[Federal Register Volume 60, Number 151 (Monday, August 7, 1995)]
[Notices]
[Pages 40215-40217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19385]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36040; File No. SR-NYSE-95-15]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1, Amendment No. 2, and Amendment No. 3 to the Proposed Rule Change by 
the New York Stock Exchange, Inc., Relating to the Use of an Automated 
Telephone Voting System by Member Organizations or Their Agents

July 31, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 


[[Page 40216]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 6, 1995, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the self-
regulatory organization. On May 10, 1995, the NYSE submitted to the 
Commission Amendment No. 1 \3\ and on June 2, 1995, the NYSE submitted 
Amendment No. 2 \4\ to the proposed rule change. The NYSE submitted 
Amendment No. 3 to the Commission on July 21, 1995.\5\ The NYSE has 
requested accelerated approval of the proposal. The Commission is 
approving the proposal and soliciting comments.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 C.F.R. 240.19b-4.
    \3\ See letter from James E. Buck, Senior Vice President and 
Secretary, NYSE to Greg Corso, Office of Tender Offers, SEC, dated 
May 10, 1995. Amendment No. 1 made non-substantive, clarifying 
changes to the proposal. Amendment No. 1 is further described at 
note 6, infra.
    \4\ See letter from James E. Buck, Senior Vice President and 
Secretary, NYSE, to Sharon Lawson, Assistant Director, SEC, dated 
May 25, 1995. Amendment No. 2 is further described at note 7, infra.
    \5\ See letter from James E. Buck, Senior Vice President and 
Secretary, NYSE to Sharon Lawson, Assistant Director, SEC, dated 
July 21, 1995. Amendment No. 3 is further described at note 8, 
infra.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules to permit the use of 
automated telephone voting systems by member organizations or their 
proxy agents. The proposed rule would amend NYSE Rule 452.16 and the 
Listed Company Manual Section 402.08(G) by adding the following test:

    Instructions from beneficial owners may also be accepted by 
member organizations or their agents through the use of an automated 
telephone voting system, which has been approved by the Exchange. 
Such a system shall utilize an identification code for beneficial 
owners and provide an opportunity for beneficial owners to validate 
votes to ensure that they were received correctly. Records of voting 
including the date of receipt of instructions and the name of the 
recipient must be retained by the member organization of their 
agent.

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 III 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 Exchange proposes to amend its rules in order to permit member 
organizations or their proxy agents to accept the use of automated 
telephone voting systems to receive voting instructions from beneficial 
owners. The voting process that is presently used by member 
organizations or their agents provides for the transmission of a proxy 
statement and a voting authorization form to beneficial owners. The 
appropriate voting selections are indicated on the form by the 
beneficial owner and it is mailed back to the member organization or 
its agent.
    The automated telephone voting system permits the beneficial owner 
to give voting instructions on appropriate corporate proposals through 
a touch tone telephone.\6\ The system utilizes identification codes and 
provides a validation opportunity in order for the beneficial owner to 
confirm that voting instructions were received correctly.\7\ Beneficial 
holders will be informed of this new option by specific language at the 
top of the voting form.\8\

    \6\ Amendment No. 1 clarified that beneficial owners still have 
the option to vote in writing using the voting authorization form. 
The use of the automated telephone voting system is an alternative 
to the current system.
    \7\ Under the NYSE rule, only those automated telephone systems 
which have been approved by the Exchange may be accepted by member 
organizations. Amendment No. 2 clarifies that the Exchange will 
consult with the Commission staff to determine whether the proposed 
system operates in a manner consistent with Section 14(a) of the Act 
and the rules and regulations thereunder, prior to the Exchange 
approving any automated system. Currently, Automatic Data Processing 
Brokerage Information Services Group provides the only approved 
system.
    \8\ Amendment No. 3 provides the specific language that will be 
added to the voting form for the purpose of informing beneficial 
owners of their option to vote through an automated telephone voting 
system. If this language is changed in any manner, the Exchange will 
contact the Commission and receive approval before using the new 
language.
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    The system is deemed to be less prone to tabulation error than the 
current system, in addition to being more efficient and cost effective.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) that an exchange have rules that are 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.

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 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 nor received written comments on 
the proposed rule change.

III. 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-95-15 and should be 
submitted by August 28, 1995.

[[Page 40217]]


IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the NYSE's proposal to permit the use of 
automated telephone voting systems by member organizations or their 
proxy agents is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange. The Commission believes that the use of automated telephone 
voting systems by member organizations or their proxy agents is 
consistent with Sections 6 \9\ and 14 \10\ of the Act. In particular, 
the proposal is consistent with the Section 6(b)(5) \11\ requirements 
that the rules of an exchange be designed to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market, and, in general, to protect investors and the 
public interest and Section 14 of the Act which sets forth the 
requirements for the solicitation of proxies.

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78n.
    \11\ 15 U.S.C. 78f(b)(5).
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    The NYSE, consistent with Section 14 of the Act, has rules 
governing the forwarding of proxy materials to beneficial holders. 
Pursuant to these rules, member firms are required to forward to 
beneficial holders a proxy statement and a voting authorization form on 
which the holder would indicate his voting selections and mail the form 
back to the member firm. The NYSE is now proposing to adopt rules that 
would permit member firms or their proxy agents to use an Exchange 
approved automated telephone voting system that operates in a manner 
consistent with Section 14(a) of the Act as an alternative to written 
voting instructions.\12\ Under the proposed rules, the automated system 
must at a minimum provide an identification code for beneficial owners 
and provide an opportunity for beneficial owners to validate 
instructions to ensure that they were received correctly. In addition, 
the automated system must provide beneficial owners with the same power 
and authority to issue, revoke, or otherwise change voting instructions 
as currently exists for instructions communicated in written form. 
Further, member organizations or their agents utilizing this method 
must maintain records of voting which include information sufficient to 
evidence validity of voting instructions, including the name of the 
beneficial owner, the date of receipt of the instructions, and the 
voting instructions as transmitted.

    \12\ See letter from James E. Buck, Senior Vice President and 
Secretary, NYSE, to Sharon Lawson, Assistant Director, SEC, dated 
May 25, 1995. As described above, Amendment No. 2 clarifies that the 
Exchange will consult with the Commission staff to determine whether 
the proposed system operates in a manner consistent with Section 
14(a) of the Act and the rules and regulations thereunder, prior to 
the Exchange approving any automated system.
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    The Commission believes that the proposal will be beneficial to 
both shareholders and member organizations in fulfilling the proxy 
requirements under the Act and NYSE rules for several reasons.
    First, the use of an automated telephone voting system is a simpler 
and more efficient means of communicating voting instructions than the 
current method, which requires a beneficial owner to mail a voting 
authorization form to the member organization, who would vote the 
proxy. In this regard, the Commission notes that the proposed rule 
change will permit beneficial owners to make more timely decisions on 
corporate matters. For these reasons, the Commission believes that the 
proposed rule change appropriately gives beneficial owners the ability 
to use a more convenient and efficient means of providing voting 
instructions. Second, the use of an automated telephone voting system 
should prove to be more efficient and accurate than the current system 
in communicating voting instructions. As the NYSE has indicated, the 
automated telephone voting system is deemed less prone to tabulation 
errors than the scanners that are currently used to calculate the votes 
from the written voting authorization forms.\13\ In addition, the 
automated telephone voting system utilizes identification codes and 
provides a validation opportunity for the beneficial owner to confirm 
that voting instructions were received correctly. Finally, the 
automated telephone voting system is generally viewed as more cost 
efficient for member organizations because this system can handle a 
higher volume of voting instructions than the scanners that are 
currently used to calculate voting instructions from the voting 
authorization forms.\14\

    \13\ Telephone conversation between Gary Tuttle, Director of 
Securities Operation Department, NYSE, and Elisa Metzger, Senior 
Counsel, SEC, on June 16, 1995.
    \14\ Id.
    In summary, the Commission believes that the use of identification 
codes, the opportunity to confirm that voting instructions were 
received correctly, and the purported improved accuracy in the new 
system will be beneficial to shareholders and member organizations and 
is consistent with the public interest and the protection of investors. 
Despite these benefits, the Commission notes that the automated voting 
system is an alternative to the current method of communicating voting 
instructions by mail. Shareholders will still have the option to choose 
their preferred method of communicating their voting instructions. In 
addition, the NYSE rules will continue to ensure that an adequate 
record is kept of all voting, including voting done through the 
automated telephone voting system.
    The Commission finds good cause for approving the proposed rule 
change, including Amendments No. 1, 2, and 3, prior to the thirtieth 
day after the date of publication of notice of filing thereof in the 
Federal Register. The Commission believes that accelerated approval of 
the use of automated telephone voting systems by member organizations 
or their proxy agent should provide an immediate benefit to investors 
by affording them a more convenient means of communicating their voting 
instructions, as well as a more efficient method of transmitting voting 
instructions. In addition, the Commission notes that the rule change 
continues to permit investors who wish to communicate their voting 
instructions by mailing the voting authorization form to the member 
organization to do so. The use of the automated telephone voting system 
is merely an alternative to the current system. For these reasons, the 
Commission finds good cause for accelerating approval of the proposed 
rule changes as amended.
    It is therefore ordered, pursuant to Section 19(b)(2)\15\ that the 
proposed rule change, including Amendments No. 1, 2, and 3, is hereby 
approved.

    \15\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\

    \16\ 17 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-19385 Filed 8-4-95; 8:45 am]
BILLING CODE 8010-01-M