropriate Disclosure. Revised C&DI 126.06 reaffirms the Division’s previous position that a person who does not beneficially own more than $5 million of the class of securities that is subject of its solicitation may make a voluntary PX14A6G filing. However, the person must affirmatively state on the cover page of its filing that the soliciting person does not beneficially own more than $5 million of the class of subject securities and that the notice is therefore being provided on a voluntary basis. Previously, the Staff’s interpretations only required the filing person to state that the filing was “voluntary,” which was not as informative as the disclosures described in the new interpretation. While not specifically addressed in the revised interpretation, one would expect that a filing person stating that they “owned less than $5 million” of a company’s stock, if in fact they do not own any of the company’s stock, could be viewed as misleading.
- Required Cover Page. C&DI 126.07 restates the Division’s prior position that a PX14A6G filing is required to have a cover page which includes the information regarding the person making the solicitation that is required under Rule 14a-103, as well as any disclosures required under C&DI 126.06. The “cover” page providing this information must appear before the filing person’s soliciting materials.
- Only For Use When Conducting A Solicitation By Other Means. In practice, submitting a PX14A6G filing via the SEC’s EDGAR filing system has become an inexpensive means for persons to communicate their views on matters to a company’s shareholders. In a significant new interpretation, C&DI 126.08 states that filing a PX14A6G on EDGAR “is not intended to be the means through which a person disseminates written soliciting material to security holders. Rather, its purpose is to notify the public of the written soliciting material that the person has sent or given to security holders through other means.” As a result, a PX14A6G filing should only be made by a person who has used another means to provide the soliciting material to the subject company’s shareholders.
- Only For Communications That Constitute A Solicitation. C&DI 126.09 reminds filing persons that the PX14A6G filing is only permissible for persons conducting an exempt solicitation under Exchange Act Rule 14a-2(b)(1), and “only written communications that constitute a ‘solicitation’ should be submitted” under the cover of a PX14A6G Notice of Exempt Solicitation. This interpretation appears targeted at PX14A6G filings that have been made addressing general policy or political viewpoints, but not specifically constituting a “solicitation” with respect to an item being voted on at a company’s meeting of shareholders. Under Rule 14a-1(l), a “solicitation” generally is defined as a request for a proxy, a request to execute or not to execute, or to revoke, a proxy, or any other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding, or revocation of a proxy. Importantly, Rule 14a-2(b)(1) is not available to a person who has “a substantial interest in the subject matter” of a proposal, which could raise questions regarding the availability of PX14A6G filings by persons who have an interest, other than as a shareholder, in a matter being voted on.
- Subject To Anti-Fraud Rule. C&DI 126.10 reminds persons making PX14A6G filings that their soliciting material are subject to Rule 14a-9, which prohibits “any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.” The note to Rule 14a-9 includes examples of statements that can be false or misleading, including those “which directly or indirectly impugns character, integrity or personal reputation, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation.”
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The new and revised C&DIs will be welcome by companies in light of concerns that PX14A6G filings have become a bit of a “Wild West” where shareholder proponents or their representatives use PX14A6G filings to assert arguments or claims in support of their proposals without disclosing their involvement with the proposal, and without verifying or taking responsibility for claims set forth in their PX14A6G filings. In its annual “stakeholders meeting” with shareholder proponents, proponent representatives, and public companies, the Staff has confirmed that it will take appropriate action when informed of problematic PX14A6G filings. These C&DIs go a long way to help address those practices.