Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Adopting Maximum Fees Member Organizations may Charge in Connection With the Distribution of Investment Company Shareholder Reports Pursuant to Any Electronic Delivery Rules Adopted by the Securities and Exchange Commission, 56717-56720 [2016-19897]
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Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Notices
Commission’s consideration concerning
negotiated service agreements. This
notice informs the public of the filing,
invites public comment, and takes other
administrative steps.
DATES: Comments are due: August 24,
2016 (Comment due date applies to all
Docket Nos. listed above)
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
asabaliauskas on DSK3SPTVN1PROD with NOTICES
I. Introduction
II. Docketed Proceeding(s)
I. Introduction
The Commission gives notice that the
Postal Service filed request(s) for the
Commission to consider matters related
to negotiated service agreement(s). The
request(s) may propose the addition or
removal of a negotiated service
agreement from the market dominant or
the competitive product list, or the
modification of an existing product
currently appearing on the market
dominant or the competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s Web site (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3007.40.
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
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U.S.C. 3642, 39 CFR part 3010, and 39
CFR part 3020, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3015, and
39 CFR part 3020, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: CP2016–166; Filing
Title: Notice of the United States Postal
Service of Filing Modification One to a
Global Reseller Expedited Package
Contracts 2 Negotiated Service
Agreement; Filing Acceptance Date:
August 16, 2016; Filing Authority: 39
CFR 3015.5; Public Representative:
Katalin K. Clendenin; Comments Due:
August 24, 2016.
2. Docket No(s).: CP2016–261; Filing
Title: Notice of United States Postal
Service of Filing a Functionally
Equivalent Global Expedited Package
Services 6 Negotiated Service
Agreement and Application for NonPublic Treatment of Materials Filed
Under Seal; Filing Acceptance Date:
August 16, 2016; Filing Authority: 39
CFR 3015.5; Public Representative:
Natalie R. Ward; Comments Due: August
24, 2016.
3. Docket No(s).: MC2016–182 and
CP2016–262; Filing Title: Request of the
United States Postal Service to Add
Priority Mail Express & Priority Mail
Contract 31 to Competitive Product List
and Notice of Filing (Under Seal) of
Unredacted Governors’ Decision,
Contract, and Supporting Data; Filing
Acceptance Date: August 16, 2016;
Filing Authority: 39 U.S.C. 3642 and 39
CFR 3020.30 et seq.; Public
Representative: Jennaca D. Upperman;
Comments Due: August 24, 2016.
4. Docket No(s).: MC2016–183 and
CP2016–263; Filing Title: Request of the
United States Postal Service to Add
Priority Mail & First-Class Package
Service Contact 27 to Competitive
Product List and Notice of Filing (Under
Seal) of Unredacted Governors’
Decision, Contract, and Supporting
Data; Filing Acceptance Date: August
16, 2016; Filing Authority: 39 U.S.C.
3642 and 39 CFR 3020.30 et seq.; Public
Representative: Jennaca D. Upperman;
Comments Due: August 24, 2016.
5. Docket No(s).: MC2016–184 and
CP2016–264; Filing Title: Request of the
United States Postal Service to Add
Priority Mail & First-Class Package
Service Contact 28 to Competitive
Product List and Notice of Filing (Under
Seal) of Unredacted Governors’
Decision, Contract, and Supporting
Data; Filing Acceptance Date: August
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56717
16, 2016; Filing Authority: 39 U.S.C.
3642 and 39 CFR 3020.30 et seq.; Public
Representative: Katalin K. Clendenin;
Comments Due: August 24, 2016
This notice will be published in the
Federal Register.
Stacy L. Ruble,
Secretary.
[FR Doc. 2016–20003 Filed 8–19–16; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78589: File No. SR–NYSE–
2016–55]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change
Adopting Maximum Fees Member
Organizations may Charge in
Connection With the Distribution of
Investment Company Shareholder
Reports Pursuant to Any Electronic
Delivery Rules Adopted by the
Securities and Exchange Commission
August 16, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
15, 2016, New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’ or the
‘‘SEC’’) 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 Exchange proposes to adopt
maximum fees member organizations
may charge in connection with the
distribution of investment company
shareholder reports pursuant to any
electronic delivery rules adopted by the
Securities and Exchange Commission.
The proposed rule change is available
on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Notices
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 those 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 parts of such
statements.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On May 20, 2015, the SEC proposed
new rules that would expand the
information that registered investment
companies are required to report (the
‘‘Investment Company Proposal’’).4 In
addition to the expanded reporting
requirements, the Investment Company
Proposal includes proposed new Rule
30(e)–3, which would permit, but not
require, investment companies to satisfy
their annual and semiannual
shareholder report delivery obligations
under the Investment Company Act by
making shareholder reports available on
the investment company’s Web site.
Investment companies relying on this
provision would be required to meet
conditions relating to, among other
things, prior shareholder consent to
electronic access rather than paper
delivery of reports and notice to
shareholders of the availability of
shareholder reports.
Specifically, proposed Rule 30e–3
would require an investment company
intending to rely on electronic access to
reports to: (i) Transmit a statement to
the shareholder at least 60 days prior to
its reliance on proposed Rule 30e–3,
notifying the shareholder of the issuer’s
intent to make future shareholder
reports available on the issuer’s Web
site until the shareholder revokes
consent; and (ii) send a notice within 60
days of the close of the fiscal period to
shareholders who have consented to
electronic transmission informing them
that the report is available online.
Proposed Rule 30e–3 would also require
investment companies to send, at no
cost to the requestor, a paper copy of
4 80 FR 33590 (June 12, 2015); Investment
Company Reporting Modernization, Securities Act
Release No. 33–9776, Exchange Act Release No. 34–
75002, Investment Company Act Release No. IC–
31610 (May 20, 2015).
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any shareholder reports to any
shareholder requesting such a copy.
NYSE Rule 451 requires NYSE
member organizations to distribute
proxy and other materials on behalf of
issuers to the beneficial owners of the
issuers’ securities on whose behalf
member organizations hold securities in
‘‘street name’’ accounts. This obligation
is conditioned on the member
organization’s receipt from the issuer of
reimbursement of all out-of-pocket
expenses, including reasonable clerical
expenses, incurred by such member
organization in connection with such
distribution. Rule 451 establishes
maximum fees which member
organizations may charge for handling
distributions required under the rule.
Rule 451 also establishes maximum
fees paid by issuers using the SEC’s
Notice and Access provisions pursuant
to Rule 14a–16 under the proxy rules.5
When an issuer elects to utilize Notice
and Access for a proxy distribution,
there is an incremental fee based on all
nominee accounts through which the
issuer’s securities are beneficially
owned as follows:
• 25 cents for each account up to
10,000 accounts;
• 20 cents for each account over
10,000 accounts, up to 100,000
accounts;
• 15 cents for each account over
100,000 accounts, up to 200,000
accounts;
• 10 cents for each account over
200,000 accounts, up to 500,000
accounts
• 5 cents for each account over
500,000 accounts.6
While mutual funds are not listed on
the NYSE, the fees set forth in Rule 451
are applied by NYSE members in
relation to distributions to ‘‘street
name’’ holders of mutual fund and
operating company shares. Mutual
funds typically do not have to elect
directors every year, and for this reason
tend not to have shareholder meetings
every year. However, every mutual fund
is required by SEC rules to distribute
each year both an annual and a semiannual report to its shareholders, and so
mutual funds pay the interim report fee
set forth in Rule 451 of 15 cents per
account each time they distribute
materials to shareholders who hold
mutual fund shares in ‘‘street name.’’ In
addition, mutual funds pay a Preference
Management Fee of 10 cents for every
account with respect to which a member
5 17
CFR 240.14a–16.
clarify, under this schedule, every issuer
pays the tier one rate for the first 10,000 accounts,
or portion thereof, with decreasing rates applicable
only on additional accounts in the additional tiers.
6 To
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organization has eliminated the need to
send paper materials. Under the current
rule, the Preference Management Fee is
in addition to, and not in lieu of, the
interim report fee.
Under the rule as currently in effect,
the Notice and Access fees in Rule 451
were intended to apply specifically to
Notice and Access distributions under
the SEC’s proxy rules and they would
not apply to electronic distributions
under proposed Rule 30e–3 without a
rule amendment. There have been a
number of comment letters filed in
relation to the Investment Company
Proposal addressing the question of how
the fees set forth in Rule 451 would
apply to electronic distributions under
proposed Rule 30e–3. The Investment
Company Institute (‘‘ICI’’) submitted a
comment letter on the Investment
Company Proposal in which it noted
that the NYSE ‘‘appears to have little
regulatory interest in fees brokers charge
for delivery of fund materials’’ and
recommends that responsibility for the
fees in relation to mutual fund
distributions should be given instead to
FINRA. As noted above, the Exchange
has no involvement in the mutual fund
industry and we therefore agree with the
ICI that we may not be best positioned
to take on the regulatory role in setting
fees for mutual funds. To that end, we
welcome the idea of considering
whether FINRA should assume this role
in the near future.7 However, we also
understand that the success of the
electronic delivery system in proposed
Rule 30e–3 is significantly dependent
on the establishment of reasonable and
transparent levels of reimbursement to
brokers for their role in the process.
Given the potential immediacy of this
need, the Exchange has agreed to a
request from the SEC that we adopt fees
specific to electronic distributions of
investment company materials.8 We are
doing so because the NYSE’s historical
role as the fee setter enables it to meet
this need more efficiently in the short
term than would be possible if that role
were assumed by FINRA at this time.
The electronic delivery process under
proposed Rule 30e–3 would require
additional work on the part of the
member organizations and their agents.
As the proposed process is very similar
to the existing Notice and Access
process for which the Exchange has
7 The Exchange believes that consideration
should be given to the question of whether it would
be more appropriate for FINRA to become the
primary regulator of all fees charged by brokers in
connection with distributions (i.e., including
operating company distributions and not just those
of investment companies).
8 These proposed fees would be effective only if
the SEC adopts Rule 30e–3.
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Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Notices
already adopted a fee schedule in Rule
451, the Exchange believes that it is
appropriate to apply the existing Notice
and Access fees to distributions under
the SEC’s proposed new rule. As such,
the Exchange proposes to amend
Section 5 of Rule 451.90 to specify that
the Notice and Access fees set forth
therein would also be charged with
respect to the distribution of investment
company shareholder reports pursuant
to any ‘‘notice and access’’ rules
adopted by the SEC in relation to such
distributions.
In applying the Notice and Access
fees to deliveries under proposed Rule
30e–3, the Exchange proposes to modify
their application in one significant
respect. Specifically, the Notice and
Access fee will not be charged for any
account with respect to which the
investment company pays a Preference
Management Fee. A Preference
Management Fee is paid whenever a
broker or its agent is able to suppress
the need to send a physical mailing to
an account, for example through
‘‘householding’’ of accounts (i.e., the
elimination of duplicative mailings to
multiple accounts at the same address)
or by getting account holders to agree to
access materials through the broker’s
own enhanced broker’s internet
platform (or ‘‘EBIP’’). Under the current
rule, an issuer utilizing Notice and
Access pays Notice and Access fees
with respect to all accounts, including
those with respect to which it is paying
a Preference Management Fee (and to
which it is therefore not sending a
notice). The Exchange proposes to
amend Rule 451 to provide that
investment companies utilizing any
notice and access process established by
the SEC will not be charged a Notice
and Access fee for any account with
respect to which they are being charged
a Preference Management Fee. As such,
funds will only pay Notice and Access
fees with respect to accounts that
actually receive Notice and Access
mailings.9
Mutual funds often issue multiple
classes of shares, so it is necessary to be
clear how the pricing tiers in the Notice
and Access fees would be applied to
investment company shareholder report
distributions. Therefore, the Exchange
proposes to amend the rule to clarify
that, in calculating the rates at which
the issuer will be charged Notice and
Access fees for investment company
shareholder report distributions, all
accounts holding shares of any class of
share of the applicable issuer eligible to
9 The Exchange is not proposing any
modifications to the amount or application of the
Preference Management Fee at this time.
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Jkt 238001
receive an identical distribution will be
aggregated in determining the
appropriate pricing tier.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(the ‘‘Act’’) generally.10 Section
6(b)(4) 11 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. Section 6(b)(5) 12 requires,
among other things, that exchange rules
promote just and equitable principles of
trade and that they are not designed to
permit unfair discrimination between
issuers, brokers or dealers. Section
6(b)(8) 13 prohibits any exchange rule
from imposing any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
The Exchange believes that the
proposed amendment represents a
reasonable allocation of fees among
issuers as required by Section 6(b)(4)
and is not designed to permit unfair
discrimination within the meaning of
Section 6(b)(5), as all issuers are subject
to the same fee schedule.14
The Exchange believes that the
proposed amendment does not impose
any unnecessary burden on competition
within the meaning of Section 6(b)(8).
Issuers are unable to make distributions
themselves to ‘‘street name’’ account
holders, but must instead rely on the
brokers that are record holders to make
those distributions. In the Exchange’s
view, the proposed amendment does not
create either any barriers to brokers
being able to make their own
distributions without an intermediary or
any impediments to other
intermediaries being able enter the
market. For some time now a single
intermediary has come to have a
predominant role in the distribution of
proxy material. The Exchange does not
believe that the predominance of this
existing single intermediary results from
the level of the existing fees or that the
proposed amended fees will change its
competitive position or create any
additional barriers to entry for potential
new intermediaries. Moreover, brokers
have the ultimate choice to use an
10 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
12 15 U.S.C. 78f(b)(5).
13 15 U.S.C. 78f(b)(8).
14 The Exchange notes that the rules in this
proposal do not involve dues, fees or other charges
paid to the Exchange. Nonetheless, to the extent a
Section 6(b)(4) analysis is appropriate, the
Exchange has included one herein.
11 15
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Fmt 4703
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56719
intermediary of their choice, or perform
the work themselves. Competitors are
also free to establish relationships with
brokers, and the proposed fees would
not operate as a barrier to entry. For the
foregoing reasons, the Exchange believes
that its proposed fee schedule does not
place any unnecessary burden on
competition.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that Rule 451 as
amended by the proposed amendments
does not impose any burdens on
competition. Under Rule 451, a member
organization is required to forward
proxy and other material to beneficial
owners of an issuer’s securities only if
the issuer reimburses it for its
reasonable expenses incurred in
connection with these distributions.
Consequently, in amending Rule 451 to
establish fees to be charged in
connection with the SEC’s proposed
rule permitting the electronic
distribution of investment company
shareholder reports, the Exchange
intended to establish fees which
represented a reasonable level of
reimbursement. As the Exchange’s
purpose was to establish fees that
reflected a reasonable expense
reimbursement level, the Exchange does
not believe that the proposed amended
fees will have the effect of providing a
competitive advantage to any particular
broker or existing intermediary or
creating any barriers to entry for
potential new intermediaries. For some
time now a single intermediary has
come to have a predominant role in the
distribution of proxy material. The
Exchange does not believe that the
predominance of this existing single
intermediary results from the level of
the existing fees or that the proposed
amended fees will change its
competitive position or create any
additional barriers to entry for potential
new intermediaries. Moreover, brokers
have the ultimate choice to use an
intermediary of their choice, or perform
the work themselves. Competitors are
also free to establish relationships with
brokers, and the proposed fees would
not operate as a barrier to entry.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange received one written
comment relevant to the proposal prior
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56720
Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Notices
to its filing. This letter was from the ICI,
in which it argued that the Exchange
should interpret its existing rules as
providing for the following:
• Investment companies should only
have to pay interim report fees once per
year rather than each time a report is
delivered to shareholders;
• the Preference Management Fee
should be charged only on a one-time
basis in relation to any specific account;
• brokers should not be permitted to
collect any fees whatsoever from
investment companies in relation to
fund shares held in managed accounts;
• brokers should not be allowed to
receive any portion of the regulated fees
collected by intermediaries conducting
distributions on their behalf;
• the current rule should be
interpreted as applying the Notice and
Access fees to electronic deliveries
under proposed Rule 30e–3; and
• the Notice and Access Fees should
not be payable in relation to any
account that does not actually receive a
Notice and Access delivery under
proposed Rule 30e–3.
The Exchange does not agree that
there is any justification in the text of
Rule 451 for regarding any of these
positions as accurate interpretations of
Rule 451 in its current form. The
purpose of the current proposal is solely
to amend Rule 451 to facilitate the SEC’s
potential finalization of proposed Rule
30e–3. Accordingly, and consistent with
certain of ICI’s recommendations, the
Exchange is proposing changes to its
rules to apply the Notice and Access
fees with respect to the distribution of
investment company shareholder
reports pursuant to any ‘‘notice and
access’’ rules adopted by the SEC in
relation to such distributions. In
addition, and also as recommended by
the ICI in its letter, the Exchange’s
proposal would provide that the Notice
and Access fee would only apply to
accounts that actually receive Notice
and Access deliveries under proposed
Rule 30e–3 and not to accounts with
respect to which investment companies
are charged a Preference Management
fee. The Exchange does not believe that
the other, more substantial changes to
the application of Rule 451 suggested by
the ICI are necessary to implementation
of Rule 30e–3 if the SEC were to finalize
its proposal and, thus the Exchange
believes those proposals should be
given separate consideration.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
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17:13 Aug 19, 2016
Jkt 238001
Commission may designate 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 or disapprove
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,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2016–55 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2016–55. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
PO 00000
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Fmt 4703
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available publicly. All submissions
should refer to File Number SR–NYSE–
2016–55 and should be submitted on or
before September 12, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–19897 Filed 8–19–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78586; File No. SR–
NYSEMKT–2016–62]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing of Proposed
Rule Change Amending Section 146 of
the NYSE MKT Company Guide To
Adjust the Entitlement to Services of
Special Purpose Acquisition
Companies
August 16, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
2, 2016, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory 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 Exchange proposes to amend
Section 146 of the NYSE MKT Company
Guide (the ‘‘Company Guide’’) to adjust
the entitlement to services of special
purpose acquisition companies. The
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
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,
15 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
E:\FR\FM\22AUN1.SGM
22AUN1
]]>Agencies
[Federal Register Volume 81, Number 162 (Monday, August 22, 2016)]
[Notices]
[Pages 56717-56720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19897]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78589: File No. SR-NYSE-2016-55]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Adopting Maximum Fees Member
Organizations may Charge in Connection With the Distribution of
Investment Company Shareholder Reports Pursuant to Any Electronic
Delivery Rules Adopted by the Securities and Exchange Commission
August 16, 2016.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on August 15, 2016, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'' or the ``SEC'') 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.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt maximum fees member organizations
may charge in connection with the distribution of investment company
shareholder reports pursuant to any electronic delivery rules adopted
by the Securities and Exchange Commission. The proposed rule change is
available on the Exchange's Web site at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
[[Page 56718]]
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
On May 20, 2015, the SEC proposed new rules that would expand the
information that registered investment companies are required to report
(the ``Investment Company Proposal'').\4\ In addition to the expanded
reporting requirements, the Investment Company Proposal includes
proposed new Rule 30(e)-3, which would permit, but not require,
investment companies to satisfy their annual and semiannual shareholder
report delivery obligations under the Investment Company Act by making
shareholder reports available on the investment company's Web site.
Investment companies relying on this provision would be required to
meet conditions relating to, among other things, prior shareholder
consent to electronic access rather than paper delivery of reports and
notice to shareholders of the availability of shareholder reports.
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\4\ 80 FR 33590 (June 12, 2015); Investment Company Reporting
Modernization, Securities Act Release No. 33-9776, Exchange Act
Release No. 34-75002, Investment Company Act Release No. IC-31610
(May 20, 2015).
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Specifically, proposed Rule 30e-3 would require an investment
company intending to rely on electronic access to reports to: (i)
Transmit a statement to the shareholder at least 60 days prior to its
reliance on proposed Rule 30e-3, notifying the shareholder of the
issuer's intent to make future shareholder reports available on the
issuer's Web site until the shareholder revokes consent; and (ii) send
a notice within 60 days of the close of the fiscal period to
shareholders who have consented to electronic transmission informing
them that the report is available online. Proposed Rule 30e-3 would
also require investment companies to send, at no cost to the requestor,
a paper copy of any shareholder reports to any shareholder requesting
such a copy.
NYSE Rule 451 requires NYSE member organizations to distribute
proxy and other materials on behalf of issuers to the beneficial owners
of the issuers' securities on whose behalf member organizations hold
securities in ``street name'' accounts. This obligation is conditioned
on the member organization's receipt from the issuer of reimbursement
of all out-of-pocket expenses, including reasonable clerical expenses,
incurred by such member organization in connection with such
distribution. Rule 451 establishes maximum fees which member
organizations may charge for handling distributions required under the
rule.
Rule 451 also establishes maximum fees paid by issuers using the
SEC's Notice and Access provisions pursuant to Rule 14a-16 under the
proxy rules.\5\ When an issuer elects to utilize Notice and Access for
a proxy distribution, there is an incremental fee based on all nominee
accounts through which the issuer's securities are beneficially owned
as follows:
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\5\ 17 CFR 240.14a-16.
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25 cents for each account up to 10,000 accounts;
20 cents for each account over 10,000 accounts, up to
100,000 accounts;
15 cents for each account over 100,000 accounts, up to
200,000 accounts;
10 cents for each account over 200,000 accounts, up to
500,000 accounts
5 cents for each account over 500,000 accounts.\6\
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\6\ To clarify, under this schedule, every issuer pays the tier
one rate for the first 10,000 accounts, or portion thereof, with
decreasing rates applicable only on additional accounts in the
additional tiers.
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While mutual funds are not listed on the NYSE, the fees set forth
in Rule 451 are applied by NYSE members in relation to distributions to
``street name'' holders of mutual fund and operating company shares.
Mutual funds typically do not have to elect directors every year, and
for this reason tend not to have shareholder meetings every year.
However, every mutual fund is required by SEC rules to distribute each
year both an annual and a semi-annual report to its shareholders, and
so mutual funds pay the interim report fee set forth in Rule 451 of 15
cents per account each time they distribute materials to shareholders
who hold mutual fund shares in ``street name.'' In addition, mutual
funds pay a Preference Management Fee of 10 cents for every account
with respect to which a member organization has eliminated the need to
send paper materials. Under the current rule, the Preference Management
Fee is in addition to, and not in lieu of, the interim report fee.
Under the rule as currently in effect, the Notice and Access fees
in Rule 451 were intended to apply specifically to Notice and Access
distributions under the SEC's proxy rules and they would not apply to
electronic distributions under proposed Rule 30e-3 without a rule
amendment. There have been a number of comment letters filed in
relation to the Investment Company Proposal addressing the question of
how the fees set forth in Rule 451 would apply to electronic
distributions under proposed Rule 30e-3. The Investment Company
Institute (``ICI'') submitted a comment letter on the Investment
Company Proposal in which it noted that the NYSE ``appears to have
little regulatory interest in fees brokers charge for delivery of fund
materials'' and recommends that responsibility for the fees in relation
to mutual fund distributions should be given instead to FINRA. As noted
above, the Exchange has no involvement in the mutual fund industry and
we therefore agree with the ICI that we may not be best positioned to
take on the regulatory role in setting fees for mutual funds. To that
end, we welcome the idea of considering whether FINRA should assume
this role in the near future.\7\ However, we also understand that the
success of the electronic delivery system in proposed Rule 30e-3 is
significantly dependent on the establishment of reasonable and
transparent levels of reimbursement to brokers for their role in the
process. Given the potential immediacy of this need, the Exchange has
agreed to a request from the SEC that we adopt fees specific to
electronic distributions of investment company materials.\8\ We are
doing so because the NYSE's historical role as the fee setter enables
it to meet this need more efficiently in the short term than would be
possible if that role were assumed by FINRA at this time.
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\7\ The Exchange believes that consideration should be given to
the question of whether it would be more appropriate for FINRA to
become the primary regulator of all fees charged by brokers in
connection with distributions (i.e., including operating company
distributions and not just those of investment companies).
\8\ These proposed fees would be effective only if the SEC
adopts Rule 30e-3.
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The electronic delivery process under proposed Rule 30e-3 would
require additional work on the part of the member organizations and
their agents. As the proposed process is very similar to the existing
Notice and Access process for which the Exchange has
[[Page 56719]]
already adopted a fee schedule in Rule 451, the Exchange believes that
it is appropriate to apply the existing Notice and Access fees to
distributions under the SEC's proposed new rule. As such, the Exchange
proposes to amend Section 5 of Rule 451.90 to specify that the Notice
and Access fees set forth therein would also be charged with respect to
the distribution of investment company shareholder reports pursuant to
any ``notice and access'' rules adopted by the SEC in relation to such
distributions.
In applying the Notice and Access fees to deliveries under proposed
Rule 30e-3, the Exchange proposes to modify their application in one
significant respect. Specifically, the Notice and Access fee will not
be charged for any account with respect to which the investment company
pays a Preference Management Fee. A Preference Management Fee is paid
whenever a broker or its agent is able to suppress the need to send a
physical mailing to an account, for example through ``householding'' of
accounts (i.e., the elimination of duplicative mailings to multiple
accounts at the same address) or by getting account holders to agree to
access materials through the broker's own enhanced broker's internet
platform (or ``EBIP''). Under the current rule, an issuer utilizing
Notice and Access pays Notice and Access fees with respect to all
accounts, including those with respect to which it is paying a
Preference Management Fee (and to which it is therefore not sending a
notice). The Exchange proposes to amend Rule 451 to provide that
investment companies utilizing any notice and access process
established by the SEC will not be charged a Notice and Access fee for
any account with respect to which they are being charged a Preference
Management Fee. As such, funds will only pay Notice and Access fees
with respect to accounts that actually receive Notice and Access
mailings.\9\
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\9\ The Exchange is not proposing any modifications to the
amount or application of the Preference Management Fee at this time.
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Mutual funds often issue multiple classes of shares, so it is
necessary to be clear how the pricing tiers in the Notice and Access
fees would be applied to investment company shareholder report
distributions. Therefore, the Exchange proposes to amend the rule to
clarify that, in calculating the rates at which the issuer will be
charged Notice and Access fees for investment company shareholder
report distributions, all accounts holding shares of any class of share
of the applicable issuer eligible to receive an identical distribution
will be aggregated in determining the appropriate pricing tier.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act'')
generally.\10\ Section 6(b)(4) \11\ 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. Section 6(b)(5) \12\ requires, among other
things, that exchange rules promote just and equitable principles of
trade and that they are not designed to permit unfair discrimination
between issuers, brokers or dealers. Section 6(b)(8) \13\ prohibits any
exchange rule from imposing any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78f(b)(8).
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The Exchange believes that the proposed amendment represents a
reasonable allocation of fees among issuers as required by Section
6(b)(4) and is not designed to permit unfair discrimination within the
meaning of Section 6(b)(5), as all issuers are subject to the same fee
schedule.\14\
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\14\ The Exchange notes that the rules in this proposal do not
involve dues, fees or other charges paid to the Exchange.
Nonetheless, to the extent a Section 6(b)(4) analysis is
appropriate, the Exchange has included one herein.
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The Exchange believes that the proposed amendment does not impose
any unnecessary burden on competition within the meaning of Section
6(b)(8). Issuers are unable to make distributions themselves to
``street name'' account holders, but must instead rely on the brokers
that are record holders to make those distributions. In the Exchange's
view, the proposed amendment does not create either any barriers to
brokers being able to make their own distributions without an
intermediary or any impediments to other intermediaries being able
enter the market. For some time now a single intermediary has come to
have a predominant role in the distribution of proxy material. The
Exchange does not believe that the predominance of this existing single
intermediary results from the level of the existing fees or that the
proposed amended fees will change its competitive position or create
any additional barriers to entry for potential new intermediaries.
Moreover, brokers have the ultimate choice to use an intermediary of
their choice, or perform the work themselves. Competitors are also free
to establish relationships with brokers, and the proposed fees would
not operate as a barrier to entry. For the foregoing reasons, the
Exchange believes that its proposed fee schedule does not place any
unnecessary burden on competition.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
Rule 451 as amended by the proposed amendments does not impose any
burdens on competition. Under Rule 451, a member organization is
required to forward proxy and other material to beneficial owners of an
issuer's securities only if the issuer reimburses it for its reasonable
expenses incurred in connection with these distributions. Consequently,
in amending Rule 451 to establish fees to be charged in connection with
the SEC's proposed rule permitting the electronic distribution of
investment company shareholder reports, the Exchange intended to
establish fees which represented a reasonable level of reimbursement.
As the Exchange's purpose was to establish fees that reflected a
reasonable expense reimbursement level, the Exchange does not believe
that the proposed amended fees will have the effect of providing a
competitive advantage to any particular broker or existing intermediary
or creating any barriers to entry for potential new intermediaries. For
some time now a single intermediary has come to have a predominant role
in the distribution of proxy material. The Exchange does not believe
that the predominance of this existing single intermediary results from
the level of the existing fees or that the proposed amended fees will
change its competitive position or create any additional barriers to
entry for potential new intermediaries. Moreover, brokers have the
ultimate choice to use an intermediary of their choice, or perform the
work themselves. Competitors are also free to establish relationships
with brokers, and the proposed fees would not operate as a barrier to
entry.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange received one written comment relevant to the proposal
prior
[[Page 56720]]
to its filing. This letter was from the ICI, in which it argued that
the Exchange should interpret its existing rules as providing for the
following:
Investment companies should only have to pay interim
report fees once per year rather than each time a report is delivered
to shareholders;
the Preference Management Fee should be charged only on a
one-time basis in relation to any specific account;
brokers should not be permitted to collect any fees
whatsoever from investment companies in relation to fund shares held in
managed accounts;
brokers should not be allowed to receive any portion of
the regulated fees collected by intermediaries conducting distributions
on their behalf;
the current rule should be interpreted as applying the
Notice and Access fees to electronic deliveries under proposed Rule
30e-3; and
the Notice and Access Fees should not be payable in
relation to any account that does not actually receive a Notice and
Access delivery under proposed Rule 30e-3.
The Exchange does not agree that there is any justification in the
text of Rule 451 for regarding any of these positions as accurate
interpretations of Rule 451 in its current form. The purpose of the
current proposal is solely to amend Rule 451 to facilitate the SEC's
potential finalization of proposed Rule 30e-3. Accordingly, and
consistent with certain of ICI's recommendations, the Exchange is
proposing changes to its rules to apply the Notice and Access fees with
respect to the distribution of investment company shareholder reports
pursuant to any ``notice and access'' rules adopted by the SEC in
relation to such distributions. In addition, and also as recommended by
the ICI in its letter, the Exchange's proposal would provide that the
Notice and Access fee would only apply to accounts that actually
receive Notice and Access deliveries under proposed Rule 30e-3 and not
to accounts with respect to which investment companies are charged a
Preference Management fee. The Exchange does not believe that the
other, more substantial changes to the application of Rule 451
suggested by the ICI are necessary to implementation of Rule 30e-3 if
the SEC were to finalize its proposal and, thus the Exchange believes
those proposals should be given separate consideration.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
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 or disapprove 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, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2016-55 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2016-55. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2016-55 and should be
submitted on or before September 12, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19897 Filed 8-19-16; 8:45 am]
BILLING CODE 8011-01-P
