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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
circumstances, imposing this new requirement on all registrants may result in costs. In particular, the notice requirements would impose a new constraint on dissidents in cases in which the same degree of notice was not otherwise required, potentially imposing some incremental costs on such dissidents. The final amendments would also prevent the incidence and eliminate the threat of contests initiated later than the required notice deadline late-breaking proxy contests at all registrants. As in the case of other potential effects of the final amendments on the incidence and perceived threat of contested elections, these effects of the notice requirements may reduce either the degree of board discipline or the risk of unproductive distraction for boards.356
To consider potential effects on latebreaking proxy contests, we reviewed the timing of recent proxy contests. As shown in Table 2 above, we estimate that dissidents filed their initial preliminary proxy statements on average 65 days before the meeting anniversary date for contested elections initiated in years 20172020.357 We also estimate that approximately 57% of these contested elections had an initial preliminary proxy statement filed by the dissident within 60 days of the meeting anniversary date, which may represent some late-breaking contests.358 While the filing of a preliminary proxy statement does not mark the earliest point at which a dissident initiates a proxy contest and finalizes a slate of nominees, it does provide a threshold date before which these actions must have occurred. We also considered the earliest date at which a dissident either directly communicated its intent to nominate directors to the registrants or publicly announced its intent to pursue a proxy contest in a regulatory filing.
For those contests for which we have such information, we estimate that in approximately 10% of these contested elections the dissident communicated or publicly announced its intent to pursue a proxy contest within 60 days of the meeting anniversary date, which is another measure of potential latebreaking contests.359 The initial communication or public announcement of intent does not necessarily coincide with providing notice of the names of the dissident nominees, but it may mark a threshold 356 See 357 See
360 In this case, the total number of persons solicited could be no more than 10. See Section IV.B.3.
361 Based on data from Factsets SharkRepellent database and staff analysis of EDGAR filings.

supra Section IV.C.4.
supra Section IV.B.2.b.

358 Id.
359 Id.

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date after which such notice could have been provided.
We therefore cannot rule out that the notice requirement may prevent some proxy contests that would otherwise have occurred. However, dissidents who might have initiated late-breaking contests may simply adjust their timetable to be compatible with the notice requirement. Also, any effects of the notice requirements on the incidence or threat of late-breaking contested elections may be offset somewhat by the ability of dissidents who are unable to meet the notice deadline to take other actions, such as initiating a vote no campaign, using an exempt solicitation,360 or calling a special meeting to the extent possible under the bylaws to remove existing directors and elect their own nominees, which may allow them to achieve similar goals with respect to changes to the board.
While advance notice bylaws currently apply to dissidents at many registrants, registrants are not currently subject to a requirement that they provide notice of their nominees to dissidents. Thus, the notice requirement for registrants would represent a new obligation for registrants in contested elections. We estimate that 61% of registrants filed a preliminary proxy statement or definitive proxy statement if they did not file a preliminary at least 50 days before the meeting anniversary date for contested elections initiated in years 20172020,361 so we expect that the majority of registrants will have a list of nominees ready by the notice deadline. However, the notice requirement may require some registrants to finalize their list of nominees somewhat earlier than they would otherwise.
Also, to the extent that a registrant might consider changing its selected nominees after providing notice and after the dissident thereby disseminates its definitive proxy materials but perhaps before the registrant does so, the notice requirement may provide registrants with an increased incentive not to make such changes because of the risk that votes for registrant nominees on the dissident card could be invalidated. Because the notice requirement may require some registrants to finalize their nominees earlier than they would otherwise and may increase registrants incentives not to change their nominees, there is a
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possibility that this requirement could have a detrimental effect on the quality of candidates that registrants nominate.
However, the majority of registrants in recent contests filed a preliminary proxy statement at least 50 days before the meeting anniversary date, so the notice deadline is close to the date by which registrants typically disclose their nominees. We therefore expect any such effects to generally be comparatively minor.
We have also considered alternatives to the notice requirements included in the final amendments, such as earlier as well as later potential notice deadlines for dissidents. In these alternatives, we have assumed that the notice deadline for registrants would also be revised to be 10 days after the revised deadline for the dissident, to allow the registrant sufficient time to prepare its notice and list of nominees in reaction to the receipt of a notice from a dissident.
Under a later notice deadline, the risk of preventing late-breaking proxy contests that would otherwise have occurred, particularly at registrants without advance notice bylaws, would be reduced. For example, when considering a deadline of no later than 45 calendar days as opposed to 60
calendar days, as in the final rule prior to the meeting anniversary date, we found that in approximately 7% of contested elections initiated in years 20172020, the dissident announced its intent to pursue a proxy contest within 45 days of the anniversary as compared to 10% within 60 days, and in 25% of the contests initiated in years 2017
2020, the dissident filed a preliminary proxy statement within 45 days of the meeting as compared to 57% within 60
days.
Additionally, a later deadline for registrants would reduce the likelihood that some registrants may have to finalize their nominees earlier than they would otherwise. For example, we estimate that in approximately 19% of contested elections initiated in years 20172020, the registrant filed its preliminary proxy statement within the 35 days before the meeting anniversary date as compared to 39% within 50
days.
However, a later deadline may increase the risk of confusion among shareholders and impose additional solicitation costs if the registrants nonuniversal proxy card has already been disseminated and requires revision. In particular, we estimate that in 22% of contests initiated in years 20172020, registrants filed a definitive proxy statement at least 45 days before the
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