15 U.S.C. § 78n — Proxies

(a) Solicitation of proxies in violation of rules and regulations. (1) A person cannot solicit a proxy, consent, or authorization for a registered security (other than an exempt security) if doing so breaks SEC rules. This applies to solicitations made by mail, by any means of interstate commerce, or through a national securities exchange. The SEC writes the rules to protect the public and investors. (2) Those SEC rules may require an issuer's proxy solicitation to include a board nominee submitted by a shareholder. The rules may also require the issuer to follow a specific procedure for that nomination. (b) Giving or refraining from giving proxy in respect of any security carried for account of customer. (1) Exchange members, brokers, dealers, and banks or other entities with fiduciary powers cannot give, or withhold, a proxy, consent, authorization, or information statement for a customer's registered security (or a security issued by a registered investment company) if doing so breaks SEC rules. (2) For banks, SEC rules cannot force disclosure of the names of beneficial owners in an account the bank held on December 28, 1985, unless the owner agrees to the disclosure. This protection does not apply if the SEC finds the bank did not make a good-faith effort to get that owner's consent. (c) Information to holders of record prior to annual or other meeting. If proxies for a registered security are not solicited from record holders under the rules in (a) before an annual or other meeting, the issuer must still file with the SEC, and send to every record holder, information as complete as what a proxy solicitation would require. Nothing had to be filed or sent under this rule before July 1, 1964. (d) Tender offer by owner of more than five per centum of class of securities; exceptions. (1) A person cannot make a tender offer, or request or invite tenders, for a registered equity security — including certain insurance-company and closed-end investment-company securities — if the purchase would leave that person owning more than 5% of the class. First, the person must file a statement with the SEC containing the required information, no later than when the offer is first published, sent, or given to security holders. Every printed request, invitation, or advertisement for the tender offer must be filed as part of that statement. Any extra soliciting material sent out after the initial offer must also be filed, no later than when it goes to security holders. Copies must go to the issuer no later than they go to security holders. (2) If two or more people act together — as a partnership, syndicate, or other group — to buy, hold, or sell an issuer's securities, the group counts as one "person" under this subsection. (3) When figuring a percentage of a class of securities, leave out any securities the issuer or its subsidiary holds for itself. (4) Any recommendation to accept or reject the tender offer must follow SEC rules. (5) A security holder can withdraw securities deposited for the tender offer during two windows: within seven days after the offer's definitive terms are first published or sent, and any time after 60 days from the original offer date — unless the SEC sets different rules. (6) Suppose the offer is for less than all of a class, and within ten days after the offer is published or sent, more securities are deposited than the buyer is willing to take. Then the buyer must take up securities pro rata from each depositor, ignoring fractions. The same pro-rata rule applies to securities deposited within ten days after the buyer raises its offer price. (7) If the buyer raises the price during the offer, it must pay every seller the higher price — even sellers who tendered before the price went up. (8) This subsection does not apply to: (A) a purchase that, combined with the same buyer's other purchases of that class in the past twelve months, totals 2% or less of the class; (B) the issuer buying back its own securities; or (C) a purchase the SEC exempts by rule or order because it is not meant to, and does not, change or influence control of the issuer. (e) Untrue statement of material fact or omission of fact with respect to tender offer. A person cannot make an untrue statement of a material fact, or leave out a material fact needed to keep other statements from being misleading, in connection with a tender offer or a solicitation for or against one. The same ban covers fraudulent, deceptive, or manipulative acts or practices. The SEC must write rules defining these banned acts and rules designed to stop them. (f) Election or designation of majority of directors of issuer by owner of more than five per centum of class of securities at other than meeting of security holders. Sometimes an arrangement tied to a (d)-type purchase — or a purchase under section 78m(d) — will install new directors without a shareholder meeting, and those directors will make up a majority of the board. Before any of them can take office, the issuer must file with the SEC, and send to every record holder entitled to vote for directors, information as complete as (a) or (c) would require if the new directors were nominees at a real meeting. (g) Filing fees. (1)(A) When a company files preliminary proxy material about an acquisition, merger, consolidation, or a sale of substantially all its assets, it must pay a filing fee — unless it is a registered investment company. For a merger, acquisition, or consolidation with a cash or securities payment to shareholders: take the value of that payment. Divide it by $1,000,000. Multiply by $92 (this rate is adjusted yearly, as (4) explains). That is the fee. For a sale of substantially all the company's assets: take the cash or value of what the company will receive. Divide by $1,000,000. Multiply by $92, adjusted the same way. That is the fee. (B) This fee goes down by however much the company already paid the SEC for the same securities under section 77f(b) of this title — and the 77f(b) fee goes down by the same amount in reverse. If two or more companies must each file this proxy material for the same deal, each pays its proportionate share of the fee. (2) When an issuer files a preliminary information statement under (c), it pays the same fee as (1) describes. (3) When a person files a statement under (d)(1), the fee works the same way: take the total cash or value of securities or property being offered. Divide by $1,000,000. Multiply by $92, adjusted yearly. That is the fee — reduced by any amount already paid for the same securities under section 6(b) of the Securities Act of 1933, with that other fee reduced in turn. (4) Each year, the SEC must adjust this $92-per-$1,000,000 rate so it matches the current rate under section 6(b) of the Securities Act of 1933. (5) Fees collected for fiscal year 2012 and later go into the Treasury's general revenue. They cannot be spent. (6) The SEC does not have to follow the normal notice-and-comment process in section 553 of title 5 to set these fees. The adjusted rate is published and takes effect the same way as under section 6(b) of the Securities Act of 1933. (7) For amounts under $1,000,000, the per-$1,000,000 rate still applies proportionally. (8) The SEC can still charge other fees for matters this subsection does not cover, using its authority under section 9701 of title 31 or elsewhere. (h) Proxy solicitations and tender offers in connection with limited partnership rollup transactions. (1) A person cannot solicit a proxy, consent, or authorization for a "limited partnership rollup transaction" (defined below), or make a tender offer to further one, unless it follows SEC rules written under (a) and (d) specifically for rollups. Those rules must: (A) let any security holder talk privately about whether to oppose the rollup — without that talk counting as a "solicitation" or needing an advance SEC filing — except that this does not weaken any anti-fraud rule, and a holder of 5% or more who regularly buys and sells limited-partnership interests must disclose that ownership and any conflicts of interest in those talks; (B) make the issuer give holders a list of the issuer's security holders, in the form the SEC sets; (C) ban paying anyone who solicits proxies directly from security holders based on (i) whether the vote favors or opposes the rollup, or (ii) whether the rollup is approved or completed; (D) require clear disclosure in the soliciting material about: (i) how the rollup changes the business plan, voting rights, ownership form, or general partner's pay, compared with each original partnership; (ii) the general partner's conflicts of interest; (iii) whether the new securities' trading price is expected to differ significantly from the partnerships' exchange values; (iv) how the limited partners' interests were valued and converted into new securities; (v) how the rollup's risks and effects differ across the partnerships involved, including the effect of leaving some partnerships out; (vi) the general partner's fairness statement described in (E); and (vii) anything else the SEC requires; (E) require the general partner to state whether the rollup is fair or unfair to each partnership's investors, explain why, and describe alternatives it considered, such as liquidating instead; (F) if the general partner or sponsor got an outside opinion, appraisal, or report on the rollup, require disclosure of: (i) how the analysis was done and what it concluded; (ii) who prepared it, how they were picked, and any relationship between them and the general partner, sponsor, or affiliates; (iii) whether their pay depended on the rollup being approved; and (iv) any limits placed on their access to the issuer's staff or records; (G) require the general partner or sponsor to explain why, if it used a preparer whose pay depended on approval or who lacked full access to records; (H) require a statement of reasons if the general partner or sponsor decided no fairness opinion was needed at all; (I) require the soliciting material to include a clear summary of the whole rollup — covering everything in (D) through (H) — with the risks placed prominently near the front; (J) require the voting or tender period to last at least 60 days, or the longest period state law allows, whichever is shorter; and (K) include any other investor-protection provisions the SEC decides are necessary. (2) The SEC may exempt any security, transaction, or person from these rollup rules or from the definition in (4), in whole or in part. (3) Nothing in this subsection limits the SEC's power under (a), (d), or any other part of this law, or stops the SEC from ordering a remedy required under this subsection. (4) Except as (5) says otherwise, a "limited partnership rollup transaction" is a combination or reorganization of one or more limited partnerships where: (A) some or all investors will receive new securities that will trade under a plan the SEC approved before December 17, 1993; (B) the investors' current limited-partnership securities do not already trade under such a pre-1993 plan; (C) investors face a real, negative change to their voting rights, how long the entity will exist, management's pay, or the investment's goals; and (D) some investors are not offered the choice to keep a security on close to the same terms they already have. (5) A transaction is not a "limited partnership rollup transaction" if: (A) it involves only partnerships that keep cash on hand and reinvest sale or refinancing proceeds, under SEC-approved criteria; (B) it involves only limited partners being bought out or exchanged, under their existing partnership agreement, for securities in an operating company that was already named when the partnership was formed; (C) the new securities do not have to be, and are not, registered under the Securities Act of 1933; (D) it involves only issuers that never had to register or report under section 78l, before or after the deal; (E) a non-affiliated party is simply taking over as general partner or sponsor, and at least 66⅔% of each partnership's units approved it, and the existing general partners get only the pay their old agreements already promised — unless the SEC says otherwise by rule; or (F) investors receive securities of another entity that already traded under a pre-1993 plan for at least 12 months before the mailing, and the new shares are no more than 20% of that entity's total outstanding shares (not counting shares the entity or its subsidiary holds) — unless the SEC says otherwise by rule. (i) Disclosure of pay versus performance. The SEC must require every issuer to clearly describe, in its annual-meeting proxy material, the executive pay it already has to disclose under SEC regulation 229.402. For issuers that are not "emerging growth companies," this description must also show how the pay executives actually received relates to the company's financial performance — accounting for changes in stock value, dividends, and other distributions. The disclosure may include a chart or graph. (j) Disclosure of hedging by employees and directors. The SEC must require every issuer to disclose, in its annual-meeting proxy material, whether any employee, board member, or their designee may buy hedging instruments — such as prepaid variable forward contracts, equity swaps, collars, or exchange funds — designed to protect against a drop in the value of equity securities that were (1) given to them as pay, or (2) that they hold directly or indirectly. (k) Data standards for proxy and consent solicitation materials. (1) The SEC must adopt, by rule, data standards covering all the information in proxy or consent material an issuer prepares for its annual meeting. The SEC may exempt exhibits, signatures, and certifications from these standards. (2) These data standards must match, as much as possible, the data standards set under section 5334 of title 12 — including, where practical, the same features listed in that section's clauses (i) through (vi) under subsection (c)(1)(B).