Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 452-NYSE Amex Equities and Section 723 of the NYSE Amex Company Guide Regarding Broker Discretionary Voting for Election of Directors and on Material Amendments to Investment Advisory Contracts, 1664-1667 [2010-308]
Download as PDF
<![CDATA[
1664
Federal Register / Vol. 75, No. 7 / Tuesday, January 12, 2010 / Notices
furnish copies thereof, and make such
reports as the Commission may require
by rule.6 Rule 17i–5 requires that an
SIBHC make and keep current certain
records relating to its business. In
addition, it requires that an SIBHC
preserve those and other records for at
least three years.
The collections of information
required pursuant to Rule 17i–5 are
necessary so that the Commission can
adequately supervise the activities of
these SIBHCs. In addition, these
collections of information are needed to
allow the Commission to effectively
determine whether supervision of an
IBHC as an SIBHC is necessary or
appropriate in furtherance of the
purposes of Section the Act. Rule 17i–
5 also enhances the Commission’s
supervision of the SIBHCs’ subsidiary
broker-dealers through collection of
additional information and inspections
of affiliates of those broker-dealers.
Without this information and
documentation, the Commission would
be unable to adequately supervise an
SIBHC, nor would it be able to
determine whether continued
supervision of an IBHC as an SIBHC
were necessary and appropriate in
furtherance of the purposes of Section
17 of the Act.
In addition to the one firm currently
supervised by the Commission as a
SIBHC, we estimate that 2 IBHCs will
file Notices of Intention with the
Commission to be supervised by the
Commission as SIBHCs; for a total of
three firms. An SIBHC will generally
require about 40 hours to create and
document a contingency plan regarding
funding and liquidity of the affiliate
group at a cost of $9,200 per SIBHC.7 An
SIBHC will require, on average,
approximately 64 hours each quarter to
create a record regarding stress tests, or
approximately 256 hours each year and
a cost of $49,920.8 Further, an SIBHC
will establish approximately 20 new
counterparty arrangements each year,
and will take, on average, about 30
minutes to create a record regarding the
basis for credit risk weights for each
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
6 15
U.S.C. 78q(i)(3)(A).
7 We believe that an SIBHC would have a Senior
Treasury Manager create this record. According to
the Securities Industry and Financial Markets
Association (‘‘SIFMA’’), the hourly cost of a Senior
Treasury Manager is $230, as reflected in the
SIFMA’s Report on Management and Professional
Earnings for 2008 (‘‘SIFMA’s Report on Professional
Earnings), and modified to account for an 1,800hour work-year and multiplied by 5.35 to account
for bonuses, firm size, employee benefits and
overhead. ($230 × 40 hours) = $9,200.
8 We believe that an SIBHC would have a Floor
Supervisor, or equivalent, create this record with an
hourly cost of $195, as reflected in SIFMA’s Report
on Professional Earnings’’). ($195 × 256) = $49,920.
VerDate Nov<24>2008
15:14 Jan 11, 2010
Jkt 220001
such counterparty for a cost of $1,410.9
Finally, an SIBHC will generally require
about 24 hours per year to maintain the
specified records for a cost of $4,632.10
We believe that an IBHC likely will
upgrade its information technology
(‘‘IT’’) systems in order to more
efficiently comply with certain of the
SIBHC framework rules (including
Rules 17i–4, 17i–5, 17i–6 and 17i–7),
and that this would be a one-time cost.
Depending on the state of development
of the IBHC’s IT systems, it would cost
an IBHC between $1 million and $10
million to upgrade its IT systems to
comply with the SIBHC framework of
rules. Thus, on average, it would cost
each of the three IBHCs about $5.5
million to upgrade their IT systems, or
approximately $16.5 million in total. It
is impossible to determine what
percentage of the IT systems costs
would be attributable to each Rule, so
we allocated the total estimated upgrade
costs equally (at 25% for each of the
above-mentioned Rules), with
$4,125,000 attributable to Rule 17i–5.
The collection of information is
mandatory and the information required
to be provided to the Commission
pursuant to this Rule is deemed
confidential pursuant to Section 17(j) of
the Exchange Act and Section
552(b)(3)(B) of the Freedom of
Information Act,11 notwithstanding any
other provision of law.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Comments should be directed to:
(i) Desk Officer for the Securities and
Exchange Commission Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Room 10102, New Executive Office
Building, Washington, DC 20503 or by
sending an
e-mail to:
Shagufta_Ahmed@comb.eop.gov; and
(ii) Charles Boucher, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Shirley
9 On average, each firm presently maintains
relationships with approximately 1,000
counterparties. Further, firms generally already
maintain documentation regarding their credit
decisions, including their determination of credit
risk weights, for those counterparties. We believe
that an SIBHC would have an Intermediate
Accountant create this record, which according to
SIFMA’s Report on Professional Earnings receives
an hourly rate of $141. ($141 × ((30 minutes × 20
counterparties)/60 minutes) = $1,410.
10 We believe that an SIBHC would have a
Programmer Analyst perform this task and
according to SIFMA’s Report on Professional
Earnings, a Programmer Analyst receives an hourly
rate of $193. ($193 × 24) = $4,632.
11 5 U.S.C. 552(b)(3)(B).
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
Martinson, 6432 General Green Way,
Alexandria, Virginia 22312 or send an
e-mail to PRA_Mailbox@sec.gov.
Comments must be submitted to OMB
within 30 days of this notice.
Dated: January 6, 2010.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–303 Filed 1–11–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61292; File No. SR–
NYSEAmex-2009–93]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Rule 452—
NYSE Amex Equities and Section 723
of the NYSE Amex Company Guide
Regarding Broker Discretionary Voting
for Election of Directors and on
Material Amendments to Investment
Advisory Contracts
January 5, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on December
23, 2009, NYSE Amex LLC (‘‘Exchange’’
or ‘‘NYSE Amex’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) the proposed
rule change as described in Items I and
II 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 amend
Rule 452—NYSE Amex Equities and
Section 723 of the NYSE Amex
Company Guide (the ‘‘Company Guide’’).
The text of the proposed rule change is
available at the Exchange, at the
Commission’s Public Reference Room,
on the Commission’s Web site at https://
www.sec.gov, and on the Exchange’s
Web site at https://www.nyse.com.
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,
1 15
2 17
E:\FR\FM\12JAN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
12JAN1
Federal Register / Vol. 75, No. 7 / Tuesday, January 12, 2010 / Notices
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
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
1. Purpose
NYSE Amex is proposing to amend
Rule 452—NYSE Amex Equities and
corresponding Section 723 of the
Company Guide,3 both entitled ‘‘Giving
Proxies by Member Organization,’’ to
eliminate broker discretionary voting for
the election of directors. Rule 452—
NYSE Amex Equities (and Section 723
of the Company Guide) allows brokers
to vote on ‘‘routine’’ proposals if the
beneficial owner of the stock has not
provided specific voting instructions to
the broker at least 10 days before a
scheduled meeting. However, Rule
452.11—NYSE Amex Equities (and
Commentary .11 to Section 723 of the
Company Guide) lists, by way of
example, eighteen (18) specific nonroutine matters as to which a member
organization may not give a proxy to
vote without instructions from
beneficial owners. The proposed rule
change would amend this list to include
the election of directors, except in the
case of a company registered under the
Investment Company Act of 1940. The
Exchange is also proposing to amend
this list to include material amendments
to investment advisory contracts with
an investment company in order to
codify previously existing
interpretations of the Exchange with
respect to investment advisory
contracts.
The proposed rule change is identical
to a rule change filed by the New York
Stock Exchange (‘‘NYSE’’) (the ‘‘NYSE
Rule Filing’’) that was recently approved
by the Commission 4 and will be
applicable to proxy voting for
shareholder meetings held on or after
January 1, 2010. Notwithstanding the
foregoing, the proposed amendment will
not apply to a meeting that was
originally scheduled to be held prior to
January 1, 2010 but was properly
3 Section 723 of the Company Guide is identical
to Rule 452—NYSE Amex Equities and the
proposed rule change will apply to both.
4 See Securities Exchange Act Release No. 60215
(July 1, 2009), 74 FR 33293 (July 10, 2009) (SR–
NYSE–2006–92) (‘‘NYSE Approval Order’’).
VerDate Nov<24>2008
15:14 Jan 11, 2010
Jkt 220001
adjourned to a date on or after that
date.5
The Exchange believes that the
proposed rule change is in conformity
with the view of the Commission stated
in the NYSE Approval Order that ‘‘while
other self-regulatory organizations
currently allow discretionary voting, we
would expect these markets to make
changes to conform to the NYSE’s new
rules to eliminate any disparities
involving voting depending on where
shares are held.’’ 6
Under the current NYSE Amex and
SEC proxy rules, brokers must deliver
proxy materials to beneficial owners
and request voting instructions in
return. If voting instructions have not
been received by the tenth day
preceding the meeting date, Rule 452—
NYSE Amex Equities provides that
brokers may vote on certain matters
deemed ‘‘routine’’ by the Exchange. One
of the most important results of broker
votes of uninstructed shares is their use
in establishing a quorum at shareholder
meetings.
Among the other matters which the
current Rule 452—NYSE Amex Equities
treats as routine is an ‘‘uncontested’’
election for a company’s board of
directors.7 Such elections remain the
general practice in corporate America
today, with contested elections
occurring relatively infrequently.
However, in recent years the
definition of a ‘‘contested election’’ has
been questioned by a number of parties
and interest groups.8 This is because of
5 In the process of making its determination that
the election of directors should no longer be
deemed to be a ‘‘routine matter’’ and that broker
discretionary voting for the election of directors
should be eliminated, the NYSE in 2005 created a
Proxy Working Group to review and make
recommendations with respect to the NYSE rules
regulating the proxy voting process. The Proxy
Working Group contained representatives from a
number of different constituencies, all of whom
have significant experience with the proxy voting
process. One of the recommendations that came
from the Proxy Working Group was that the
proposed changes to NYSE Rule 452 should not
apply to any company registered under the
Investment Company Act of 1940, and this
exception was adopted by the NYSE. For a full
discussion of the role of the Proxy Working Group,
see the NYSE Rule Filing.
6 NYSE Approval Order, 74 FR at 33298, n. 69.
7 Rule 452.11(2)—NYSE Amex Equities defines a
‘‘contest’’ as a matter that ‘‘is the subject of a
counter-solicitation, or is part of a proposal made
by a stockholder which is being opposed by
management.’’
8 For example, in 2002, the Council of
Institutional Investors publicly criticized in the
media the NYSE’s definition of ‘‘contests’’ (which is
exactly identical to NYSE Amex’s definition of the
term) as ‘‘problematic’’ because it fails to classify as
contests ‘‘just vote no’’ campaigns, it fails to
recognize the use of the Internet as a means of
contesting management, it puts ADP in an
inappropriate and conflicted role, and it is
inconsistent with securities laws which recognize
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
1665
the rise of a number of new types of
proxy campaigns, including ‘‘just vote
no’’ campaigns. Because these
campaigns often do not result in
competing solicitations, historically
these efforts have not been considered
‘‘contests’’ for purposes of Rule 452—
NYSE Amex Equities, and thus broker
votes have been counted. This has
drawn the ire of some investor groups
since generally brokers vote
uninstructed shares in accordance with
the incumbent board’s
recommendations.
On ‘‘non-routine’’ matters, which
generally speaking are those involving a
contest or any matter which may affect
substantially the rights or privileges of
stockholders, NYSE Amex rules prohibit
brokers from voting without receiving
instructions from the beneficial owners.
At present, Rule 452.11—NYSE Amex
Equities lists by way of example
eighteen such ‘‘non-routine’’ matters,
including items such as stockholder
proposals opposed by management, and
mergers or consolidations.
The NYSE has amended NYSE Rule
452, and corresponding NYSE Listed
Company Manual Section 402.08, to
eliminate broker discretionary voting for
the election of directors, but to except
from that amendment companies
registered under the Investment
Company Act of 1940. The Commission
has stated in the NYSE Approval Order
that it expects other markets to make
changes to their comparable rules to
conform to the NYSE’s new rules and
eliminate any disparities involving
voting. Consequently, NYSE Amex
proposes herein to amend Rule 452—
NYSE Amex Equities, and
corresponding Section 723 of the
Company Guide (which closely track
NYSE Rule 452 and NYSE Listed
Company Manual Section 402.08,
respectively, prior to their recent
amendment), to eliminate broker
discretionary voting for the election of
directors, but to except from that
amendment companies registered under
the Investment Company Act of 1940.
Effective Date
The proposed amendment will be
applicable to proxy voting for
the validity of exempt solicitations. In a letter to the
SEC dated June 13, 2003, Institutional Shareholders
Services expressed concern that because ‘‘the NYSE
classifies the election of directors as a routine
voting item unless a full-blown proxy contest has
erupted,’’ the efforts of shareholders to express
disapproval of board actions at companies like
Sprint and Tyco in the 2003 proxy season were
‘‘watered down by broker votes.’’ Moreover, in their
presentations to the Proxy Working Group, several
groups recommended that the definition of a
contest be expanded or changed, including the
AFL–CIO and the American Business Conference.
E:\FR\FM\12JAN1.SGM
12JAN1
1666
Federal Register / Vol. 75, No. 7 / Tuesday, January 12, 2010 / Notices
shareholder meetings held on or after
January 1, 2010. Notwithstanding the
foregoing, the proposed amendment will
not apply to a meeting that was
originally scheduled to be held prior to
January 1, 2010 but was properly
adjourned to a date on or after that date.
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
Material Amendments to Investment
Contracts
In addition to the current 18 specific
actions set out in Supplementary
Material .11 to NYSE Rule 452, the
NYSE has long interpreted NYSE Rule
452 to preclude member organizations
from voting without instructions in
certain other situations, including on
any material amendment to the
investment advisory contract with an
investment company.9
In addition, in 2005, the NYSE
published an interpretation,10 pursuant
to a request from the SEC’s Division of
Investment Management, that provided
that any proposal to obtain shareholder
approval of an investment company’s
investment advisory contract with a
new investment adviser, which
approval is required by the Investment
Company Act of 1940, as amended (the
‘‘1940 Act’’), and the rules thereunder,
will be deemed to be a ‘‘matter which
may affect substantially the rights or
privileges of such stock’’ for purposes of
NYSE Rule 452 so that a member
organization may not give a proxy to
vote shares registered in its name absent
instruction from the beneficial holder of
the shares. As a result, for example, a
member organization of the NYSE may
not give a proxy to vote shares
registered in its name, absent
instruction from the beneficial holder of
the shares, on any proposal to obtain
shareholder approval required by the
1940 Act of an investment advisory
contract between an investment
company and a new investment adviser
due to an assignment of the investment
company’s investment advisory
contract, including an assignment
caused by a change in control of the
investment adviser that is party to the
assigned contract.
Also in 2005, immediately following
publication of the NYSE’s interpretation
referenced in the preceding paragraph,
the Exchange’s predecessor, the
American Stock Exchange LLC
(‘‘Amex’’), also filed a rule change with
the Commission establishing the exact
same interpretation with respect to
9 See Securities Exchange Act Release No. 30697
(May 13, 1992), 57 FR 21434 (May 20, 1992) (SR–
NYSE–1992–05).
10 See Securities Exchange Act Release No. 52569
(October 6, 2005), 70 FR 60118 (October 14, 2005)
(SR–NYSE–2005–61).
VerDate Nov<24>2008
15:14 Jan 11, 2010
Jkt 220001
investment advisory contracts.11 Noting
that ‘‘[a] proposed rule change filed by
the NYSE of its interpretation of its rule
governing proxies by member
organizations on votes relating to
changes to investment advisory
contracts recently became effective,’’ the
Amex Interpretation Release stated,
‘‘Following discussions with the staff of
the Commission’s Division of
Investment Management, the Amex has
determined to adopt a comparable
interpretation of [Amex] Rule 577 to
conform to the NYSE interpretation.’’ 12
The NYSE has amended NYSE Rule
452, and corresponding NYSE Listed
Company Manual Section 402.08, to
specifically codify these interpretations
in its rules. Consistent with the previous
adoption by Amex of these NYSE
interpretations with respect to
investment advisory contracts, the
Exchange proposes herein to amend
Rule 452—NYSE Amex Equities, and
corresponding Section 723 of the
Company Guide (which closely track
NYSE Rule 452 and NYSE Listed
Company Manual Section 402.08,
respectively, prior to their recent
amendment), to specifically codify these
interpretations in the Exchange’s rules
as well.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 13 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest. Specifically, the
Exchange believes that the proposed
rule change will protect investors and
the public interest by ensuring better
corporate governance and transparency
of the election process for directors and
by promoting greater uniformity with
the proxy rules of other exchanges. In
particular, for Exchange member firms
that are also NYSE member firms,
confusion might arise as to which
exchange’s proxy voting rules are
applicable to a company listed on the
Exchange if there are disparities
between the rules of the Exchange and
the NYSE. The proposal should further
the protection of investors and the
public interest by assuring that voting
on matters as critical as the election of
11 See Securities Exchange Act Release No. 52765
(November 10, 2005), 70 FR 69999 (November 18,
2005) (SR–Amex–2005–102) (‘‘Amex Interpretation
Release’’).
12 Id.
13 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
directors can no longer be determined
by brokers without instructions from the
beneficial owner, and thus should
enhance corporate governance and
accountability to shareholders.
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.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 14 and Rule
19b–4(f)(6) thereunder.15 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) by its terms,
become operative prior to 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, if consistent with the
protection of investors and the public
interest, the proposed rule change has
become effective pursuant to Section
19(b)(3)(A) of the Act 16 and Rule 19b–
4(f)(6)(iii) thereunder.17
A proposed rule change filed under
Rule 19b–4(f)(6) 18 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),19 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has requested the Commission
to waive the 30-day operative delay so
that the proposal may become operative
immediately upon filing. In making this
request, the Exchange stated, among
14 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
16 15 U.S.C. 78s(b)(3)(A).
17 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied the pre-filing requirement.
18 17 CFR 240.19b–4(f)(6).
19 17 CFR 240.19b–4(f)(6)(iii).
15 17
E:\FR\FM\12JAN1.SGM
12JAN1
Federal Register / Vol. 75, No. 7 / Tuesday, January 12, 2010 / Notices
other things, that waiver of the 30-day
operative delay will allow the change to
become operative on the same date as
NYSE’s rule change and conform to the
Commission’s desire to eliminate any
disparities involving voting.
The Commission believes that the
waiver of the 30-day operative delay
period is consistent with the protection
of investors and the public interest.20
The proposal would permit the
Exchange to comply with the
Commission’s stated goal that other selfregulatory organizations, that currently
allow member discretionary voting for
director elections, conform their rules to
the NYSE’s new rules to eliminate any
disparities involving voting depending
on where the shares are held. Further,
the proposal would codify previously
published interpretations with respect
to voting on investment advisory
contracts. Finally, the Commission
notes that the NYSE’s recently adopted
rule changes, which are identical to the
Exchange’s proposed changes, were
subject to full notice and comment, and
considered and approved by the
Commission.21 Based on the above, the
Commission finds that waiving the 30day operative delay period is consistent
with the protection of investors and the
public interest and the proposal is
therefore deemed effective upon filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
Electronic Comments
20 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
21 See supra note 4.
15:14 Jan 11, 2010
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEAmex–2009–93. This
file number should be included on the
subject line if e-mail 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 inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such 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–NYSEAmex–2009–93 and
should be submitted on or before
February 2, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–308 Filed 1–11–10; 8:45 am]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEAmex–2009–93 on
the subject line.
VerDate Nov<24>2008
Paper Comments
Jkt 220001
BILLING CODE 8011–01–P
1667
SECURITIES AND EXCHANGE
COMMISSION
Release No. 34–61296; File No. SR–ISE–
2009–114]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to Fee Changes
January 6, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
31, 2009, International Securities
Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the Exchange.
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 ISE is proposing to amend its
Schedule of Fees to increase the
surcharge fee for transactions in options
on the Nasdaq-100® Stock Index. The
text of the proposed rule change is
available on the Exchange’s Web site
(https://www.ise.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
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
its Schedule of Fees to increase the
surcharge fee for transactions in options
1 15
22 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00085
Fmt 4703
Sfmt 4703
2 17
E:\FR\FM\12JAN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
12JAN1
]]>Agencies
[Federal Register Volume 75, Number 7 (Tuesday, January 12, 2010)]
[Notices]
[Pages 1664-1667]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-308]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61292; File No. SR-NYSEAmex-2009-93]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending Rule 452--
NYSE Amex Equities and Section 723 of the NYSE Amex Company Guide
Regarding Broker Discretionary Voting for Election of Directors and on
Material Amendments to Investment Advisory Contracts
January 5, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on December 23, 2009, NYSE Amex LLC (``Exchange'' or ``NYSE
Amex'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I and II 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 452--NYSE Amex Equities and
Section 723 of the NYSE Amex Company Guide (the ``Company Guide''). The
text of the proposed rule change is available at the Exchange, at the
Commission's Public Reference Room, on the Commission's Web site at
https://www.sec.gov, and on the Exchange's Web site at https://www.nyse.com.
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,
[[Page 1665]]
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
NYSE Amex is proposing to amend Rule 452--NYSE Amex Equities and
corresponding Section 723 of the Company Guide,\3\ both entitled
``Giving Proxies by Member Organization,'' to eliminate broker
discretionary voting for the election of directors. Rule 452--NYSE Amex
Equities (and Section 723 of the Company Guide) allows brokers to vote
on ``routine'' proposals if the beneficial owner of the stock has not
provided specific voting instructions to the broker at least 10 days
before a scheduled meeting. However, Rule 452.11--NYSE Amex Equities
(and Commentary .11 to Section 723 of the Company Guide) lists, by way
of example, eighteen (18) specific non-routine matters as to which a
member organization may not give a proxy to vote without instructions
from beneficial owners. The proposed rule change would amend this list
to include the election of directors, except in the case of a company
registered under the Investment Company Act of 1940. The Exchange is
also proposing to amend this list to include material amendments to
investment advisory contracts with an investment company in order to
codify previously existing interpretations of the Exchange with respect
to investment advisory contracts.
---------------------------------------------------------------------------
\3\ Section 723 of the Company Guide is identical to Rule 452--
NYSE Amex Equities and the proposed rule change will apply to both.
---------------------------------------------------------------------------
The proposed rule change is identical to a rule change filed by the
New York Stock Exchange (``NYSE'') (the ``NYSE Rule Filing'') that was
recently approved by the Commission \4\ and will be applicable to proxy
voting for shareholder meetings held on or after January 1, 2010.
Notwithstanding the foregoing, the proposed amendment will not apply to
a meeting that was originally scheduled to be held prior to January 1,
2010 but was properly adjourned to a date on or after that date.\5\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 60215 (July 1,
2009), 74 FR 33293 (July 10, 2009) (SR-NYSE-2006-92) (``NYSE
Approval Order'').
\5\ In the process of making its determination that the election
of directors should no longer be deemed to be a ``routine matter''
and that broker discretionary voting for the election of directors
should be eliminated, the NYSE in 2005 created a Proxy Working Group
to review and make recommendations with respect to the NYSE rules
regulating the proxy voting process. The Proxy Working Group
contained representatives from a number of different constituencies,
all of whom have significant experience with the proxy voting
process. One of the recommendations that came from the Proxy Working
Group was that the proposed changes to NYSE Rule 452 should not
apply to any company registered under the Investment Company Act of
1940, and this exception was adopted by the NYSE. For a full
discussion of the role of the Proxy Working Group, see the NYSE Rule
Filing.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is in
conformity with the view of the Commission stated in the NYSE Approval
Order that ``while other self-regulatory organizations currently allow
discretionary voting, we would expect these markets to make changes to
conform to the NYSE's new rules to eliminate any disparities involving
voting depending on where shares are held.'' \6\
---------------------------------------------------------------------------
\6\ NYSE Approval Order, 74 FR at 33298, n. 69.
---------------------------------------------------------------------------
Under the current NYSE Amex and SEC proxy rules, brokers must
deliver proxy materials to beneficial owners and request voting
instructions in return. If voting instructions have not been received
by the tenth day preceding the meeting date, Rule 452--NYSE Amex
Equities provides that brokers may vote on certain matters deemed
``routine'' by the Exchange. One of the most important results of
broker votes of uninstructed shares is their use in establishing a
quorum at shareholder meetings.
Among the other matters which the current Rule 452--NYSE Amex
Equities treats as routine is an ``uncontested'' election for a
company's board of directors.\7\ Such elections remain the general
practice in corporate America today, with contested elections occurring
relatively infrequently.
---------------------------------------------------------------------------
\7\ Rule 452.11(2)--NYSE Amex Equities defines a ``contest'' as
a matter that ``is the subject of a counter-solicitation, or is part
of a proposal made by a stockholder which is being opposed by
management.''
---------------------------------------------------------------------------
However, in recent years the definition of a ``contested election''
has been questioned by a number of parties and interest groups.\8\ This
is because of the rise of a number of new types of proxy campaigns,
including ``just vote no'' campaigns. Because these campaigns often do
not result in competing solicitations, historically these efforts have
not been considered ``contests'' for purposes of Rule 452--NYSE Amex
Equities, and thus broker votes have been counted. This has drawn the
ire of some investor groups since generally brokers vote uninstructed
shares in accordance with the incumbent board's recommendations.
---------------------------------------------------------------------------
\8\ For example, in 2002, the Council of Institutional Investors
publicly criticized in the media the NYSE's definition of
``contests'' (which is exactly identical to NYSE Amex's definition
of the term) as ``problematic'' because it fails to classify as
contests ``just vote no'' campaigns, it fails to recognize the use
of the Internet as a means of contesting management, it puts ADP in
an inappropriate and conflicted role, and it is inconsistent with
securities laws which recognize the validity of exempt
solicitations. In a letter to the SEC dated June 13, 2003,
Institutional Shareholders Services expressed concern that because
``the NYSE classifies the election of directors as a routine voting
item unless a full-blown proxy contest has erupted,'' the efforts of
shareholders to express disapproval of board actions at companies
like Sprint and Tyco in the 2003 proxy season were ``watered down by
broker votes.'' Moreover, in their presentations to the Proxy
Working Group, several groups recommended that the definition of a
contest be expanded or changed, including the AFL-CIO and the
American Business Conference.
---------------------------------------------------------------------------
On ``non-routine'' matters, which generally speaking are those
involving a contest or any matter which may affect substantially the
rights or privileges of stockholders, NYSE Amex rules prohibit brokers
from voting without receiving instructions from the beneficial owners.
At present, Rule 452.11--NYSE Amex Equities lists by way of example
eighteen such ``non-routine'' matters, including items such as
stockholder proposals opposed by management, and mergers or
consolidations.
The NYSE has amended NYSE Rule 452, and corresponding NYSE Listed
Company Manual Section 402.08, to eliminate broker discretionary voting
for the election of directors, but to except from that amendment
companies registered under the Investment Company Act of 1940. The
Commission has stated in the NYSE Approval Order that it expects other
markets to make changes to their comparable rules to conform to the
NYSE's new rules and eliminate any disparities involving voting.
Consequently, NYSE Amex proposes herein to amend Rule 452--NYSE Amex
Equities, and corresponding Section 723 of the Company Guide (which
closely track NYSE Rule 452 and NYSE Listed Company Manual Section
402.08, respectively, prior to their recent amendment), to eliminate
broker discretionary voting for the election of directors, but to
except from that amendment companies registered under the Investment
Company Act of 1940.
Effective Date
The proposed amendment will be applicable to proxy voting for
[[Page 1666]]
shareholder meetings held on or after January 1, 2010. Notwithstanding
the foregoing, the proposed amendment will not apply to a meeting that
was originally scheduled to be held prior to January 1, 2010 but was
properly adjourned to a date on or after that date.
Material Amendments to Investment Contracts
In addition to the current 18 specific actions set out in
Supplementary Material .11 to NYSE Rule 452, the NYSE has long
interpreted NYSE Rule 452 to preclude member organizations from voting
without instructions in certain other situations, including on any
material amendment to the investment advisory contract with an
investment company.\9\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 30697 (May 13,
1992), 57 FR 21434 (May 20, 1992) (SR-NYSE-1992-05).
---------------------------------------------------------------------------
In addition, in 2005, the NYSE published an interpretation,\10\
pursuant to a request from the SEC's Division of Investment Management,
that provided that any proposal to obtain shareholder approval of an
investment company's investment advisory contract with a new investment
adviser, which approval is required by the Investment Company Act of
1940, as amended (the ``1940 Act''), and the rules thereunder, will be
deemed to be a ``matter which may affect substantially the rights or
privileges of such stock'' for purposes of NYSE Rule 452 so that a
member organization may not give a proxy to vote shares registered in
its name absent instruction from the beneficial holder of the shares.
As a result, for example, a member organization of the NYSE may not
give a proxy to vote shares registered in its name, absent instruction
from the beneficial holder of the shares, on any proposal to obtain
shareholder approval required by the 1940 Act of an investment advisory
contract between an investment company and a new investment adviser due
to an assignment of the investment company's investment advisory
contract, including an assignment caused by a change in control of the
investment adviser that is party to the assigned contract.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 52569 (October 6,
2005), 70 FR 60118 (October 14, 2005) (SR-NYSE-2005-61).
---------------------------------------------------------------------------
Also in 2005, immediately following publication of the NYSE's
interpretation referenced in the preceding paragraph, the Exchange's
predecessor, the American Stock Exchange LLC (``Amex''), also filed a
rule change with the Commission establishing the exact same
interpretation with respect to investment advisory contracts.\11\
Noting that ``[a] proposed rule change filed by the NYSE of its
interpretation of its rule governing proxies by member organizations on
votes relating to changes to investment advisory contracts recently
became effective,'' the Amex Interpretation Release stated, ``Following
discussions with the staff of the Commission's Division of Investment
Management, the Amex has determined to adopt a comparable
interpretation of [Amex] Rule 577 to conform to the NYSE
interpretation.'' \12\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 52765 (November 10,
2005), 70 FR 69999 (November 18, 2005) (SR-Amex-2005-102) (``Amex
Interpretation Release'').
\12\ Id.
---------------------------------------------------------------------------
The NYSE has amended NYSE Rule 452, and corresponding NYSE Listed
Company Manual Section 402.08, to specifically codify these
interpretations in its rules. Consistent with the previous adoption by
Amex of these NYSE interpretations with respect to investment advisory
contracts, the Exchange proposes herein to amend Rule 452--NYSE Amex
Equities, and corresponding Section 723 of the Company Guide (which
closely track NYSE Rule 452 and NYSE Listed Company Manual Section
402.08, respectively, prior to their recent amendment), to specifically
codify these interpretations in the Exchange's rules as well.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \13\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
Specifically, the Exchange believes that the proposed rule change will
protect investors and the public interest by ensuring better corporate
governance and transparency of the election process for directors and
by promoting greater uniformity with the proxy rules of other
exchanges. In particular, for Exchange member firms that are also NYSE
member firms, confusion might arise as to which exchange's proxy voting
rules are applicable to a company listed on the Exchange if there are
disparities between the rules of the Exchange and the NYSE. The
proposal should further the protection of investors and the public
interest by assuring that voting on matters as critical as the election
of directors can no longer be determined by brokers without
instructions from the beneficial owner, and thus should enhance
corporate governance and accountability to shareholders.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) by its terms, become
operative prior to 30 days from the date on which it was filed, or such
shorter time as the Commission may designate, if consistent with the
protection of investors and the public interest, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the Act
\16\ and Rule 19b-4(f)(6)(iii) thereunder.\17\
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the Exchange to give the Commission written
notice of the Exchange's intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied the pre-filing requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\19\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested the Commission to waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. In making
this request, the Exchange stated, among
[[Page 1667]]
other things, that waiver of the 30-day operative delay will allow the
change to become operative on the same date as NYSE's rule change and
conform to the Commission's desire to eliminate any disparities
involving voting.
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission believes that the waiver of the 30-day operative
delay period is consistent with the protection of investors and the
public interest.\20\ The proposal would permit the Exchange to comply
with the Commission's stated goal that other self-regulatory
organizations, that currently allow member discretionary voting for
director elections, conform their rules to the NYSE's new rules to
eliminate any disparities involving voting depending on where the
shares are held. Further, the proposal would codify previously
published interpretations with respect to voting on investment advisory
contracts. Finally, the Commission notes that the NYSE's recently
adopted rule changes, which are identical to the Exchange's proposed
changes, were subject to full notice and comment, and considered and
approved by the Commission.\21\ Based on the above, the Commission
finds that waiving the 30-day operative delay period is consistent with
the protection of investors and the public interest and the proposal is
therefore deemed effective upon filing.
---------------------------------------------------------------------------
\20\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\21\ See supra note 4.
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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 e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEAmex-2009-93 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAmex-2009-93.
This file number should be included on the subject line if e-mail 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 inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such 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-NYSEAmex-2009-93 and should
be submitted on or before February 2, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
---------------------------------------------------------------------------
\22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-308 Filed 1-11-10; 8:45 am]
BILLING CODE 8011-01-P
