[Federal Register Volume 63, Number 215 (Friday, November 6, 1998)]
[Notices]
[Pages 60036-60037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29718]



[[Page 60036]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40621; File No. SR-NYSE-98-38]


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

October 30, 1998.
    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 October 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 October 31, 1998. The Exchange proposes to extend the pilot 
period through February 12, 1999.
    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 Filing'' \3\ 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,'' \4\ the 
Exchange extended the pilot period through July 31, 1998, and lowered 
the rate of reimbursement for mailing each set of initial proxies and 
annual reports from $.55 to $.50. In the ``July Filing,'' \5\ the 
Exchange extended the pilot period through October 31, 1998, and kept 
intact the five cent fee reduction implemented by the February Filing. 
This proposed rule change would extend the pilot through February 12, 
1999, and likewise keep intact the five cent fee reduction.
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    \3\ 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.
    \4\ See Securities Exchange Act Release No. 39672 (Feb. 17, 
1998), 63 FR 9034 (Feb. 23, 1998).
    \5\ See Securities Exchange Act Release No. 40289 (July 31, 
1998), 63 FR 42652 (Aug. 10, 1998).
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    The extension of the pilot period would give the Commission 
additional time to consider the ``March Filing,'' \6\ 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 Initial Filing \7\ 
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 the auditor's Audit Report.\8\
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    \6\ See Securities Exchange Act Release No. 39774 (Mar. 19, 
1998), 63 FR 14745 (Mar. 26, 1998).
    \7\ The Exchange's filing mistakenly references the February 
Filing rather than the Initial Filing. The Exchange confirmed that 
its reference to the February Filing was an oversight and that it 
intended to refer to the Initial Filing. Telephone conversation 
between Michael J. Simon, Attorney, Milbank Tweed Hadley & McCloy, 
and Michael Loftus, Attorney, Division of Market Regulation, 
Commission (October 29, 1998).
    \8\ As noted in the March Filing, the Exchange committed to 
undertake an independent audit of the pilot fee structure during the 
1998 proxy season.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act \9\ 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) \10\ 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.
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    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
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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

[[Page 60037]]

19(b)(3)(A) of the Exchange Act \11\ and Rule 19b-4(e)(6) \12\ 
thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(e)(6).
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    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) \13\ 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 period so that the proposed rule 
change may take effect immediately upon its filing. The immediate 
effectiveness would: (i) continue to make available the five cent fee 
reduction regarding the distribution of each set of initial proxies and 
annual reports; (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.
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    \13\ 17 CFR 240.19b-4(e)(6)(iii).
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    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 continue to make available the five cent fee 
reduction regarding the distribution of each set of initial proxies and 
annual reports. 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 October 31, 1998, through February 12, 1999. The 
extension of the pilot period will provide the Commission with 
additional time to complete its review of the March Filing \14\ and the 
opportunity to further evaluate the proposal. Furthermore, the current 
pilot period is due to expire about the same time as 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. The extension will therefore provide 
the Commission with the necessary time to review the Audit Report in 
connection with its review of the pending March Filing.
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    \14\ The Commission received approximately 46 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.
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    The Commission notes that unless the current pilot period's 
expiration date is extended, the reimbursement rates for proxy 
materials distributed after October 31, 1998, will revert to those in 
effect prior to the pilot period. The Commission believes such a result 
would be confusing and counterproductive, especially given that the 
March Filing proposing to extend the pilot period through June 30, 
2001, is still pending with the Commission.
    For all of the reasons set forth above, the Commission believes it 
is reasonable that the proposed rule change become immediately 
effective upon the date of filing, October 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, 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 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, NW, 
Washington, DC 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-98-38 and should be 
submitted by November 27, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-29718 Filed 11-5-98; 8:45 am]
BILLING CODE 8010-01-M