[Federal Register Volume 63, Number 153 (Monday, August 10, 1998)]
[Notices]
[Pages 42652-42653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21277]



[[Page 42652]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40289; File No. SR-NYSE-98-23]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc., Extending the Pilot Rules Governing the Reimbursement of Member 
Organizations for Costs Incurred in the Transmission of Proxy and Other 
Shareholder Communication Material

July 31, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 29, 1998, the New 
York Stock Exchange, Inc. (the ``Exchange'' or ``NYSE'') 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 Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1)
---------------------------------------------------------------------------

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

    The Exchange seeks to extend the current pilot period regarding 
Exchange Rule 451, ``Transmission of Proxy Material,'' and Exchange 
Rule 465, ``Transmission of Interim Reports and Other Material'' 
(collectively the ``Rules''). The Rules establish guidelines for the 
reimbursement of expenses by NYSE issuers to NYSE member organizations 
for the processing and delivery of proxy materials and other issuer 
communications to security holders whose securities are held in street 
name. The present pilot period regarding the Rules is scheduled to 
expire on July 31, 1998. The Exchange proposes to extend the pilot 
period through October 31, 1998.
    The text of the proposed rule change is available at the Office of 
the Secretary, the Exchange, and at the Commission.

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 Exchange 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 Exchange 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 ``Initial Filings'' \2\ revised the Rules to lower certain 
reimbursement guidelines, create incentive fees to eliminate 
duplicative mailings, and establish a supplemental fee for 
intermediaries that coordinate multiple nominees. The Commission 
approved the Initial Filing as a one-year pilot, and designated May 13, 
1998, as the date of expiration. In the ``February Filing,'' \3\ the 
Exchange extended the pilot period through July 31, 1998, and lowered 
one rate of reimbursement.\4\ This proposed rule change would extend 
the pilot period through the end of the current proxy season, October 
31, 1998.
---------------------------------------------------------------------------

    \2\ See Securities Exchange Act Release No. 38406 (Mar. 14, 
1997), 62 FR 13922 (Mar. 24, 1997). The Initial Filing contains a 
detailed description regarding the background and history of the 
Rules.
    \3\ See Securities Exchange Act Release No. 39672 (Feb. 17, 
1998), 63 FR 9034 (Feb. 23, 1998).
    \4\ The February Filing lowered the rate of reimbursement for 
mailing each set of initial proxies and annual reports from $.55 to 
$.50.
---------------------------------------------------------------------------

    The extension of the pilot period would give the Commission 
additional time to consider the ``March Filing,'' \5\ without a lapse 
in the current rules. In the March Filing, the Exchange proposed a 
change to the Rules regarding ``householding'' and proposed extending 
the pilot period through June 30, 2001. Thus, absent an extension of 
the pilot period, the fees in effect prior to the February Filing would 
return to effectiveness, creating confusion among NYSE member 
organizations and issuers. Furthermore, the extension will provide the 
Exchange's independent auditor with additional time to finish its 
review of the impact of the pilot fee structure and will provide the 
Commission with an opportunity to review that Audit Report.\6\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 39774 (Mar. 19, 
1998), 63 FR 14745 (Mar. 26, 1998).
    \6\ As noted in the March Filing, the Exchange committed to 
undertake an independent audit of the pilot fee structure during the 
1998 proxy season.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act \7\ in that it provides for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and other persons using its facilities. The Exchange further 
believes that the proposed rule change satisfies the requirement under 
Section 6(b)(5) \8\ that an exchange have rules that are designed to 
prevent fraudulent and manipulative acts and practices; promote just 
and equitable principles of trade; foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities; remove impediments to and perfect the mechanism of a free 
and open market and a national market system; and, in general, protect 
investors and the public interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange believes the proposed rule change does not 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 not solicited, and does not intend to solicit, 
comments on the 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

    Because the foregoing rule change: (1) does not significantly 
affect the protection of investors or the public interest; (2) does not 
impose any significant burden on competition; and (3) the Exchange 
provided the Commission with written notice of its intent to file the 
proposed rule change at least five business days prior to the filing 
date; the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Exchange Act \9\ and Rule 19b-4(e)(6) \10\ 
thereunder.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(e)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(e)(6) normally does 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(e)(6)(iii) \11\ permits the Commission to designate 
such shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission designate such shorter time

[[Page 42653]]

period so that the proposed rule change may take effect immediately 
upon its filing. The immediate effectiveness would: (i) make the fee 
reduction regarding the distribution of each set of initial proxies and 
annual reports available for the remainder of the 1998 proxy season; 
(ii) provide the Commission with sufficient time to complete its review 
of the March Filing, and analyze the Audit Report concerning the pilot 
fee structure that will be prepared by the Exchange's independent 
auditor; and (iii) allow the current pilot fee structure to continue 
uninterrupted.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(e)(6)(iii).
---------------------------------------------------------------------------

    The Commission, consistent with the protection of investors and the 
public interest, has determined to make the proposed rule change 
effective immediately upon filing for the following reasons. The 
proposed rule change would make the fee reduction regarding the 
distribution of each set of initial proxies and annual reports 
available for the remainder of the 1998 proxy season. This fee 
reduction should continue to benefit NYSE issuers and public investors 
in the form of lower costs and expenses. As the Commission noted in the 
March Filing, the fee reduction is based upon the Exchange's experience 
with the reimbursement guidelines and better reflects the actual costs 
incurred by NYSE member organizations.
    The proposed rule change also extends the expiration date of the 
pilot period from July 31, 1998, through October 31, 1998. The 
extension of the pilot will provide the Commission with additional time 
to complete its review of the March Filing \12\ and the opportunity to 
further evaluate the proposal. Furthermore, the current pilot period is 
due to expire before the estimated date on which the Exchange hopes to 
deliver to the Commission the Audit Report examining the proxy 
distribution process with respect to securities held in street name.
---------------------------------------------------------------------------

    \12\ The Commission received approximately 42 comment letters on 
the March Filing. As part of its review of the March Filing, the 
Commission will consider the substance of those comment letters.
---------------------------------------------------------------------------

    The Commission also notes that the current pilot period's 
expiration date falls within the time period when proxy materials 
traditionally are distributed to shareholders. As a result, NYSE member 
organizations would potentially be reimbursed at two different rates--
the rates established by the Initial Filing, and the rates in effect 
prior to the implementation of the Initial Filing (the default rates)--
if the expiration date were not extended. The Commission believes it is 
reasonable that the proposed rule change become immediately effective 
upon the date of filing, July 29, 1998.
    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 in the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-NYSE-98-23 and should be 
submitted by August 31, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. 98-21277 Filed 8-7-98; 8:45 am]
BILLING CODE 8010-01-M