98-21277. Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the New York Stock Exchange, Inc., Extending the Pilot Rules Governing the Reimbursement of Member Organizations for Costs Incurred in ...  

  • [Federal Register Volume 63, Number 153 (Monday, August 10, 1998)]
    [Notices]
    [Pages 42652-42653]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 98-21277]
    
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Release No. 34-40289; File No. SR-NYSE-98-23]
    
    
    Self-Regulatory Organizations; Notice of Filing and Immediate 
    Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
    Inc., Extending the Pilot Rules Governing the Reimbursement of Member 
    Organizations for Costs Incurred in the Transmission of Proxy and Other 
    Shareholder Communication Material
    
    July 31, 1998.
        Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
    (``Act''),\1\ notice is hereby given that on July 29, 1998, the New 
    York Stock Exchange, Inc. (the ``Exchange'' or ``NYSE'') 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 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)
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    I. Self-Regulatory Organization's Statement of the Terms of 
    Substance of the Proposed Rule Change
    
        The Exchange seeks to extend the current pilot period regarding 
    Exchange Rule 451, ``Transmission of Proxy Material,'' and Exchange 
    Rule 465, ``Transmission of Interim Reports and Other Material'' 
    (collectively the ``Rules''). 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. The present pilot period regarding the Rules is scheduled to 
    expire on July 31, 1998. The Exchange proposes to extend the pilot 
    period through October 31, 1998.
        The text of the proposed rule change is available at the Office of 
    the Secretary, the Exchange, and at the Commission.
    
    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
    
    1. Purpose
        The ``Initial Filings'' \2\ revised the Rules to lower certain 
    reimbursement guidelines, create incentive fees to eliminate 
    duplicative mailings, and establish a supplemental fee for 
    intermediaries that coordinate multiple nominees. The Commission 
    approved the Initial Filing as a one-year pilot, and designated May 13, 
    1998, as the date of expiration. In the ``February Filing,'' \3\ the 
    Exchange extended the pilot period through July 31, 1998, and lowered 
    one rate of reimbursement.\4\ This proposed rule change would extend 
    the pilot period through the end of the current proxy season, October 
    31, 1998.
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        \2\ See Securities Exchange Act Release No. 38406 (Mar. 14, 
    1997), 62 FR 13922 (Mar. 24, 1997). The Initial Filing contains a 
    detailed description regarding the background and history of the 
    Rules.
        \3\ See Securities Exchange Act Release No. 39672 (Feb. 17, 
    1998), 63 FR 9034 (Feb. 23, 1998).
        \4\ The February Filing lowered the rate of reimbursement for 
    mailing each set of initial proxies and annual reports from $.55 to 
    $.50.
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        The extension of the pilot period would give the Commission 
    additional time to consider the ``March Filing,'' \5\ without a lapse 
    in the current rules. In the March Filing, the Exchange proposed a 
    change to the Rules regarding ``householding'' and proposed extending 
    the pilot period through June 30, 2001. Thus, absent an extension of 
    the pilot period, the fees in effect prior to the February Filing would 
    return to effectiveness, creating confusion among NYSE member 
    organizations and issuers. Furthermore, the extension will provide the 
    Exchange's independent auditor with additional time to finish its 
    review of the impact of the pilot fee structure and will provide the 
    Commission with an opportunity to review that Audit Report.\6\
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        \5\ See Securities Exchange Act Release No. 39774 (Mar. 19, 
    1998), 63 FR 14745 (Mar. 26, 1998).
        \6\ As noted in the March Filing, the Exchange committed to 
    undertake an independent audit of the pilot fee structure during the 
    1998 proxy season.
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    2. Statutory Basis
        The Exchange believes the proposed rule change is consistent with 
    Section 6(b)(4) of the Act \7\ in that it provides for the equitable 
    allocation of reasonable dues, fees, and other charges among its 
    members and other persons using its facilities. The Exchange further 
    believes that the proposed rule change satisfies the requirement under 
    Section 6(b)(5) \8\ that an exchange have rules that are designed to 
    prevent fraudulent and manipulative acts and practices; promote just 
    and equitable principles of trade; foster cooperation and coordination 
    with persons engaged in regulating, clearing, settling, processing 
    information with respect to, and facilitating transactions in 
    securities; remove impediments to and perfect the mechanism of a free 
    and open market and a national market system; and, in general, protect 
    investors and the public interest.
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        \7\ 15 U.S.C. 78f(b)(4).
        \8\ 15 U.S.C. 78f(b)(5).
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    B. Self-Regulatory Organization's Statement on Burden on Competition
    
        The Exchange believes 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
    
        The Exchange has not solicited, and does not intend to solicit, 
    comments on the proposed rule change. The Exchange has not received any 
    unsolicited written comments from members or other interested parties.
    
    III. Date of Effectiveness of the Proposed Rule Change and Timing 
    for Commission Action
    
        Because the foregoing rule change: (1) does not significantly 
    affect the protection of investors or the public interest; (2) does not 
    impose any significant burden on competition; and (3) the Exchange 
    provided the Commission with written notice of its intent to file the 
    proposed rule change at least five business days prior to the filing 
    date; the proposed rule change has become effective pursuant to Section 
    19(b)(3)(A) of the Exchange Act \9\ and Rule 19b-4(e)(6) \10\ 
    thereunder.
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        \9\ 15 U.S.C. 78s(b)(3)(A).
        \10\ 17 CFR 240.19b-4(e)(6).
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        A proposed rule change filed under Rule 19b-4(e)(6) normally does 
    not become operative prior to 30 days after the date of filing. 
    However, Rule 19b-4(e)(6)(iii) \11\ permits the Commission to designate 
    such shorter time if such action is consistent with the protection of 
    investors and the public interest. The Exchange has requested that the 
    Commission designate such shorter time
    
    [[Page 42653]]
    
    period so that the proposed rule change may take effect immediately 
    upon its filing. The immediate effectiveness would: (i) make the fee 
    reduction regarding the distribution of each set of initial proxies and 
    annual reports available for the remainder of the 1998 proxy season; 
    (ii) provide the Commission with sufficient time to complete its review 
    of the March Filing, and analyze the Audit Report concerning the pilot 
    fee structure that will be prepared by the Exchange's independent 
    auditor; and (iii) allow the current pilot fee structure to continue 
    uninterrupted.
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        \11\ 17 CFR 240.19b-4(e)(6)(iii).
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        The Commission, consistent with the protection of investors and the 
    public interest, has determined to make the proposed rule change 
    effective immediately upon filing for the following reasons. The 
    proposed rule change would make the fee reduction regarding the 
    distribution of each set of initial proxies and annual reports 
    available for the remainder of the 1998 proxy season. This fee 
    reduction should continue to benefit NYSE issuers and public investors 
    in the form of lower costs and expenses. As the Commission noted in the 
    March Filing, the fee reduction is based upon the Exchange's experience 
    with the reimbursement guidelines and better reflects the actual costs 
    incurred by NYSE member organizations.
        The proposed rule change also extends the expiration date of the 
    pilot period from July 31, 1998, through October 31, 1998. The 
    extension of the pilot will provide the Commission with additional time 
    to complete its review of the March Filing \12\ and the opportunity to 
    further evaluate the proposal. Furthermore, the current pilot period is 
    due to expire before the estimated date on which the Exchange hopes to 
    deliver to the Commission the Audit Report examining the proxy 
    distribution process with respect to securities held in street name.
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        \12\ The Commission received approximately 42 comment letters on 
    the March Filing. As part of its review of the March Filing, the 
    Commission will consider the substance of those comment letters.
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        The Commission also notes that the current pilot period's 
    expiration date falls within the time period when proxy materials 
    traditionally are distributed to shareholders. As a result, NYSE member 
    organizations would potentially be reimbursed at two different rates--
    the rates established by the Initial Filing, and the rates in effect 
    prior to the implementation of the Initial Filing (the default rates)--
    if the expiration date were not extended. The Commission believes it is 
    reasonable that the proposed rule change become immediately effective 
    upon the date of filing, July 29, 1998.
        At any time within 60 days of the filing of the proposed rule 
    change, the Commission may summarily abrogate such rule change if it 
    appears to the Commission that such action is necessary or appropriate 
    in the public interest, for the protection of investors, or otherwise 
    in furtherance of the purposes of the Act.
    
    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, N.W., Washington, D.C. 20549. 
    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 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-98-23 and should be 
    submitted by August 31, 1998.
    
        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).
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    Jonathan G. Katz,
    Secretary.
    [FR Doc. 98-21277 Filed 8-7-98; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
08/10/1998
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
98-21277
Pages:
42652-42653 (2 pages)
Docket Numbers:
Release No. 34-40289, File No. SR-NYSE-98-23
PDF File:
98-21277.pdf