[Federal Register Volume 59, Number 8 (Wednesday, January 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-687]


[[Page Unknown]]

[Federal Register: January 12, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33437; File No. SR-NYSE-93-37]

 

Self-Regulatory Organizations; Filing of Proposed Rule Change by 
the New York Stock Exchange, Inc. Relating to Amendments to Rules 450 
(``Restrictions on Giving of Proxies''), 451 (``Transmission of Proxy 
Material''), 452 (``Giving of Proxies by Member Organizations'') and 
465 (``Transmission of Interim Reports and Other Material'')

January 5, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October 
22, 1993, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE is herewith filing proposed amendments to NYSE Rules 450, 
451, 452 and 465 which will allow designated registered investment 
advisers to vote proxies and receive proxy and related issuer material 
in lieu of beneficial owners. The text of these rules follows:
Italics reflect additions

Proxies

(Rules and Policies Administered by Marketing Division.)
    Applicability of proxy rules--Rules 450 to 460 [2450-2460], 
inclusive, apply to both listed and unlisted securities, unless the 
context otherwise limits application.
    The term ``unregistered company'' as used in Rule 456 to 459 
[2456-2459] means a company not required to conform to the proxy 
rules of the Securities and Exchange Commission in the solicitation 
of proxies with respect to its securities.
    The term ``member'' as used in connection with Rules 456 to 459 
[2456-2459] includes a member, allied member, member firm, member 
corporation and employee thereof.
    The term ``investment adviser'' as used in Rules 450, 451, 452 
and 465 [2450, 2451, 2452, 2465] may include a registered broker-
dealer.

Restriction on Giving of Proxies

    Rule 450. No member organization shall give or authorize the 
giving of a proxy to vote stock registered in its name, or in the 
name of its nominee, except as required or permitted under the 
provisions of Rule 452 [2452], unless such member organization is 
the beneficial owner of such stock. Notwithstanding the foregoing,
    (1) Any member organization designated by a named fiduciary as 
the investment manager of stock held as assets of an ERISA Plan that 
expressly grants discretion to the investment manager to manage, 
acquire, or dispose of any plan asset and which has not expressly 
reserved the proxy voting right for the named fiduciary may vote the 
proxies in accordance with its ERISA Plan fiduciary 
responsibilities; and
    (2) any person registered as an investment adviser under the 
Investment Advisers Act of 1940 who exercises investment discretion 
pursuant to an advisory contract for the beneficial owner and has 
been designated in writing by the beneficial owner to vote the 
proxies for stock which is in the possession or control of the 
member organization, may vote such proxies.

Transmission of Proxy Material

    Rule 451.(a) Whenever a person soliciting proxies shall furnish 
a member organization:
    (1) copies of all soliciting material which such person is 
sending to registered holders and
    (2) satisfactory assurance that he will reimburse such member 
organization for all out-of-pocket expenses, including reasonable 
clerical expenses, incurred by such member organization in 
connection with such solicitation,

Such member organization shall transmit to each beneficial owner of 
stock which is in its possession or control or to an investment 
adviser registered under the Investment Advisers Act of 1940 who 
exercises investment discretion pursuant to an advisory contract for 
the beneficial owner and has been designated in writing by the 
beneficial owner of such stock to receive soliciting material in 
lieu of the beneficial owner, the material furnished; and
    (b) such member organization shall transmit with such material 
either:
    (1) a request for voting instructions and, as to matters which 
may be voted without instructions under Rule 452 [2452], a 
statement to the effect that, if such instructions are not received 
by the tenth day before the meeting, the proxy may be given at 
discretion by the owner of record of the stock; provided, however, 
that such statement may be made only when the proxy soliciting 
material is transmitted to the beneficial owner of the stock or to 
the beneficial owner's designated investment adviser registered 
under the Investment Advisers Act of 1940 who exercises investment 
discretion pursuant to an advisory contract for such beneficial 
owner, at least fifteen days before the meeting. When the proxy 
soliciting material is transmitted to the beneficial owner of the 
stock or to the beneficial owner's designated investment adviser 
registered under the Investment Advisers Act of 1940 twenty-five 
days or more before the meeting, the statement accompanying such 
material shall be to the effect that the proxy may be given fifteen 
days before the meeting at the discretion of the owner of record of 
the stock; or
    (2) a signed proxy indicating the number of shares held for such 
beneficial owner and bearing a symbol identifying the proxy records 
of such member organization, and also a letter informing the 
beneficial owner or the beneficial owner's designated investment 
adviser registered under the Investment Advisers Act of 1940 who 
exercises investment discretion pursuant to an advisory contract for 
such beneficial owner, of the necessity for completing the proxy 
form and forwarding it to the person soliciting proxies in order 
that the shares may be represented at the meeting.
    This rule shall not apply to beneficial owners outside the 
United States.
    . . . Supplementary Material:
    .10 Annual reports to be transmitted.--The annual report shall 
be transmitted to beneficial owners or to beneficial owners' 
designated investment advisers registered under the Investment 
Advisers Act of 1940 who exercise investment discretion pursuant to 
an advisory contract for such beneficial owners under the same 
conditions as those applying to proxy soliciting material under Rule 
451 even though it is not proxy-soliciting material under the proxy 
rules of the Securities and Exchange Commission.
    .60 Duty to transmit even when requested not to.--The proxy 
material must be sent to a beneficial owner even though such owner 
has instructed the member organization not to do so, unless the 
beneficial owner has instructed the member organization in writing 
to send such material to a designated investment adviser registered 
under the Investment Advisers Act of 1940 who exercises investment 
discretion pursuant to an advisory contract for such beneficial 
owner.

Rule 452 Giving Proxies by Member Organization

Voting procedure without instructions

    A member organization which has transmitted proxy soliciting 
material to the beneficial owner of stock or to an investment 
adviser registered under the Investment Adviser Act of 1940 who 
exercises investment discretion pursuant to an advisory contract for 
the beneficial owner and has been designated in writing by the 
beneficial owner of such stock to receive soliciting material in 
lieu of the beneficial owner and solicited voting instructions in 
accordance with the provisions of Rule 451 [2451], and which has 
not received instructions from the beneficial owner or from such 
designated registered investment adviser by the date specified in 
the statement accompanying such material, may give or authorize the 
giving of a proxy to vote such stock, provided the person in the 
member organization giving or authorizing the giving of the proxy 
has no knowledge of any contest as to the action to be taken at the 
meeting and provided such action is adequately disclosed to 
stockholders and does not include authorization for a merger, 
consolidation or any other matter which may affect substantially the 
rights or privileges of such stock.
    . . . Supplementary Material:

Giving a Proxy To Vote Stock

    .10 When member organization may vote without customer 
instructions.--Rule 452, above, provides that a member organization 
may give a proxy to vote stock provided that:
    (1) It has transmitted proxy soliciting material to the 
beneficial owner of stock or to an investment adviser registered 
under the Investment Advisers Act of 1940 who exercises investment 
discretion pursuant to an advisory contract for the beneficial owner 
and has been designated by the beneficial owner to receive such 
material in accordance with Rule 451 [2451], and
    (2) it has not received voting instructions from the beneficial 
owner or from the beneficial owner's designated investment adviser 
registered under the Investment Advisers Act of 1940 who exercises 
investment discretion pursuant to an advisory contract for such 
beneficial owner, by the date specified in the statement 
accompanying such material, and
    (3) [No change in text]

Transmission of Interim Reports and Other Material

    Rule 465. A member organization, when so requested by a company, 
and upon being furnished with:
    (1) copies of interim reports of earnings or other material 
being sent to stockholders, and
    (2) satisfactory assurance that it will be reimbursed by such 
company for all out-of-pocket expenses, including reasonable 
clerical expenses, shall transmit such reports or material to each 
beneficial owner of stock of such company held by such member 
organization and registered in the name other than the name of the 
beneficial owner unless the beneficial owner has instructed the 
member organization in writing to transmit such reports or material 
to a designated investment adviser registered under the Investment 
Advisers Act of 1940 who exercises investment discretion pursuant to 
an advisory contract for such beneficial owner.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule amendments is to provide 
beneficial owners of stock with the ability to have investment advisers 
registered under the Investment Advisers Act of 1940 who exercise 
investment discretion for their account(s) pursuant to an advisory 
contract and who have been designated in writing by the beneficial 
owners to receive proxy materials and to vote proxies on behalf of such 
beneficial owners. The proposed rule amendments will also allow the 
designated registered investment advisers to receive annual reports and 
other related material. This would include both member organizations of 
the NYSE and other entities registered as investment advisers.
    Currently, Exchange rules prohibit a member organization from 
voting proxies, on a discretionary basis, on securities held in its 
custody unless the securities are beneficially owned by the member 
organization, the beneficial owner has failed to provide the member 
organization with voting instructions and the subject of the vote is 
nonsubstantive, or the member organization is the investment manager 
for an ERISA account.
    Further, Exchange rules require transmission of proxy and related 
issuer materials, as well as proxy voting instructions, to each 
beneficial owner of stock held in the member organization's possession 
and control. Rule 451.60 explicitly requires that proxy material be 
sent to a beneficial owner even though such owner has instructed the 
member organization not to do so.
    A number of member organizations and the Investment Adviser 
Committee of the Securities Industry Association (``SIA'') represented 
to the Exchange that many of their customers who have their accounts 
managed by investment advisers do not want to receive proxy related 
information and annual reports or vote the proxy. These member 
organizations have indicated that their customers would rather have the 
professionals, whom they pay to manage their accounts, represent their 
interests relative to the companies in which they own stock because the 
professionals are better qualified.
    Also, banks, investment advisers and broker/dealers who are not 
subject to Exchange rules may receive proxy material and vote proxies 
on behalf of their customers in accordance with fiduciary obligations 
set forth by contractual arrangement.
    The amendments to Exchange Rules 450, 451, 452 and 465 will permit 
investment advisers who exercise investment discretion pursuant to an 
advisory contract and who have been designated in writing by the 
beneficial owner, to receive proxy soliciting materials, annual reports 
and other related material and to vote proxies in lieu of the 
beneficial owners of securities. The term investment adviser is defiend 
to include a registered broker-dealer (e.g., a member organization).
    The proposed rule change will not diminish a beneficial owner's 
rights to receive proxy related materials and to vote proxies. Rather, 
it will give beneficial owners the option to designate their investment 
adviser as the person to receive such materials and to vote proxies. In 
addition, it will enable member organizations to comply with customer 
desires concerning transmission of proxy materials and voting proxies.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b)(5) of the 
Securities Exchange Act of 1934 which requires that the rules of the 
Exchange be designed to prevent fraudulent and manipulative acts, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and, in general, 
to protect the investing public, in that it establishes standards for 
investment advisers to receive proxy and related material and to vote 
proxies, thereby meeting customer needs while providing appropriate 
regulatory safeguards.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited, and does not intend to solicit, 
comments regarding this proposed rule change. The Exchange has not 
received any unsolicited written comments from members or other 
interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the publication of this notice in the Federal 
Register or within such other period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying at the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the NYSE. All 
submissions should refer to File No. SR-NYSE-93-37 and should be 
submitted by February 2, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-687 Filed 1-11-94; 8:45 am]
BILLING CODE 8010-01-M