[Federal Register Volume 59, Number 130 (Friday, July 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16567]


[[Page Unknown]]

[Federal Register: July 8, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34294; File No. SR-Amex-94-3]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange, Inc. Relating to Amendments to 
Rules 575 (``Giving of Proxies Restricted''), 576 (``Transmission of 
Proxy Material to Customers''), 577 (``Giving Proxies by Member 
Organization'') and 585 (``Transmission of Interim Reports and Other 
Material'')

July 1, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder\2\ notice is hereby given that 
on February 22, 1994, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the self-
regulatory organization. On May 26, 1994, the Amex submitted to the 
Commission Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1994).
    \3\See letter from Linda Tarr, Senior Counsel, Amex, to Sandra 
Sciole, Special Counsel, SEC, dated May 25, 1994. Amendment No. 1 
made certain clarifying changes to the proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to amend Exchange Rules 575, 576, 577, and 585 
governing proxies, to allow designated registered investment advisers 
to vote proxies and receive proxy and related issuer material in lieu 
of the beneficial owners. The Amex also proposes to amend Rule 575 to 
allow a member organization which is the investment manager for an 
ERISA Plan to vote proxies on behalf of the ERISA Plan.\4\ The text of 
these rules follows (italics reflects proposed additions to the Rules):
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    \4\ERISA is an acronym for the Employee Retirement Income 
Security Act of 1974. See 29 U.S.C. 1001-1461 (1988). ERISA defines 
the term ``investment manager'' to mean any fiduciary (other than a 
trustee or named fiduciary, as defined in Section 1102(a)(2) of 
Title 29): (A) who has the power to manage, acquire, or dispose of 
any asset of a plan; (B) who is (i) registered as an investment 
adviser under the Investment Advisers Act of 1940 (ii) is a bank, as 
defined in that Act or (iii) is an insurance company qualified to 
perform services described in subparagraph (A) under the laws of 
more than one State; and (C) has acknowledged in writing that he is 
a fiduciary with respect to the plan. See 29 U.S.C. Sec. 1002(38) 
(1988).
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Giving of Proxies Restricted

    Rule 575. 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 577, unless such member organization is the 
beneficial owner of such stock. Notwithstanding the foregoing,
    (1) any member organization designed 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 to Customers

    Rule 576. (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 (hereinafter ``designated investment 
adviser'') 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 577, 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 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, 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 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 with 
proxy records of such member organization, and also a letter 
informing the beneficial owner or the beneficial owner's designated 
investment adviser, 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.

* * * Commentary

    .01 Annual reports to be transmitted.--The annual report shall 
be transmitted to beneficial owners or to the beneficial owners' 
designated investment advisers under the same conditions as those 
applying to proxy soliciting material under Rule 576 even though it 
is not proxy soliciting material under the proxy rules of the 
Securities and Exchange Commission.
    .20 through .50--No Change.
    .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 the beneficial owner's designated 
investment adviser.
    .70 through .92--No Change.

Giving Proxies by Member Organization

    Rule 577. A member organization shall give or authorize the 
giving of a proxy for stock registered in its name, or in the name 
of its nominee, at the direction of the beneficial owner. If the 
stock is not in the control or possession of the member 
organization, satisfactory proof of the beneficial ownership as of 
the record date may be required.

Voting Member Organization Holdings as Executor, etc.

    A member organization may give or authorize the giving of a 
proxy to vote any stock registered in its name, or in the name of 
its nominee, if such member organization holds such stock as 
executor, administrator, guardian, trustee, or in a similar 
representative or fiduciary capacity with authority to vote.

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 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 (hereinafter ``designated investment 
adviser'') to receive soliciting material in lieu of the beneficial 
owner and solicited voting instructions in accordance with the 
provisions of Rule 576, and which has not received instructions from 
the beneficial owner or from the beneficial owner's designated 
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.

Instructions on Stock in Names of Other Member Organizations

    A member organization which has in its possession or control 
stock registered in the name of another member organization, and 
which has solicited voting instructions in accordance with the 
provisions of Rule 576(b)(1), shall
    (1) forward to the second member organization any voting 
instructions received from the beneficial owner, or
    (2) if the proxy soliciting material has been transmitted to the 
beneficial owner of the stock in accordance with Rule 576 and no 
instructions have been received by the date specified in the 
statement accompanying such material, notify the second member 
organization of such fact in order that such member organization may 
give the proxy as provided in the third paragraph of this rule.

Signed Proxies for Stock in Names of Other Member Organizations

    A member organization which has in its possession or control 
stock registered in the name of another member organization, and 
which desires to transmit signed proxies pursuant to the provisions 
of Rule 576(b)(2), shall obtain the requisite number of signed 
proxies from such holder of record.

* * * Commentary

Giving a Proxy to Vote Stock

    .10 When member organization may vote without customer 
instructions.--Rule 577, 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 the beneficial owner's designated 
investment adviser in accordance with Rule 576, and
    (2) it has not received voting instructions from the beneficial 
owner or from the beneficial owner's designed investment adviser, by 
the date specified in the statement accompanying such material, and
    (3)--No Change.
    .11 through .20--No Change.

Transmission of Interim Reports and Other Material

    Rule 585. 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 materials to each 
beneficial owner of stock of such company held by such member 
organization and registered in a 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.

* * * Commentary--No Change

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

(a) Purpose
    The Exchange's rules currently prohibit a member organization from 
voting proxies, on a discretionary basis, on securities held in its 
custody unless (1) the securities are beneficially owned by the member 
organization, or (2) the beneficial owner has failed to provide the 
member organization with voting instructions and the subject of the 
vote is nonsubstantive. Exchange rules further require member 
organizations to transmit proxy and related issuer materials to each 
beneficial owner of stock held in the member organization's possession 
even when the beneficial owner has instructed the member organization 
not to do so.
    The Exchange is proposing to amend Rules 575, 576, 577 and 585 to 
provide that a beneficial owner of stock may designate in writing that 
a registered investment adviser who exercises investment discretion for 
his account(s) pursuant to an advisory contract, is to receive proxy 
materials and vote proxies on behalf of such beneficial owner. The 
proposed rule amendments would also allow designated registered 
investment advisers to receive annual reports and other related issuer 
materials in lieu of the beneficial owner. The term investment adviser 
is defined to include a registered broker-dealer, such as a member 
organization.\5\
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    \5\The Investment Advisers Act of 1940 defines an ``investment 
adviser'' as any person who, for compensation, engages in the 
business of advising others, either directly or through publications 
or writings, as to the value of securities or as to the advisability 
of investing in, purchasing, or selling securities, or who, for 
compensation and as part of a regular business, issues or 
promulgates analyses or reports concerning securities; but does not 
include (A) a bank, or any bank holding company as defined in the 
Bank Holding Company Act of 1956, which is not an investment 
company; (B) any lawyer, accountant, engineer, or teacher whose 
performance of such services is solely incidental to the practice of 
his profession; (C) any broker or dealer whose performance of such 
services is solely incidental to the conduct of his business as a 
broker or dealer and who receives no special compensation therefor; 
(D) the publisher of any bona fide newspaper, news magazine or 
business or financial publication of general and regular 
circulation; (E) any person whose advice, analyses, or reports 
relate to no securities other than securities which are direct 
obligations of or obligations guaranteed as to principal or interest 
by the United States, or securities issued or guaranteed by 
corporations in which the United States has a direct or indirect 
interest which shall have been designated by the Secretary of the 
Treasury, pursuant to Section 3(a)(12) of the 1934 Act, as exempted 
securities for the purposes of that Act; or (F) such other persons 
not within the intent of this paragraph, as the Commission may 
designate by rules and regulations or order. 15 U.S.C. Sec. 80b-
2(a)(11) (1988).
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    The Board of Directors of the New York Stock Exchange, Inc. 
(``NYSE'') recently approved a proposal to amend its comparable proxy 
rules, and filed such proposal with the SEC.\6\ The NYSE proposal was 
developed in response to concerns raised by a number of its member 
organizations and by the Investment Adviser Committee of the Securities 
Industry Association, that many customers do not want to receive proxy 
materials and vote. These customers apparently would prefer that their 
registered investment advisers represent their interests in this regard 
because, as professionals, they are better qualified to perform this 
function.
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    \6\See File No. SR-NYSE-93-37 filed with the Commission on 
October 22, 1993.
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    It is also proposed that the Board approve an additional amendment 
to Exchange Rule 575 to conform that rule to a comparable NYSE rule 
which allows a member organization managing stock under an ERISA Plan 
to vote the proxies on the stock in accordance with its ERISA Plan 
fiduciary responsibilities.\7\
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    \7\This NYSE Rule currently states that 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, unless such 
member organization is the beneficial owner of such stock. 
Notwithstanding the foregoing, 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. See NYSE Rule 450, Restriction on 
Giving of Proxies.
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    Most Amex member firms doing a public business are dual members of 
both the NYSE and Amex, and the rules of the two exchanges regarding 
proxies and voting have historically been substantially the same. 
Accordingly, it is appropriate to modify these Amex rules to track the 
NYSE amendments.
(b) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act in general and furthers the objectives of 
Section 6(b)(5) in particular in that it prevents fraudulent and 
manipulative acts, promotes just and equitable principles of trade, 
removes impediments to and perfects the mechanism of a free and open 
market and, in general, protects 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 
impose any burden on competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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, N.W., Washington, D.C. 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 Room, 450 Fifth Street, N.W., Washington, 
D.C. 20549. Copies of the filing will also be available for inspection 
and copying at the principal office of the Amex. All submissions should 
refer to File No. SR-Amex-94-3 and should be submitted by July 29, 
1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16567 Filed 7-7-94; 8:45 am]
BILLING CODE 8010-01-M