[Federal Register Volume 68, Number 18 (Tuesday, January 28, 2003)]
[Notices]
[Pages 4263-4265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1881]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47215; File No. SR-NYSE-2002-50]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the New York Stock Exchange, Inc. 
To Adopt Amendments to Exchange Rules 450 (``Restrictions on Giving of 
Proxies''), 451 (``Transmission of Proxy Material''), 452 (``Giving 
Proxies by Member Organizations''), and 465 (``Transmission of Interim 
Reports and Other Material'')

January 17, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 16, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in items I, II, 
and III below, which items have been prepared by the NYSE. On December 
19, 2002, the NYSE 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Darla Stuckey, Corpoate Secretary, NYSE, to 
Nancy Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated December 19, 2002 (``Amendment No. 1''). In 
Amendment No. 1, the NYSE revised the first footnote of proposed 
NYSE rule 451 to define the term ``state'' by reference to the 
Investment Advisers Act of 1940, instead of the Securities Exchange 
Act of 1934
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE is proposing to amend NYSE rule 450 (``Restriction on 
Giving of Proxies''), NYSE rule 451 (``Transmission of Proxy 
Material''), NYSE rule 452 (``Giving Proxies by Member 
Organizations''), and NYSE rule 465 (``Transmission of Interim Reports 
and Other Material'') to allow authorized state-registered investment 
advisers to receive and vote proxy materials on behalf of beneficial 
owners. The text of the proposed rule change is below. Proposed new 
language is in italics; deleted language is in brackets.

Restriction on Giving of Proxies

    Rule 450. No member organization shall give or authorize the giving 
of a proxy to vote stock registered in its name, or in the name of its 
nominee, except as required or permitted under the provisions of rule 
452, unless such member organization is the beneficial owner of such 
stock. Notwithstanding the foregoing,
    (1) Any member organization, designated by a named fiduciary as the 
investment manager of stock held as assets of an ERISA Plan that 
expressly grants discretion to the investment manager to manage, 
acquire, or dispose of any plan asset and which has not expressly 
reserved the proxy voting right for the named fiduciary, may vote the 
proxies in accordance with its ERISA Plan fiduciary responsibilities; 
and
    (2) Any person registered as an investment adviser, either under 
the Investment Advisers Act of 1940 or under the laws of a state,\4\ 
who exercises investment discretion pursuant to an advisory contract 
for the beneficial owner and has been designated in writing by the 
beneficial owner to vote the proxies for stock which is in the 
possession or control of the member organization, may vote such 
proxies.
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    \4\ The term ``state'' as used herein shall have the meaning 
given to such term in Section 3(a)(16) of the Investment Advisers 
Act of 1940, and as such term may be amended from time to time 
therein.
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Transmission of Proxy Material

    Rule 451. (a) Whenever a person soliciting proxies shall furnish a 
member organization:
    (1) [C]copies of all soliciting material which such person is 
sending to registered holders, and
    (2) satisfactory assurance that [he]
    the person will reimburse such member organization for all out-of-
pocket expenses, including reasonable clerical expenses, incurred by 
such member organization in connection with such solicitation,

such member organization shall transmit to each beneficial owner of 
stock which is in its possession or

[[Page 4264]]

control or to an investment advisor, registered either under the 
Investment Advisers Act of 1940 or under the laws of a state, who 
exercises discretion pursuant to an advisory contract for the 
beneficial owner and has been designated in writing by the beneficial 
owner of such stock (hereinafter ``designated investment adviser'') to 
receive soliciting material in lieu of the beneficial owner, the 
furnished material; and
    (b) No Change.
* * * * *

Giving Proxies by Member Organizations

    Rule 452. A member organization shall give or authorize the giving 
of a proxy for stock registered in its name, or in the name of its 
nominee, at the direction of the beneficial owner. If the stock is not 
in the control or possession of the member organization, satisfactory 
proof of the beneficial ownership as of the record date may be 
required.

Voting Member Organization Holdings as Executor, etc.

    A member organization may give or authorize the giving of a proxy 
to vote any stock registered in its name, or in the name of its 
nominee, if such member organization holds such stock as executor, 
administrator, guardian, trustee, or in a similar representative or 
fiduciary capacity with authority to vote.

Voting Procedure Without Instructions

    A member organization which has transmitted proxy soliciting 
material to the beneficial owner of stock or to an investment adviser, 
registered either under the Investment Advisers Act of 1940 or under 
the laws of a state, who exercises investment discretion pursuant to an 
advisory contract for the beneficial owner and has been designated in 
writing by the beneficial owner of such stock (hereinafter ``designated 
investment adviser'') to receive soliciting material in lieu of the 
beneficial owner and solicited voting instructions in accordance with 
the provisions of rule 451, and which has not received instructions 
from the beneficial owner or from the beneficial owner's designated 
investment adviser by the date specified in the statement accompanying 
such material, may give or authorize the giving of a proxy to voted 
such stock, provided the person in the member organization giving or 
authorizing the giving of the proxy has no knowledge of any contest as 
to the action to be taken at the meeting and provided such action is 
adequately disclosed to stockholders and does not include authorization 
for a merger, consolidation or any other matter which may affect 
substantially the rights or privileges of such stock.
* * * * *

Transmission of Interim Reports and Other Material

    Rule 465. A member organization, when so requested by a company, 
and upon being furnished with:
    (1) Copies of interim reports of earnings or other material being 
sent to stockholders, and
    (2) Satisfactory assurance that it will be reimbursed by such 
company for all out-of-pocket expenses, including reasonable clerical 
expenses, shall transmit such reports or material to each beneficial 
owner of stock of such company held by such member organization and 
registered in a name other than the name of the beneficial owner unless 
the beneficial owner has instructed the member organization in writing 
to transmit such reports or material to a designated investment 
adviser, registered either under the Investment Advisers Act of 1940 or 
under the laws of a state, who exercises investment discretion pursuant 
to an advisory contract for such beneficial owner.
* * * * *

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

I. Purpose

Background and Prior Amendments

    On August 25, 1994, the Commission approved amendments to Exchange 
rules related to voting of proxies and transmission of proxy and 
related issuer material.\5\ The affected rules were NYSE rule 450 
(``Restrictions on Giving of Proxies''), NYSE rule 451 (``Transmission 
of Proxy Material''), NYSE rule 452 (``Giving Proxies by Member 
Organizations''), and NYSE rule 465 (``Transmission of Interim Reports 
and Other Material'').
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    \5\ See Exchange Act Release No. 34596, 59 FR 45050 (August 31, 
1994) and NYSE Information Memo Number 94-41 (September 7, 1994).
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    The 1994 amendments gave beneficial owners the ability to authorize 
investment advisers registered under the Investment Advisers Act of 
1940 (``Advisers Act'')\6\ who exercise investment discretion pursuant 
to an advisory contract and who have been designated to the member 
organization in writing by the beneficial owner, to receive proxy 
soliciting materials, annual reports and other related issuer material 
and to vote proxies for the beneficial owners of securities. In other 
words, the amendments permitted member organizations to comply with 
such duly authorized customer requests, provided the designated adviser 
was registered under the Advisers Act.
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    \6\ 15 U.S.C. 80b.
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    Prior to these amendments, Exchange rules required transmission of 
proxy and related materials by the member organization to each 
beneficial owner of stock held in the member organization's possession 
and control. In fact, pre-amendment NYSE rule 451 explicitly required 
that proxy materials be sent to a beneficial owner even if such owner 
had instructed the member organization not to do so.

The National Securities Market Improvement Act Amendments

    Effective July 1997, the Commission adopted new rules and rule 
amendments under the Advisers Act to implement provisions under title 
III of the National Securities Markets Improvement Act of 1996 that 
reallocate regulatory responsibilities for investment advisers between 
the Commission and the states.\7\ Generally, title III (a/k/a The 
Investment Advisers Supervision Coordination Act or the ``Coordination 
Act'') provides for Commission regulation of advisers with $25 million 
or more of assets under management, and state regulation of advisers 
with less than $25 million of assets under management.
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    \7\ 62 FR 28112 (May 22, 1997); Release No. IA-1633, File No. 
S7-31-96.
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    Specifically, new section 203A(a) of the Advisers Act \8\ provides 
that an investment adviser that is regulated or required to be 
regulated as an investment adviser in the state in which it maintains 
its principal office and place of business is prohibited from

[[Page 4265]]

registering with the Commission unless the adviser:
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    \8\ 15 U.S.C. 80b-3a.
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    (i) Has assets under management of not less than $25 million (or 
such higher amount as the Commission may, by rule, deem appropriate), 
or
    (ii) Is an adviser to an investment company registered under the 
Investment Company Act of 1940.

The Proposed Amendments

    The provisions of the Coordination Act have been estimated to 
reduce by two-thirds the number of advisers eligible to register with 
the Commission.
    Consequently, a large number of investment advisers (those with 
less than $25 million under management) who exercise investment 
discretion pursuant to an advisory contract, and have been designated 
to the member organization in writing by the beneficial owner to 
receive and vote proxy materials, are no longer authorized to do so 
under NYSE Rules. NYSE believes that amending NYSE rules 450, 451, 452, 
and 465 to allow such authorization to be extended to advisers 
registered under state law would allow for the reasonable customer 
expectation that duly designated advisers, subject to regulation, be 
permitted to receive and vote proxy materials on their behalf.
    The Exchange represents that the proposed amendments are consistent 
with a proposed rule change recently filed by the National Association 
of Securities Dealers, Inc. with the Commission.\9\
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    \9\ See Exchange Act Release No. 47214 (January 17, 2003).
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2. Statutory Basis
    NYSE believes that the basis under the Exchange Act for this 
proposed rule change is the requirement under section 6(b)(5) of the 
Act \10\ that an Exchange have rules that are designed to promote just 
and equitable principles of trade, to remove impediments to and to 
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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    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal does not impose any burden 
on competition 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

    Written comments were neither solicited nor received.

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 the file number in the caption 
above and should be submitted by February 18, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-1881 Filed 1-27-03; 8:45 am]
BILLING CODE 8010-01-P