Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Amend BYX Rule 13.3 To Prohibit Members From Voting Uninstructed Shares on Certain Matters and To Align BYX Rule 13.3, Concerning the Forwarding of Proxy and Other Material and Proxy Voting, With the Rules of Other Self-Regulatory Organizations, 62103-62107 [2011-25792]
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Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
opportunities and flexibility and the
ability to more closely tailor their
investment and risk management
strategies and decisions. Therefore, the
Exchange requests a modest expansion
of the current Weeklys Program.
It is expected that other options
exchanges that have adopted a Weeklys
Program will submit similar proposals.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) 7 of the Act and the rules
and regulations under the Act, in
general, and furthers the objectives of
Section 6(b)(5),8 in particular, in that it
is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanisms of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
Exchange believes that expanding the
number of series per option class
eligible to participate in the Weeklys
Program will allow the investing public
and other market participants to better
manage their risk exposure, and would
benefit investors by giving them more
flexibility to closely tailor their
investment decisions in a greater
number of securities. While the
expansion of the Weeklys Program will
generate additional quote traffic, the
Exchange does not believe that this
increased traffic will become
unmanageable since the proposal is
limited to a fixed number of series per
class. Further, the Exchange does not
believe that the proposal will result in
a material proliferation of additional
series because it is limited to a fixed
number of series per class and the
Exchange does not believe that the
additional price points will result in
fractured liquidity.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.
7 15
U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
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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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
As the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
such 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:
62103
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
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of CBOE.
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 publicly available. All
submissions should refer to File
Number SR–CBOE–2011–086 and
should be submitted on or before
October 27, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–25793 Filed 10–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65448; File No. SR–BYX–
2011–024]
Electronic Comments
• 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–CBOE–2011–086 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–CBOE–2011–086. 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
PO 00000
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Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change To Amend
BYX Rule 13.3 To Prohibit Members
From Voting Uninstructed Shares on
Certain Matters and To Align BYX Rule
13.3, Concerning the Forwarding of
Proxy and Other Material and Proxy
Voting, With the Rules of Other SelfRegulatory Organizations
September 30, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or the ‘‘Exchange Act’’),1 and
Rule 19b–4 thereunder,2 notice is
hereby given that on September 16,
2011, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
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 and is
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
approving the proposed rule change on
an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to amend
BYX Rule 13.3, entitled ‘‘Forwarding of
Issuer Materials,’’ in accordance with
the provisions of Section 957 of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (the ‘‘DoddFrank Act’’). The Exchange is also
proposing changes to BYX Rule 13.3 in
order to better align the Exchange’s rule
with the rules of other self-regulatory
organizations (‘‘SROs’’).
The text of the proposed rule addition
is available at the Exchange’s Web site
at https://www.batstrading.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 parts of such
statements.
mstockstill on DSK4VPTVN1PROD with NOTICES
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Section 957 of the Dodd-Frank Act
amends Section 6(b) of the Act 3 to
require the rules of each national
securities exchange to prohibit any
member organization that is not the
beneficial owner of a security registered
under Section 12 of the Act 4 from
granting a proxy to vote the security in
connection with certain stockholder
votes, unless the beneficial owner of the
security has instructed the member
organization to vote the proxy in
accordance with the voting instructions
of the beneficial owner. The stockholder
votes covered by Section 957 include
any vote with respect to (i) the election
of a member of the board of directors of
an issuer (other than an uncontested
election of a director of an investment
company registered under the
3 15
4 15
U.S.C. 78f(b).
U.S.C. 78l.
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Investment Company Act), (ii) executive
compensation, or (iii) any other
significant matter, as determined by the
Commission, by rule.
Accordingly, in order to carry out the
requirements of Section 957 of the
Dodd-Frank Act, the Exchange proposes
to add new paragraph (b) to BYX Rule
13.3 to prohibit a Member from giving
a proxy to vote stock that is registered
in its name, unless: (i) Such Member is
the beneficial owner of such stock; (ii)
such proxy is given pursuant to the
written instructions of the beneficial
owner; or (iii) such proxy is given
pursuant to the rules of any national
securities exchange or association of
which it is a member provided that the
records of the Member clearly indicate
the procedure it is following. The
Exchange is proposing to adopt these
rules because other national securities
exchanges and associations do allow
proxy voting under certain limited
circumstances while the current
Exchange Rules are silent on such
matters. Therefore, a Member that is
also a member of another national
securities exchange or association may
vote the shares held for a customer
when allowed under its membership at
another national securities exchange or
association, provided that the records of
the Member clearly indicate the
procedure it is following.
Notwithstanding the above, as
proposed in new paragraph (c) to Rule
13.3, a Member that is not the beneficial
owner of a security registered under
Section 12 of the Exchange Act is
prohibited from granting a proxy to vote
the security in connection with a
shareholder vote on the election of a
member of the board of directors of an
issuer (except for a vote with respect to
uncontested election of a member of the
board of directors of any investment
company registered under the
Investment Company Act of 1940),
executive compensation, or any other
significant matter, as determined by the
Commission, by rule, unless the
beneficial owner of the security has
instructed the Member to vote the proxy
in accordance with the voting
instructions of the beneficial owner.
In order to promote consistency with
FINRA Rule 2251, the Exchange also
proposes to add language to the existing
text of Rule 13.3 to state that for
beneficial owners, the proxy materials
or other materials to be forwarded on
behalf of an issuer can be sent to the
beneficial owner’s designated
investment adviser, if applicable. In
conjunction with this change, the
Exchange proposes to adopt the
definition of ‘‘designated investment
adviser’’ set forth in FINRA Rule 2251(f)
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as Interpretation and Policy .01 to Rule
13.3.
Similarly, the Exchange proposes to
add new paragraph (d) to Rule 13.3,
based entirely on FINRA Rule 2251(d),
to explicitly state that a Member may
give a proxy to vote any stock registered
in its name if such Member holds such
stock as executor, administrator,
guardian, trustee, or in a similar
representative or fiduciary capacity with
authority to vote. Proposed paragraph
(d) will also state that a Member that has
in its possession or within its control
stock registered in the name of another
Member and that desires to transmit
signed proxies pursuant to the
provisions of paragraph (a) of Rule 13.3,
shall obtain the requisite number of
signed proxies from such holder of
record. Lastly, proposed paragraph (d)
also states that, notwithstanding the
foregoing: (1) Any Member designated
by a named Employee Retirement
Income Security Act of 1974 (as
amended) (‘‘ERISA’’) Plan fiduciary as
the investment manager of stock held as
assets of the ERISA Plan may vote the
proxies in accordance with the ERISA
Plan fiduciary responsibilities if the
ERISA Plan expressly grants discretion
to the investment manager to manage,
acquire, or dispose of any plan asset and
has not expressly reserved the proxy
voting right for the named ERISA Plan
fiduciary; and (2) any designated
investment adviser may vote such
proxies.
The Exchange also proposes
modifying the text of Rule 13.3, which
currently would require forwarding of
proxy material but which does not
explicitly reference such material, to
add such an explicit reference. The
Exchange further proposes to modify the
text of Rule 13.3 to reference ‘‘security
holders,’’ rather than stockholders, in
the initial sentence, to ensure that the
coverage of the rule applies to all
securities, including debt securities to
the extent applicable, and not just
equity securities. The Exchange also
proposes to incorporate certain language
from FINRA Rule 2251 that provides
additional detail regarding the material
that must be provided to beneficial
owners in the event of a proxy
solicitation. Specifically, Rule 13.3 as
amended will state that in the event of
a proxy solicitation, materials provided
pursuant to the Rule shall include a
signed proxy indicating the number of
shares held for such beneficial owner
and bearing a symbol identifying the
proxy with proxy records maintained by
the Member, and a letter informing the
beneficial owner (or the beneficial
owner’s designated investment adviser)
of the time limit and necessity for
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Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
completing the proxy form and
forwarding it to the person soliciting
proxies prior to the expiration of the
time limit in order for the shares to be
represented at the meeting. The Rule
will also require a Member to furnish a
copy of the symbols to the person
soliciting the proxies and shall also
retain a copy thereof pursuant to the
provisions of Exchange Act Rule 17a–4.
Finally, the Exchange proposes to
modify the title of Rule 13.3 to include
reference to proxy voting.
The Exchange believes that these
additional changes to Rule 13.3 will
help to avoid confusion by Members of
the Exchange that are also members of
FINRA by further aligning the
Exchange’s rules with FINRA Rule 2251.
In addition, the Exchange notes that it
is party to an agreement with FINRA
pursuant to which certain regulatory
responsibility to examine and enforce
common rules of the Exchange and
FINRA is allocated to FINRA pursuant
to Rule 17d–2 under the Act (the ‘‘17d–
2 Agreement’’).5 The proposed changes
to Rule 13.3 may be sufficient to
incorporate Rule 13.3 into the 17d–2
Agreement, further reducing duplicative
regulation of Members that are also
members of FINRA.
2. Statutory Basis
Approval of the rule change proposed
in this submission is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the Act.6
The Exchange believes that proposed
Rule 13.3(c) is consistent with Section
6(b)(10) 7 requirements that all national
securities exchanges adopt rules
prohibiting members from voting,
without receiving instructions from the
beneficial owner of shares, on the
election of a member of a board of
directors of an issuer (except for a vote
with respect to the uncontested election
of a member of the board of directors of
any investment company registered
under the Investment Company Act of
1940), executive compensation, or any
other significant matter, as determined
by the Commission, by rule. The
Exchange also believes that proposed
Rule 13.3(c) is consistent with Section
6(b)(5) of the Act,8 because it would
promote just and equitable principles of
trade, remove impediments to, and
perfect the mechanism of, a free and
open market and a national market
CFR 240.17d–2.
U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(10).
8 15 U.S.C. 78f(b)(5).
system, and, in general, protect
investors and the public interest. The
Exchange is adopting proposed Rule
13.3(c) to comply with the requirements
of Section 957 of the Dodd-Frank Act,
and therefore believes the proposed rule
change to be consistent with the Act,
particularly with respect to the
protection of investors and the public
interest.
The Exchange also believes that
proposed Rule 13.3(b) is consistent with
Section 6(b)(5) of the Act,9 particularly
with respect to removal of impediments
to, and perfection the mechanism of, a
free and open market and a national
market system, because the proposed
changes will provide for consistent
regulation for Members of the Exchange
that are members of other SROs with
analogous rules.10 Moreover, the
proposed changes to Rule 13.3(a),
proposed Rule 13.3(d), and proposed
Interpretation and Policy .01 are
consistent with FINRA Rule 2251.
Accordingly, the Exchange believes that
the proposal fosters cooperation
amongst SROs because to the extent the
Exchange is able to incorporate Rule
13.3 into the 17d–2 Agreement as a rule
in common between the Exchange and
FINRA (a ‘‘Common Rule’’), then FINRA
will conduct a review for compliance
with the Common Rule to the extent a
Member of the Exchange is also a
member of FINRA, and the Exchange
will not conduct a duplicative review of
the same activity by that Member.
Finally, the Exchange believes that
the proposal will contribute to investor
protection by defining important
requirements to which Members must
abide with respect to proxy solicitation,
proxy voting and delivery of proxy
materials.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change imposes any
burden on competition.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
5 17
6 15
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16:07 Oct 05, 2011
9 Id.
10 See, e.g., FINRA Rule 2251, ISE Rule 421,
NYSE Arca Rule 9.4, and Nasdaq Rule 2251.
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62105
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 rulecomments@sec.gov. Please include File
Number SR–BYX–2011–024 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–BYX–2011–024. 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 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
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–BYX–
2011–024 and should be submitted on
or before October 27, 2011.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
In its filing, the Exchange requested
that the Commission approve the
proposal on an accelerated basis so that
the Exchange could comply with the
requirements imposed by the DoddFrank Act, and because the proposed
rule text is based upon FINRA Rule
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Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
2251, as well as ISE Rule 421, Nasdaq
Rule 2251, and NYSE Arca Rule 9.4.11
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.12
The Commission believes that
proposed Rule 13.3(b) is consistent with
Section 6(b)(5) 13 of the Act, which
provides, among other things, that the
rules of the Exchange must be designed
to promote just and equitable principles
of trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest, and
are not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
Under proposed Rule 13.3(b), a
Member shall be prohibited from voting
uninstructed shares unless (1) That
Member is the beneficial owner of the
stock; (2) pursuant to the written
instructions of the beneficial owner; or
(3) pursuant to the rules of any national
securities exchange or association of
which it is also a member, provided that
the Member’s records clearly indicate
the procedure it is following. This
provision is based on ISE Rule 421,
FINRA Rule 2251 and NYSE Arca Rule
9.4, which were previously approved by
the Commission.14 The Commission
notes that the proposed change will
provide clarity to Exchange Members
going forward on whether broker
discretionary voting is permitted by
Exchange Members under limited
circumstances when the Member is also
a member of another national securities
exchange or association that permits
broker discretionary voting. In
approving this portion of the proposal,
the Commission notes that Rule 13.3(b)
is consistent with the approach taken
under the rules of other national
securities exchanges or national
securities association, and for Exchange
Members who are not also members of
11 See Securities Exchange Act Release 63139
(October 20, 2010), 75 FR 65680 (October 26, 2010)
(SR–ISE–2010–99); 61052 (November 23, 2009), 74
FR 62857 (December 1, 2009) (SR–FINRA–2009–
066) (finding that the proposed rule change was
consistent with the Act because the Rule ‘‘will
continue to provide FINRA members with guidance
on the forwarding of proxy and other issuer-related
materials.’’); 62992 (September 24, 2010), 75 FR
60844 (October 1, 2010) (SR–NASDAQ–2010–114);
and 48735 (October 31, 2003), 68 FR 63173
(November 7, 2003) (SR–PCX–2003–50).
12 In approving this rule change, the Commission
notes that it has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
13 15 U.S.C. 78f(b)(5).
14 See supra note 11.
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16:07 Oct 05, 2011
Jkt 226001
another national securities exchange or
association prohibits broker
discretionary voting on any matter,
consistent with investor protection and
the public interest.
The Commission believes that
proposed Rule 13.3(c) is consistent with
Section 6(b)(10) 15 of the Act, which
requires that national securities
exchanges adopt rules prohibiting
members that are not beneficial holders
of a security from voting uninstructed
proxies with respect to the election of a
member of the board of directors of an
issuer (except for uncontested elections
of directors for companies registered
under the Investment Company Act),
executive compensation, or any other
significant matter, as determined by the
Commission by rule.
The Commission believes that
proposed Rule 13.3(c) is consistent with
Section 6(b)(10) of the Act because it
adopts revisions that comply with that
section. As noted in the accompanying
Senate Report, Section 957, which
enacted Section 6(b)(10), reflects the
principle that ‘‘final vote tallies should
reflect the wishes of the beneficial
owners of the stock and not be affected
by the wishes of the broker that holds
the shares.’’ 16 The proposed rule
change will make the Exchange
compliant with the new requirements of
Section 6(b)(10) by specifically
prohibiting broker-dealers, who are not
beneficial owners of a security, from
voting uninstructed shares in
connection with a shareholder vote on
the election of a member of the board of
directors of an issuer (except for a vote
with respect to the uncontested election
of a member of the board of directors of
any investment company registered
under the Investment Company Act of
1940), executive compensation, or any
other significant matter, as determined
by the Commission by rule, unless the
member receives voting instructions
from the beneficial owner of the
shares.17
The Commission also believes that
proposed Rule 13.3(c) is consistent with
Section 6(b)(5) 18 of the Act, which
provides, among other things, that the
rules of the Exchange must be designed
to promote just and equitable principles
of trade, remove impediments to and
perfect the mechanism of a free and
U.S.C. 78f(b)(10).
S. Rep. No. 111–176, at 136 (2010).
17 The Commission has not, to date, adopted rules
concerning other significant matters where
uninstructed broker votes should be prohibited,
although it may do so in the future. Should the
Commission adopt such rules, we would expect the
Exchange to adopt coordinating rules promptly to
comply with the statute.
18 15 U.S.C. 78f(b)(5).
open market and a national market
system, and, in general, to protect
investors and the public interest, and
are not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission believes that the rule
assures that shareholder votes on the
election of the board of directors of an
issuer (except for a vote with respect to
the uncontested election of a member of
the board of directors of any investment
company registered under the
Investment Company Act of 1940) and
on executive compensation matters are
made by those with an economic
interest in the company, rather than by
a broker that has no such economic
interest, which should enhance
corporate governance and accountability
to shareholders.19 Based on the above,
the Commission finds that the
Exchange’s proposal will further the
purposes of Sections 6(b)(5) and 6(b)(10)
of the Act because it should enhance
corporate accountability to shareholders
while also serving to fulfill the
Congressional intent in adopting
Section 6(b)(10) of the Act.
The Commission also believes that
Proposed Rule 13.3(a), (d), and
Interpretations and Policies .01 are
consistent with Section 6(b)(5) of the
Act 20 in that they are designed to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system. The
Commission notes that the proposed
changes will further align Rule 13.3
with FINRA Rule 2251, which should
reduce regulatory confusion amongst
Members that are also members of
FINRA, and as the Exchange notes, may
also reduce regulatory duplication
should the proposed rule become a
Common Rule under the 17d–2
Agreement. Finally, we note that the
changes to Proposed Rule 13(a), (d), and
Interpretations and Policies .01 will also
further investor protection and the
public interest by setting forth proxy
voting requirements as to beneficial
owner accounts as well as the
requirements that a Member must
follow when forwarding proxy or other
15 15
16 See
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Fmt 4703
Sfmt 4703
19 As the Commission stated in approving NYSE
rules prohibiting broker voting in the election of
directors, having those with an economic interest in
the company vote the shares, rather than the broker
who has no such economic interest, furthers the
goal of enfranchising shareholders. See Securities
Exchange Act Release No. 60215 (July 1, 2009), 74
FR 33293 (July 10, 2009) (SR–NYSE–2006–92).
20 15 U.S.C. 78f(b)(5).
E:\FR\FM\06OCN1.SGM
06OCN1
Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices
materials to the beneficial owners of the
stock or their designated investment
advisors.
The Commission also finds good
cause, pursuant to Section 19(b)(2) of
the Act,21 for approving the proposed
rule change prior to the 30th day after
the date of publication of notice in the
Federal Register. The Commission
believes that good cause exists to grant
accelerated approval to the proposed
changes to Rule 13.3, because the
proposal will conform the Exchange
rule to FINRA Rule 2251, in particular,
as well as ISE Rule 421, NYSE Arca
Rule 9.4 and Nasdaq Rule 2251, which
were published for public comment in
the Federal Register and approved by
the Commission, and for which no
comments were received.22 Further,
because proposed Rule 13.3 is
substantially similar to the FINRA, ISE,
NYSE Arca and Nasdaq rules, we do not
believe it raises any new regulatory
issues that were not previously
considered with adoption of the rules
for those other self-regulatory
organizations.
Moreover, proposed Rule 13.3(c) will
conform the Exchange’s rules to the
requirements of Section 6(b)(10) of the
Act. Section 6(b)(10) of the Act, enacted
under Section 957 of the Dodd-Frank
Act, does not provide for a transition
phase, and requires rules of national
securities exchanges to prohibit broker
voting on the election of a member of
the board of directors of an issuer
(except for a vote with respect to the
uncontested election of a member of the
board of directors of any investment
company registered under the
Investment Company Act of 1940),
executive compensation, or any other
significant matter, as determined by the
Commission by rule. Therefore, the
Commission believes that good cause
exists to grant accelerated approval to
proposed Rule 13.3(c), because it will
conform the Exchange rule to the
requirements of Section 6(b)(10) of the
Act. Moreover, proposed Rule 13.3(c) is
substantially similar to ISE Rule 421
and Nasdaq Rule 2251.23
mstockstill on DSK4VPTVN1PROD with NOTICES
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,24 that the
proposed rule change (SR–BYX–2011–
024) be, and it hereby is, approved on
an accelerated basis.
21 15
U.S.C. 78s(b)(2).
supra notes 11.
22 See
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–25792 Filed 10–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65449; File No. SR–BATS–
2011–036]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change To Amend
BATS Rule 13.3 To Prohibit Members
From Voting Uninstructed Shares on
Certain Matters and To Align BATS
Rule 13.3, Concerning the Forwarding
of Proxy and Other Material and Proxy
Voting, With the Rules of Other SelfRegulatory Organizations
September 30, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or the ‘‘Exchange Act’’),1 and
Rule 19b–4 thereunder,2 notice is
hereby given that on September 16,
2011, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
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, and is
approving the proposed rule change on
an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to amend
BATS Rule 13.3, entitled ‘‘Forwarding
of Issuer Materials,’’ in accordance with
the provisions of Section 957 of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (the ‘‘DoddFrank Act’’). The Exchange is also
proposing changes to BATS Rule 13.3 in
order to better align the Exchange’s rule
with the rules of other self-regulatory
organizations (‘‘SROs’’). The text of the
proposed rule addition is available at
the Exchange’s Web site at https://
www.batstrading.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 parts of such
statements.
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Section 957 of the Dodd-Frank Act
amends Section 6(b) of the Act 3 to
require the rules of each national
securities exchange to prohibit any
member organization that is not the
beneficial owner of a security registered
under Section 12 of the Act 4 from
granting a proxy to vote the security in
connection with certain stockholder
votes, unless the beneficial owner of the
security has instructed the member
organization to vote the proxy in
accordance with the voting instructions
of the beneficial owner. The stockholder
votes covered by Section 957 include
any vote with respect to (i) The election
of a member of the board of directors of
an issuer (other than an uncontested
election of a director of an investment
company registered under the
Investment Company Act), (ii) executive
compensation, or (iii) any other
significant matter, as determined by the
Commission, by rule.
Accordingly, in order to carry out the
requirements of Section 957 of the
Dodd-Frank Act, the Exchange proposes
to add new paragraph (b) to BATS Rule
13.3 to prohibit a Member from giving
a proxy to vote stock that is registered
in its name, unless: (i) Such Member is
the beneficial owner of such stock; (ii)
such proxy is given pursuant to the
written instructions of the beneficial
owner; or (iii) such proxy is given
pursuant to the rules of any national
securities exchange or association of
which it is a member provided that the
records of the Member clearly indicate
the procedure it is following. The
Exchange is proposing to adopt these
rules because other national securities
exchanges and associations do allow
23 Id.
24 15
25 17
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
16:07 Oct 05, 2011
1 15
2 17
Jkt 226001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00073
Fmt 4703
3 15
4 15
Sfmt 4703
62107
E:\FR\FM\06OCN1.SGM
U.S.C. 78f(b).
U.S.C. 78l.
06OCN1
]]>Agencies
[Federal Register Volume 76, Number 194 (Thursday, October 6, 2011)]
[Notices]
[Pages 62103-62107]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25792]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65448; File No. SR-BYX-2011-024]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Order Granting Accelerated Approval of Proposed Rule Change
To Amend BYX Rule 13.3 To Prohibit Members From Voting Uninstructed
Shares on Certain Matters and To Align BYX Rule 13.3, Concerning the
Forwarding of Proxy and Other Material and Proxy Voting, With the Rules
of Other Self-Regulatory Organizations
September 30, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on September 16, 2011, BATS Y-Exchange,
Inc. (the ``Exchange'' or ``BYX'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II 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 and is
[[Page 62104]]
approving the proposed rule change on an accelerated basis.
---------------------------------------------------------------------------
\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 is proposing to amend BYX Rule 13.3, entitled
``Forwarding of Issuer Materials,'' in accordance with the provisions
of Section 957 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act''). The Exchange is also proposing
changes to BYX Rule 13.3 in order to better align the Exchange's rule
with the rules of other self-regulatory organizations (``SROs'').
The text of the proposed rule addition is available at the
Exchange's Web site at https://www.batstrading.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 parts of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 957 of the Dodd-Frank Act amends Section 6(b) of the Act
\3\ to require the rules of each national securities exchange to
prohibit any member organization that is not the beneficial owner of a
security registered under Section 12 of the Act \4\ from granting a
proxy to vote the security in connection with certain stockholder
votes, unless the beneficial owner of the security has instructed the
member organization to vote the proxy in accordance with the voting
instructions of the beneficial owner. The stockholder votes covered by
Section 957 include any vote with respect to (i) the election of a
member of the board of directors of an issuer (other than an
uncontested election of a director of an investment company registered
under the Investment Company Act), (ii) executive compensation, or
(iii) any other significant matter, as determined by the Commission, by
rule.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78l.
---------------------------------------------------------------------------
Accordingly, in order to carry out the requirements of Section 957
of the Dodd-Frank Act, the Exchange proposes to add new paragraph (b)
to BYX Rule 13.3 to prohibit a Member from giving a proxy to vote stock
that is registered in its name, unless: (i) Such Member is the
beneficial owner of such stock; (ii) such proxy is given pursuant to
the written instructions of the beneficial owner; or (iii) such proxy
is given pursuant to the rules of any national securities exchange or
association of which it is a member provided that the records of the
Member clearly indicate the procedure it is following. The Exchange is
proposing to adopt these rules because other national securities
exchanges and associations do allow proxy voting under certain limited
circumstances while the current Exchange Rules are silent on such
matters. Therefore, a Member that is also a member of another national
securities exchange or association may vote the shares held for a
customer when allowed under its membership at another national
securities exchange or association, provided that the records of the
Member clearly indicate the procedure it is following.
Notwithstanding the above, as proposed in new paragraph (c) to Rule
13.3, a Member that is not the beneficial owner of a security
registered under Section 12 of the Exchange Act is prohibited from
granting a proxy to vote the security in connection with a shareholder
vote on the election of a member of the board of directors of an issuer
(except for a vote with respect to uncontested election of a member of
the board of directors of any investment company registered under the
Investment Company Act of 1940), executive compensation, or any other
significant matter, as determined by the Commission, by rule, unless
the beneficial owner of the security has instructed the Member to vote
the proxy in accordance with the voting instructions of the beneficial
owner.
In order to promote consistency with FINRA Rule 2251, the Exchange
also proposes to add language to the existing text of Rule 13.3 to
state that for beneficial owners, the proxy materials or other
materials to be forwarded on behalf of an issuer can be sent to the
beneficial owner's designated investment adviser, if applicable. In
conjunction with this change, the Exchange proposes to adopt the
definition of ``designated investment adviser'' set forth in FINRA Rule
2251(f) as Interpretation and Policy .01 to Rule 13.3.
Similarly, the Exchange proposes to add new paragraph (d) to Rule
13.3, based entirely on FINRA Rule 2251(d), to explicitly state that a
Member may give a proxy to vote any stock registered in its name if
such Member holds such stock as executor, administrator, guardian,
trustee, or in a similar representative or fiduciary capacity with
authority to vote. Proposed paragraph (d) will also state that a Member
that has in its possession or within its control stock registered in
the name of another Member and that desires to transmit signed proxies
pursuant to the provisions of paragraph (a) of Rule 13.3, shall obtain
the requisite number of signed proxies from such holder of record.
Lastly, proposed paragraph (d) also states that, notwithstanding the
foregoing: (1) Any Member designated by a named Employee Retirement
Income Security Act of 1974 (as amended) (``ERISA'') Plan fiduciary as
the investment manager of stock held as assets of the ERISA Plan may
vote the proxies in accordance with the ERISA Plan fiduciary
responsibilities if the ERISA Plan expressly grants discretion to the
investment manager to manage, acquire, or dispose of any plan asset and
has not expressly reserved the proxy voting right for the named ERISA
Plan fiduciary; and (2) any designated investment adviser may vote such
proxies.
The Exchange also proposes modifying the text of Rule 13.3, which
currently would require forwarding of proxy material but which does not
explicitly reference such material, to add such an explicit reference.
The Exchange further proposes to modify the text of Rule 13.3 to
reference ``security holders,'' rather than stockholders, in the
initial sentence, to ensure that the coverage of the rule applies to
all securities, including debt securities to the extent applicable, and
not just equity securities. The Exchange also proposes to incorporate
certain language from FINRA Rule 2251 that provides additional detail
regarding the material that must be provided to beneficial owners in
the event of a proxy solicitation. Specifically, Rule 13.3 as amended
will state that in the event of a proxy solicitation, materials
provided pursuant to the Rule shall include a signed proxy indicating
the number of shares held for such beneficial owner and bearing a
symbol identifying the proxy with proxy records maintained by the
Member, and a letter informing the beneficial owner (or the beneficial
owner's designated investment adviser) of the time limit and necessity
for
[[Page 62105]]
completing the proxy form and forwarding it to the person soliciting
proxies prior to the expiration of the time limit in order for the
shares to be represented at the meeting. The Rule will also require a
Member to furnish a copy of the symbols to the person soliciting the
proxies and shall also retain a copy thereof pursuant to the provisions
of Exchange Act Rule 17a-4. Finally, the Exchange proposes to modify
the title of Rule 13.3 to include reference to proxy voting.
The Exchange believes that these additional changes to Rule 13.3
will help to avoid confusion by Members of the Exchange that are also
members of FINRA by further aligning the Exchange's rules with FINRA
Rule 2251. In addition, the Exchange notes that it is party to an
agreement with FINRA pursuant to which certain regulatory
responsibility to examine and enforce common rules of the Exchange and
FINRA is allocated to FINRA pursuant to Rule 17d-2 under the Act (the
``17d-2 Agreement'').\5\ The proposed changes to Rule 13.3 may be
sufficient to incorporate Rule 13.3 into the 17d-2 Agreement, further
reducing duplicative regulation of Members that are also members of
FINRA.
---------------------------------------------------------------------------
\5\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
2. Statutory Basis
Approval of the rule change proposed in this submission is
consistent with the requirements of the Act and the rules and
regulations thereunder that are applicable to a national securities
exchange, and, in particular, with the requirements of Section 6(b) of
the Act.\6\ The Exchange believes that proposed Rule 13.3(c) is
consistent with Section 6(b)(10) \7\ requirements that all national
securities exchanges adopt rules prohibiting members from voting,
without receiving instructions from the beneficial owner of shares, on
the election of a member of a board of directors of an issuer (except
for a vote with respect to the uncontested election of a member of the
board of directors of any investment company registered under the
Investment Company Act of 1940), executive compensation, or any other
significant matter, as determined by the Commission, by rule. The
Exchange also believes that proposed Rule 13.3(c) is consistent with
Section 6(b)(5) of the Act,\8\ because it would promote just and
equitable principles of trade, remove impediments to, and perfect the
mechanism of, a free and open market and a national market system, and,
in general, protect investors and the public interest. The Exchange is
adopting proposed Rule 13.3(c) to comply with the requirements of
Section 957 of the Dodd-Frank Act, and therefore believes the proposed
rule change to be consistent with the Act, particularly with respect to
the protection of investors and the public interest.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(10).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange also believes that proposed Rule 13.3(b) is consistent
with Section 6(b)(5) of the Act,\9\ particularly with respect to
removal of impediments to, and perfection the mechanism of, a free and
open market and a national market system, because the proposed changes
will provide for consistent regulation for Members of the Exchange that
are members of other SROs with analogous rules.\10\ Moreover, the
proposed changes to Rule 13.3(a), proposed Rule 13.3(d), and proposed
Interpretation and Policy .01 are consistent with FINRA Rule 2251.
Accordingly, the Exchange believes that the proposal fosters
cooperation amongst SROs because to the extent the Exchange is able to
incorporate Rule 13.3 into the 17d-2 Agreement as a rule in common
between the Exchange and FINRA (a ``Common Rule''), then FINRA will
conduct a review for compliance with the Common Rule to the extent a
Member of the Exchange is also a member of FINRA, and the Exchange will
not conduct a duplicative review of the same activity by that Member.
---------------------------------------------------------------------------
\9\ Id.
\10\ See, e.g., FINRA Rule 2251, ISE Rule 421, NYSE Arca Rule
9.4, and Nasdaq Rule 2251.
---------------------------------------------------------------------------
Finally, the Exchange believes that the proposal will contribute to
investor protection by defining important requirements to which Members
must abide with respect to proxy solicitation, proxy voting and
delivery of proxy materials.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change imposes
any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. 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-BYX-2011-024 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-BYX-2011-024. 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 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
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-BYX-2011-024 and should be
submitted on or before October 27, 2011.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
In its filing, the Exchange requested that the Commission approve
the proposal on an accelerated basis so that the Exchange could comply
with the requirements imposed by the Dodd-Frank Act, and because the
proposed rule text is based upon FINRA Rule
[[Page 62106]]
2251, as well as ISE Rule 421, Nasdaq Rule 2251, and NYSE Arca Rule
9.4.\11\ After careful consideration, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\12\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release 63139 (October 20,
2010), 75 FR 65680 (October 26, 2010) (SR-ISE-2010-99); 61052
(November 23, 2009), 74 FR 62857 (December 1, 2009) (SR-FINRA-2009-
066) (finding that the proposed rule change was consistent with the
Act because the Rule ``will continue to provide FINRA members with
guidance on the forwarding of proxy and other issuer-related
materials.''); 62992 (September 24, 2010), 75 FR 60844 (October 1,
2010) (SR-NASDAQ-2010-114); and 48735 (October 31, 2003), 68 FR
63173 (November 7, 2003) (SR-PCX-2003-50).
\12\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
The Commission believes that proposed Rule 13.3(b) is consistent
with Section 6(b)(5) \13\ of the Act, which provides, among other
things, that the rules of the Exchange must be designed to promote just
and equitable principles of trade, remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest, and are
not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Under proposed Rule 13.3(b), a Member shall be prohibited from
voting uninstructed shares unless (1) That Member is the beneficial
owner of the stock; (2) pursuant to the written instructions of the
beneficial owner; or (3) pursuant to the rules of any national
securities exchange or association of which it is also a member,
provided that the Member's records clearly indicate the procedure it is
following. This provision is based on ISE Rule 421, FINRA Rule 2251 and
NYSE Arca Rule 9.4, which were previously approved by the
Commission.\14\ The Commission notes that the proposed change will
provide clarity to Exchange Members going forward on whether broker
discretionary voting is permitted by Exchange Members under limited
circumstances when the Member is also a member of another national
securities exchange or association that permits broker discretionary
voting. In approving this portion of the proposal, the Commission notes
that Rule 13.3(b) is consistent with the approach taken under the rules
of other national securities exchanges or national securities
association, and for Exchange Members who are not also members of
another national securities exchange or association prohibits broker
discretionary voting on any matter, consistent with investor protection
and the public interest.
---------------------------------------------------------------------------
\14\ See supra note 11.
---------------------------------------------------------------------------
The Commission believes that proposed Rule 13.3(c) is consistent
with Section 6(b)(10) \15\ of the Act, which requires that national
securities exchanges adopt rules prohibiting members that are not
beneficial holders of a security from voting uninstructed proxies with
respect to the election of a member of the board of directors of an
issuer (except for uncontested elections of directors for companies
registered under the Investment Company Act), executive compensation,
or any other significant matter, as determined by the Commission by
rule.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b)(10).
---------------------------------------------------------------------------
The Commission believes that proposed Rule 13.3(c) is consistent
with Section 6(b)(10) of the Act because it adopts revisions that
comply with that section. As noted in the accompanying Senate Report,
Section 957, which enacted Section 6(b)(10), reflects the principle
that ``final vote tallies should reflect the wishes of the beneficial
owners of the stock and not be affected by the wishes of the broker
that holds the shares.'' \16\ The proposed rule change will make the
Exchange compliant with the new requirements of Section 6(b)(10) by
specifically prohibiting broker-dealers, who are not beneficial owners
of a security, from voting uninstructed shares in connection with a
shareholder vote on the election of a member of the board of directors
of an issuer (except for a vote with respect to the uncontested
election of a member of the board of directors of any investment
company registered under the Investment Company Act of 1940), executive
compensation, or any other significant matter, as determined by the
Commission by rule, unless the member receives voting instructions from
the beneficial owner of the shares.\17\
---------------------------------------------------------------------------
\16\ See S. Rep. No. 111-176, at 136 (2010).
\17\ The Commission has not, to date, adopted rules concerning
other significant matters where uninstructed broker votes should be
prohibited, although it may do so in the future. Should the
Commission adopt such rules, we would expect the Exchange to adopt
coordinating rules promptly to comply with the statute.
---------------------------------------------------------------------------
The Commission also believes that proposed Rule 13.3(c) is
consistent with Section 6(b)(5) \18\ of the Act, which provides, among
other things, that the rules of the Exchange must be designed to
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest, and are not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the rule assures that shareholder
votes on the election of the board of directors of an issuer (except
for a vote with respect to the uncontested election of a member of the
board of directors of any investment company registered under the
Investment Company Act of 1940) and on executive compensation matters
are made by those with an economic interest in the company, rather than
by a broker that has no such economic interest, which should enhance
corporate governance and accountability to shareholders.\19\ Based on
the above, the Commission finds that the Exchange's proposal will
further the purposes of Sections 6(b)(5) and 6(b)(10) of the Act
because it should enhance corporate accountability to shareholders
while also serving to fulfill the Congressional intent in adopting
Section 6(b)(10) of the Act.
---------------------------------------------------------------------------
\19\ As the Commission stated in approving NYSE rules
prohibiting broker voting in the election of directors, having those
with an economic interest in the company vote the shares, rather
than the broker who has no such economic interest, furthers the goal
of enfranchising shareholders. See Securities Exchange Act Release
No. 60215 (July 1, 2009), 74 FR 33293 (July 10, 2009) (SR-NYSE-2006-
92).
---------------------------------------------------------------------------
The Commission also believes that Proposed Rule 13.3(a), (d), and
Interpretations and Policies .01 are consistent with Section 6(b)(5) of
the Act \20\ in that they are designed to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, and to remove impediments to and perfect the mechanism
of a free and open market and a national market system. The Commission
notes that the proposed changes will further align Rule 13.3 with FINRA
Rule 2251, which should reduce regulatory confusion amongst Members
that are also members of FINRA, and as the Exchange notes, may also
reduce regulatory duplication should the proposed rule become a Common
Rule under the 17d-2 Agreement. Finally, we note that the changes to
Proposed Rule 13(a), (d), and Interpretations and Policies .01 will
also further investor protection and the public interest by setting
forth proxy voting requirements as to beneficial owner accounts as well
as the requirements that a Member must follow when forwarding proxy or
other
[[Page 62107]]
materials to the beneficial owners of the stock or their designated
investment advisors.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f(b)(5).
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The Commission also finds good cause, pursuant to Section 19(b)(2)
of the Act,\21\ for approving the proposed rule change prior to the
30th day after the date of publication of notice in the Federal
Register. The Commission believes that good cause exists to grant
accelerated approval to the proposed changes to Rule 13.3, because the
proposal will conform the Exchange rule to FINRA Rule 2251, in
particular, as well as ISE Rule 421, NYSE Arca Rule 9.4 and Nasdaq Rule
2251, which were published for public comment in the Federal Register
and approved by the Commission, and for which no comments were
received.\22\ Further, because proposed Rule 13.3 is substantially
similar to the FINRA, ISE, NYSE Arca and Nasdaq rules, we do not
believe it raises any new regulatory issues that were not previously
considered with adoption of the rules for those other self-regulatory
organizations.
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\21\ 15 U.S.C. 78s(b)(2).
\22\ See supra notes 11.
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Moreover, proposed Rule 13.3(c) will conform the Exchange's rules
to the requirements of Section 6(b)(10) of the Act. Section 6(b)(10) of
the Act, enacted under Section 957 of the Dodd-Frank Act, does not
provide for a transition phase, and requires rules of national
securities exchanges to prohibit broker voting on the election of a
member of the board of directors of an issuer (except for a vote with
respect to the uncontested election of a member of the board of
directors of any investment company registered under the Investment
Company Act of 1940), executive compensation, or any other significant
matter, as determined by the Commission by rule. Therefore, the
Commission believes that good cause exists to grant accelerated
approval to proposed Rule 13.3(c), because it will conform the Exchange
rule to the requirements of Section 6(b)(10) of the Act. Moreover,
proposed Rule 13.3(c) is substantially similar to ISE Rule 421 and
Nasdaq Rule 2251.\23\
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\23\ Id.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\24\ that the proposed rule change (SR-BYX-2011-024) be, and it
hereby is, approved on an accelerated basis.
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\24\ 15 U.S.C. 78s(b)(2).
\25\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25792 Filed 10-5-11; 8:45 am]
BILLING CODE 8011-01-P
