[Federal Register Volume 64, Number 56 (Wednesday, March 24, 1999)]
[Notices]
[Pages 14294-14300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7157]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41177; File No. SR-NYSE-98-05]


Self-Regulatory Organizations; New York Stock Exchange, Inc.: 
Order Approving Proposed Rule Change and Notice of Filing and Order 
Granting Accelerated Approval to Amendment No. 1 to Proposed Rule 
Change Relating to the Reimbursement of Member Organizations for Costs 
Incurred in the Transmission of Proxy and Other Shareholder 
Communication Material

March 16, 1999.

I. Introduction

    On February 6, 1998, the New York Stock Exchange, Inc. 
(``Exchange'' or ``NYSE'') submitted to the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to extend through June 30, 2001, 
the effectiveness of the pilot fees (``Pilot Fee Structure'') set forth 
in Exchange Rule 451, ``Transmission of Proxy Material,'' and Exchange 
Rule 465, ``Transmission of Interim Reports and Other Material'' 
(collectively the ``Rules'').\3\ 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.\4\ The proposed rule change also

[[Page 14295]]

sought to revise the Rules to allow NYSE member firms to reduce 
mailings to beneficial owners through the ``householding'' of 
materials, provided that implied consent (i.e., beneficial owner does 
not object after receiving 60 days written notice of the proposed 
householding) is obtained from the beneficial owners.\5\ This portion 
of the proposal has been withdrawn by the Exchange.\6\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The ``Pilot Fee Structure'' originally was approved by the 
Commission on March 14, 1997. See Securities Exchange Act Release 
No. 38406 (Mar. 14, 1997), 62 FR 13922 (Mar. 24, 1997) (``Original 
Pilot Approval Order''). The Pilot Fee Structure subsequently was 
extended several times and modified once. See infra notes 14 and 15. 
The Exchange amended its proposed rule change to extend the Pilot 
Fee Structure through August 31, 1999, rather than June 30, 2001, as 
originally proposed. See infra note 8.
    \4\ The ownership of shares in street name means that a 
shareholder, or ``beneficial owner,'' has purchased shares through a 
broker-dealer or bank, also known as a ``nominee.'' In contrast to 
direct ownership, where the shares are directly registered in the 
name of the shareholder, shares held in street name are registered 
in the name of the nominee, or in the nominee name of a depository 
such as the Depository Trust Company. Research provided by the 
Exchange indicates that approximately 70 to 80 percent of all 
outstanding shares are held in street name and that the shares held 
in street name are dispersed among approximately 800 nominees.
    \5\ ``Householding'' is used to eliminate multiple mailings of 
proxy and other materials to beneficial owners residing at the same 
address. For example, if a husband and wife living together both 
separately own shares in the same NYSE issuer, householding could be 
used to reduce from two to one the number of proxy packages sent to 
the married couple.
    \6\ See infra note 8.
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    The proposed rule change was published for comment in the Federal 
Register on March 26, 1998.\7\ The Commission received 47 comment 
letters on the proposal. On March 9, 1999, the Exchange filed with the 
Commission Amendment No. 1 to the proposed rule change.\8\ This order 
approves, through August 31, 1999, the proposed rule change, as 
amended, and Amendment No. 1 on an accelerated basis.
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    \7\ Securities Exchange Act Release No. 39774 (Mar. 19, 1998), 
63 FR 14745 (Mar. 26, 1998).
    \8\ See Letter from James E. Buck, Senior Vice President and 
Secretary, Exchange, to Sharon Lawson, Senior Special Counsel, 
Division of Market Regulation, Commission, dated March 8, 1999 
(``Amendment No. 1''). Amendment No. 1 to the proposed rule change 
proposes two revisions: (1) modifying the proposed term of the Pilot 
Fee Stucture from June 30, 2001, to August 31, 1999; and (2) 
withdrawing the householding through implied consent provision. 
Amendment No. 1 also clarifies that the proposed rule change, as 
revised by Amendment No. 1, proposes to extend through August 31, 
1999, the Pilot Fee Structure, as amended by the companion filing 
(see infra note 14 and related text for a description of the 
companion filing).
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II. Background

    NYSE member organizations that hold securities for beneficial 
owners in street name solicit proxies from, and deliver proxy and 
issuer communication materials to, beneficial owners on behalf of 
owners of NYSE-listed company shares. For this service, NYSE issuers 
reimburse NYSE member organizations for reasonable out-of-pocket, 
clerical, postage, and other expenses incurred in performing such 
activities. The Rules provide specific fee guidelines for the 
reimbursement of these expenses.
    Over the last thirty years, NYSE member firms increasingly have 
outsourced their proxy delivery obligations to proxy distribution 
intermediaries. The primary reason underlying this shift is that member 
firms believe proxy distribution is not a core broker-dealer business 
and that capital is better used elsewhere. By the early 1990's, two 
proxy distribution firms distributed most of the proxies to street name 
accounts on behalf of NYSE member firms: Automatic Data Processing 
(``ADP'') \9\ and the Independent Election Corporation of America 
(``IECA''). In February 1992, ADP acquired IECA and became the dominant 
proxy distribution intermediary. By 1993, ADP reportedly distributed 
seventy percent of all proxies sent to beneficial owners holding shares 
in street name. Because three of the four remaining major self-
distributing broker-dealers recently contracted with ADP to discharge 
their proxy delivery and voting obligations,\10\ that figure now stands 
close to one hundred percent.\11\
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    \9\ The name of the actual business unit that serves as a proxy 
distribution intermediary is ADP Beneficial Shareowner Communication 
(``ADP BCS''). ADP BCS is a service line of ADP Investor 
Communication Services, a division of ADP Financial Information 
Services, Inc., which in turn is an indirect wholly owned subsidiary 
of Automatic Data Processing, Inc. For clarity and ease of 
reference, the acronym ``ADP'' will be used in place of ``ADP BCS.''
    \10\ As recently as the 1997 proxy season, four major broker-
dealers directly distributed proxy materials to their customers 
holding shares in street name: Merrill Lynch, Paine Webber, 
Prudential Securities, and the Dean Witter arm of Morgan Stanley 
Dean Witter. Currently, only Dean Witter directly distributes proxy 
materials to street name accounts.
    \11\ For a more detailed description of the background and 
history of the proxy distribution industry, proxy fees, as well as 
the events leading to the Exchange's proposal to revise the Rules, 
see Original Pilot Approval Order supra note 3.
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III. Description of the Proposal

A. The Pilot Fee Structure

    On March 14, 1997, the Commission approved an Exchange proposal 
that significantly revised the reimbursement guidelines set forth in 
the Rules and established the Pilot Fee Structure.\12\ The Pilot Fee 
Structure was designed to address many of the functional and 
technological changes that had occurred in the proxy distribution 
process since the Rules were last revised in 1986. Although the Pilot 
Fee Structure reduced certain fees, it also raised one fee, and in some 
instances created new fees. The Pilot Fee Structure initially was set 
to expire on May 13, 1998.
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    \12\ See Original Pilot Approval Order supra note 3. Under the 
Pilot Fee Structure, NYSE member organizations also are entitled to 
receive reimbursement for: (i) actual postage costs (including 
return postage at the lowest available rate); (ii) the actual cost 
of envelopes (provided they are not furnished by the person 
soliciting proxies); and (iii) any actual communication expenses 
(excluding overhead) incurred in receiving voting returns either 
telephonically or electronically. Prior to the Pilot Fee Structure, 
NYSE member firms were entitled to reimbursement for ``all out-of-
pocket expenses, including reasonable clerical expenses, incurred in 
connection with proxy solicitations pursuant to Rule 451 and in 
mailing interim reports or other material pursuant to Rule 465.'' 
See Exchange Rule 451, Supplementary Material .90, ``Schedule of 
Approved Charges by Member Organizations in Connection with Proxy 
Solicitations'' and Exchange Rule 465, Supplementary Material .20, 
``Mailing Charges by Member Organizations.''
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    Under the fee structure in effect prior to March 14, 1997, NYSE 
member firms were permitted to charge NYSE issuers a basic processing 
fee of $0.60-$0.70 for each proxy package (i.e., proxy statement, form 
of proxy, and annual report) delivered to a beneficial owner.\13\ The 
Pilot Fee Structure reduced this fee to $0.55 per proxy package. In the 
subsequent companion filing to this proposed rule change, the Exchange 
amended the Pilot Fee Structure to further reduce the basic proxy 
processing fee to $0.50.\14\ The companion filing also extended the 
effectiveness of the Pilot Fee Structure from May 13, 1998, through 
July 31, 1998. Three additional Exchange rule filings extended the 
effectiveness of the Pilot Fee Structure, as amended by the companion 
filing, to March 15, 1999.\15\
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    \13\ The $0.60 fee applied to proxy packages for meetings that 
did not include a proposal that required beneficial owner 
instructions; the $0.70 fee applied to proxy packages for meetings 
that included a proposal that required beneficial owner instructions 
(e.g., proxy fights).
    \14\ See Securities Exchange Act Release No. 39672 (Feb. 17, 
1998), 63 FR 9034 (Feb. 23, 1998).
    \15\ See Securities Exchange Act Release Nos. 40289 (July 31, 
1998), 63 FR 42652 (Aug. 10, 1998) (extended the Pilot Fee Structure 
from July 31, 1998, through October 31, 1998); 40621 (Oct. 30, 
1998), 63 FR 60036 (Nov. 6, 1998) (extended the Pilot Fee Structure 
from October 31, 1998, through February 12, 1999); and 41044 (Feb. 
11, 1999), 64 FR 8422 (Feb. 19, 1999) (extended the Pilot Fee 
Structure from February 12, 1999, through March 15, 1999).
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    The Pilot Fee Structure also reduced from $0.20 to $0.15 the fee 
for annual reports that are mailed separately from the proxy materials 
pursuant to the instruction of the person soliciting proxies. The Pilot 
Fee Structure likewise reduced from $0.20 to $0.15 the fee for interim 
reports, annual reports if mailed separately, post meeting reports, or 
other material. The historic fee structure's $0.60 fee for mailing 
follow-up proxy materials only to beneficial owners who had not voted 
was eliminated; however, the fee for mailing follow-up proxy materials 
to all beneficial owners remained $0.40. The fee for proxy fights 
(i.e., an opposition proxy statement has been furnished to security 
holders) was raised under the

[[Page 14296]]

Pilot Fee Structure from $0.70 to $1.00 for each set of proxy materials 
mailed.
    The Pilot Fee Structure implemented two new fees. First, a paper 
elimination incentive fee of $0.50 was instituted for each proxy 
package ($0.10 for each interim report) not mailed because of either 
householding or electronic delivery. The paper elimination fee was 
intended to serve as an incentive to use technologies, such as 
electronic mail, to reduce the number of paper mailings sent to 
beneficial owners. The paper elimination incentive fee could be 
assessed in addition to the basic processing fee. Second, the Pilot Fee 
Structure implemented a nominee coordination fee of $20 per nominee 
(i.e., each NYSE issuer must pay $20 for each nominee holding its 
shares in street name). The nominee coordination fee was designed to 
compensate a proxy distribution intermediary for coordinating a series 
of functions across multiple nominees. The functions included are: 
consolidation of search responses, delivery of materials to nominees, 
use of bulk mail, and tabulation and dissemination of preliminary 
voting information.\16\
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    \16\ See Original Pilot Approval Order supra note 3 for a more 
detailed discussion of the nominee coordination fee, the 
coordination services encompassed in that fee, and the supporting 
rationale provided by the Exchange.
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    Finally, the Pilot Fee Structure permitted the householding of 
proxy and other materials to beneficial owners provided that actual 
written consent was obtained from the beneficial owner to whom the 
materials are not sent.\17\ This provision allows member firms to 
household annual reports, interim reports, proxy statements, and other 
material.\18\
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    \17\ See Exchange Rule 451, Supplementary Material .95, `` 
`Householding' of Reports'' and Exchange Rule 465, Supplementary 
Material .25, `` `Householding' of Reports.'' For a description of 
householding, see supra note 5.
    \18\ But see 17 CFR 240.14a-3(e) and 17 CFR 240.14c-7(a).
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B. The Proposal and Amendment No. 1

    In its original form, the Exchange's proposed rule change sought to 
extend the effectiveness of the Pilot Fee Structure through June 30, 
2001. In Amendment No. 1, the Exchange requested that the Pilot Fee 
Structure end on August 31, 1999. The original version of the proposal 
also sought to permit the householding of proxy materials and other 
issuer communications through implied consent. Specifically, the 
Exchange had sought to permit householding if a beneficial owner did 
not object after receiving 60 days written notice of the proposed 
householding. Amendment No. 1 withdrew the householding through implied 
consent provision from the Exchange's proposal.

IV. Summary of Comments

    The Commission received 47 comment letters regarding the Exchange's 
proposed rule change.\19\ A substantial majority of the commenters, 41 
of the 47, supported the proposal. Four commenters did not support the 
proposal,\20\ and one commenter

[[Page 14297]]

specifically objected to the nominee coordination fee.\21\ One 
additional commenter, who was retained by ADP to provide an economic 
analysis of proxy processing, submitted a comment letter that examined 
price trends, market share, natural monopoly status, predatory pricing, 
regulatory best practices, and peak-load pricing.\22\
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    \19\ All of the comment letters are part of File No. SR-NYSE-98-
05, which is available for public review and inspection in the 
Commission's Public Reference Section. The comment letters were 
submitted by twenty-six issuers, nine broker-dealers, six trade 
associations, two institutional investors, one bank, one potential 
proxy service provider, one economic analysis company retained by 
ADP (Analysis Group/Economics), and the ADP Steering Committee. The 
comment letters are listed below in the order they were received by 
the Commission's Office of the Secretary. See Letters from: Timothy 
E. Hall, Corporate Controller, Flexsteel Industries, Inc., dated 
February 24, 1998 (``Flexsteel Letter''); Judy Foshay, Director, 
Shareholder Services, Cirrus Logic, dated April 9, 1998 (``Cirrus 
Letter''); Sari L. Macrie, Vice President, Investor Relations, 
Ameritech, dated April 8, 1998 (``Ameritech Letter''); Janet M. 
Turner, Vice President, Investor Relations, PLM International, Inc., 
dated April 14, 1998 (``PLM Letter''); Sophia G. Vergas, Assistant 
Secretary, The Liberty Corporation, dated April 14, 1998 (``Liberty 
Letter''); Anne C. Cumberledge, Manager, Investor Relations, 
Meridian Industrial Trust, dated April 10, 1998 (``Meridian 
Letter''); Rhoda Anderson, Director, Corporate Secretary's 
Department, Lucent Technologies, and Chairperson, ADP Steering 
Committee (on behalf of: Linda Selbach, Barclays Global Investors; 
Janice Hester Amey, CALSTRS; Ray DiSanza, Charles Schwab & Co.; 
Paula Gurley, Colorado Public Employees' Retirement Association; 
Steven Berk, J.P. Morgan Services; Nancy Obringer, Mellon Bank; 
Gordon Garney, Mobil Corporation; and Rafael Dieppa, Oppenheimer & 
Co.), dated April 14, 1998 (``ADP Steering Committee Letter''); 
Jerome J. Clair, Senior Vice President, Smith Barney Inc., dated 
April 15, 1998 (``Smith Barney Letter''); Virgil L. Clubbs, 
Associate Vice President, A.G. Edwards & Sons, Inc., dated April 15, 
1998 (``A.G. Edwards Letter''); John E. Nolan, Senior Vice 
President, Raymond James & Associates, Inc., dated April 15, 1998 
(``Raymond James Letter''); Peter Quick, President, Quick & Reilly, 
dated April 13, 1998 (``Quick & Reilly Letter''); John B. Meagher, 
Consultant to Corn Products International, Inc., dated April 15, 
1998 (``Corn Products Letter''); George Kim Johnson, General 
Counsel, and Paula A. Gurley, Manager, Shareholder Responsibility 
Division, Public Employees' Retirement Association of Colorado, 
dated April 13, 1998 (``PERA Letter''); D. Stuart Bowers, Senior 
Vice President, Legg Mason Wood Walker, Incorporated, dated April 
15, 1998 (``Legg Mason Letter''); Roger P. Smith, Secretary, 3M, 
dated April 16, 1998 (``3M Letter''); Janice Hester Amey, Corporate 
Affairs Advisor, State of California State Teachers' Retirement 
System, dated April 15, 1998 (``CALSTRS Letter''); Andrew D. Hendy, 
Senior Vice President, General Counsel, and Secretary, Colgate-
Palmolive Company, dated April 15, 1998 (``Colgate-Palmolive 
Letter''); John W. Hetherington, Vice President, Secretary, and 
Assistant General Counsel, Westvaco, dated April 13, 1998 
(``Westvaco Letter''); Robert M. Williams, Assistant Secretary, 
Carolina Power and Light Company, dated April 15, 1998 (``CP&L 
Letter''); Gordon G. Garney, Senior Assistant Secretary, Mobil 
Corporation, dated April 16, 1998 (``Mobil Letter''); Stacy A. 
Matseas, Manager, Stock Administration, QUALCOMM, Incorporated, 
dated April 15, 1998 (``QUALCOMM Letter''); Gary Ball, Manager, 
Investor Relations, Fluke Corporation, dated April 15, 1998 (``Fluke 
Letter''); Sarah A.B. Teslik, Executive Director, Council of 
Institutional Investors, dated April 20, 1998, with attached letter 
to Brian Lane dated February 9, 1998 (``CII Letter''); Glynn E. 
Williams, Jr., Vice President, Finance, Goodrich Petroleum 
Corporation, dated April 15, 1998 (``Goodrich Letter''); Walter 
Flicker, Secretary, ResMed Corp., dated April 16, 1998 (``ResMed 
Letter''); Mike Tate, Controller, Galileo Technology, dated April 
14, 1998 (``Galileo Letter''); David Kerner, Treasurer, Standard 
Motor Products, Inc., dated April 13, 1998 (``Standard Motor 
Letter''); Laurin L. Laderoute, Jr., Vice President, Assistant 
General Counsel, and Secretary, Olsten Corporation, dated April 23, 
1998 (``Olsten Letter''); Ron Miele, Vice President, Global 
Operations, Goldman, Sachs & Co., dated April 20, 1998 (``Goldman 
Letter''); Brian T. Borders, President, Association of Publicly 
Traded Companies, dated April 24, 1998 (``APTC Letter''); Robert S. 
Harkey, Senior Vice President, General Counsel, and Secretary, Delta 
Air Lines, Inc., dated April 16, 1998 (``Delta Letter''); George M. 
Holston, Assistant General Manager and Assistant Secretary, Texaco 
Inc., dated April 14, 1998 (``Texaco Letter''); William A. Bowen, 
Vice President, Finance, AAON, Inc., dated April 16, 1998 (``AAON 
Letter''); Jennifer LaGrow, Director, Shareholder Services, The Walt 
Disney Company, dated April 28, 1998 (``Disney Letter''); Donna 
Murphy, Investor Relations Coordinator, UniSource Energy 
Corporation, dated April 16, 1998, (``UniSource Letter''); Joan 
DiBlasi, President, Corporate Transfer Agents Association, Inc., 
dated May 7, 1998 (``CTA Letter''); David W. Smith, President, 
American Society of Corporate Secretaries, dated May 11, 1998 
(``ASCS Letter''); Susan E. Shaw, Secretary, The Coca-Cola Company, 
dated May 1, 1998 (``Coca-Cola Letter''); Thomas L. Montrone, 
President, The Securities Transfer Association, Inc., dated May 18, 
1998 (``STA Letter''); Lindsay Klombies, Reorganization Manager, 
Norwest Bank, dated May 12, 1998 (``Norwest Letter''); Susan C. 
Hafleigh, Assistant Treasurer, Oracle Corporation, dated May 14, 
1998 (``Oracle Letter''); Anne O. Faulk, received June 15, 1998 
(``Faulk Letter''); Robert Kaplan, Senior Vice President, 
Administrative Group Office, Prudential Securities Incorporated, 
dated June 22, 1998 (``Prudential Letter''); The Corporate Actions 
Division, Inc., Securities Industry Association, dated July 7, 1998 
(``SIA Letter''); Doug Harris, Incumbent Secretary, and Polk 
Laffoon, Incoming Secretary, Knight Ridder, dated July 23, 1998 
(``Knight Letter''); Stephen P. Norman, Secretary, American Express 
Company, dated August 31, 1998 (``American Express Letter''); and 
Robert Comment, Analysis Group/Economics, dated October 27, 1998 
(``Analysis Group Letter'').
    Commission staff also interviewed representatives from fourteen 
proxy industry participants. See. Memorandums to File No. SR-NYSE-
98-05 regarding Commission staff meetings or conversations with: 
First Chicago Trust Co., dated August 13, 1998; The Depository Trust 
Company, dated August 11, 1998; Dean Witter Reynolds, Inc., dated 
August 11, 1998; Georgeson & Company, Inc., dated August 11, 1998; 
JP Morgan, Inc., dated August 11, 1998; Carl T. Hagberg & 
Associates, dated August 11, 1998; Salomon Brothers, Inc./Smith 
Barney, Inc., dated August 11, 1998; Bank of New York, dated August 
11, 1998; Prudential Securities, dated August 11, 1998; Merrill 
Lynch, Pierce, Fenner & Smith, Inc., dated August 11, 1998; CT 
Corporation System, dated August 13, 1998; Investor Responsibility 
Research Center, dated August 11, 1998; Corporate Investor 
Communications, dated August 13, 1998; and Paine Webber, Inc., dated 
August 11, 1998.
    \20\ See CII Letter, CTA Letter, STA Letter, and Faulk Letter, 
supra note 19. Several of these commenters believed that a lack of 
competition in the proxy distribution industry has resulted in 
higher than necessary proxy fees and that the regulatory structure 
governing the delivery of proxy materials to street name 
shareholders should be revised to promote more competition.
    \21\ See Flexteel Letter supra note 19.
    \22\ See Analysis Group Letter supra note 19.
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    Thirty-six of the 41 commenters supporting the proposal believed an 
extension of the Pilot Fee Structure through June 30, 2001, was 
appropriate,\23\ while five of those commenters believed that another 
review of the Pilot Fee Structure was necessary at the conclusion of 
the extended pilot period.\24\ Several other commenters believed that a 
shorter pilot period would be more appropriate.\25\ The commenter 
retained by ADP asserted that ``the `ongoing pilot' approach to 
regulating fees is an invitation to micro-management, and as such is 
flatly inconsistent with regulatory best practices.'' \26\
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    \23\ See Cirrus Letter, Ameritech Letter, PLM Letter, Liberty 
Letter, Meridian Letter, ADP Steering Committee Letter, Smith Barney 
Letter, A.G. Edwards Letter, Raymond James Letter, Quick & Reilly 
Letter, Corn Products Letter, PERA Letter, Legg Mason Letter, 3M 
Letter, CALSTRS Letter, Colgate-Palmolive Letter, Westvaco Letter, 
CP&L Letter, QUALCOMM Letter, Fluke Letter, Goodrich Letter, ResMed 
Letter, Galileo Letter, Standard Motor Letter, Olsten Letter, 
Goldman Letter, APTC Letter, Delta Letter, Texaco Letter, AAON 
Letter, UniSource Letter, ASCS Letter, Norwest Letter, Oracle 
Letter, SIA Letter, and American Express Letter, supra note 19.
    \24\ See Cirrus Letter, PLM Letter, CP&L Letter, Fluke Letter, 
and Standard Motor Letter, supra note 19.
    \25\ The commenter who did not support extension of the Pilot 
Fee Structure through June 30, 2001, generally did, however, support 
extending the pilot for a shorter period of either one or two years. 
See Mobil Letter (one or two years), CII Letter (until July 31, 
1999). CTA Letter (no more than two years), supra Note 19.
    \26\ See Analysis Group Letter, supra note 19.
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    In the published notice of the proposed rule change, the Commission 
solicited comment on the itemized fees prescribed under the Pilot Fee 
Structure. In particular, the Commission sought comment on the nominee 
coordination fee and its impact on issuers, the paper elimination 
incentive fee, certain fees relating to electronic (e.g., Internet) 
voting and delivery of proxy materials, as well as the length of the 
proposed extension.\27\
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    \27\ The Commission sought comment on these questions in 
connection with its independent determination whether the Pilot Fee 
Structure: (1) provides for the equitable allocation of reasonable 
fees among NYSE-listed companies and NYSE member firms; (2) conforms 
with Sections 6(b)(5) and 6(b)(8) of the Act by not unfairly 
discriminating among issuers and imposing a burden on competition 
that is not necessary under the Act; and (3) imposes fees that are 
``reasonable'' within the meaning of Rules 14a-13, 14b-1, and 14b-2 
under Sections 14(a) and 14(b) of the Act (Rules 14a-13, 14b-1, and 
14b-2 Act collectively provide that nominees are entitled to 
reimbursement for the ``reasonable expenses'' incurred in the 
delivery of proxy materials to beneficial owners.).
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    Most commenters did not discuss the itemized fees that ADP charges 
issuers for electronic proxy delivery and voting services, although 20 
commenters stated that they expect that technological developments in 
electronic delivery and voting will eventually result in cost savings 
to issuers and therefore should warrant a reevaluation of the 
appropriate level of the fees in the future.\28\ Several commenters 
specifically stated that the reimbursement fee assessed in connection 
with electronic voting was appropriate.\29\ In contrast, one commenter 
believed that the basic proxy processing fee for electronic delivery 
was not appropriate and stated that, according to ADP, ``votes returned 
by mail cost companies $0.34 per return while Internet votes cost $0.03 
per return,'' thus suggesting that ``proxy materials delivered by 
Internet should cost intermediaries substantially less than materials 
delivered by mail.'' \30\
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    \28\ See Cirrus Letter, PLM Letter, Liberty Letter, ADP Steering 
Committee Letter, Corn Products Letter, 3M Letter, CP&L Letter, 
QUALCOMM Letter, Fluke Letter, Goodrich Letter, ResMed Letter, 
Galileo Letter, Standard Motor Letter, Olsten Letter, Goldman 
Letter, Texaco Letter, AAON Letter, Disney Letter, UniSource Letter, 
ASCS Letter, and Oracle Letter, supra note 19. One commenter 
questioned the need for the nominee coordination fee and the paper 
elimination incentive fee at a time when technology is increasingly 
being used by issuers and shareholders. See Faulk Letter supra note 
19.
    \29\ See Ameritech Letter, ADP Steering Committee Letter, Smith 
Barney Letter (stating that the basic proxy processing fee 
``represents the multiple steps required in the preparation of the 
forthcoming proxy record date, the identification of the clients on 
record date and the vote tabulation. These processes are required 
regardless whether the distribution is by mail or the Internet.''), 
A.G. Edwards Letter, Legg Mason Letter, and SIA Letter, supra note 
19.
    \30\ See CII letter, supra note 19. Separately, several 
commenters believed that the processing fee relating to the mailing 
of materials in paper form was appropriate. See A.G. Edwards Letter, 
Raymond James Letter, CP&L Letter, QUALCOMM Letter, ResMed Letter, 
Goldman Letter, Delta Letter, Texaco Letter, and Oracle Letter, 
supra note 19.
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    Although the majority of commenters were silent regarding the 
appropriateness of the paper elimination incentive fee, 14 commenters 
believed the incentive fee was appropriate.\31\ One commenter noted 
that although it ``seems reasonable to continue some incentive 
appropriate to encourage ongoing efforts to make the substantial 
improvements yet possible,'' a reduction in the paper elimination 
incentive fee should be possible now that ADP is offering a system 
approach to electronic processing.\32\ One commenter believed that the 
incentive fee was inappropriate and stated that the fee was too high in 
relation to the basic processing fee and the cost savings realized by 
issuers that household or electronically distribute proxy 
materials.\33\
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    \31\ One commenter noted that ``[o]nce an automated system is 
put in place, it must be maintained, at the same time ADP must 
continue to operate and maintain its normal mailing/vote recording 
process and integrate both for the process to work.'' See Prudential 
Letter, supra note 19. See also, Cirrus Letter, ADP Steering 
Committee Letter, Smith Barney Letter, A.G. Edwards Letter, Raymond 
James Letter, 3M Letter, CP&L Letter, QUALCOMM Letter, Galileo 
Letter, Standard Motor Letter, Oracle Letter, SIA Letter, and 
American Express Letter, supra note 19.
    \32\ See 3M Letter, supra note 19.
    \33\ See CII Letter, supra note 19.
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    Most commenters did not specifically mention the nominee 
coordination fee. One commenter, however, complained that although its 
costs for proxy distribution increased significantly over the previous 
year (104%) because of the nominee coordination fee, the services 
provided by the proxy distribution intermediary did not change from the 
previous year.\34\ This commenter concluded that the nominee 
coordination fee ``appears to be unreasonable.'' Four commenters, none 
of whom are small issuers, believed that small issuers with a diffuse 
shareholder base should realize the same benefits from the nominee 
coordination fee as large issuers whose securities are widely owned but 
more concentrated in the accounts of nominees.\35\ Four other 
commenters, who considered themselves small issuers, did not 
specifically address the nominee coordination fee issue but stated that 
they benefit from the application of

[[Page 14298]]

technology by ADP.\36\ Finally, one commenter expressed concern that 
there was no provision for phasing out the nominee coordination fee 
once the technology was in place for which it was established.\37\
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    \34\ Flexsteel industries (``Flexsteel''), a small issuer listed 
on the Nasdaq Stock Market, believed that its 1997 proxy costs 
greatly increased because of the nominee coordination fee but that 
the higher fee did not reflect any change in service. Flexsteel 
noted that it had ``1,920 and 1,646 shareholders of common stock at 
June 30, 1997 and 1996 respectively.'' Flexsteel's proxy 
distribution costs, however, ``increased from $2,168.94 in 1996 to 
$4,433.16 in 1997.'' This difference was primarily attributable to 
the nominee coordination fee of $2,200 charged to Flexsteel. See 
Flexsteel Letter, supra note 19.
    \35\ One commenter noted that ``[a]s a relatively large 
issuer,'' it could not ``address this question. However, savings in 
the initiatives for electronic processing should exist for everyone, 
the relativity of benefits amongst issuers seeming a secondary 
matter.'' See 3M Letter, supra note 19. See also, QUALCOMM Letter, 
Goldman Letter, and Oracle Letter, supra note 19.
    \36\ See PLM Letter, Quick & Reilly Letter, Goodrich Letter, and 
Galileo Letter, supra note 19.
    \37\ See CTA Letter supra note 19. In addition, this commenter 
stated that concrete guidelines need to be developed to justify the 
continuation of the nominee coordination fee.
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    Without commenting on the impact that the nominee coordination fee 
has on small issuers, four commenters specifically supported the 
nominee coordination fee.\38\ Two other commenters believed that the 
nominee coordination fee currently appears reasonable, but that the 
Commission should monitor the appropriateness of the fee in the 
future.\39\ In addition, three commenters suggested that because fees 
are ``shared'' between ADP and some broker-dealers, the fees could be 
reduced.\40\ Specifically, one commenter questioned whether revenue 
sharing or a rebate system creates the need for extra revenue through 
additional fees, such as the nominee coordination fee. The commenter 
stated that ``[c]learly[,] if rebates are being given, then there is 
still room in the system to reduce the fees to issuers. Reasonable 
expense for reimbursement by issuers should not include money to 
subsidize any revenue sharing or a rebate system since that only serves 
to cement the intermediary's relationship with their clients which 
reduces competition.'' \41\
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    \38\ See A. G. Edwards Letter, Raymond James Letter, ResMed 
Letter, and Delta Letter, supra note 19.
    \39\ See CP&L Letter and Knight Letter, supra note 19.
    \40\ See CII Letter, Mobil Letter, and STA Letter, supra note 
19. The commenter retained by ADP noted, however, that ADP's single 
billing service, in which ADP bills issuers on a consolidated basis 
on behalf of all nominees, necessitated an ancillary system of 
sharing revenue with nominees in order to reimburse them for the in-
house costs they still incur after subcontracting to ADP. ``Single 
billing [, however,] has the unintended consequence of placing 
squarely on ADP the locus of concern over whether nominees are 
compensated fairly for their in-house costs.'' See Analysis Group 
Letter, supra note 19.
    \41\ See Mobil Letter, supra note 19.
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    Finally, several commenters indicated their support for the 
Exchange's implied consent householding proposal.\42\ Three commenters 
suggested that the regulatory framework currently governing the 
delivery of proxy materials to beneficial owners should be revised to 
permit greater competition.\43\ In addition, one commenter suggested 
that the Pilot Fee Structure should be revised to increase the economic 
rationality of the fee structure and to better reflect marginal 
costs.\44\
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    \42\ See Smith Barney Letter, Raymond James Letter, Corn 
Products Letter, Legg Mason Letter, 3M Letter, Mobil Letter, Olsten 
Letter, APTC Letter, Texaco Letter, CTA Letter, ASCS Letter, Coca-
Cola Letter, and SIA Letter, supra note 19.
    \43\ See CTA Letter, STA Letter, and Faulk Letter, supra note 
19. One of these commenters observed that under the current 
regulatory framework, ``issuers are precluded from selecting other 
agents for the distribution of annual meeting materials and 
tabulation of proxies for NOBOs [non-objecting beneficial owners].'' 
See STA Letter, Supra note 19. A potential competitor to ADP 
believed that competition in the delivery of corporate communication 
materials to beneficial owners should be encouraged. Specifically, 
``ownership data for NOBOs should be made available to any 
participant in the shareholder distribution business. Additionally, 
ownership information on OBOs [objecting beneficial owners] should 
also be available to any entity who can assure the objecting owner 
of a firewall between it and the corporate issuer.'' See Faulk 
Letter, supra note 19.
    \44\ Specifically, the commenter retained by ADP believed that 
the current system of uniform pricing ignores the fact that costs 
are higher due to the seasonality in annual meetings. This commenter 
believed that a non-uniform, peak-load pricing schedule should be 
introduced to charge peak users for the full cost of the extra 
capacity needed to accommodate the peak load. See Analysis Group 
Letter, supra note 19.
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V. Discussion

    For the reasons discussed below, the Commission finds that the 
proposal to extend the effectiveness of the Pilot Fee Structure is 
consistent with the requirements of the Act and the rules and 
regulations under the Act applicable to a national securities exchange, 
and, in particular, with the requirements of Section 6(b).\45\ Section 
6(b)(4) requires that exchange rules provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using the facilities of an 
exchange.\46\ Section 6(b)(5) requires, among other things, that the 
rules of an exchange promote just and equitable principles of trade and 
that they are not designed to permit unfair discrimination between 
issuers, brokers, or dealers.\47\ Section 6(b)(8) prohibits any 
exchange rule from imposing any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.\48\ 
For the reasons discussed in more detail below, the Commission believes 
the proposal to extend the Pilot Fee Structure through August 31, 1999, 
meets the requirements of the Act.\49\
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    \45\ 15 U.S.C. 78f(b).
    \46\ 15 U.S.C. 78f(b)(4).
    \47\ 15 U.S.C. 78f(b)(5).
    \48\ 15 U.S.C. 78f(b)(8).
    \49\ In approving this proposed rule change, the Commission has 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
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    The Commission, along with the Exchange, has carefully monitored 
the Pilot Fee Structure since its adoption on March 14, 1997. The 
Commission's Original Pilot Approval Order specifically stated that the 
Commission's preliminary determination to approve the Pilot Fee 
Structure would be reevaluated in light of the results of the pilot 
period and the Exchange's independent audit report. Following 
publication of the notice of the Exchange's proposed rule change in 
March 1998, the Commission conducted a thorough review of the Pilot Fee 
Structure and its impact on NYSE issuers and member firms. In 
particular, the Commission staff interviewed numerous proxy industry 
participants to gather information and views on the current proxy 
system and the Pilot Fee Structure.\50\ These interviews provided the 
staff with information concerning the mechanics of the proxy 
distribution business and the role of nominees and proxy distribution 
intermediaries. Based on this information, the Commission staff also 
analyzed the economic impact of the Pilot Fee Structure on smaller, 
non-NYSE issuers--a sample that was outside the scope of the Exchange's 
audit reports.
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    \50\ See supra Note 19 for a listing of the proxy industry 
participants interviewed by the Commission staff.
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    In addition, the Commission staff undertook an in-depth review of 
the 1997 and 1998 Audit Reports that were prepared by an independent 
accounting firm retained by the Exchange.\51\ The Audit Reports 
examined the proxy distribution process for NYSE issuers and member 
firms during the 1997 and 1998 proxy seasons. The 1997 Audit Report 
analyzed the proxy operations of ADP and the four major broker-dealers 
that distributed proxy materials directly during the 1997 proxy season: 
Dean Witter, Merrill Lynch, Paine Webber, and Prudential Securities. 
Because three of these broker-dealers contracted with ADP before the 
1998 proxy season. Dean Witter was the sole major broker-dealer during 
the 1998 proxy season that continued to distribute proxy materials 
directly.\52\
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    \51\ See New York Stock Exchange: Shareholder Communication and 
Proxy Study, January 1998 (``1997 Audit Report''), and New York 
Exchange: Shareholder Communication and Proxy Study, December 1998 
(``1998 Audit Report''). Copies of both Audit Reports are publicly 
available for review in File No. SR-NYSE-98-05 at the Commission's 
Public Reference Section located at the address specified in Item VI 
of this order.
    \52\ Dean Witter elected not to participate in the survey 
underlying the 1998 Audit Report.
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    Finally, ADP provided the Commission with a comprehensive report 
examining the proxy distribution business and ADP's role as an 
intermediary. In addition to providing an overview of the proxy 
distribution business and an evaluation of specific

[[Page 14299]]

aspects of the Pilot Fee Structure, the ADP report made recommendations 
to improve the current system.
    The Commission believes the reimbursement guidelines established 
under the Pilot Fee Structure should be allowed to continue through 
August 31, 1999.\53\ The Commission notes that the Pilot Fee Structure 
provides an incentive to reduce paper mailings through householding and 
electronic delivery. The Commission also recognizes that the nominee 
coordination fee rewards intermediaries, such as ADP, for the 
consolidation and simplification of numerous functions. Indeed, in 
general, NYSE issuers and member firms appear to be satisfied with the 
quality of service provided by ADP. This was further evidenced by the 
support expressed in a majority of the comment letters regarding the 
Exchange's proposal to extend the Pilot Fee Structure through June 30, 
2001.
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    \53\ The Commission notes that its determination applies only to 
the reimbursement guidelines explicitly set forth in the Pilot Fee 
Structure. The Commission is not making any findings on any terms or 
practices that are part of privately negotiated contracts between 
NYSE member firms and proxy distribution intermediaries such as ADP, 
including multi-year exclusive-dealing and fee-sharing arrangements.
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    However, based on the facts gathered and reviewed during the past 
two years, including the 1997 and 1998 Audit Reports and the Commission 
staff's independent analyses, the Commission believes the Pilot Fee 
Structure could be further modified in the future to provide for a 
fairer and more reasonable allocation of fees among NYSE issuers and 
member firms. The experience with the Pilot Fee Structure during the 
1997 and 1998 proxy seasons shows that it would be possible to devise a 
fee structure that benefits more NYSE issuers and that results in lower 
fees. The Commission has therefore requested that the Exchange promptly 
and carefully review the Pilot Fee Structure and make changes where 
necessary to develop an improved fee structure.\54\ The Commission has 
communicated to the Exchange the Commission's desire to see a new fee 
structure in place for the year 2000 proxy season. Accordingly, the 
Exchange has agreed to file with the Commission a new fee structure 
proposal in May 1999.
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    \54\ The Commission staff also continues to gather information 
regarding the current proxy season. Although the Exchange is not 
required to prepare an Audit Report for the 1998 proxy season, the 
Commission nonetheless expects to obtain certain basic information 
from the Exchange and others regarding the results of the 1999 proxy 
season.
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    For several reasons, the Commission believes it is reasonable to 
extend the Pilot Fee Structure through August 31, 1999, even though the 
reimbursement guidelines will be further modified in the near future. 
First, the 1999 proxy season is already underway. The Commission 
believes that if Pilot Fee Structure were permitted to lapse in the 
midst of the current proxy season, the resulting change in fee 
structure (i.e., reversion to the fee structure in place before March 
14, 1997) could be inequitable or confusing to NYSE issuers and member 
firms.\55\ The extension through August 31, 1999, will ensure that one 
pricing scheme will apply to all proxy distributions made to beneficial 
owners of shares of NYSE issuers during the 1999 proxy season. Second, 
the additional five month extension will provide the Exchange and the 
Commission staff with the time necessary to review the Pilot Fee 
Structure to determine the most equitable way to modify fees. Finally, 
members of the public will have the opportunity to comment on any 
proposed fee changes before they are implemented. This is particularly 
important given that the Pilot Fee Structure generated a significant 
number of comment letters from a variety of constituencies interested 
in, and affected by, the fees.
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    \55\ For example, consider two hypothetical NYSE issuers (A and 
B) that are identical in all respects, including their shareholder 
profiles. Issuer A distributed its proxy materials before the March 
15, 1999, expiration, while Issuer B will do the same in April 1999. 
If the Pilot Fee Structure were to lapse, these two issuers would 
pay different proxy fees despite receiving identical proxy services. 
In addition, some NYSE issuers may distribute proxy materials both 
before and after the March 15, 1999, expiration date (e.g., proxy 
statements mailed March 1, 1999, and remember proxies mailed March 
29, 1999). In such a case, the issuers would be billed for services 
during the same proxy season according to two different fee 
schedules.
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    Although the Commission believes it is currently appropriate for 
the Exchange to specify rates of reimbursement for NYSE member firms 
that distribute proxy materials to beneficial owners of NYSE issuers 
during the 1999 proxy season, it remains concerned that competitive 
market forces do not determine these rates. In the Original Pilot 
Approval Order, the Commission encouraged the Exchange, issuers, and 
broker-dealers to develop an approach that would foster competition in 
the proxy distribution industry so that market forces would determine 
``reasonable expenses'' within the meaning of the proxy and Exchange 
rules. The Commission is concerned that the current lack of competition 
in the proxy distribution industry may ultimately result in higher 
costs for NYSE issuers and their shareholders.
    In addition to encouraging market participants to explore ways to 
increase competition, the Commission also suggested that the Exchange 
and other self-regulatory organizations (``SROs'') investigate whether 
reimbursement rates could be set by market forces, and whether market 
forces would provide a more efficient, competitive, and fair process 
than SRO standards. Because of further consolidation in the proxy 
distribution industry (i.e., recent contractual arrangements between 
ADP and Merrill Lynch, Paine Webber, and Prudential), the Exchange has 
expressed doubts that ``competition will develop to the extent 
necessary to relieve the Exchange of its role in establishing 
reimbursement guidelines.''\56\ Although the Exchange indicated support 
for increased competition, it also concluded that the proxy 
communication process benefits from the economies of scale and 
uniformity that is created when most mailings are coordinated through a 
single entity. Furthermore, while other SROs are considering 
alternatives, no SRO has yet formally proposed an alternative to the 
present system.
---------------------------------------------------------------------------

    \56\ See Securities Exchange Act Release No. 39774 (Mar. 19, 
1998), 63 FR 14745 (Mar. 26, 1998).
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    In general, the Commission believes that free market forces, rather 
than governmental or quasi-governmental authorities, should determine 
what fees are reasonable for the services provided, especially during 
this age of rapid technological developments that facilitate the 
electronic delivery of proxy materials. The Commission is concerned 
that there are risks attendant to a single proxy distribution 
intermediary controlling such a high percentage of shareholder material 
distribution. Moreover, because of the operation of the Commission's 
proxy rules, issuers cannot themselves distribute proxy materials to 
street name shareholders or hire their own agents to do so, but instead 
must reimburse broker-dealers for the reasonable expenses incurred in 
distributing shareholder materials. Under these rules and industry 
practice, issuers have no role in determining whether the broker-
dealers outsource their proxy distribution function, and if so, which 
agents they choose. Thus, issuers are unable to bargain for rates 
commensurate with their size or shareholder profile. Therefore, the 
Commission in the future will consider ways to increase competition in 
this area, including whether it would be appropriate to remove itself 
and the SROs from the rate-setting process.
    The Commission requests comment on ways to encourage competition in 
the

[[Page 14300]]

distribution of proxy materials to beneficial owners.\57\ For example, 
the Commission previously requested comment on whether a system for 
voluntary direct delivery of proxy materials to non-objecting 
beneficial owners by issuers or their agents is preferable to the 
existing proxy distribution process by allowing issuers to 
independently determine whether to rely on in-house operations or to 
contract with outsiders to distribute their proxy materials to non-
objecting beneficial owners.\58\ Several transfer agents, proxy 
solicitors, and others have expressed an interest in competing for this 
type of business. Also, the Commission may consider whether it is 
appropriate for a uniform fee schedule to take into account the fact 
that small, non-NYSE issuers have experienced increases in proxy 
distribution fees.
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    \57\ See Item VI of this approval order for specific 
instructions regarding the submission of comments on these issues.
    \58\ See Securities Exchange Act Release No. 40633 (Nov. 3, 
1998), 63 FR 67331 (Dec. 4, 1998).
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    In summary, although there are some benefits derived from the 
existing regulatory scheme, the Commission believes that it may be 
appropriate to consider changes to the Commission's proxy rules in the 
near future. While the exact form and scope of any possible rulemaking 
have not been determined, the primary goal is clear: the Commission 
seeks to ensure protection of shareholder voting rights by introducing 
competition in the proxy distribution industry. When market forces 
operate freely to set competitive and reasonable rate of reimbursement, 
the Commission will consider whether to discontinue its rate-setting 
role.
    The changes outlined above require a two step process. As 
previously mentioned, the Commission believes the data on the Pilot Fee 
Structure, including The Commission staff's own economic analyses, 
indicates that further revisions to the Exchange's reimbursement 
guidelines are necessary. The Commission expects the Exchange to 
propose and implement such changes before the year 2000 proxy season. 
At the same time, the Commission will consider whether to alter the 
regulatory structure governing the distribution of proxy materials to 
beneficial owners to remove barriers to the entry of new competitors in 
this area.
    The Commission finds good cause for approving Amendment No. 1 to 
the proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing thereof. Amendment No. 1 changes the 
period of effectiveness for the Pilot Fee Structure from June 30, 2001, 
to August 31, 1999. As stated above, the Commission has asked the 
Exchange to undertake a thorough and prompt review of the Pilot Fee 
Structure. After the Exchange has completed its review, the Commission 
expects the Exchange to submit a proposed rule change in May 1999, 
which presents a new fee structure. The Commission believes it is 
appropriate for the Exchange to prepare for the implementation of a new 
fee structure by shortening the duration of the Pilot Fee Structure. 
Accordingly, the extension through August 31, 1999, will allow the 
Pilot Fee Structure to continue uninterrupted during the 1999 proxy 
season, while providing the Exchange additional time to consider and 
propose revisions to the Pilot Fee Structure.
    Amendment No. 1 also removes from the proposal the provision 
permitting householding through implied consent. The Commission notes 
that the Exchange's implied consent householding proposal differs from 
the Commission's householding initiative now under consideration as 
part of Commission rulemaking.\59\ The Commission is concerned that if 
the Exchange's householding proposal was approved by the Commission, 
NYSE member firms would be permitted to engage in householding 
practices that might be inconsistent with any rule amendments that the 
Commission might ultimately adopt. Therefore, the Commission believes 
it is appropriate for the Exchange to withdraw its implied consent 
householding proposal and wait for the Commission to complete its 
independent rulemaking.
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    \59\ See Securities Act Release No. 7475; Securities Exchange 
Act Release No. 39321; and Investment Company Act Release No. 22884 
(Nov. 13, 1997), 62 FR 61933 (Nov. 20, 1997).
---------------------------------------------------------------------------

    Based on the above, the Commission believes good cause exists, 
consistent with Sections 6(b) and 19(b) of the Act,\60\ to accelerate 
approval of Amendment No. 1 to the Exchange's proposed rule change.
---------------------------------------------------------------------------

    \60\ 15 U.S.C. 78f(b) and 78s(b).
---------------------------------------------------------------------------

VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
to 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. 20549-0609. Copies of the submissions, 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 persons, 
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-98-05 and 
should be submitted by April 14, 1999.

VII. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange and, in particular, the requirements of Sections 6(b)(4), 
6(b)(5), and 6(b)(8),\61\ and the rules and regulations thereunder.
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    \61\ 15 U.S.C. 78f(b)(4), 78f(b)(5), and 78f(b)(8).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\62\ that the proposed rule change (SR-NYSE-98-05), as amended, is 
approved through August 31, 1999.
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    \62\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\63\
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    \63\ 17 CFR 200.30-39a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-7157 Filed 3-23-99; 8:45 am]
BILLING CODE 8010-01-M