[Federal Register Volume 65, Number 164 (Wednesday, August 23, 2000)]
[Notices]
[Pages 51384-51387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21521]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43159: File No. SR-NYSE-00-36]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc., Extending the Pilot Fee 
Structure Governing the Reimbursement of Member Organizations for Costs 
Incurred in the Transmission of Proxy and Other Shareholder 
Communication Materials and Amending the Components of Coordination 
Activities

August 16, 2000.
    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 August 11, 2000, the New York Stock Exchange, Inc. (``Exchange'' or 
``NYSE'') filed with the Securities and Exchange Commission (``SEC'' or 
``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 NYSE proposes to extend the effectiveness of the pilot fee 
structure (``Pilot Fee Structure'') currently set forth in Exchange 
Rules 451, ``Transmission of Proxy Material,'' and 465, ``Transmission 
of Interim Reports and other Material'' (``Rules'').\3\ Among other 
things, the Rules establish guidelines for the reimbursement of 
expenses by NTSE issuers to NYSE member organizations for the 
processing of proxy materials and other issuer communications 
(collectively, ``Materials'') with respect to security holders whose 
securities are held in street name. The current pilot period regarding 
the rules is scheduled to expire on October 10, 2000.\4\ NYSE proposes 
to extend the Pilot Fee Structure through September 1, 2001.
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    \3\ The text of rule 451 also is included at Para. 402.10(A) of 
the Exchange's Listed Company Manual and the Exchange proposes to 
make conforming changes to that paragraph.
    \4\ See Securities Exchange Act Release No. 43151 (August 14, 
2000).
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    In addition, NYSE proposes to amend the functions that an 
intermediary is expected to perform, at a minimum, to recover the 
suggested intermediary-coordination fee set forth in the Rules. The 
text of the proposed rule change follows; additions are italicized; 
deletions are [bracketed].

Transmission of Proxy Material

    Rule 451.--No change.
* * * Supplementary Material:
    .10 through .80--No change.
    .90 Schedule of approved charges by member organizations in 
connection with proxy solicitations.--The Exchange has approved the 
following as fair and reasonable rates of reimbursement of member 
organizations 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. In addition to the charges specified in this 
schedule, 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.

Charges for Initial Proxy and/or Annual Report Mailings

    Effective February 12, 1998, 50 cents for each set of proxy 
material, i.e., proxy statement, form of proxy and annual report when 
mailed as a unit, unless an opposition proxy statement has been 
furnished to security holders, with a minimum of $5.00 for all sets 
mailed;
    Effective March 14, 1997, $1.00 for each set of proxy materials, 
i.e., proxy statement, form of proxy and annual report when mailed as a 
unit, for a meeting for which an opposition proxy statement has been 
furnished to security holders, with a minimum of $5.00 for all sets 
mailed;
    Effective March 14, 1997, 15 cents for each copy, plus postage, for 
annual reports, which are mailed separately from the proxy material 
pursuant to the instruction of the person soliciting proxies, with a 
minimum of $3.00 for all sets mailed;
    Effective March 14, 1997, the Exchange has approved as fair and 
reasonable, a supplemental proxy fee per nominee of $20.00 for any 
intermediary that coordinates multiple nominees, provided that such 
intermediary, at a minimum:
    (1) coordinates the search for nominees and beneficial owners, 
including:
    (a) searching for all nominees that are clients of the 
intermediary;

[[Page 51385]]

    (b) obtaining beneficial ownership lists from nominees;
    (c) consolidating nominee responses to the issuer's beneficial 
owner requests; and
    (d) [(1)] providing [provides] to an issuer the names and addresses 
of the nominee[s] in response to the issuer's request pursuant to rule 
14a-13(a)(1)(D) under Securities Exchange Act of 1934, as amended (the 
``Exchange Act'');
    (2) prepares issuer materials across multiple nominees for 
distribution, including:
    (a) ordering appropriate quantities of the materials from the 
issuer on behalf of multiple nominees within no more than seven 
business days of the issuer's request; and
    (b) packaging and labeling issuer materials;
    (3) transmits the issuer's proxy materials to the beneficial owners 
of the shares by making effective use of bulk mailing opportunities by 
combining nominees for bulk mailings as the issuer may request;
    (4) provides vote reports, including:
    (a) receiving and tabulating vote responses;
    (b) providing a vote report that is consolidated across multiple 
nominees no less than 10 days before a shareholder meeting;
    (c) thereafter providing daily vote updates that are consolidated 
across multiple nominees until the day before the meeting;
    (d) providing two vote reports on the day before the meeting; and
    (e) providing a final vote report, consolidated across multiple 
nominees, on the day of the meeting; and
    (5) consolidates invoices payable by the issuer for the processing 
of multiple nominees.
    For the purposes of this Supplementary Material .90, the term 
``nominee'' means an entity that:
    (1) is either:
    (a) ``record holder'' as defined in Rule 14a-1(i) under the 
Exchange Act;
    (b) a ``respondent bank'' as defined in Rule 14a-1(k) under the 
Exchange Act; or
    (c) a ``respondent broker or dealer'' as defined below; and
    (2) has the legal right to vote the shares it holds as record 
holder under state law or through contractual arrangement, or as 
respondent bank or respondent broker or dealer, on behalf of one or 
more beneficial owners, which right to vote is capable of verification 
and reconciliation to the issuer's records.
    A ``respondent broker or dealer'' means a broker or dealer that 
holds securities on behalf of beneficial owners and that deposits such 
securities for safekeeping with another broker or dealer.
    Charges for Proxy Follow-Up Mailings--No change.
    Charges for Interim Report Mailings--No change.
    Incentive Fees--No change.
    .91 through .95--No change.

Transmission of Interim Reports and Other Material

    Rule 465.--No change.
* * * Supplementary Material:
    .10 Application of Rule--No change.
    .20 Mailing charges by member organizations.--The Exchange has 
approved the following as fair and reasonable rates of reimbursement of 
member organizations 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. In addition to the charges 
specified in this schedule, member organizations are also 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.

Charges for Initial Proxy and/or Annual Report Mailings

    Effective February 12, 1998, 50 cents for each set of proxy 
material, i.e., proxy statement, form of proxy and annual report when 
mailed as a unit, unless an opposition proxy statement has been 
furnished to security holders, with a minimum of $5.00 for all sets 
mailed;
    Effective March 14, 1997, $1.00 for each set of proxy materials, 
i.e., proxy statement, form of proxy and annual report when mailed as a 
unit, for a meeting for which an opposition proxy statement has been 
furnished to security holders, with a minimum of $5.00 for all sets 
mailed;
    Effective March 14, 1997, 15 cents for each copy, plus postage, for 
annual reports, which are mailed separately from the proxy material 
pursuant to the instruction of the person soliciting proxies, with a 
minimum of $3.00 for all sets so mailed;
    Effective March 14, 1997, the Exchange has approved as fair and 
reasonable, a supplemental proxy fee per nominee of $20.00 for any 
intermediary that coordinates multiple nominees, provided that such 
intermediary, at a minimum;
    (1) coordinates the search for nominees and beneficial owners, 
including:
    (a) searching for all nominees that are clients of the 
intermediary;
    (b) obtaining beneficial ownerships lists from nominees;
    (c) consolidating nominee responses to the issuer's beneficial 
owner requests; and
    (d) [(1)] providing [provides] to an issuer the names and addresses 
of the nominee[s] in response to the issuer's request pursuant to Rules 
14a-13(a)(1)(D) under Securities Exchange Act of 1934, as amended (the 
``Exchange Act'');
    (2) prepares issuer materials across multiple nominees for 
distribution, including:
    (a) ordering appropriate quantities of the materials from the 
issuer on behalf of multiple nominees within no more than seven 
business days of the issuer's request; and
    (b) packaging and labeling issuer materials;
    (3) transmits the issuer's proxy materials to the beneficial owners 
of the shares by making effective use of bulk mailing opportunities by 
combining nominees for bulk mailings as the issuer may request;
    (4) provides vote reports, including:
    (a) receiving and tabulating vote responses;
    (b) providing a vote report that is consolidated across multiple 
nominees no less than 10 days before a shareholder meeting;
    (c) thereafter providing daily vote updates that are consolidated 
across multiple nominees until the day before the meeting;
    (d) providing two vote reports on the day before the meeting; and
    (e) providing a final vote report, consolidated across multiple 
nominees, on the day of the meeting; and
    (5) consolidates invoices payable by the issuer for the processing 
of multiple nominees.
    For the purposes of this Supplementary Material .90, the term 
``nominee'' means an entity that:
    (1) is either:
    (a) a ``record holder'' as defined in Rule 14a-1(i) under the 
Exchange Act;
    (b) a ``respondent bank'' as defined in Rule 14a-1(k) under the 
Exchange Act; or
    (c) a ``respondent broker or dealer'' as defined below; and
    (2) has the legal right to vote the shares it holds as record 
holder under state law or through contractual arrangement, or 
respondent bank or

[[Page 51386]]

respondent broker or dealer, on behalf of one or more beneficial 
owners, which right to vote is capable of verification and 
reconciliation to the issuer's records.
    A ``respondent broker or dealer'' means a broker or dealer that 
holds securities on behalf of beneficial owners and that deposits such 
securities for safekeeping with another broker or dealer.
    Charges for Proxy Follow-Up Mailings--No change.
    Charges for Interim Report Mailings--No change.
    Incentive Fees--No change.
    .21 through .25--No change.
* * * * *

Text of Changes to the Listed Company Manual

402.10 Charges by Member Organizations for Distributing Material:

* * * * *

(A) Charges for Initial Proxy and/or Annual Report Mailings

* * * * *
    A supplemental proxy fee per nominee of $20.00 for any intermediary 
that coordinates multiple nominees, provided that such intermediary, at 
a minimum:
    (1) coordinates that search for nominees and beneficial owners, 
including:
    (a) searching for all nominees that are clients of the 
intermediary;
    (b) obtaining beneficial ownership lists from nominees;
    (c) consolidating nominee responses to the issuer's beneficial 
owner requests; and
    (d) [(1)] providing [provides] to an issuer the names and addresses 
of the nominee[s] in response to the issuer's request pursuant to Rule 
14a-13(a)(1)(D) under Securities Exchange Act of 1934, as amended (the 
``Exchange Act'');
    (2) prepared issuer materials across multiple nominees for 
distribution, including:
    (a) ordering appropriate quantities of the materials from the 
issuer on behalf of multiple nominees within no more than seven 
business days of the issuer's request; and
    (b) packing and labeling issuer materials;
    (3) transmits the issuer's proxy materials to the beneficial owners 
of the shares by making effective use of bulk mailing opportunities by 
combining nominees for bulk mailings as the issuer may request; 
    (4) provides vote reports, including:
    (a) receiving and tabulating vote responses;
    (b) providing a vote report that is consolidated across multiple 
nominees no less than 10 days before a shareholder meeting;
    (c) thereafter providing daily vote updates that are consolidated 
across multiple nominees until the day before the meeting;
    (d) providing two vote reports on the day before the meeting; and
    (e) providing a final vote report, consolidated across multiple 
nominees, on the day of the meeting; and
    (5) consolidates invoices payable by the issuer for the processing 
of multiple nominees.
    For the purposes of this Supplementary Material .90, the term 
``nominee'' means an entity that:
    (1) is either:
    (a) a ``record holder'' as defined in Rule 14a-1(i) under the 
Exchange Act;
    (b) a ``record bank'' as defined in Rule 14a-1(k) under the 
Exchange Act; or
    (c) a ``respondent broker or dealer'' as defined below; and
    (2) has the legal right to vote the shares it holds as record 
holder under state law or through contractual arrangement, or as 
respondent bank or respondent broker or dealer, on behalf of one or 
more beneficial owners, which right to vote is capable of verification 
and reconciliation to the issuer's records.
    A ``respondent broker or dealer'' means a broker or dealer that 
holds securities on behalf of beneficial owners and that deposits such 
securities for safekeeping with another broker or dealer.
    INCENTIVE FEES--No change.
    (B) through (D)--No change.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the 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 
section 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
    Among other things, the Pilot Free Structure lowers certain 
guidelines concerning the reimbursement of fees for the distribution of 
Materials, creates incentive fees to eliminate duplicative mailings, 
and establishes a supplemental fee for intermediaries that coordinate 
multiple nominees. The proposed rule change would extend the Pilot Fee 
Structure's termination date from October 10, 2000, to September 1, 
2001.
    The Exchange believes that an extension of the Pilot Fee 
Structure's termination date will give the Commission additional time 
to consider the pilot program, without a lapse in the current rules. 
Absent an extension of the Pilot Fee Structure's termination date, the 
fees in effect prior to the Pilot Fee Structure would return to 
effectiveness after October 10, 2000, creating confusion in the market.
    In addition, NYSE proposes to amend the functions that an 
intermediary is expected to perform, at a minimum, in order to recover 
the suggested intermediary-coordination fee set forth in the Rules. 
Currently, the only such functions that the Rules explicitly enumerate 
are (1) providing the issuer with the names and addresses of nominees 
pursuant to an issuer request, and (2) transmitting the issuer's proxy 
materials to the beneficial owners of the shares.
    The Exchange proposes to include the first of those two functions 
within a broader category of functions: Intermediary coordination of 
the search for nominees and beneficial owners. This broader function 
includes (in addition to providing nominee names and addresses) 
searching for all nominees that are clients of the intermediary, 
obtaining beneficial ownership lists from nominees, and consolidating 
nominee responses to the issuer's beneficial owner requests.
    The Exchange proposes to clarify the latter of those two currently 
specified functions by specifying that those transmissions should make 
efficient use of bulk mailing opportunities by combining nominees for 
bulk mailing as the issuer may request.
    In addition, the Exchange proposes to cause the Rules to explicitly 
list three additional functions that an intermediary would be expected 
to perform in order to earn its coordination fee in respect of a 
nominee. First, the intermediary would be expected to prepare issuer 
materials for distribution, including ordering adequate supplies of 
materials, packaging and labeling. Second, the intermediary would be 
expected to provide reports of proxy votes. That function would include 
receiving and tabulating votes, consolidating vote tallies cast by

[[Page 51387]]

multiple nominees at least 10 days prior to a shareholder meeting, 
thereafter providing daily updates on a consolidated basis up through 
the day prior to the meeting, providing two vote reports on the day 
prior to the meeting, and providing a final, consolidated vote report 
on the date of the meeting. Finally, the intermediary would be expected 
to consolidate the invoices that it presents to an issuer for the 
processing of multiple nominees.
    These additions of proposed specificity to the functions that are 
expected of the intermediary in return for the coordination fee are not 
meant to be exclusive. However, NYSE believes that adding this level of 
specificity in connection with the minimum performance to be expected 
of an intermediary will help to clarify the relationship between 
intermediary and issuer. Both issuers and intermediaries will be put on 
notice as to the minimum performance that is to be expected of an 
intermediary in its performance of coordination functions.
2. Basis
    The Exchange believes that the basis under the Act for the proposed 
rule change is the requirement under Section 6(b)(4) \5\ that an 
exchange have rules that provide for the equitable allocation of 
reasonable dues, fees and other charges among its members and other 
persons using its facilities. In addition, the Exchange believes that 
an additional basis for the proposed rule change is the requirement 
under Section 6(b)(5) \6\ 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.
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    \5\ 15 U.S.C. 78f(b)(4).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that 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

    According to the Exchange, it has engaged in on-going dialogue 
regarding the proposed rule change as well as other aspects of its 
proxy reimbursement guidelines with Commission staff as well as the 
Proxy Fee Working Committee, a group that NYSE selected as 
representative of the parties interested in the proxy process, 
including representatives of the American Society of Corporate 
Secretaries (on behalf of issuers). NYSE believes that a majority of 
the committee's representatives approve of the proposed rule change. 
NYSE has not otherwise solicited, and does not intend to solicit, 
comments on the proposed rule change. NYSE has not received any 
unsolicited comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register, or within such longer period (i) as the Commission 
may designate up to 90 days of such date if it finds such longer period 
to be appropriate and publishes its reasons for so finding or (ii) as 
to which the self-regulatory organization consents, the Commission 
will:
    (a) By order approve such proposed rule change, or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, 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 20549-0609. 
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 Room. 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-00-36 and should 
be submitted by September 13, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-21521 Filed 8-22-00; 8:45 am]
BILLING CODE 8010-01-M