SEC OKs e-delivery of shareholder information

Companies issuing information to shareholders will at last be allowed to use the Internet as a legal method of delivery beginning July 1, 2007, according to new rules published by the U.S. Securities and Exchange Commission last week.

Current rules require proxy materials and annual reports to be delivered in hard-copy form unless a shareholder specifically requests electronic delivery.

Under the new rules (click to see PDF of the SEC regulations), companies can choose to use an electronic method of notification for anything except certain types of business transactions. The information for an entire shareholder meeting must be posted on a public Web site in formats conducive to reading online, as well as printing in hard copy. Shareholders also must have the ability to vote anonymously either through a Web site or by phone.

Despite the new rules, e-proxy notification isn't mandatory--yet. The SEC announced simultaneously that it is considering a proposal that would require Internet access for these announcements. The public-comment period ends March 30, 2007.

Sun Microsystems CEO and blogger Jonathan Schwartz specifically addressed the issue in a blog on his company's Web site last September, noting that he sent a letter on the same topic to SEC Chairman Christopher Cox.

Cox responded in the comments section of Schwartz's blog in November, writing that the Internet is "a powerful tool" for providing information to investors and its potential "has not yet been fully exploited." He also hinted that he agreed with Schwartz.

The proposal was first brought before the commission in December 2005 to allow companies to "take advantage of communications technology" when releasing information to shareholders as well as reduce printing and mailing costs.

But it's not the first time the issue has been raised. In 2000, the commission also discussed a model in which the act of putting the proxy information on a public Web site could be considered the same as delivery due to the prevalence of Internet access, but no action was taken, according to the staff report (click here for a PDF of the report).