Self-Regulatory Organizations; Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Amendments to Rules 450 (``Restrictions on Giving of Proxies''), 451 (``Transmission of Proxy Material''), 452 (``Giving of Proxies by Member Organizations'') and 465 (``Transmission of Interim Reports and Other Material'')

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33437; File No. SR-NYSE-93-37]

Self-Regulatory Organizations; Filing of Proposed Rule Change by

the New York Stock Exchange, Inc. Relating to Amendments to Rules 450

(``Restrictions on Giving of Proxies''), 451 (``Transmission of Proxy

Material''), 452 (``Giving of Proxies by Member Organizations'') and

465 (``Transmission of Interim Reports and Other Material'')

January 5, 1994.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October

22, 1993, 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 self-regulatory organization. The

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

The NYSE is herewith filing proposed amendments to NYSE Rules 450,

451, 452 and 465 which will allow designated registered investment

advisers to vote proxies and receive proxy and related issuer material

in lieu of beneficial owners. The text of these rules follows:

Italics reflect additions

Proxies

(Rules and Policies Administered by Marketing Division.)

Applicability of proxy rules--Rules 450 to 460 [2450-2460],

inclusive, apply to both listed and unlisted securities, unless the

context otherwise limits application.

The term ``unregistered company'' as used in Rule 456 to 459

[2456-2459] means a company not required to conform to the proxy

rules of the Securities and Exchange Commission in the solicitation

of proxies with respect to its securities.

The term ``member'' as used in connection with Rules 456 to 459

[2456-2459] includes a member, allied member, member firm, member

corporation and employee thereof.

The term ``investment adviser'' as used in Rules 450, 451, 452

and 465 [2450, 2451, 2452, 2465] may include a registered broker-

dealer.

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 [2452], 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 under the

Investment Advisers Act of 1940 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.

Transmission of Proxy Material

Rule 451.(a) Whenever a person soliciting proxies shall furnish

a member organization:

(1) copies of all soliciting material which such person is

sending to registered holders and

(2) satisfactory assurance that he 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 control or to an investment

adviser registered under the Investment Advisers Act of 1940 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 to receive soliciting material in

lieu of the beneficial owner, the material furnished; and

(b) such member organization shall transmit with such material

either:

(1) a request for voting instructions and, as to matters which

may be voted without instructions under Rule 452 [2452], a

statement to the effect that, if such instructions are not received

by the tenth day before the meeting, the proxy may be given at

discretion by the owner of record of the stock; provided, however,

that such statement may be made only when the proxy soliciting

material is transmitted to the beneficial owner of the stock or to

the beneficial owner's designated investment adviser registered

under the Investment Advisers Act of 1940 who exercises investment

discretion pursuant to an advisory contract for such beneficial

owner, at least fifteen days before the meeting. When the proxy

soliciting material is transmitted to the beneficial owner of the

stock or to the beneficial owner's designated investment adviser

registered under the Investment Advisers Act of 1940 twenty-five

days or more before the meeting, the statement accompanying such

material shall be to the effect that the proxy may be given fifteen

days before the meeting at the discretion of the owner of record of

the stock; or

(2) a signed proxy indicating the number of shares held for such

beneficial owner and bearing a symbol identifying the proxy records

of such member organization, and also a letter informing the

beneficial owner or the beneficial owner's designated investment

adviser registered under the Investment Advisers Act of 1940 who

exercises investment discretion pursuant to an advisory contract for

such beneficial owner, of the necessity for completing the proxy

form and forwarding it to the person soliciting proxies in order

that the shares may be represented at the meeting.

This rule shall not apply to beneficial owners outside the

United States.

. . . Supplementary Material:

.10 Annual reports to be transmitted.--The annual report shall

be transmitted to beneficial owners or to beneficial owners'

designated investment advisers registered under the Investment

Advisers Act of 1940 who exercise investment discretion pursuant to

an advisory contract for such beneficial owners under the same

conditions as those applying to proxy soliciting material under Rule

451 even though it is not proxy-soliciting material under the proxy

rules of the Securities and Exchange Commission.

.60 Duty to transmit even when requested not to.--The proxy

material must be sent to a beneficial owner even though such owner

has instructed the member organization not to do so, unless the

beneficial owner has instructed the member organization in writing

to send such material to a designated investment adviser registered

under the Investment Advisers Act of 1940 who exercises investment

discretion pursuant to an advisory contract for such beneficial

owner.

Rule 452 Giving Proxies by Member Organization

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 under the Investment Adviser Act of 1940 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 to receive soliciting material in

lieu of the beneficial owner and solicited voting instructions in

accordance with the provisions of Rule 451 [2451], and which has

not received instructions from the beneficial owner or from such

designated registered investment adviser by the date specified in

the statement accompanying such material, may give or authorize the

giving of a proxy to vote 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.

. . . Supplementary Material:

Giving a Proxy To Vote Stock

.10 When member organization may vote without customer

instructions.--Rule 452, above, provides that a member organization

may give a proxy to vote stock provided that:

(1) It has transmitted proxy soliciting material to the

beneficial owner of stock or to an investment adviser registered

under the Investment Advisers Act of 1940 who exercises investment

discretion pursuant to an advisory contract for the beneficial owner

and has been designated by the beneficial owner to receive such

material in accordance with Rule 451 [2451], and

(2) it has not received voting instructions from the beneficial

owner or from the beneficial owner's designated investment adviser

registered under the Investment Advisers Act of 1940 who exercises

investment discretion pursuant to an advisory contract for such

beneficial owner, by the date specified in the statement

accompanying such material, and

(3) [No change in text]

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 the 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 under the Investment

Advisers Act of 1940 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 self-regulatory organization

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 self-regulatory organization

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 purpose of the proposed rule amendments is to provide

beneficial owners of stock with the ability to have investment advisers

registered under the Investment Advisers Act of 1940 who exercise

investment discretion for their account(s) pursuant to an advisory

contract and who have been designated in writing by the beneficial

owners to receive proxy materials and to vote proxies on behalf of such

beneficial owners. The proposed rule amendments will also allow the

designated registered investment advisers to receive annual reports and

other related material. This would include both member organizations of

the NYSE and other entities registered as investment advisers.

Currently, Exchange rules prohibit a member organization from

voting proxies, on a discretionary basis, on securities held in its

custody unless the securities are beneficially owned by the member

organization, the beneficial owner has failed to provide the member

organization with voting instructions and the subject of the vote is

nonsubstantive, or the member organization is the investment manager

for an ERISA account.

Further, Exchange rules require transmission of proxy and related

issuer materials, as well as proxy voting instructions, to each

beneficial owner of stock held in the member organization's possession

and control. Rule 451.60 explicitly requires that proxy material be

sent to a beneficial owner even though such owner has instructed the

member organization not to do so.

A number of member organizations and the Investment Adviser

Committee of the Securities Industry Association (``SIA'') represented

to the Exchange that many of their customers who have their accounts

managed by investment advisers do not want to receive proxy related

information and annual reports or vote the proxy. These member

organizations have indicated that their customers would rather have the

professionals, whom they pay to manage their accounts, represent their

interests relative to the companies in which they own stock because the

professionals are better qualified.

Also, banks, investment advisers and broker/dealers who are not

subject to Exchange rules may receive proxy material and vote proxies

on behalf of their customers in accordance with fiduciary obligations

set forth by contractual arrangement.

The amendments to Exchange Rules 450, 451, 452 and 465 will permit

investment advisers who exercise investment discretion pursuant to an

advisory contract and who have been designated in writing by the

beneficial owner, to receive proxy soliciting materials, annual reports

and other related material and to vote proxies in lieu of the

beneficial owners of securities. The term investment adviser is defiend

to include a registered broker-dealer (e.g., a member organization).

The proposed rule change will not diminish a beneficial owner's

rights to receive proxy related materials and to vote proxies. Rather,

it will give beneficial owners the option to designate their investment

adviser as the person to receive such materials and to vote proxies. In

addition, it will enable member organizations to comply with customer

desires concerning transmission of proxy materials and voting proxies.

2. Statutory Basis

The proposed rule change is consistent with Section 6(b)(5) of the

Securities Exchange Act of 1934 which requires that the rules of the

Exchange be designed to prevent fraudulent and manipulative acts, 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 the investing public, in that it establishes standards for

investment advisers to receive proxy and related material and to vote

proxies, thereby meeting customer needs while providing appropriate

regulatory safeguards.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will

result in 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, and does not intend to solicit,

comments regarding this 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

Within 35 days of the publication of this notice in the Federal

Register or within such other 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 the 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. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, NW., Washington, DC 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 at the

Commission's Public Reference Section, 450 Fifth Street, NW.,

Washington, DC 20549. 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-93-37 and should be

submitted by February 2, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-687 Filed 1-11-94; 8:45 am]

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