Self-Regulatory Organizations; New York Stock Exchange, Inc.: Order Approving Proposed Rule Change and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 1 to Proposed Rule Change Relating to the Reimbursement of Member Organizations for Costs Incurred in the Transmission of Proxy and Other Shareholder Communication Material
Federal RegisterMar 24, 1999
Ask Donna
What actually matters in this document.
Text
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41177; File No. SR-NYSE-98-05]
Self-Regulatory Organizations; New York Stock Exchange, Inc.:
Order Approving Proposed Rule Change and Notice of Filing and Order
Granting Accelerated Approval to Amendment No. 1 to Proposed Rule
Change Relating to the Reimbursement of Member Organizations for Costs
Incurred in the Transmission of Proxy and Other Shareholder
Communication Material
March 16, 1999.
I. Introduction
On February 6, 1998, the New York Stock Exchange, Inc.
(``Exchange'' or ``NYSE'') submitted to 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 extend through June 30, 2001,
the effectiveness of the pilot fees (``Pilot Fee Structure'') set forth
in Exchange Rule 451, ``Transmission of Proxy Material,'' and Exchange
Rule 465, ``Transmission of Interim Reports and Other Material''
(collectively the ``Rules'').\3\ 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.\4\ The proposed rule change also
[[Page 14295]]
sought to revise the Rules to allow NYSE member firms to reduce
mailings to beneficial owners through the ``householding'' of
materials, provided that implied consent (i.e., beneficial owner does
not object after receiving 60 days written notice of the proposed
householding) is obtained from the beneficial owners.\5\ This portion
of the proposal has been withdrawn by the Exchange.\6\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The ``Pilot Fee Structure'' originally was approved by the
Commission on March 14, 1997. See Securities Exchange Act Release
No. 38406 (Mar. 14, 1997), 62 FR 13922 (Mar. 24, 1997) (``Original
Pilot Approval Order''). The Pilot Fee Structure subsequently was
extended several times and modified once. See infra notes 14 and 15.
The Exchange amended its proposed rule change to extend the Pilot
Fee Structure through August 31, 1999, rather than June 30, 2001, as
originally proposed. See infra note 8.
\4\ The ownership of shares in street name means that a
shareholder, or ``beneficial owner,'' has purchased shares through a
broker-dealer or bank, also known as a ``nominee.'' In contrast to
direct ownership, where the shares are directly registered in the
name of the shareholder, shares held in street name are registered
in the name of the nominee, or in the nominee name of a depository
such as the Depository Trust Company. Research provided by the
Exchange indicates that approximately 70 to 80 percent of all
outstanding shares are held in street name and that the shares held
in street name are dispersed among approximately 800 nominees.
\5\ ``Householding'' is used to eliminate multiple mailings of
proxy and other materials to beneficial owners residing at the same
address. For example, if a husband and wife living together both
separately own shares in the same NYSE issuer, householding could be
used to reduce from two to one the number of proxy packages sent to
the married couple.
\6\ See infra note 8.
---------------------------------------------------------------------------
The proposed rule change was published for comment in the Federal
Register on March 26, 1998.\7\ The Commission received 47 comment
letters on the proposal. On March 9, 1999, the Exchange filed with the
Commission Amendment No. 1 to the proposed rule change.\8\ This order
approves, through August 31, 1999, the proposed rule change, as
amended, and Amendment No. 1 on an accelerated basis.
---------------------------------------------------------------------------
\7\ Securities Exchange Act Release No. 39774 (Mar. 19, 1998),
63 FR 14745 (Mar. 26, 1998).
\8\ See Letter from James E. Buck, Senior Vice President and
Secretary, Exchange, to Sharon Lawson, Senior Special Counsel,
Division of Market Regulation, Commission, dated March 8, 1999
(``Amendment No. 1''). Amendment No. 1 to the proposed rule change
proposes two revisions: (1) modifying the proposed term of the Pilot
Fee Stucture from June 30, 2001, to August 31, 1999; and (2)
withdrawing the householding through implied consent provision.
Amendment No. 1 also clarifies that the proposed rule change, as
revised by Amendment No. 1, proposes to extend through August 31,
1999, the Pilot Fee Structure, as amended by the companion filing
(see infra note 14 and related text for a description of the
companion filing).
---------------------------------------------------------------------------
II. Background
NYSE member organizations that hold securities for beneficial
owners in street name solicit proxies from, and deliver proxy and
issuer communication materials to, beneficial owners on behalf of
owners of NYSE-listed company shares. For this service, NYSE issuers
reimburse NYSE member organizations for reasonable out-of-pocket,
clerical, postage, and other expenses incurred in performing such
activities. The Rules provide specific fee guidelines for the
reimbursement of these expenses.
Over the last thirty years, NYSE member firms increasingly have
outsourced their proxy delivery obligations to proxy distribution
intermediaries. The primary reason underlying this shift is that member
firms believe proxy distribution is not a core broker-dealer business
and that capital is better used elsewhere. By the early 1990's, two
proxy distribution firms distributed most of the proxies to street name
accounts on behalf of NYSE member firms: Automatic Data Processing
(``ADP'') \9\ and the Independent Election Corporation of America
(``IECA''). In February 1992, ADP acquired IECA and became the dominant
proxy distribution intermediary. By 1993, ADP reportedly distributed
seventy percent of all proxies sent to beneficial owners holding shares
in street name. Because three of the four remaining major self-
distributing broker-dealers recently contracted with ADP to discharge
their proxy delivery and voting obligations,\10\ that figure now stands
close to one hundred percent.\11\
---------------------------------------------------------------------------
\9\ The name of the actual business unit that serves as a proxy
distribution intermediary is ADP Beneficial Shareowner Communication
(``ADP BCS''). ADP BCS is a service line of ADP Investor
Communication Services, a division of ADP Financial Information
Services, Inc., which in turn is an indirect wholly owned subsidiary
of Automatic Data Processing, Inc. For clarity and ease of
reference, the acronym ``ADP'' will be used in place of ``ADP BCS.''
\10\ As recently as the 1997 proxy season, four major broker-
dealers directly distributed proxy materials to their customers
holding shares in street name: Merrill Lynch, Paine Webber,
Prudential Securities, and the Dean Witter arm of Morgan Stanley
Dean Witter. Currently, only Dean Witter directly distributes proxy
materials to street name accounts.
\11\ For a more detailed description of the background and
history of the proxy distribution industry, proxy fees, as well as
the events leading to the Exchange's proposal to revise the Rules,
see Original Pilot Approval Order supra note 3.
---------------------------------------------------------------------------
III. Description of the Proposal
A. The Pilot Fee Structure
On March 14, 1997, the Commission approved an Exchange proposal
that significantly revised the reimbursement guidelines set forth in
the Rules and established the Pilot Fee Structure.\12\ The Pilot Fee
Structure was designed to address many of the functional and
technological changes that had occurred in the proxy distribution
process since the Rules were last revised in 1986. Although the Pilot
Fee Structure reduced certain fees, it also raised one fee, and in some
instances created new fees. The Pilot Fee Structure initially was set
to expire on May 13, 1998.
---------------------------------------------------------------------------
\12\ See Original Pilot Approval Order supra note 3. Under the
Pilot Fee Structure, NYSE member organizations also are entitled to
receive reimbursement for: (i) actual postage costs (including
return postage at the lowest available rate); (ii) the actual cost
of envelopes (provided they are not furnished by the person
soliciting proxies); and (iii) any actual communication expenses
(excluding overhead) incurred in receiving voting returns either
telephonically or electronically. Prior to the Pilot Fee Structure,
NYSE member firms were entitled to reimbursement for ``all out-of-
pocket expenses, including reasonable clerical expenses, incurred in
connection with proxy solicitations pursuant to Rule 451 and in
mailing interim reports or other material pursuant to Rule 465.''
See Exchange Rule 451, Supplementary Material .90, ``Schedule of
Approved Charges by Member Organizations in Connection with Proxy
Solicitations'' and Exchange Rule 465, Supplementary Material .20,
``Mailing Charges by Member Organizations.''
---------------------------------------------------------------------------
Under the fee structure in effect prior to March 14, 1997, NYSE
member firms were permitted to charge NYSE issuers a basic processing
fee of $0.60-$0.70 for each proxy package (i.e., proxy statement, form
of proxy, and annual report) delivered to a beneficial owner.\13\ The
Pilot Fee Structure reduced this fee to $0.55 per proxy package. In the
subsequent companion filing to this proposed rule change, the Exchange
amended the Pilot Fee Structure to further reduce the basic proxy
processing fee to $0.50.\14\ The companion filing also extended the
effectiveness of the Pilot Fee Structure from May 13, 1998, through
July 31, 1998. Three additional Exchange rule filings extended the
effectiveness of the Pilot Fee Structure, as amended by the companion
filing, to March 15, 1999.\15\
---------------------------------------------------------------------------
\13\ The $0.60 fee applied to proxy packages for meetings that
did not include a proposal that required beneficial owner
instructions; the $0.70 fee applied to proxy packages for meetings
that included a proposal that required beneficial owner instructions
(e.g., proxy fights).
\14\ See Securities Exchange Act Release No. 39672 (Feb. 17,
1998), 63 FR 9034 (Feb. 23, 1998).
\15\ See Securities Exchange Act Release Nos. 40289 (July 31,
1998), 63 FR 42652 (Aug. 10, 1998) (extended the Pilot Fee Structure
from July 31, 1998, through October 31, 1998); 40621 (Oct. 30,
1998), 63 FR 60036 (Nov. 6, 1998) (extended the Pilot Fee Structure
from October 31, 1998, through February 12, 1999); and 41044 (Feb.
11, 1999), 64 FR 8422 (Feb. 19, 1999) (extended the Pilot Fee
Structure from February 12, 1999, through March 15, 1999).
---------------------------------------------------------------------------
The Pilot Fee Structure also reduced from $0.20 to $0.15 the fee
for annual reports that are mailed separately from the proxy materials
pursuant to the instruction of the person soliciting proxies. The Pilot
Fee Structure likewise reduced from $0.20 to $0.15 the fee for interim
reports, annual reports if mailed separately, post meeting reports, or
other material. The historic fee structure's $0.60 fee for mailing
follow-up proxy materials only to beneficial owners who had not voted
was eliminated; however, the fee for mailing follow-up proxy materials
to all beneficial owners remained $0.40. The fee for proxy fights
(i.e., an opposition proxy statement has been furnished to security
holders) was raised under the
[[Page 14296]]
Pilot Fee Structure from $0.70 to $1.00 for each set of proxy materials
mailed.
The Pilot Fee Structure implemented two new fees. First, a paper
elimination incentive fee of $0.50 was instituted for each proxy
package ($0.10 for each interim report) not mailed because of either
householding or electronic delivery. The paper elimination fee was
intended to serve as an incentive to use technologies, such as
electronic mail, to reduce the number of paper mailings sent to
beneficial owners. The paper elimination incentive fee could be
assessed in addition to the basic processing fee. Second, the Pilot Fee
Structure implemented a nominee coordination fee of $20 per nominee
(i.e., each NYSE issuer must pay $20 for each nominee holding its
shares in street name). The nominee coordination fee was designed to
compensate a proxy distribution intermediary for coordinating a series
of functions across multiple nominees. The functions included are:
consolidation of search responses, delivery of materials to nominees,
use of bulk mail, and tabulation and dissemination of preliminary
voting information.\16\
---------------------------------------------------------------------------
\16\ See Original Pilot Approval Order supra note 3 for a more
detailed discussion of the nominee coordination fee, the
coordination services encompassed in that fee, and the supporting
rationale provided by the Exchange.
---------------------------------------------------------------------------
Finally, the Pilot Fee Structure permitted the householding of
proxy and other materials to beneficial owners provided that actual
written consent was obtained from the beneficial owner to whom the
materials are not sent.\17\ This provision allows member firms to
household annual reports, interim reports, proxy statements, and other
material.\18\
---------------------------------------------------------------------------
\17\ See Exchange Rule 451, Supplementary Material .95, ``
`Householding' of Reports'' and Exchange Rule 465, Supplementary
Material .25, `` `Householding' of Reports.'' For a description of
householding, see supra note 5.
\18\ But see 17 CFR 240.14a-3(e) and 17 CFR 240.14c-7(a).
---------------------------------------------------------------------------
B. The Proposal and Amendment No. 1
In its original form, the Exchange's proposed rule change sought to
extend the effectiveness of the Pilot Fee Structure through June 30,
2001. In Amendment No. 1, the Exchange requested that the Pilot Fee
Structure end on August 31, 1999. The original version of the proposal
also sought to permit the householding of proxy materials and other
issuer communications through implied consent. Specifically, the
Exchange had sought to permit householding if a beneficial owner did
not object after receiving 60 days written notice of the proposed
householding. Amendment No. 1 withdrew the householding through implied
consent provision from the Exchange's proposal.
IV. Summary of Comments
The Commission received 47 comment letters regarding the Exchange's
proposed rule change.\19\ A substantial majority of the commenters, 41
of the 47, supported the proposal. Four commenters did not support the
proposal,\20\ and one commenter
[[Page 14297]]
specifically objected to the nominee coordination fee.\21\ One
additional commenter, who was retained by ADP to provide an economic
analysis of proxy processing, submitted a comment letter that examined
price trends, market share, natural monopoly status, predatory pricing,
regulatory best practices, and peak-load pricing.\22\
---------------------------------------------------------------------------
\19\ All of the comment letters are part of File No. SR-NYSE-98-
05, which is available for public review and inspection in the
Commission's Public Reference Section. The comment letters were
submitted by twenty-six issuers, nine broker-dealers, six trade
associations, two institutional investors, one bank, one potential
proxy service provider, one economic analysis company retained by
ADP (Analysis Group/Economics), and the ADP Steering Committee. The
comment letters are listed below in the order they were received by
the Commission's Office of the Secretary. See Letters from: Timothy
E. Hall, Corporate Controller, Flexsteel Industries, Inc., dated
February 24, 1998 (``Flexsteel Letter''); Judy Foshay, Director,
Shareholder Services, Cirrus Logic, dated April 9, 1998 (``Cirrus
Letter''); Sari L. Macrie, Vice President, Investor Relations,
Ameritech, dated April 8, 1998 (``Ameritech Letter''); Janet M.
Turner, Vice President, Investor Relations, PLM International, Inc.,
dated April 14, 1998 (``PLM Letter''); Sophia G. Vergas, Assistant
Secretary, The Liberty Corporation, dated April 14, 1998 (``Liberty
Letter''); Anne C. Cumberledge, Manager, Investor Relations,
Meridian Industrial Trust, dated April 10, 1998 (``Meridian
Letter''); Rhoda Anderson, Director, Corporate Secretary's
Department, Lucent Technologies, and Chairperson, ADP Steering
Committee (on behalf of: Linda Selbach, Barclays Global Investors;
Janice Hester Amey, CALSTRS; Ray DiSanza, Charles Schwab & Co.;
Paula Gurley, Colorado Public Employees' Retirement Association;
Steven Berk, J.P. Morgan Services; Nancy Obringer, Mellon Bank;
Gordon Garney, Mobil Corporation; and Rafael Dieppa, Oppenheimer &
Co.), dated April 14, 1998 (``ADP Steering Committee Letter'');
Jerome J. Clair, Senior Vice President, Smith Barney Inc., dated
April 15, 1998 (``Smith Barney Letter''); Virgil L. Clubbs,
Associate Vice President, A.G. Edwards & Sons, Inc., dated April 15,
1998 (``A.G. Edwards Letter''); John E. Nolan, Senior Vice
President, Raymond James & Associates, Inc., dated April 15, 1998
(``Raymond James Letter''); Peter Quick, President, Quick & Reilly,
dated April 13, 1998 (``Quick & Reilly Letter''); John B. Meagher,
Consultant to Corn Products International, Inc., dated April 15,
1998 (``Corn Products Letter''); George Kim Johnson, General
Counsel, and Paula A. Gurley, Manager, Shareholder Responsibility
Division, Public Employees' Retirement Association of Colorado,
dated April 13, 1998 (``PERA Letter''); D. Stuart Bowers, Senior
Vice President, Legg Mason Wood Walker, Incorporated, dated April
15, 1998 (``Legg Mason Letter''); Roger P. Smith, Secretary, 3M,
dated April 16, 1998 (``3M Letter''); Janice Hester Amey, Corporate
Affairs Advisor, State of California State Teachers' Retirement
System, dated April 15, 1998 (``CALSTRS Letter''); Andrew D. Hendy,
Senior Vice President, General Counsel, and Secretary, Colgate-
Palmolive Company, dated April 15, 1998 (``Colgate-Palmolive
Letter''); John W. Hetherington, Vice President, Secretary, and
Assistant General Counsel, Westvaco, dated April 13, 1998
(``Westvaco Letter''); Robert M. Williams, Assistant Secretary,
Carolina Power and Light Company, dated April 15, 1998 (``CP&L
Letter''); Gordon G. Garney, Senior Assistant Secretary, Mobil
Corporation, dated April 16, 1998 (``Mobil Letter''); Stacy A.
Matseas, Manager, Stock Administration, QUALCOMM, Incorporated,
dated April 15, 1998 (``QUALCOMM Letter''); Gary Ball, Manager,
Investor Relations, Fluke Corporation, dated April 15, 1998 (``Fluke
Letter''); Sarah A.B. Teslik, Executive Director, Council of
Institutional Investors, dated April 20, 1998, with attached letter
to Brian Lane dated February 9, 1998 (``CII Letter''); Glynn E.
Williams, Jr., Vice President, Finance, Goodrich Petroleum
Corporation, dated April 15, 1998 (``Goodrich Letter''); Walter
Flicker, Secretary, ResMed Corp., dated April 16, 1998 (``ResMed
Letter''); Mike Tate, Controller, Galileo Technology, dated April
14, 1998 (``Galileo Letter''); David Kerner, Treasurer, Standard
Motor Products, Inc., dated April 13, 1998 (``Standard Motor
Letter''); Laurin L. Laderoute, Jr., Vice President, Assistant
General Counsel, and Secretary, Olsten Corporation, dated April 23,
1998 (``Olsten Letter''); Ron Miele, Vice President, Global
Operations, Goldman, Sachs & Co., dated April 20, 1998 (``Goldman
Letter''); Brian T. Borders, President, Association of Publicly
Traded Companies, dated April 24, 1998 (``APTC Letter''); Robert S.
Harkey, Senior Vice President, General Counsel, and Secretary, Delta
Air Lines, Inc., dated April 16, 1998 (``Delta Letter''); George M.
Holston, Assistant General Manager and Assistant Secretary, Texaco
Inc., dated April 14, 1998 (``Texaco Letter''); William A. Bowen,
Vice President, Finance, AAON, Inc., dated April 16, 1998 (``AAON
Letter''); Jennifer LaGrow, Director, Shareholder Services, The Walt
Disney Company, dated April 28, 1998 (``Disney Letter''); Donna
Murphy, Investor Relations Coordinator, UniSource Energy
Corporation, dated April 16, 1998, (``UniSource Letter''); Joan
DiBlasi, President, Corporate Transfer Agents Association, Inc.,
dated May 7, 1998 (``CTA Letter''); David W. Smith, President,
American Society of Corporate Secretaries, dated May 11, 1998
(``ASCS Letter''); Susan E. Shaw, Secretary, The Coca-Cola Company,
dated May 1, 1998 (``Coca-Cola Letter''); Thomas L. Montrone,
President, The Securities Transfer Association, Inc., dated May 18,
1998 (``STA Letter''); Lindsay Klombies, Reorganization Manager,
Norwest Bank, dated May 12, 1998 (``Norwest Letter''); Susan C.
Hafleigh, Assistant Treasurer, Oracle Corporation, dated May 14,
1998 (``Oracle Letter''); Anne O. Faulk, received June 15, 1998
(``Faulk Letter''); Robert Kaplan, Senior Vice President,
Administrative Group Office, Prudential Securities Incorporated,
dated June 22, 1998 (``Prudential Letter''); The Corporate Actions
Division, Inc., Securities Industry Association, dated July 7, 1998
(``SIA Letter''); Doug Harris, Incumbent Secretary, and Polk
Laffoon, Incoming Secretary, Knight Ridder, dated July 23, 1998
(``Knight Letter''); Stephen P. Norman, Secretary, American Express
Company, dated August 31, 1998 (``American Express Letter''); and
Robert Comment, Analysis Group/Economics, dated October 27, 1998
(``Analysis Group Letter'').
Commission staff also interviewed representatives from fourteen
proxy industry participants. See. Memorandums to File No. SR-NYSE-
98-05 regarding Commission staff meetings or conversations with:
First Chicago Trust Co., dated August 13, 1998; The Depository Trust
Company, dated August 11, 1998; Dean Witter Reynolds, Inc., dated
August 11, 1998; Georgeson & Company, Inc., dated August 11, 1998;
JP Morgan, Inc., dated August 11, 1998; Carl T. Hagberg &
Associates, dated August 11, 1998; Salomon Brothers, Inc./Smith
Barney, Inc., dated August 11, 1998; Bank of New York, dated August
11, 1998; Prudential Securities, dated August 11, 1998; Merrill
Lynch, Pierce, Fenner & Smith, Inc., dated August 11, 1998; CT
Corporation System, dated August 13, 1998; Investor Responsibility
Research Center, dated August 11, 1998; Corporate Investor
Communications, dated August 13, 1998; and Paine Webber, Inc., dated
August 11, 1998.
\20\ See CII Letter, CTA Letter, STA Letter, and Faulk Letter,
supra note 19. Several of these commenters believed that a lack of
competition in the proxy distribution industry has resulted in
higher than necessary proxy fees and that the regulatory structure
governing the delivery of proxy materials to street name
shareholders should be revised to promote more competition.
\21\ See Flexteel Letter supra note 19.
\22\ See Analysis Group Letter supra note 19.
---------------------------------------------------------------------------
Thirty-six of the 41 commenters supporting the proposal believed an
extension of the Pilot Fee Structure through June 30, 2001, was
appropriate,\23\ while five of those commenters believed that another
review of the Pilot Fee Structure was necessary at the conclusion of
the extended pilot period.\24\ Several other commenters believed that a
shorter pilot period would be more appropriate.\25\ The commenter
retained by ADP asserted that ``the `ongoing pilot' approach to
regulating fees is an invitation to micro-management, and as such is
flatly inconsistent with regulatory best practices.'' \26\
---------------------------------------------------------------------------
\23\ See Cirrus Letter, Ameritech Letter, PLM Letter, Liberty
Letter, Meridian Letter, ADP Steering Committee Letter, Smith Barney
Letter, A.G. Edwards Letter, Raymond James Letter, Quick & Reilly
Letter, Corn Products Letter, PERA Letter, Legg Mason Letter, 3M
Letter, CALSTRS Letter, Colgate-Palmolive Letter, Westvaco Letter,
CP&L Letter, QUALCOMM Letter, Fluke Letter, Goodrich Letter, ResMed
Letter, Galileo Letter, Standard Motor Letter, Olsten Letter,
Goldman Letter, APTC Letter, Delta Letter, Texaco Letter, AAON
Letter, UniSource Letter, ASCS Letter, Norwest Letter, Oracle
Letter, SIA Letter, and American Express Letter, supra note 19.
\24\ See Cirrus Letter, PLM Letter, CP&L Letter, Fluke Letter,
and Standard Motor Letter, supra note 19.
\25\ The commenter who did not support extension of the Pilot
Fee Structure through June 30, 2001, generally did, however, support
extending the pilot for a shorter period of either one or two years.
See Mobil Letter (one or two years), CII Letter (until July 31,
1999). CTA Letter (no more than two years), supra Note 19.
\26\ See Analysis Group Letter, supra note 19.
---------------------------------------------------------------------------
In the published notice of the proposed rule change, the Commission
solicited comment on the itemized fees prescribed under the Pilot Fee
Structure. In particular, the Commission sought comment on the nominee
coordination fee and its impact on issuers, the paper elimination
incentive fee, certain fees relating to electronic (e.g., Internet)
voting and delivery of proxy materials, as well as the length of the
proposed extension.\27\
---------------------------------------------------------------------------
\27\ The Commission sought comment on these questions in
connection with its independent determination whether the Pilot Fee
Structure: (1) provides for the equitable allocation of reasonable
fees among NYSE-listed companies and NYSE member firms; (2) conforms
with Sections 6(b)(5) and 6(b)(8) of the Act by not unfairly
discriminating among issuers and imposing a burden on competition
that is not necessary under the Act; and (3) imposes fees that are
``reasonable'' within the meaning of Rules 14a-13, 14b-1, and 14b-2
under Sections 14(a) and 14(b) of the Act (Rules 14a-13, 14b-1, and
14b-2 Act collectively provide that nominees are entitled to
reimbursement for the ``reasonable expenses'' incurred in the
delivery of proxy materials to beneficial owners.).
---------------------------------------------------------------------------
Most commenters did not discuss the itemized fees that ADP charges
issuers for electronic proxy delivery and voting services, although 20
commenters stated that they expect that technological developments in
electronic delivery and voting will eventually result in cost savings
to issuers and therefore should warrant a reevaluation of the
appropriate level of the fees in the future.\28\ Several commenters
specifically stated that the reimbursement fee assessed in connection
with electronic voting was appropriate.\29\ In contrast, one commenter
believed that the basic proxy processing fee for electronic delivery
was not appropriate and stated that, according to ADP, ``votes returned
by mail cost companies $0.34 per return while Internet votes cost $0.03
per return,'' thus suggesting that ``proxy materials delivered by
Internet should cost intermediaries substantially less than materials
delivered by mail.'' \30\
---------------------------------------------------------------------------
\28\ See Cirrus Letter, PLM Letter, Liberty Letter, ADP Steering
Committee Letter, Corn Products Letter, 3M Letter, CP&L Letter,
QUALCOMM Letter, Fluke Letter, Goodrich Letter, ResMed Letter,
Galileo Letter, Standard Motor Letter, Olsten Letter, Goldman
Letter, Texaco Letter, AAON Letter, Disney Letter, UniSource Letter,
ASCS Letter, and Oracle Letter, supra note 19. One commenter
questioned the need for the nominee coordination fee and the paper
elimination incentive fee at a time when technology is increasingly
being used by issuers and shareholders. See Faulk Letter supra note
19.
\29\ See Ameritech Letter, ADP Steering Committee Letter, Smith
Barney Letter (stating that the basic proxy processing fee
``represents the multiple steps required in the preparation of the
forthcoming proxy record date, the identification of the clients on
record date and the vote tabulation. These processes are required
regardless whether the distribution is by mail or the Internet.''),
A.G. Edwards Letter, Legg Mason Letter, and SIA Letter, supra note
19.
\30\ See CII letter, supra note 19. Separately, several
commenters believed that the processing fee relating to the mailing
of materials in paper form was appropriate. See A.G. Edwards Letter,
Raymond James Letter, CP&L Letter, QUALCOMM Letter, ResMed Letter,
Goldman Letter, Delta Letter, Texaco Letter, and Oracle Letter,
supra note 19.
---------------------------------------------------------------------------
Although the majority of commenters were silent regarding the
appropriateness of the paper elimination incentive fee, 14 commenters
believed the incentive fee was appropriate.\31\ One commenter noted
that although it ``seems reasonable to continue some incentive
appropriate to encourage ongoing efforts to make the substantial
improvements yet possible,'' a reduction in the paper elimination
incentive fee should be possible now that ADP is offering a system
approach to electronic processing.\32\ One commenter believed that the
incentive fee was inappropriate and stated that the fee was too high in
relation to the basic processing fee and the cost savings realized by
issuers that household or electronically distribute proxy
materials.\33\
---------------------------------------------------------------------------
\31\ One commenter noted that ``[o]nce an automated system is
put in place, it must be maintained, at the same time ADP must
continue to operate and maintain its normal mailing/vote recording
process and integrate both for the process to work.'' See Prudential
Letter, supra note 19. See also, Cirrus Letter, ADP Steering
Committee Letter, Smith Barney Letter, A.G. Edwards Letter, Raymond
James Letter, 3M Letter, CP&L Letter, QUALCOMM Letter, Galileo
Letter, Standard Motor Letter, Oracle Letter, SIA Letter, and
American Express Letter, supra note 19.
\32\ See 3M Letter, supra note 19.
\33\ See CII Letter, supra note 19.
---------------------------------------------------------------------------
Most commenters did not specifically mention the nominee
coordination fee. One commenter, however, complained that although its
costs for proxy distribution increased significantly over the previous
year (104%) because of the nominee coordination fee, the services
provided by the proxy distribution intermediary did not change from the
previous year.\34\ This commenter concluded that the nominee
coordination fee ``appears to be unreasonable.'' Four commenters, none
of whom are small issuers, believed that small issuers with a diffuse
shareholder base should realize the same benefits from the nominee
coordination fee as large issuers whose securities are widely owned but
more concentrated in the accounts of nominees.\35\ Four other
commenters, who considered themselves small issuers, did not
specifically address the nominee coordination fee issue but stated that
they benefit from the application of
[[Page 14298]]
technology by ADP.\36\ Finally, one commenter expressed concern that
there was no provision for phasing out the nominee coordination fee
once the technology was in place for which it was established.\37\
---------------------------------------------------------------------------
\34\ Flexsteel industries (``Flexsteel''), a small issuer listed
on the Nasdaq Stock Market, believed that its 1997 proxy costs
greatly increased because of the nominee coordination fee but that
the higher fee did not reflect any change in service. Flexsteel
noted that it had ``1,920 and 1,646 shareholders of common stock at
June 30, 1997 and 1996 respectively.'' Flexsteel's proxy
distribution costs, however, ``increased from $2,168.94 in 1996 to
$4,433.16 in 1997.'' This difference was primarily attributable to
the nominee coordination fee of $2,200 charged to Flexsteel. See
Flexsteel Letter, supra note 19.
\35\ One commenter noted that ``[a]s a relatively large
issuer,'' it could not ``address this question. However, savings in
the initiatives for electronic processing should exist for everyone,
the relativity of benefits amongst issuers seeming a secondary
matter.'' See 3M Letter, supra note 19. See also, QUALCOMM Letter,
Goldman Letter, and Oracle Letter, supra note 19.
\36\ See PLM Letter, Quick & Reilly Letter, Goodrich Letter, and
Galileo Letter, supra note 19.
\37\ See CTA Letter supra note 19. In addition, this commenter
stated that concrete guidelines need to be developed to justify the
continuation of the nominee coordination fee.
---------------------------------------------------------------------------
Without commenting on the impact that the nominee coordination fee
has on small issuers, four commenters specifically supported the
nominee coordination fee.\38\ Two other commenters believed that the
nominee coordination fee currently appears reasonable, but that the
Commission should monitor the appropriateness of the fee in the
future.\39\ In addition, three commenters suggested that because fees
are ``shared'' between ADP and some broker-dealers, the fees could be
reduced.\40\ Specifically, one commenter questioned whether revenue
sharing or a rebate system creates the need for extra revenue through
additional fees, such as the nominee coordination fee. The commenter
stated that ``[c]learly[,] if rebates are being given, then there is
still room in the system to reduce the fees to issuers. Reasonable
expense for reimbursement by issuers should not include money to
subsidize any revenue sharing or a rebate system since that only serves
to cement the intermediary's relationship with their clients which
reduces competition.'' \41\
---------------------------------------------------------------------------
\38\ See A. G. Edwards Letter, Raymond James Letter, ResMed
Letter, and Delta Letter, supra note 19.
\39\ See CP&L Letter and Knight Letter, supra note 19.
\40\ See CII Letter, Mobil Letter, and STA Letter, supra note
19. The commenter retained by ADP noted, however, that ADP's single
billing service, in which ADP bills issuers on a consolidated basis
on behalf of all nominees, necessitated an ancillary system of
sharing revenue with nominees in order to reimburse them for the in-
house costs they still incur after subcontracting to ADP. ``Single
billing [, however,] has the unintended consequence of placing
squarely on ADP the locus of concern over whether nominees are
compensated fairly for their in-house costs.'' See Analysis Group
Letter, supra note 19.
\41\ See Mobil Letter, supra note 19.
---------------------------------------------------------------------------
Finally, several commenters indicated their support for the
Exchange's implied consent householding proposal.\42\ Three commenters
suggested that the regulatory framework currently governing the
delivery of proxy materials to beneficial owners should be revised to
permit greater competition.\43\ In addition, one commenter suggested
that the Pilot Fee Structure should be revised to increase the economic
rationality of the fee structure and to better reflect marginal
costs.\44\
---------------------------------------------------------------------------
\42\ See Smith Barney Letter, Raymond James Letter, Corn
Products Letter, Legg Mason Letter, 3M Letter, Mobil Letter, Olsten
Letter, APTC Letter, Texaco Letter, CTA Letter, ASCS Letter, Coca-
Cola Letter, and SIA Letter, supra note 19.
\43\ See CTA Letter, STA Letter, and Faulk Letter, supra note
19. One of these commenters observed that under the current
regulatory framework, ``issuers are precluded from selecting other
agents for the distribution of annual meeting materials and
tabulation of proxies for NOBOs [non-objecting beneficial owners].''
See STA Letter, Supra note 19. A potential competitor to ADP
believed that competition in the delivery of corporate communication
materials to beneficial owners should be encouraged. Specifically,
``ownership data for NOBOs should be made available to any
participant in the shareholder distribution business. Additionally,
ownership information on OBOs [objecting beneficial owners] should
also be available to any entity who can assure the objecting owner
of a firewall between it and the corporate issuer.'' See Faulk
Letter, supra note 19.
\44\ Specifically, the commenter retained by ADP believed that
the current system of uniform pricing ignores the fact that costs
are higher due to the seasonality in annual meetings. This commenter
believed that a non-uniform, peak-load pricing schedule should be
introduced to charge peak users for the full cost of the extra
capacity needed to accommodate the peak load. See Analysis Group
Letter, supra note 19.
---------------------------------------------------------------------------
V. Discussion
For the reasons discussed below, the Commission finds that the
proposal to extend the effectiveness of the Pilot Fee Structure is
consistent with the requirements of the Act and the rules and
regulations under the Act applicable to a national securities exchange,
and, in particular, with the requirements of Section 6(b).\45\ Section
6(b)(4) requires that exchange rules provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using the facilities of an
exchange.\46\ Section 6(b)(5) requires, among other things, that the
rules of an exchange promote just and equitable principles of trade and
that they are not designed to permit unfair discrimination between
issuers, brokers, or dealers.\47\ Section 6(b)(8) prohibits any
exchange rule from imposing any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.\48\
For the reasons discussed in more detail below, the Commission believes
the proposal to extend the Pilot Fee Structure through August 31, 1999,
meets the requirements of the Act.\49\
---------------------------------------------------------------------------
\45\ 15 U.S.C. 78f(b).
\46\ 15 U.S.C. 78f(b)(4).
\47\ 15 U.S.C. 78f(b)(5).
\48\ 15 U.S.C. 78f(b)(8).
\49\ In approving this proposed rule change, the Commission has
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
The Commission, along with the Exchange, has carefully monitored
the Pilot Fee Structure since its adoption on March 14, 1997. The
Commission's Original Pilot Approval Order specifically stated that the
Commission's preliminary determination to approve the Pilot Fee
Structure would be reevaluated in light of the results of the pilot
period and the Exchange's independent audit report. Following
publication of the notice of the Exchange's proposed rule change in
March 1998, the Commission conducted a thorough review of the Pilot Fee
Structure and its impact on NYSE issuers and member firms. In
particular, the Commission staff interviewed numerous proxy industry
participants to gather information and views on the current proxy
system and the Pilot Fee Structure.\50\ These interviews provided the
staff with information concerning the mechanics of the proxy
distribution business and the role of nominees and proxy distribution
intermediaries. Based on this information, the Commission staff also
analyzed the economic impact of the Pilot Fee Structure on smaller,
non-NYSE issuers--a sample that was outside the scope of the Exchange's
audit reports.
---------------------------------------------------------------------------
\50\ See supra Note 19 for a listing of the proxy industry
participants interviewed by the Commission staff.
---------------------------------------------------------------------------
In addition, the Commission staff undertook an in-depth review of
the 1997 and 1998 Audit Reports that were prepared by an independent
accounting firm retained by the Exchange.\51\ The Audit Reports
examined the proxy distribution process for NYSE issuers and member
firms during the 1997 and 1998 proxy seasons. The 1997 Audit Report
analyzed the proxy operations of ADP and the four major broker-dealers
that distributed proxy materials directly during the 1997 proxy season:
Dean Witter, Merrill Lynch, Paine Webber, and Prudential Securities.
Because three of these broker-dealers contracted with ADP before the
1998 proxy season. Dean Witter was the sole major broker-dealer during
the 1998 proxy season that continued to distribute proxy materials
directly.\52\
---------------------------------------------------------------------------
\51\ See New York Stock Exchange: Shareholder Communication and
Proxy Study, January 1998 (``1997 Audit Report''), and New York
Exchange: Shareholder Communication and Proxy Study, December 1998
(``1998 Audit Report''). Copies of both Audit Reports are publicly
available for review in File No. SR-NYSE-98-05 at the Commission's
Public Reference Section located at the address specified in Item VI
of this order.
\52\ Dean Witter elected not to participate in the survey
underlying the 1998 Audit Report.
---------------------------------------------------------------------------
Finally, ADP provided the Commission with a comprehensive report
examining the proxy distribution business and ADP's role as an
intermediary. In addition to providing an overview of the proxy
distribution business and an evaluation of specific
[[Page 14299]]
aspects of the Pilot Fee Structure, the ADP report made recommendations
to improve the current system.
The Commission believes the reimbursement guidelines established
under the Pilot Fee Structure should be allowed to continue through
August 31, 1999.\53\ The Commission notes that the Pilot Fee Structure
provides an incentive to reduce paper mailings through householding and
electronic delivery. The Commission also recognizes that the nominee
coordination fee rewards intermediaries, such as ADP, for the
consolidation and simplification of numerous functions. Indeed, in
general, NYSE issuers and member firms appear to be satisfied with the
quality of service provided by ADP. This was further evidenced by the
support expressed in a majority of the comment letters regarding the
Exchange's proposal to extend the Pilot Fee Structure through June 30,
2001.
---------------------------------------------------------------------------
\53\ The Commission notes that its determination applies only to
the reimbursement guidelines explicitly set forth in the Pilot Fee
Structure. The Commission is not making any findings on any terms or
practices that are part of privately negotiated contracts between
NYSE member firms and proxy distribution intermediaries such as ADP,
including multi-year exclusive-dealing and fee-sharing arrangements.
---------------------------------------------------------------------------
However, based on the facts gathered and reviewed during the past
two years, including the 1997 and 1998 Audit Reports and the Commission
staff's independent analyses, the Commission believes the Pilot Fee
Structure could be further modified in the future to provide for a
fairer and more reasonable allocation of fees among NYSE issuers and
member firms. The experience with the Pilot Fee Structure during the
1997 and 1998 proxy seasons shows that it would be possible to devise a
fee structure that benefits more NYSE issuers and that results in lower
fees. The Commission has therefore requested that the Exchange promptly
and carefully review the Pilot Fee Structure and make changes where
necessary to develop an improved fee structure.\54\ The Commission has
communicated to the Exchange the Commission's desire to see a new fee
structure in place for the year 2000 proxy season. Accordingly, the
Exchange has agreed to file with the Commission a new fee structure
proposal in May 1999.
---------------------------------------------------------------------------
\54\ The Commission staff also continues to gather information
regarding the current proxy season. Although the Exchange is not
required to prepare an Audit Report for the 1998 proxy season, the
Commission nonetheless expects to obtain certain basic information
from the Exchange and others regarding the results of the 1999 proxy
season.
---------------------------------------------------------------------------
For several reasons, the Commission believes it is reasonable to
extend the Pilot Fee Structure through August 31, 1999, even though the
reimbursement guidelines will be further modified in the near future.
First, the 1999 proxy season is already underway. The Commission
believes that if Pilot Fee Structure were permitted to lapse in the
midst of the current proxy season, the resulting change in fee
structure (i.e., reversion to the fee structure in place before March
14, 1997) could be inequitable or confusing to NYSE issuers and member
firms.\55\ The extension through August 31, 1999, will ensure that one
pricing scheme will apply to all proxy distributions made to beneficial
owners of shares of NYSE issuers during the 1999 proxy season. Second,
the additional five month extension will provide the Exchange and the
Commission staff with the time necessary to review the Pilot Fee
Structure to determine the most equitable way to modify fees. Finally,
members of the public will have the opportunity to comment on any
proposed fee changes before they are implemented. This is particularly
important given that the Pilot Fee Structure generated a significant
number of comment letters from a variety of constituencies interested
in, and affected by, the fees.
---------------------------------------------------------------------------
\55\ For example, consider two hypothetical NYSE issuers (A and
B) that are identical in all respects, including their shareholder
profiles. Issuer A distributed its proxy materials before the March
15, 1999, expiration, while Issuer B will do the same in April 1999.
If the Pilot Fee Structure were to lapse, these two issuers would
pay different proxy fees despite receiving identical proxy services.
In addition, some NYSE issuers may distribute proxy materials both
before and after the March 15, 1999, expiration date (e.g., proxy
statements mailed March 1, 1999, and remember proxies mailed March
29, 1999). In such a case, the issuers would be billed for services
during the same proxy season according to two different fee
schedules.
---------------------------------------------------------------------------
Although the Commission believes it is currently appropriate for
the Exchange to specify rates of reimbursement for NYSE member firms
that distribute proxy materials to beneficial owners of NYSE issuers
during the 1999 proxy season, it remains concerned that competitive
market forces do not determine these rates. In the Original Pilot
Approval Order, the Commission encouraged the Exchange, issuers, and
broker-dealers to develop an approach that would foster competition in
the proxy distribution industry so that market forces would determine
``reasonable expenses'' within the meaning of the proxy and Exchange
rules. The Commission is concerned that the current lack of competition
in the proxy distribution industry may ultimately result in higher
costs for NYSE issuers and their shareholders.
In addition to encouraging market participants to explore ways to
increase competition, the Commission also suggested that the Exchange
and other self-regulatory organizations (``SROs'') investigate whether
reimbursement rates could be set by market forces, and whether market
forces would provide a more efficient, competitive, and fair process
than SRO standards. Because of further consolidation in the proxy
distribution industry (i.e., recent contractual arrangements between
ADP and Merrill Lynch, Paine Webber, and Prudential), the Exchange has
expressed doubts that ``competition will develop to the extent
necessary to relieve the Exchange of its role in establishing
reimbursement guidelines.''\56\ Although the Exchange indicated support
for increased competition, it also concluded that the proxy
communication process benefits from the economies of scale and
uniformity that is created when most mailings are coordinated through a
single entity. Furthermore, while other SROs are considering
alternatives, no SRO has yet formally proposed an alternative to the
present system.
---------------------------------------------------------------------------
\56\ See Securities Exchange Act Release No. 39774 (Mar. 19,
1998), 63 FR 14745 (Mar. 26, 1998).
---------------------------------------------------------------------------
In general, the Commission believes that free market forces, rather
than governmental or quasi-governmental authorities, should determine
what fees are reasonable for the services provided, especially during
this age of rapid technological developments that facilitate the
electronic delivery of proxy materials. The Commission is concerned
that there are risks attendant to a single proxy distribution
intermediary controlling such a high percentage of shareholder material
distribution. Moreover, because of the operation of the Commission's
proxy rules, issuers cannot themselves distribute proxy materials to
street name shareholders or hire their own agents to do so, but instead
must reimburse broker-dealers for the reasonable expenses incurred in
distributing shareholder materials. Under these rules and industry
practice, issuers have no role in determining whether the broker-
dealers outsource their proxy distribution function, and if so, which
agents they choose. Thus, issuers are unable to bargain for rates
commensurate with their size or shareholder profile. Therefore, the
Commission in the future will consider ways to increase competition in
this area, including whether it would be appropriate to remove itself
and the SROs from the rate-setting process.
The Commission requests comment on ways to encourage competition in
the
[[Page 14300]]
distribution of proxy materials to beneficial owners.\57\ For example,
the Commission previously requested comment on whether a system for
voluntary direct delivery of proxy materials to non-objecting
beneficial owners by issuers or their agents is preferable to the
existing proxy distribution process by allowing issuers to
independently determine whether to rely on in-house operations or to
contract with outsiders to distribute their proxy materials to non-
objecting beneficial owners.\58\ Several transfer agents, proxy
solicitors, and others have expressed an interest in competing for this
type of business. Also, the Commission may consider whether it is
appropriate for a uniform fee schedule to take into account the fact
that small, non-NYSE issuers have experienced increases in proxy
distribution fees.
---------------------------------------------------------------------------
\57\ See Item VI of this approval order for specific
instructions regarding the submission of comments on these issues.
\58\ See Securities Exchange Act Release No. 40633 (Nov. 3,
1998), 63 FR 67331 (Dec. 4, 1998).
---------------------------------------------------------------------------
In summary, although there are some benefits derived from the
existing regulatory scheme, the Commission believes that it may be
appropriate to consider changes to the Commission's proxy rules in the
near future. While the exact form and scope of any possible rulemaking
have not been determined, the primary goal is clear: the Commission
seeks to ensure protection of shareholder voting rights by introducing
competition in the proxy distribution industry. When market forces
operate freely to set competitive and reasonable rate of reimbursement,
the Commission will consider whether to discontinue its rate-setting
role.
The changes outlined above require a two step process. As
previously mentioned, the Commission believes the data on the Pilot Fee
Structure, including The Commission staff's own economic analyses,
indicates that further revisions to the Exchange's reimbursement
guidelines are necessary. The Commission expects the Exchange to
propose and implement such changes before the year 2000 proxy season.
At the same time, the Commission will consider whether to alter the
regulatory structure governing the distribution of proxy materials to
beneficial owners to remove barriers to the entry of new competitors in
this area.
The Commission finds good cause for approving Amendment No. 1 to
the proposed rule change prior to the thirtieth day after the date of
publication of notice of filing thereof. Amendment No. 1 changes the
period of effectiveness for the Pilot Fee Structure from June 30, 2001,
to August 31, 1999. As stated above, the Commission has asked the
Exchange to undertake a thorough and prompt review of the Pilot Fee
Structure. After the Exchange has completed its review, the Commission
expects the Exchange to submit a proposed rule change in May 1999,
which presents a new fee structure. The Commission believes it is
appropriate for the Exchange to prepare for the implementation of a new
fee structure by shortening the duration of the Pilot Fee Structure.
Accordingly, the extension through August 31, 1999, will allow the
Pilot Fee Structure to continue uninterrupted during the 1999 proxy
season, while providing the Exchange additional time to consider and
propose revisions to the Pilot Fee Structure.
Amendment No. 1 also removes from the proposal the provision
permitting householding through implied consent. The Commission notes
that the Exchange's implied consent householding proposal differs from
the Commission's householding initiative now under consideration as
part of Commission rulemaking.\59\ The Commission is concerned that if
the Exchange's householding proposal was approved by the Commission,
NYSE member firms would be permitted to engage in householding
practices that might be inconsistent with any rule amendments that the
Commission might ultimately adopt. Therefore, the Commission believes
it is appropriate for the Exchange to withdraw its implied consent
householding proposal and wait for the Commission to complete its
independent rulemaking.
---------------------------------------------------------------------------
\59\ See Securities Act Release No. 7475; Securities Exchange
Act Release No. 39321; and Investment Company Act Release No. 22884
(Nov. 13, 1997), 62 FR 61933 (Nov. 20, 1997).
---------------------------------------------------------------------------
Based on the above, the Commission believes good cause exists,
consistent with Sections 6(b) and 19(b) of the Act,\60\ to accelerate
approval of Amendment No. 1 to the Exchange's proposed rule change.
---------------------------------------------------------------------------
\60\ 15 U.S.C. 78f(b) and 78s(b).
---------------------------------------------------------------------------
VI. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to 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. 20549-0609. Copies of the submissions, 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 persons,
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-98-05 and
should be submitted by April 14, 1999.
VII. Conclusion
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange and, in particular, the requirements of Sections 6(b)(4),
6(b)(5), and 6(b)(8),\61\ and the rules and regulations thereunder.
---------------------------------------------------------------------------
\61\ 15 U.S.C. 78f(b)(4), 78f(b)(5), and 78f(b)(8).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\62\ that the proposed rule change (SR-NYSE-98-05), as amended, is
approved through August 31, 1999.
---------------------------------------------------------------------------
\62\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\63\
---------------------------------------------------------------------------
\63\ 17 CFR 200.30-39a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-7157 Filed 3-23-99; 8:45 am]
BILLING CODE 8010-01-M
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.