What’s The Climate For The SEC Online Proxy Rules? Hot, Hot, Hot.

By Rhoda Anderson, President, Rhoda Anderson Associates, and Co-Founder, EZOnlineDocuments

It doesn’t seem so hard these days to forecast the climate at the SEC. With the financial “tsunami” of last year and an ongoing technology front fast moving in, it seems to be all about the Internet.

Last year the Notice & Access floodgates opened - with a deluge of new rules for posting shareholder communications on the web: It began with certain “accelerated filers” having a requirement to post Proxy and Annual Meeting information online in 2008, with the balance of companies having to start the process this year. And, the requirements have been pretty specific that the files be:

1. Searchable
2. Printable
3. Substantially the same as a printed “hard copy”

So how’s it going?

Some firms simply put up a PDF file. But there continue to be issues with that format, including the need for the recipient to have Adobe Acrobat software, the related PDF download times that rightly annoy many individual investors and the fact that many PDF postings are simply not that readily searchable. Users are often unfamiliar with the Search and other functions in Acrobat software, leaving some to believe the PDF is a stepping stone to a better solution. Many other, wiser firms, however, have gone in a different direction by using providers of online documents to convert the printed piece into an electronic version in a more user friendly format.

Then there is XBRL…

XBRL was created to enhance financial data and make it more reliable, accurate and efficient for users in the financial industry. It is based on a widely used system of tags that identify and standardize key items of information. This allows data to be searched, downloaded and analyzed in a much more efficient manner. As many know, the required XBRL process started this past June with staged rollouts to accelerated filers in June 2010, with the remaining companies to adopt by June 2011.

Expanding the Plan:

But the SEC is not just putting the heat on standard online shareholder communications; they are reaching into other financial services as well. One area impacted by increased regulations for online notification is the Mutual Fund industry. Much like the tornado felt in 2008 with Notice & Access, Funds are now being blown around by new waves of regulations, specifically, with the requirements related to posting Summary Prospectuses and associated documents online, slated to start in January 2010. In brief, those requirements are that the document must be:

• Accessible on the Internet free of charge for 90 days.
• Convenient for both reading online and printing on paper.
• Designed so users can move directly back and forth between section headings in their Table of Contents and the content itself.
• Cross-linked, allowing users to move back and forth to required documents with continuously visible links.
• Able for users to retain and print, without charge, from the electronic copy.

The forecast:

This ever-increasing interest in the Internet as a delivery method points to the reality that online requirements are here to stay. The implication: get ready for more integration of technology in the regulatory environment - and for increased demands to make materials more user-friendly. What is also apparent is that the scramble for Notice & Access, XBRL and for Mutual Funds online compliance indicates that the financial industry needs to be ahead of the curve, not behind it.

All is not bad news, though. On the positive side electronic documents save printing and mailing costs, are much kinder to the environment and can be produced in a fairly simple process when working with expert providers. Such providers are familiar with the changing requirements and can offer a variety of solutions.

The most impactful solutions provide:

• No change to the original documents - and a simple conversion process.
• Easy accessibility for users, via multiple kinds of user browsers.
• Familiarity with all the compliance regulations and industry deadlines.
• Simple and user-friendly features that provide the easiest means for reviewing the documents.
• Specialization in the delivery of online financial documents. Now is the time to take action to ensure compliance with current SEC rules regarding Internet availability of your Annual Meeting and other important shareholder materials. It is also time to make a plan before the next wave of SEC regulations creates a new storm across the industry. By implementing better solutions now, it will make the process more effective and efficient.

Rhoda Anderson is president of Rhoda Anderson Associates, a corporate governance consulting practice; and CEO of EZOnlineDocuments. She can be reached at randerson@RhodaAnderson.com Telephone: (609) 371-5631