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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations total incremental burden hours 422
75% and $121,200 1,212 total incremental burden hours 25%
$400, plus $5,400 in professional costs due to the additional solicitation burden, for the services of outside
professionals. We further estimate for purposes of the PRA that the total incremental burden on all soliciting parties of the final amendments under Rule 20a1 will be 166.5 hours for internal time 222 total incremental
68377

burden hours 75% and $22,200 222
total incremental burden hours 25%
$400 for the services of outside professionals.
A summary of the estimated changes is included in the table below.

TABLE 1CALCULATION OF INCREMENTAL PRA BURDEN ESTIMATES

Schedule 14A
Rule 20a1

Current annual responses
Estimated annual responses
Current burden hours
Estimated increase in burden hours
Estimated total burden hours
Current professional costs
Estimated increase in professional costs
Estimated total professional costs
A

B

C

D

E = C + D

F

G

=F+G

6,369
1,333

6,369
1,333

VI. Final Regulatory Flexibility Analysis The Regulatory Flexibility Act RFA 423 requires the Commission, in promulgating rules under Section 553 of the Administrative Procedure Act,424 to consider the impact of those rules on small entities. We have prepared this Final Regulatory Flexibility Analysis FRFA in accordance with Section 604 of the RFA.425 An Initial Regulatory Flexibility Act Analysis IRFA was prepared in accordance with the RFA
and was included in the Proposing Release. The FRFA relates to the amendments to Exchange Act Rules 14a2, 14a3, 14a4, 14a5, 14a6, and 14a101, and new Exchange Act Rule 14a19.
A. Need for, and Objectives of, the Final Amendments
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The final amendments will allow a shareholder voting by proxy to choose among director nominees in an election contest in a manner that more closely reflects the choice that could be made by voting in person at a shareholder meeting. To this end, we are amending the proxy rules applicable to operating companies to:
Revise the consent required of a bona fide nominee;
eliminate the short slate rule;
require the use of universal proxy cards in all non-exempt solicitations in connection with contested elections;
and prescribe requirements for universal proxy cards including notice, filing and solicitation requirements.
422 This figure represents the sum of the aforementioned 150 additional total incremental burden hours from election contests and the aforementioned 1,062 additional total incremental burden hours from director elections generally.
423 5 U.S.C. 601 et seq.
424 5 U.S.C. 553.
425 5 U.S.C. 604.
426 See supra Section II.

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777,590
113,305

1,212
222

778,802
113,527

We are also adopting amendments that will apply to all director elections and will require disclosure regarding the effect of shareholder action to vote against, withhold or abstain and require that the appropriate voting option be included on the proxy card.
The need for, and objectives of, the amendments are discussed in more detail in Section I, above. We discuss the economic impact, including the estimated compliance costs and burdens, of the amendments in Sections IV and V above.
B. Significant Issues Raised by Public Comments In the Proposing Release, we requested comment on all aspects of the IRFA, including how the Proposed Rules could further lower the burden on small entities, the number of small entities that would be affected by the Proposed Rules, the existence or nature of the potential impact of the proposals on small entities discussed in the analysis, and how to quantify the impact of the Proposed Rules. We did not receive any comments specifically addressing the IRFA. However, we received a number of comments on the Proposed Rules generally,426 and have considered these comments in developing the FRFA.
C. Small Entities Subject to the Final Amendments The final amendments will affect small entities that file proxy statements under the Exchange Act. The RFA
defines small entity to mean small business, small organization, or 427 5

U.S.C. 6016.
17 CFR 230.157 under the Securities Act and 17 CFR 240.010a under the Exchange Act.
429 This estimate is based on staff analysis of issuers potentially subject to the final amendments, excluding co-registrants, with EDGAR filings on Form 10K, or amendments thereto, filed during the calendar year of January 1, 2020 to December 31, 2020, or filed by September 1, 2021, that, if timely filed by the applicable deadline, would have been 428 See
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$103,678,712
39,990,000

$126,600
22,200

$103,805,312
40,012,200

small governmental jurisdiction. 427
For purposes of the RFA, under our rules, an issuer, other than an investment company, is a small business or small organization if it had total assets of $5 million or less on the last day of its most recent fiscal year and is engaged or proposing to engage in an offering of securities that does not exceed $5 million.428 We estimate that there are approximately 660 issuers that file with the Commission, other than investment companies, that may be considered small entities and are potentially subject to all of the final amendments.429 Under 17 CFR 270.0
10, an investment company, including a business development company, is considered to be a small entity if it, together with other investment companies in the same group of related investment companies, has net assets of $50 million or less as of the end of its most recent fiscal year. Commission staff estimates that, as of June 2021, there were 70 registered investment companies that would be subject to the proposed amendments that may be considered small entities.430
D. Projected Reporting, Recordkeeping, and Other Compliance Requirements As noted above, the purpose of the final amendments is to allow a shareholder voting by proxy to choose among director nominees in an election contest in a manner that more closely reflects the choice that could be made by voting in person at a shareholder meeting. In addition, we are adopting amendments that apply to all director elections and require disclosure filed between January 1 and December 31, 2020.
Analysis is based on data from XBRL filings, Compustat, Ives Group Audit Analytics, and manual review of filings submitted to the Commission.
430 These estimates are based on staff analysis of Morningstar data and data submitted by investment company registrants in forms filed on EDGAR as of June 30, 2021.

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