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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
the Commission reopened the comment period for the Proposing Release to permit commenters to further analyze and comment upon the Proposed Rules in light of developments since the publication of the Proposed Rules.19 We received many comment letters in response to the Proposing Release and the Reopening Release.20 After taking into consideration these public comments, which were generally supportive of the rulemaking, and developments in proxy contests since the Proposing Release, we are adopting the Proposed Rules substantially as proposed, with the exception of an increase in the minimum solicitation requirement described in detail in Section II.D below and other minor changes.

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B. Overview of Final Amendments The new rules will require use of a universal proxy card in all nonexempt director election contests. This universal proxy card must include the names of all duly nominated director candidates presented for election by any party and for whom proxies are solicited. Requiring a universal proxy card in non-exempt director election contests is the most effective means to ensure that shareholders voting by proxy are able to elect directors in a manner consistent with their right to vote in person at a shareholder meeting.21
The amendments that we are adopting in this document will not apply to investment companies registered under Section 8 of the Investment Company Act of 1940 or business development companies as defined by Section 2a48 of the Investment Company Act of 1940 BDCs, and together with registered investment companies, funds.22 Funds were not covered by 2016 81 FR 79122 Release No. 3479164
Proposing Release, and the related comment period ended on January 9, 2017.
19 This reopening of the comment period was set out in a release published in the Federal Register on May 6, 2021 86 FR 24364 Release No. 34
91603 Reopening Release. The comment period ended on June 7, 2021.
20 Unless otherwise indicated, comment letters cited in this release are comment letters received in response to the Proposing Release and the Reopening Release, which are available at https
www.sec.gov/comments/s7-24-16/s72416.htm.
21 Congress intended our proxy rules to effectuate shareholders ability to fully and consistently exercise the fair corporate suffrage available to them under state corporate law. See H. R. Rep. No.
731383, 2d Sess., at 13 1934. See also Mills v.
Elec. Auto-Lite Co., 396 U.S. 375, 381 1970; J. I.
Case Co. v. Borak, 377 U.S. 426, 431 1964.
22 15 U.S.C. 80a8; 15 U.S.C. 80a2a48. BDCs are a category of closed-end investment companies that are not registered under the Investment Company Act, but are subject to certain provisions of the Investment Company Act. See Proposing Release at n.178.

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the Proposed Rules. In light of developments since 2016, as well as the comments that we have received, we believe further consideration of the application of a universal proxy mandate to some or all funds before deciding how to proceed with respect to funds is appropriate.
II. Discussion of Final Amendments We are adopting the Proposed Rules largely as proposed to better align the Federal proxy rules with a shareholders ability to vote in person at a shareholder meeting. The final rules:
Require the use of a universal proxy card by all participants in a non-exempt director election contest. The universal proxy card must include the names of both registrant and dissident nominees, along with certain other shareholder nominees included as a result of proxy access;
Expand the determination of a bona fide nominee to include a person who consents to being named in any proxy statement for a registrants next shareholder meeting for the election of directors;
Require dissidents to provide registrants with notice of their intent to solicit proxies and to provide the names of their nominees no later than 60
calendar days before the anniversary of the previous years annual meeting;
Require registrants to notify dissidents of the names of the registrants nominees no later than 50
calendar days before the anniversary of the previous years annual meeting;
Require dissidents to file their definitive proxy statement by the later of 25 calendar days before the shareholder meeting or five calendar days after the registrant files its definitive proxy statement;
Require each side in a proxy contest to refer shareholders to the other partys proxy statement for information about the other partys nominees and refer shareholders to the Commissions website to access the other sides proxy statement free of charge;
Require that dissidents solicit the holders of shares representing at least 67% of the voting power of the shares entitled to vote at the meeting; and Establish presentation and formatting requirements for universal proxy cards that ensure that each partys nominees are presented in a clear, neutral manner.
We also are adopting, as proposed, changes to the form of proxy and proxy statement disclosure requirements applicable to all director elections.
These amendments:
Require proxy cards to include an against voting option in director
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elections, when there is a legal effect 23
to a vote against a director nominee;
Require that the proxy card provide shareholders with the ability to abstain in a director election where a majority voting standard applies; and Require proxy statement disclosure about the effect of a withhold vote in an election of directors.
We discuss the final amendments in greater detail below.24
A. Mandatory Use of Universal Proxies in Non-Exempt Solicitations in Contested Elections 1. Proposed Rules The Commission proposed to require the use of universal proxy cards in all non-exempt solicitations in contested director elections except those involving funds.25 The Commission proposed that each sides proxy card in a contested director election must include the names of all nominees of both the dissident and registrant and the nominees of certain shareholders i.e., proxy access nominees. In proposing the mandatory use of universal proxy cards in these kinds of contests, the Commission was guided by the principle that shareholders should enjoy the same ability to vote on a proxy card as they would have if attending a shareholder meeting in person.
2. Comments Received A number of commenters expressed views on whether the use of a universal proxy card should be voluntary or mandatory. Most favored the mandatory approach because it more effectively replicates the voting options available through in-person voting at a shareholder meeting.26 Some 23 State law and the registrants governing documents determine the voting standard for director elections, with director nominees generally elected under either a plurality voting standard or majority voting standard. They also determine whether an against voting option has a legal effect under the applicable voting standard. For example, under a plurality voting standard, a director nominee can be elected to the board with a single vote in favor of his or her election, with the withhold or against votes having no impact on the outcome of the election.
24 In addition to the substantive final amendments, we are making technical amendments to: i Rule 14a3 punctuational and related minor edits; and ii Rule 14a4b and Note 3 to Rule 14a6a removal of obsolete references to vacated Rule 14a11.
25 See proposed Rule 14a19e.
26 See letters dated Dec. 28, 2016, Sep. 7, 2017, Nov. 8, 2018, and Jun. 2, 2021 from Council of Institutional Investors CII; letters dated Jan. 4, 2017 and Jun. 7, 2021 from Ohio Public Employees Retirement System OPERS; letter dated Jan. 9, 2017 from Colorado Public Employees Retirement Association Colorado PERA; letter dated Jan. 9, 2017 from Trian Fund Management, L.P. Trian;
letter dated Jan. 9, 2017 from Ad Hoc Coalition of Institutional Investors in Closed-End Funds Ad
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