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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations
dissidents while doing little to address the freeriding concerns discussed above.
For similar reasons, a requirement for the dissident to solicit a minimum number of all shareholder accounts both registered and street name shareholders, as suggested by one commenter, could impose significantly higher burdens on dissidents, particularly those seeking to effect change at large, widely-held public companies.108 A requirement to solicit a minimum of 67% or even a majority of the shareholder accounts could result in dissidents having to deliver proxy statements and universal proxy cards to thousands or tens of thousands of shareholder accounts, including those that have relatively few shares entitled to vote on the director election. The high cost of such deliveries could unduly deter many dissidents, particularly those with fewer resources, from attempting to effect change by contesting the election of registrants nominees. Such a burden is unnecessary to address the freeriding concerns underlying the minimum solicitation requirement.
We have not adopted a special mechanism for ensuring compliance with the minimum solicitation requirement because existing proxy rules are adequate in that regard. If a dissident fails to meet the 67%
minimum solicitation threshold, that failure would constitute a violation of Rule 14a19 and the dissident would face the same liability as if it had violated any other proxy rules. In addition, Rule 14a19a3 requires dissidents to include a statement in the proxy statement or form of proxy that it intends to solicit holders of shares representing at least 67% of the voting power of shares entitled to vote on the election of directors. The dissident would be subject to liability under 17
CFR 240.14a9 Exchange Act Rule 14a 9, which prohibits material misstatements or omissions in proxy soliciting materials, if such a statement is false.
In response to the suggestion that registrants reimburse dissidents for the reasonable costs associated with the solicitation process when at least 50%
of a dissidents nominees are elected, the universal proxy rules are not intended to address the appropriate cost-sharing between registrants and dissidents for soliciting fees, which is a separate issue. The purpose of the minimum solicitation requirement is to prevent freeriding by dissidents who
want to take advantage of the benefits of the universal proxy requirement but do not intend to undertake meaningful solicitation efforts. We also note that registrants often have policies in their governing documents outlining when reimbursement can be sought, and the universal proxy requirement is not intended to intrude into those arrangements.
We acknowledge the concern regarding some retail investors not receiving proxy materials from dissidents electing to solicit the minimum required. Increasing the minimum solicitation threshold to 67%
of the voting power may help address this concern. However, as explained above, we must balance this concern against the risk of imposing undue costs on dissidents and thereby deterring legitimate, potentially value-enhancing contests.
Finally, we recognize any minimum solicitation requirement imposes on the dissident the costs of delivering proxy materials to shareholders. To address this concern, the adopted rules, like the Proposed Rules, do not mandate a specific method of furnishing the proxy materials. A dissident may choose to use the less costly e-proxy delivery method i.e., the notice and access method of mailing a notice of internet availability and posting the proxy materials on a website should it wish.109 We also acknowledge that some dissidents might have chosen to initiate contests to pursue goals other than changes in board composition, such as to publicize a particular issue or to encourage management to engage with the dissident.110 Such contests will not be possible without meaningful solicitation efforts under the rules we adopt in this document.

108 See infra notes 390397 and accompanying text for a detailed discussion of the potential costs associated with such a requirement.

109 See infra Section IV.B.2.b for additional detail regarding this topic.
110 See discussion in Section IV.B.2.c infra.

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E. Dissidents Requirement To File Definitive Proxy Statement 25 Calendar Days Prior to Meeting 1. Proposed Rules The Commission proposed to require a dissident in a contested election to file its definitive proxy statement with the Commission by the later of 25 calendar days prior to the meeting date or five calendar days after the registrant files its definitive proxy statement, regardless of the proxy delivery method. As proposed, the five calendar day deadline would be triggered if the registrant files its definitive proxy statement fewer than 30 calendar days prior to the meeting date, in which case the dissident would be required to file
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its definitive proxy statement no later than five calendar days after the registrant files its definitive proxy statement.
2. Comments Received We received few comments on this proposed requirement. Three commenters expressed support for the deadline imposed on dissidents to file their definitive proxy statement with the Commission.111 One commenter opposed a filing deadline for the dissident in the absence of a similar deadline for registrants.112 This commenter advocated requiring the registrant to publicly disclose in a Form 8K the names of its nominees, as well as other information about the shareholder meeting, such as the record and meeting dates, at least 30 days before the earlier of the nomination deadline under the registrants governing instruments or the notice deadline established in proposed Rule 14a19.113 One commenter proposed, as a disciplinary measure, that if a dissident fails to file and disseminate its definitive proxy statement by the deadline, then the dissident should be prohibited from engaging in a proxy contest at any registrant or at least, the registrant in question for a period of time e.g., three years.114
3. Final Amendments We are adopting, as proposed, the requirement that a dissident in a contested director election file its definitive proxy statement with the Commission by the later of 25 calendar days prior to the meeting date or five calendar days after the registrant files its definitive proxy statement.
Due to the typical sequencing of registrant and dissident proxy filings, as well as the fact that dissidents may choose not to solicit all shareholders, shareholders may not have seen information about the dissidents nominees when they receive a universal proxy card from the registrant.
Therefore, a dissident filing deadline is appropriate to help ensure that shareholders who receive a universal proxy card will have access to information about all nominees sufficiently in advance of the meeting.115 We recognize, however, that 111 See
letters from ICI; CFA Institute; CII.
letters from Olshan.
113 See letters from Olshan.
114 See letter from Sidley.
115 As discussed in Section II.F infra, we are also adopting a requirement that each party in a contested election include a statement in its proxy materials referring shareholders to the other partys proxy statement for information about the other partys nominees and explaining that shareholders 112 See
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