[Federal Register Volume 66, Number 66 (Thursday, April 5, 2001)]
[Notices]
[Pages 18134-18136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8351]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44133; File No. SR-NYSE-00-21]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the New York 
Stock Exchange, Inc. Relating to the Electronic Delivery of Proxy 
Materials and Proxies

March 29, 2001.
    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 May 3, 2000, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On February 23, 2001, the Exchange submitted Amendment No. 1 to the 
proposed rule change.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons. The Commission has also decided to grant 
accelerated approval to the amended proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Letter from James E. Buck, Senior Vice President and 
Secretary, NYSE to Sharon M. Lawson, Division of Market Regulation, 
SEC, dated February 22, 2001 (``Amendment No. 1''). In Amendment No. 
1, the Exchange proposed changes to the text of the rule that 
clarifies that electronic delivery of proxy materials and proxies 
must be effected in compliance with applicable federal and state 
laws, including for the purposes of this rule, interpretations of 
the Commission.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change consists of amendments to Section 402.04 
of the Listed Company Manual (``Manual''). This section of the Manual 
sets forth the proxy solicitation requirements for listed companies. 
The text of proposed rule change follows. Additions are in italics; 
deletions are [bracketed].

NYSE Listed Company Manual

* * * * *

Section 4 Shareholders' Meetings and Proxies

* * * * *

402.04 Proxy Solicitation Required

    (A) Actively operating companies are required.
* * * * *

[[Page 18135]]

    (B) Electronic Delivery of Proxy Materials. As permitted by 
applicable state and federal law (including any interpretations thereof 
by the SEC), a company may arrange for the delivery of its proxy 
material by electronic means (including by posting on a company's web 
site, with an electronic mail notice to the beneficial owner of its 
availability on the web site) to beneficial owners who have given their 
prior written consent to such delivery. Such consent may be in the form 
of electronic mail. Such arrangements should be made in coordination 
with any intermediaries that are record holders of the securities. 
Proxies may also be delivered by electronic means by beneficial owners 
as permitted by applicable state and federal law (including any 
interpretations thereof by the SEC) and if appropriate arrangements 
have been made with any intermediaries that are record holders of the 
securities. (See, for example, the following interpretations by the 
SEC: Release No. 34-36345, File No. S7-31-95; Release No. 34-37182, 
File No. S7-13-96; and Release Nos. 33-7856, 34-42728, File No. S7-11-
00).

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 III 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 Exchange proposes to make it possible for companies to arrange 
for the delivery of proxy material to beneficial owners by electronic 
means, as permitted by and in compliance with applicable state and 
federal law, which for the purposes of this rule will include any 
interpretations thereof by the Commission.\4\ The term ``electronic 
means'' will include (but will not be limited to) posting such 
materials on the company's web site, with an electronic mail notice to 
the beneficial owner of the availability of such posting. The amended 
rule provides that the described electronic delivery may be utilized 
only if beneficial holders have given prior written consent to such 
delivery (consents by electronic mail will be acceptable).
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    \4\ To date, applicable interpretations of the Commission 
include Release No. 34-36345 (October 6, 1995), 60 FR 53458 (October 
12, 1995) (File No. S7-31-95); Release No. 34-37182 (May 9, 1996), 
61 FR 24644 (May 15, 1996) (File No. S7-31-96); Release Nos. 33-
7856, 34-42728 (April 28, 2000), 65 FR 25843 (May 4, 2000) (File No. 
S7-11-00).
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    Pursuant to the proposed rule change, beneficial owners will also 
be allowed to deliver their proxies by electronic means, subject to 
applicable state and federal laws, as described above, which also 
includes Commission interpretations.\5\ Finally, the proposed rule 
change provides that any arrangements for electronic delivery of 
proxies and proxy materials should be coordinated with any 
intermediaries \6\ who are record holders of the affected 
securities.\7\
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    \5\ Id.
    \6\ Section 402.07 of the Listed Company Manual sets forth 
procedures that the Exchange has established for guidance of member 
organizations acting as intermediaries under NYSE Rules 450 to 455. 
These rules, among other things, establish the requirements of 
member organizations that transmit proxy materials to beneficial 
owners. According to the Exchange, it has interpreted Section 402.07 
of the Listed Company Manual, which sets forth the methods to be 
used in transmitting proxy materials, to allow members to transmit 
proxy materials to beneficial owners in a manner consistent with 
Section 402.04 of the Listed Company Manual. Therefore, member 
organizations that act as nominees for beneficial owners may use 
electronic delivery methods to deliver proxy materials to beneficial 
owners so long as they comply with the provisions of Section 402.04, 
as amended. Telephone call between Elena Daly, Assistant General 
Counsel, NYSE, and Kelly Riley, Special Counsel, SEC, on March 22, 
2001.
    \7\ The Exchange stated that it will send written notification 
to its listed companies and member organizations of the new 
electronic delivery provisions and refer them to applicable federal 
and state law as well as the Commission's interpretations. Telephone 
call between Elena Daly, Assistant General Counsel, NYSE, and Kelly 
Riley, Special Counsel, SEC, on March 15, 2001.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) \8\ of the Act, which requires, among other 
things, that exchange rules be designed to promote just and equitable 
principles of trade, to remove impediments to, and perfect the 
mechanism of a free and open market and, in general, to protect 
investors and the public interest.
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    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 the File 
No. SR-NYSE-00-21 and should be submitted by April 26, 2001.

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

    The Commission finds that the proposed rule change, as amended, is 
consistent with the Act and the rules and regulations thereunder 
applicable to a national securities exchange,\9\ and in particular, the 
requirements of Section 6(b)(5) of the Act.\10\ The Commission finds 
that the Exchange's proposal to permit listed companies to deliver 
proxy materials by electronic means to foster cooperation and 
coordination with persons engaged in processing information with 
respect to securities because it would allow issuers and investors to 
utilize new technology to deliver documents required under the Act in a 
more efficient manner.\11\

[[Page 18136]]

Specifically, issuers should be able to delivery proxy materials to 
investors in a more timely and cost effective fashion. Issuers that 
send their proxy materials to their investors electronically should 
realize savings on postage and printing costs. Furthermore, because 
electronic delivery methods permit near instantaneous delivery of 
documents, investors could receive their proxy materials sooner than 
permitted by the current delivery methods. In addition, the Commission 
finds that the proposed rule change is not designed to permit unfair 
discrimination between issuers because all NYSE-listed companies will 
be able to make use of electronic delivery methods under the rule.
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    \9\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ The Commission notes that the Section 402.04 of the Listed 
Company Manual applies to NYSE-listed companies. According to NYSE, 
it has interpreted the requirements of Section 402.04 of the Listed 
Company Manual to apply to NYSE members who act as nominees and hold 
securities for beneficial owners, pursuant to Section 402.07 of the 
Listed Company Manual. The Commission suggests that the NYSE 
consider adding a cross reference to this effect to help clarify 
their rules.
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    Under the proposed rule, issuers and member organizations will only 
be permitted to use electronic means to deliver proxy materials as 
permitted by applicable federal and state law, including 
interpretations issued by the Commission. To date the Commission has 
issued three interpretations on this issue.\12\ Accordingly, all 
electronic deliveries effected under the NYSE rule would have to comply 
with the requirements in these interpretations and any future 
interpretations that the Commission may issue on this matter. Further, 
issuers and member organizations will only be permitted to use 
electronic means to deliver proxy materials if they have received 
written consent for such delivery means from each individual investor. 
The Commission believes that these restrictions should ensure that all 
investors continue to receive proxy materials regardless of the 
delivery method used.
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    \12\ See note 4 supra.
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    The proposal would permit beneficial owners to use electronic means 
to deliver proxies. Like issuers, beneficial owners would only be 
permitted to utilize electronic means to deliver proxies as permitted 
by applicable state and federal law, including applicable Commission 
interpretations. The Commission believes these requirements will allow 
beneficial owners to use and gain the benefits of new technological 
advances.
    Finally, as noted above, the Commission to date has issued three 
interpretations regarding electronic delivery requirements under 
federal securities laws.\13\ Issuers and member organizations using 
electronic delivery means for proxy materials and proxies are required 
under the proposed rule to ensure that they comply with current 
Commission interpretations, as well as any future interpretations that 
the Commission may issue on these issues. The Commission expects that 
the Exchange will monitor developments regarding electronic delivery 
requirements and notify their members and listed companies in the event 
the Commission issues future releases on these issues.
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    \13\ See note 4 supra.
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    The Commission finds good cause to approve the proposal prior to 
the thirtieth day after the date of publication of notice of the filing 
in the Federal Register. By accelerating effectiveness of the 
Exchange's rule proposal, NYSE issuers and members would be able to 
utilize electronic delivery methods for the current proxy season. The 
Commission believes that the Exchange has complied with the regulatory 
requirements for the use of electronic delivery methods by requiring 
compliance with applicable federal and state law as well as requiring 
that investors consent to electronic delivery in writing. The 
Commission believes that these requirements should ensure that 
investors continue to receive their proxy materials in accordance with 
federal and state law. Further, the proposed rule change does not 
change delivery requirements. It merely provides an alternative method 
by which delivery can be accomplished. Accordingly, the Commission 
believes that good cause exists, consistent with Sections 6(b)(5) \14\ 
and 19(b)(2) \15\ of the Act, to approve the proposed rule change on an 
accelerated basis.
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    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the amended proposed rule change (SR-NYSE-00-21) is 
hereby approved.
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    \16\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\17\
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    \17\ 17 CFR 200.30(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8351 Filed 4-4-01; 8:45 am]
BILLING CODE 8351-M