[Federal Register Volume 68, Number 49 (Thursday, March 13, 2003)]
[Notices]
[Page 12131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6075]



[[Page 12131]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47458; File No. SR-NYSE-2002-50]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change, as Amended by 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'')

March 6, 2003.
    On October 16, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with 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 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. On December 19, 2002, 
the NYSE amended the proposal to define the term ``state'' in proposed 
NYSE Rule 451 by reference to the Investment Advisers Act of 1940 
(``Advisers Act''),\3\ instead of the Act.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 80b.
    \4\ See letter from Darla Stuckey, Corporate Secretary, NYSE, to 
Nancy Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated December 19, 2002 (``Amendment No. 1'').
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    The Commission published the proposed rule change, as amended, for 
comment in the Federal Register on January 28, 2003.\5\ The Commission 
received one comment letter relating to the proposal. \6\ This order 
approves the amended proposal.
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    \5\ See Securities Exchange Act Release No. 47215 (January 17, 
2003), 68 FR 4263.
    \6\ See letter from Christine A. Bruenn, NASSA President and 
Maine Securities Administrator, North American Securities 
Administrators Association, Inc. (``NASAA''), to Jonathan G. Katz, 
Secretary, Commission, dated February 18, 2003 (``NASAA Comment 
Letter''). In its comment letter, the NASAA expressed support for 
the proposal. See also infra note 11.
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    Currently, NYSE Rules 450, 451, 452, and 465 provide beneficial 
owners the ability to authorize investment advisors to receive proxy 
material, other related issuer material and to vote proxies on their 
behalf, if such investment advisers are registered under the Advisers 
Act, exercise investment discretion pursuant to an advisory contract, 
and have been designated to the member organization in writing by the 
beneficial owner.
    Title III of the National Securities Markets Improvement Act of 
1996 (the ``Coordination Act'') reallocated regulatory responsibilities 
for investment advisers between the Commission and the states.\7\ 
Generally, 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. As a result, the Exchange believes that the number of 
advisers eligible to be registered with the Commission has been reduced 
by approximately two-thirds. Consequently, because NYSE's current rules 
require the authorized investment adviser to be registered under the 
Advisers Act, beneficial owners cannot designate a large number of 
investment advisers (those with less than $25 million under management) 
to exercise investment discretion pursuant to an advisory contract, or 
to receive and vote proxy materials on their behalf. The proposed 
amendments would allow such authorization to be extended to advisers 
registered under state law.
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    \7\ 62 FR 28112 (May 22, 1997); Release No. IA-1633, File No. 
S7-31-96.
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \8\ 
and, in particular, the requirements of section 6 of the Act.\9\ The 
Commission finds that the proposed rule change, as amended, is 
consistent with section 6(b)(5) of the Act,\10\ which requires, among 
other things, that the rules of an exchange be designed to promote just 
and equitable principles of trade and, in general, to protect investors 
and the public interest. The Commission believes that amending NYSE 
Rules 450, 451, 452, and 465 to allow authorized state-registered 
advisers to receive and vote proxy materials on behalf of the 
beneficial owner, would allow for the reasonable expectation that all 
registered advisers, state and federal, subject to due authorization 
and regulation, be permitted to receive and vote proxy materials on 
their behalf. The Commission also believes that this change recognizes, 
and is consistent with, the regulatory scheme set up for the 
registration of investment advisors under state and federal law 
pursuant to the Coordination Act.\11\
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    \8\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See NASAA Comment Letter, supra note 6. In its comment 
letter, the NASAA stated that while federal and state-registered 
advisers are distinguished based on their levels of assets under 
management, both federal and state-registered advisers generally 
perform similar functions. According to the NASAA, while not all 
clients may want their adviser to vote on their behalf, NASAA 
believes this option should be available to all investors.
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    NYSE's rules will continue to require that such investment advisers 
are exercising investment discretion on behalf of the beneficial owner 
pursuant to an advisory contract, and have been designated to the 
member organization in writing by the beneficial owner. These 
requirements should help to ensure that any state registered adviser is 
acting on behalf of the beneficial owner.
    It is therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-NYSE-2002-50), as amended, 
is approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30'3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-6075 Filed 3-12-03; 8:45 am]
BILLING CODE 8010-01-P