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Ready or not, electronic filings will soon be a choice for companies and investors. What's more, the SEC is proposing a mandatory requirement that companies push more regulatory solicitations to the Web.
Helen Shaw, CFO.com | US
December 14, 2006
It's sort of a paper independence day. As of July 1, 2007, companies will be able to offer proxy statements and annual reports on the Internet, thanks to the Securities and Exchange Commission's unanimous adoption of a proposed rule. Investors partial to paper need not fear, however. The "SEC will always guarantee your right to printed document delivery," said SEC Chairman Christopher Cox at an SEC open meeting on Wednesday.
The decision for companies to provide proxy materials on the Internet—and for investors to access them electronically—will be entirely voluntary. The rule requires issuers to notify investors by postcard that proxy materials will be available online. In addition, the postcard should provide instructions for requesting paper copies of the documents. "We're switching from a model that requires an affirmative opt-in of electronic delivery to one that requires an affirmative opt-out," explained Commissioner Roel Campos.
The rule aims to lower mailing and printing costs for companies and individuals involved in proxy solicitation issues. Furthermore, the push to the web may be one SEC regulation that, indeed, contributes to the environment, noted Cox, who added that "one non-profit [organization] estimated it could prevent 100,000 tons of paper from being dumped in landfills."
Campos hailed the change as the "first steps toward a regime that modernizes shareholder communication." Commissioner Annette Nazareth noted that the rule's effects may not be noticed immediately, but will become more apparent as the SEC's new electronic regulatory filing tool, known as XBRL, is adopted by public companies over time.
Furthermore, the SEC is proposing a mandatory requirement that companies offer materials on the Internet for all solicitations, except for business combinations, sometime in the future. That rule, if approved, could become effective as early as the 2008 proxy season, commented John White, director of the SEC's division of corporation finance.
While the SEC commissioners unanimously adopted the new rule, it is not without controversy. As reported recently on CFO.com, a majority of investors still prefer a printed copy of regulatory filings. That preference is the reason why access to that information will continue to be voluntary, noted Cox. However, "we'll never know the answers to the questions [about what investors prefer] until some give it a try," declared Cox.