Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Amendment to NYSE Amex Rule 452 and Corresponding Section 723 of the Company Guide and Amex Rule 577 Relating to Discretionary Proxy Voting on Executive Compensation Matters, 80989-80992 [2011-33045]
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Federal Register / Vol. 76, No. 248 / Tuesday, December 27, 2011 / Notices
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[FR Doc. 2011–33040 Filed 12–23–11; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66006; File No. SR–
NYSEAmex–2011–97]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and Order
Granting Accelerated Approval of a
Proposed Rule Amendment to NYSE
Amex Rule 452 and Corresponding
Section 723 of the Company Guide and
Amex Rule 577 Relating to
Discretionary Proxy Voting on
Executive Compensation Matters
sroberts on DSK5SPTVN1PROD with NOTICES
December 20, 2011.
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
6, 2011, NYSE Amex LLC (‘‘Exchange’’
or ‘‘NYSE Amex’’) 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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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 proposes to amend
Rule 452—NYSE Amex Equities and
corresponding Section 723 of the NYSE
Amex Company Guide (‘‘Company
Guide’’) and to replace the text of Rule
577 of the NYSE Amex Rules with a
cross-reference indicating that Rule
452—NYSE Amex Equities and Section
723 of the Company Guide apply to all
NYSE Amex member organizations. The
text of the proposed rule change is
available at the Exchange, the
Commission’s Public Reference Room,
and 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,
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
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, each entitled ‘‘Giving
Proxies by Member Organization,’’ to
prohibit member organizations from
voting uninstructed shares if the matter
voted on relates to executive
compensation. The foregoing changes
are required by the provisions of Section
957 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(‘‘Dodd-Frank Act’’), which was signed
by the President on July 21, 2010. The
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Exchange is also proposing to add the
words ‘‘or authorize’’ in certain places
throughout the rules to clarify that the
rules cover not only the giving of a
proxy but also the authorization of such
proxy.
Under current NYSE Amex and
Commission 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 and corresponding
Section 723 of the Company Guide
provide that a broker may vote on
certain matters when the broker has no
knowledge of any contest as to the
action to be taken at the meeting and
provided such action is adequately
disclosed to stockholders, and does not
include authorization for a merger,
consolidation or any matter which may
affect substantially the rights or
privileges of such stock. In addition,
Rule 452.11—NYSE Amex Equities and
Commentary .11 to Section 723 of the
Company Guide currently identify 20
matters with respect to which brokers
may not vote without instructions from
beneficial owners. Prior to the July 21,
2010 enactment of the Dodd-Frank Act,
under Rule 452—NYSE Amex Equities
and corresponding Section 723 of the
Company Guide and the Exchange’s
prior interpretations, member
organizations were permitted to cast
votes on some matters, including some
executive compensation proposals,
without specific instructions from
beneficial owners of the stock.
Section 957 of the Dodd-Frank Act
amends Section 6(b) 3 of the Exchange
Act 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 4 of the Exchange Act
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
3 15
4 15
E:\FR\FM\27DEN1.SGM
U.S.C. 78f(b).
U.S.C. 78l.
27DEN1
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80990
Federal Register / Vol. 76, No. 248 / Tuesday, December 27, 2011 / Notices
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.
Rule 452—NYSE Amex Equities and
corresponding Section 723 of the
Company Guide already prohibit
member organizations from voting
uninstructed shares if the matter voted
on is the election of directors (other
than in the case of an issuer registered
under the Investment Company Act,
provided the matter is not the subject of
a counter-solicitation). The Commission
has not at this time determined by rule
any other significant matters with
respect to which a national securities
exchange must prohibit member
organizations from voting uninstructed
shares. Accordingly, in order to carry
out the requirements of Section 957 of
the Dodd-Frank Act, the Exchange
proposes to amend Rule 452—NYSE
Amex Equities and corresponding
Section 723 of the Company Guide to
also prohibit member organizations
from voting uninstructed shares if the
matter voted on relates to executive
compensation.
Specifically, the Exchange is
proposing to add to Rule 452.11—NYSE
Amex Equities and corresponding
Commentary .11 to Section 723 of the
Company Guide (both entitled ‘‘When
member organization may not vote
without customer instructions’’) a new
Item 21 and accompanying commentary
to provide that a member organization
may not give or authorize a proxy to
vote without instructions from the
beneficial owner when the matter to be
voted upon relates to executive
compensation. The proposed
commentary to Item 21 of Rule 452.11—
NYSE Amex Equities and corresponding
Section 723 of the Company Guide
would clarify that a matter relating to
executive compensation would include,
among other things, the items referred to
in Section 14A of the Exchange Act
(added by Section 951 of the DoddFrank Act), including (i) an advisory
vote to approve the compensation of
executives, (ii) a vote on whether to
hold such an advisory vote every one,
two or three years, and (iii) an advisory
vote to approve any type of
compensation (whether present,
deferred, or contingent) that is based on
or otherwise relates to an acquisition,
merger, consolidation, sale, or other
disposition of all or substantially all of
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the assets of an issuer and the aggregate
total of all such compensation that may
(and the conditions upon which it may)
be paid or become payable to or on
behalf of an executive officer. In
addition, a member organization may
not give or authorize a proxy to vote
without instructions on a matter relating
to executive compensation, even if such
matter would otherwise qualify for an
exception from the requirements of Item
12, Item 13 or any other Item under Rule
452.11—NYSE Amex Equities or
corresponding Section 723 of the
Company Guide. The Exchange
proposes to add new Commentary to
each of Item 12 and Item 13 under Rule
452.11—NYSE Amex Equities and
corresponding Section 723 of the
Company Guide to specify that any vote
on these or similar executive
compensation-related matters would be
subject to the requirements of Rule
452—NYSE Amex Equities, as amended,
or corresponding Section 723 of the
Company Guide, as amended.
The Exchange also proposes in this
filing to delete the text of NYSE Amex
Rule 577 (entitled ‘‘Giving Proxies by
Member Organizations’’) from the NYSE
Amex Rulebook and replace it with a
cross-reference indicating that Rule
452—NYSE Amex and Section 723 of
the Company Guide apply to all NYSE
Amex member organizations. Rule
452—NYSE Amex Equities and Section
723 of the Company Guide include all
of the restrictions contained in NYSE
Amex Rule 577 and some additional
restrictions that have been added in
recent years that have not been added to
NYSE Amex Rule 577.5 In light of the
fact that all of the requirements of NYSE
Amex Rule 577 are duplicated in Rule
452—NYSE Amex Equities and Section
723 of the Company Guide, the
Exchange believes that it is appropriate
to replace the text of NYSE Amex Rule
577 with the proposed cross-reference
and that doing so will avoid any
confusion associated with having two
duplicative rules governing the same
activity.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the
Exchange Act,6 in general and with
5 In addition to the requirements of NYSE Amex
Rule 577, Rule 452—NYSE Amex Equities prohibits
brokers from voting uninstructed shares with
respect to (i) the election of directors (except an
uncontested director election of an investment
company registered under the Investment Company
Act of 1940) and (ii) any material amendment to an
investment advisory contract with an investment
company.
6 15 U.S.C. 78f.
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Section 6(b)(10) 7 of the Exchange Act,
in particular. Specifically, the Exchange
believes the proposed rule change is
consistent with the requirements of
Section 6(b)(10) 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 the
proposed rule change is consistent with
the requirements under Section 6(b)(5) 8
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. The
Exchange is adopting this proposed rule
change 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
Exchange Act, particularly with respect
to the protection of investors and the
public interest. The requirements of
NYSE Amex Rule 577 are all duplicative
of Rule 452—NYSE Amex Equities and
Section 723 of the Company Guide and
its replacement by a simple crossreference to those other rules serves the
purpose of avoiding potential confusion
without changing the substantive
requirements in any way and is
therefore consistent with the protection
of investors and the public interest. The
addition of the words ‘‘or authorize’’ in
certain places throughout Rule 452—
NYSE Amex and Section 723 of the
Company Guide is a clarification and
not a substantive change and is
therefore consistent with the protection
of investors and the public interest.
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.
7 15
8 15
E:\FR\FM\27DEN1.SGM
U.S.C. 78f(b)(10).
U.S.C. 78f(b)(5).
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Federal Register / Vol. 76, No. 248 / Tuesday, December 27, 2011 / Notices
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. 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:
sroberts on DSK5SPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEAmex–2011–97 on
the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEAmex–2011–97. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of Phlx.
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–NYSEAmex–2011–97 and
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22:00 Dec 23, 2011
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should be submitted on or before
January 17, 2012.
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 of the Dodd-Frank Act.
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.9 The
Commission believes that the proposal
is consistent with Section 6(b)(10) 10 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
also believes that the proposal is
consistent with Section 6(b)(5) 11 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.
The Commission believes that the
proposal 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 adopts
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.’’ 12
The proposed rule change will make
NYSE Amex rules compliant with the
new requirements of Section 6(b)(10) by
prohibiting broker-dealers, who are not
beneficial owners of a security, from
voting uninstructed shares with respect
9 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).
10 15 U.S.C. 78f(b)(10).
11 15 U.S.C. 78f(b)(5).
12 See S. Rep. No. 111–176, at 136 (2010).
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80991
to any matter on executive
compensation.13
The Commission believes that the
proposal is consistent with Section
6(b)(5) of the Act because the proposal
will further investor protection and the
public interest by assuring that
shareholder votes 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.14
The Commission notes that NYSE
Amex’s new rules prohibiting
uninstructed broker votes on executive
compensation covers the specific items
identified in Section 951 of the DoddFrank Act, as well as any other matter
concerning executive compensation,
and has been drafted broadly to reflect
the requirements of Section 6(b)(10) of
the Act. The proposed rule language
also specifically states that a broker vote
on any executive compensation matter
would not be permitted even if it would
otherwise qualify for an exception from
any item under NYSE Amex Rule 452
and corresponding Section 723 of the
Company Guide. The Commission
believes this provision will make clear
that any past practice or interpretation
that may have permitted a broker vote
on an executive compensation matter,
under existing rules, will no longer be
applicable and is superseded by the
newly adopted provisions.
The Commission also notes that the
Exchange will replace the text of Amex
Rule 577 with Rule 452 NYSE Amex
and corresponding Section 723 of the
Company Guide by cross-reference. The
Exchange has represented that the
requirements of NYSE Amex Rule 577
are duplicative of Rule 452—NYSE
Amex Equities and Section 723 of the
13 As noted above, Section 6(b)(10) also prohibits
broker voting for director elections, except for
uncontested director elections of registered
investment companies, and also ‘‘any other
significant matter, as determined by the
Commission, by rule.’’ NYSE Amex already
prohibits broker voting in director elections except
for uncontested director elections for registered
investment companies. See NYSE Amex Rule
452.11(19) and corresponding Section 723 of the
Company Guide. As to other matters, 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
NYSE Amex to adopt coordinating rules promptly
to comply with the statute.
14 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).
E:\FR\FM\27DEN1.SGM
27DEN1
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Federal Register / Vol. 76, No. 248 / Tuesday, December 27, 2011 / Notices
Company Guide. Accordingly, the
Commission believes that the proposed
change should avoid potential
confusion associated with having
duplicative rules and is therefore,
consistent with Section 6 of the Act.
Finally, the Commission notes that
the change to reflect that NYSE Amex
rules prohibit not only the giving of a
proxy, but also the authorization of the
proxy, should help to clarify the intent
of NYSE Amex proxy rules and is
consistent with the requirements of
Section 6 of the Act.
Based on the above, the Commission
believes that the NYSE Amex’s proposal
will further the purposes of Sections
6(b)(5) and 6(b)(10) of the Act by
ensuring that brokers, holding shares on
behalf of beneficial owners, are not
voting uninstructed shares on matters
relating to executive compensation,
which should enhance corporate
accountability to shareholders. The rule
filing should also serve to fulfill the
Congressional intent in adopting
Section 6(b)(10) of the Act.
The Commission also finds good
cause, pursuant to Section 19(b)(2) of
the Act,15 for approving the proposed
rule change prior to the 30th day after
the date of publication of notice in the
Federal Register. 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, among other things, broker
voting on executive compensation. The
Commission believes that good cause
exists to grant accelerated approval to
the Exchange’s proposal, because it will
conform NYSE Amex rules to the
requirements of Section 6(b)(10) of the
Act. Moreover, the Commission notes
that the proposed changes are based on
NYSE Rule 452.16
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,17 that the
proposed rule change (SR–NYSEAmex–
2011–97) be, and it hereby is, approved
on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to
delegated authority.18
sroberts on DSK5SPTVN1PROD with NOTICES
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2011–33045 Filed 12–23–11; 8:45 am]
BILLING CODE 8011–01–P
15 15
U.S.C. 78s(b)(2).
16 See NYSE Rule 452, Securities Exchange Act
Release No. 34–62874 (September 9, 2010), 75 FR
56152 (September 15, 2010) (SR–NYSE–2010–59).
17 15 U.S.C. 78s(b)(2).
18 17 CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66013; File No. SR–
NASDAQ–2011–146]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Approving a Proposed Rule Change to
Modify Rule 7034 Regarding Low
Latency Network Connections
December 20, 2011.
I. Introduction
On October 31, 2011, the NASDAQ
Stock Market LLC (‘‘NASDAQ’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
modify Exchange Rule 7034 entitled
‘‘Co-Location Services’’ to establish a
program for offering low latency
network connections and to establish
the initial fees for such connections.
The Exchange also proposed
administrative modifications to
Exchange Rule 7034. The proposed rule
change was published for comment in
the Federal Register on November 10,
2011.3 The Commission received no
comments on the proposal. This order
approves the proposed rule change.
II. Description of the Proposed Rule
Change
The Exchange proposed to modify
Exchange Rule 7034, which governs the
Exchange’s program for co-location
services, to offer new options for low
latency network telecommunication
connections and to establish the fees for
such connections. As its initial offering,
the Exchange proposed to offer point-topoint telecommunication connectivity
from the co-location facility to select
major financial trading and co-location
venues in the New York and New Jersey
metropolitan areas, Toronto, and
Chicago.4
According to the Exchange, the
enhanced point-to-point connectivity
would provide the Exchange’s co1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 65688
(November 4, 2011), 76 FR 70199 (‘‘Notice’’).
4 Id. at 70199. The Exchange represented that it
currently provides a cross connect from a client’s
cabinet to its requested telecommunication carrier’s
cabinet (known as a ‘‘telco cross connect’’).
According to the Exchange, clients would have the
option to use the enhanced point-to-point
connectivity service to receive low latency network
connectivity from the Exchange’s data center to the
client’s chosen venue(s), in addition to the telco
cross connect. These connections could be utilized
to send market data to and receive orders from the
chosen venues.
2 17
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location customers with the opportunity
to obtain low latency network
connectivity with greater ease than is
currently the case, and at a competitive
price.5 The Exchange represented that
co-location customers currently obtain
similar services by negotiating fees,
obtaining service level agreements, and
executing service agreements directly
with approved telecommunication
carriers, and that such co-location
customers are currently charged a
monthly negotiated fee by the
telecommunications carrier in addition
to a cross connection fee by the
Exchange.6 The Exchange represented
that for its low latency network
connection services, it would obtain
wholesale rates from the carriers and
then charge a markup to compensate the
Exchange for its efforts to negotiate and
establish the arrangement, for
integrating the connectivity into the
Exchange co-location connectivity
offering, and for administrative costs
associated with establishing and
maintaining each new connection.7
According to the Exchange, colocation customers would have the
opportunity to request these new low
latency network telecommunication
connections through the same process
used to request a new co-located cabinet
and other co-location services.8 Colocation customers would retain the
option of contracting directly with
telecommunication providers, including
either the providers that participate in
the program, the current providers in
the data center who have not yet agreed
to participate, or any new carrier that is
approved to install equipment in the
Exchange’s data center.9
The Exchange proposed one-time fees
for the installation of
telecommunication connectivity to
select major financial trading and colocation venues in the New York and
New Jersey metropolitan areas, Toronto,
and Chicago, as well as per-month
connectivity fees, at connectivity levels
of 100MB, 1G, and 10G, respectively.10
The Exchange represented that the fees
were based on anticipated bandwidth
necessary for the connections and
distances to these select venues. The
Exchange indicated its belief that the
fees are reasonable, because they are
similar and competitive with fees
charged for similar services by other
entities.11
5 Id.
at 70200.
6 Id.
7 Id.
8 Id.
9 Id.
10 Id.
11 Id.
E:\FR\FM\27DEN1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Notices]
[Pages 80989-80992]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33045]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66006; File No. SR-NYSEAmex-2011-97]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Order Granting Accelerated Approval of a Proposed Rule Amendment to
NYSE Amex Rule 452 and Corresponding Section 723 of the Company Guide
and Amex Rule 577 Relating to Discretionary Proxy Voting on Executive
Compensation Matters
December 20, 2011.
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 6, 2011, NYSE Amex LLC (``Exchange'' or ``NYSE Amex'')
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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 452--NYSE Amex Equities and
corresponding Section 723 of the NYSE Amex Company Guide (``Company
Guide'') and to replace the text of Rule 577 of the NYSE Amex Rules
with a cross-reference indicating that Rule 452--NYSE Amex Equities and
Section 723 of the Company Guide apply to all NYSE Amex member
organizations. The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and 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, 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
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, each entitled ``Giving
Proxies by Member Organization,'' to prohibit member organizations from
voting uninstructed shares if the matter voted on relates to executive
compensation. The foregoing changes are required by the provisions of
Section 957 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act''), which was signed by the President
on July 21, 2010. The Exchange is also proposing to add the words ``or
authorize'' in certain places throughout the rules to clarify that the
rules cover not only the giving of a proxy but also the authorization
of such proxy.
Under current NYSE Amex and Commission 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 and corresponding Section 723 of the Company Guide provide
that a broker may vote on certain matters when the broker has no
knowledge of any contest as to the action to be taken at the meeting
and provided such action is adequately disclosed to stockholders, and
does not include authorization for a merger, consolidation or any
matter which may affect substantially the rights or privileges of such
stock. In addition, Rule 452.11--NYSE Amex Equities and Commentary .11
to Section 723 of the Company Guide currently identify 20 matters with
respect to which brokers may not vote without instructions from
beneficial owners. Prior to the July 21, 2010 enactment of the Dodd-
Frank Act, under Rule 452--NYSE Amex Equities and corresponding Section
723 of the Company Guide and the Exchange's prior interpretations,
member organizations were permitted to cast votes on some matters,
including some executive compensation proposals, without specific
instructions from beneficial owners of the stock.
Section 957 of the Dodd-Frank Act amends Section 6(b) \3\ of the
Exchange Act 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 \4\ of the Exchange Act 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
[[Page 80990]]
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.
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\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78l.
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Rule 452--NYSE Amex Equities and corresponding Section 723 of the
Company Guide already prohibit member organizations from voting
uninstructed shares if the matter voted on is the election of directors
(other than in the case of an issuer registered under the Investment
Company Act, provided the matter is not the subject of a counter-
solicitation). The Commission has not at this time determined by rule
any other significant matters with respect to which a national
securities exchange must prohibit member organizations from voting
uninstructed shares. Accordingly, in order to carry out the
requirements of Section 957 of the Dodd-Frank Act, the Exchange
proposes to amend Rule 452--NYSE Amex Equities and corresponding
Section 723 of the Company Guide to also prohibit member organizations
from voting uninstructed shares if the matter voted on relates to
executive compensation.
Specifically, the Exchange is proposing to add to Rule 452.11--NYSE
Amex Equities and corresponding Commentary .11 to Section 723 of the
Company Guide (both entitled ``When member organization may not vote
without customer instructions'') a new Item 21 and accompanying
commentary to provide that a member organization may not give or
authorize a proxy to vote without instructions from the beneficial
owner when the matter to be voted upon relates to executive
compensation. The proposed commentary to Item 21 of Rule 452.11--NYSE
Amex Equities and corresponding Section 723 of the Company Guide would
clarify that a matter relating to executive compensation would include,
among other things, the items referred to in Section 14A of the
Exchange Act (added by Section 951 of the Dodd-Frank Act), including
(i) an advisory vote to approve the compensation of executives, (ii) a
vote on whether to hold such an advisory vote every one, two or three
years, and (iii) an advisory vote to approve any type of compensation
(whether present, deferred, or contingent) that is based on or
otherwise relates to an acquisition, merger, consolidation, sale, or
other disposition of all or substantially all of the assets of an
issuer and the aggregate total of all such compensation that may (and
the conditions upon which it may) be paid or become payable to or on
behalf of an executive officer. In addition, a member organization may
not give or authorize a proxy to vote without instructions on a matter
relating to executive compensation, even if such matter would otherwise
qualify for an exception from the requirements of Item 12, Item 13 or
any other Item under Rule 452.11--NYSE Amex Equities or corresponding
Section 723 of the Company Guide. The Exchange proposes to add new
Commentary to each of Item 12 and Item 13 under Rule 452.11--NYSE Amex
Equities and corresponding Section 723 of the Company Guide to specify
that any vote on these or similar executive compensation-related
matters would be subject to the requirements of Rule 452--NYSE Amex
Equities, as amended, or corresponding Section 723 of the Company
Guide, as amended.
The Exchange also proposes in this filing to delete the text of
NYSE Amex Rule 577 (entitled ``Giving Proxies by Member
Organizations'') from the NYSE Amex Rulebook and replace it with a
cross-reference indicating that Rule 452--NYSE Amex and Section 723 of
the Company Guide apply to all NYSE Amex member organizations. Rule
452--NYSE Amex Equities and Section 723 of the Company Guide include
all of the restrictions contained in NYSE Amex Rule 577 and some
additional restrictions that have been added in recent years that have
not been added to NYSE Amex Rule 577.\5\ In light of the fact that all
of the requirements of NYSE Amex Rule 577 are duplicated in Rule 452--
NYSE Amex Equities and Section 723 of the Company Guide, the Exchange
believes that it is appropriate to replace the text of NYSE Amex Rule
577 with the proposed cross-reference and that doing so will avoid any
confusion associated with having two duplicative rules governing the
same activity.
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\5\ In addition to the requirements of NYSE Amex Rule 577, Rule
452--NYSE Amex Equities prohibits brokers from voting uninstructed
shares with respect to (i) the election of directors (except an
uncontested director election of an investment company registered
under the Investment Company Act of 1940) and (ii) any material
amendment to an investment advisory contract with an investment
company.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Exchange Act,\6\ in general and
with Section 6(b)(10) \7\ of the Exchange Act, in particular.
Specifically, the Exchange believes the proposed rule change is
consistent with the requirements of Section 6(b)(10) 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 the proposed rule change is consistent with
the requirements under Section 6(b)(5) \8\ 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. The
Exchange is adopting this proposed rule change 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 Exchange
Act, particularly with respect to the protection of investors and the
public interest. The requirements of NYSE Amex Rule 577 are all
duplicative of Rule 452--NYSE Amex Equities and Section 723 of the
Company Guide and its replacement by a simple cross-reference to those
other rules serves the purpose of avoiding potential confusion without
changing the substantive requirements in any way and is therefore
consistent with the protection of investors and the public interest.
The addition of the words ``or authorize'' in certain places throughout
Rule 452--NYSE Amex and Section 723 of the Company Guide is a
clarification and not a substantive change and is therefore consistent
with the protection of investors and the public interest.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(10).
\8\ 15 U.S.C. 78f(b)(5).
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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.
[[Page 80991]]
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. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEAmex-2011-97 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAmex-2011-97. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of Phlx. 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-NYSEAmex-2011-97 and should
be submitted on or before January 17, 2012.
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 of the Dodd-Frank Act. 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.\9\
The Commission believes that the proposal is consistent with Section
6(b)(10) \10\ 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 also believes that the proposal is consistent with Section
6(b)(5) \11\ 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.
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\9\ 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).
\10\ 15 U.S.C. 78f(b)(10).
\11\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the proposal 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 adopts 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.'' \12\ The proposed rule change will make NYSE Amex rules
compliant with the new requirements of Section 6(b)(10) by prohibiting
broker-dealers, who are not beneficial owners of a security, from
voting uninstructed shares with respect to any matter on executive
compensation.\13\
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\12\ See S. Rep. No. 111-176, at 136 (2010).
\13\ As noted above, Section 6(b)(10) also prohibits broker
voting for director elections, except for uncontested director
elections of registered investment companies, and also ``any other
significant matter, as determined by the Commission, by rule.'' NYSE
Amex already prohibits broker voting in director elections except
for uncontested director elections for registered investment
companies. See NYSE Amex Rule 452.11(19) and corresponding Section
723 of the Company Guide. As to other matters, 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 NYSE Amex to adopt coordinating rules promptly to
comply with the statute.
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The Commission believes that the proposal is consistent with
Section 6(b)(5) of the Act because the proposal will further investor
protection and the public interest by assuring that shareholder votes
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.\14\
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\14\ 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).
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The Commission notes that NYSE Amex's new rules prohibiting
uninstructed broker votes on executive compensation covers the specific
items identified in Section 951 of the Dodd-Frank Act, as well as any
other matter concerning executive compensation, and has been drafted
broadly to reflect the requirements of Section 6(b)(10) of the Act. The
proposed rule language also specifically states that a broker vote on
any executive compensation matter would not be permitted even if it
would otherwise qualify for an exception from any item under NYSE Amex
Rule 452 and corresponding Section 723 of the Company Guide. The
Commission believes this provision will make clear that any past
practice or interpretation that may have permitted a broker vote on an
executive compensation matter, under existing rules, will no longer be
applicable and is superseded by the newly adopted provisions.
The Commission also notes that the Exchange will replace the text
of Amex Rule 577 with Rule 452 NYSE Amex and corresponding Section 723
of the Company Guide by cross-reference. The Exchange has represented
that the requirements of NYSE Amex Rule 577 are duplicative of Rule
452--NYSE Amex Equities and Section 723 of the
[[Page 80992]]
Company Guide. Accordingly, the Commission believes that the proposed
change should avoid potential confusion associated with having
duplicative rules and is therefore, consistent with Section 6 of the
Act.
Finally, the Commission notes that the change to reflect that NYSE
Amex rules prohibit not only the giving of a proxy, but also the
authorization of the proxy, should help to clarify the intent of NYSE
Amex proxy rules and is consistent with the requirements of Section 6
of the Act.
Based on the above, the Commission believes that the NYSE Amex's
proposal will further the purposes of Sections 6(b)(5) and 6(b)(10) of
the Act by ensuring that brokers, holding shares on behalf of
beneficial owners, are not voting uninstructed shares on matters
relating to executive compensation, which should enhance corporate
accountability to shareholders. The rule filing should also serve to
fulfill the Congressional intent in adopting Section 6(b)(10) of the
Act.
The Commission also finds good cause, pursuant to Section 19(b)(2)
of the Act,\15\ for approving the proposed rule change prior to the
30th day after the date of publication of notice in the Federal
Register. 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, among other things,
broker voting on executive compensation. The Commission believes that
good cause exists to grant accelerated approval to the Exchange's
proposal, because it will conform NYSE Amex rules to the requirements
of Section 6(b)(10) of the Act. Moreover, the Commission notes that the
proposed changes are based on NYSE Rule 452.\16\
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\15\ 15 U.S.C. 78s(b)(2).
\16\ See NYSE Rule 452, Securities Exchange Act Release No. 34-
62874 (September 9, 2010), 75 FR 56152 (September 15, 2010) (SR-
NYSE-2010-59).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\17\ that the proposed rule change (SR-NYSEAmex-2011-97) be, and it
hereby is, approved on an accelerated basis.
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\17\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Trading and Markets, pursuant to
delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-33045 Filed 12-23-11; 8:45 am]
BILLING CODE 8011-01-P
