[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