Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Its Application of the Proxy Delivery Requirements of NYSE Rule 451(b)(1) Through and Including May 31, 2020, 23875-23878 [2020-09050]
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Federal Register / Vol. 85, No. 83 / Wednesday, April 29, 2020 / Notices
shareholder meetings in the COVID–19
pandemic context.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: April 27, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–09224 Filed 4–27–20; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release Nos. 33–10776; 34–88742; File No.
265–32]
SEC Small Business Capital Formation
Advisory Committee
Securities and Exchange
Commission.
ACTION: Notice of meeting.
AGENCY:
The Securities and Exchange
Commission Small Business Capital
Formation Advisory Committee,
established pursuant to Section 40 of
the Securities Exchange Act of 1934 as
added by the SEC Small Business
Advocate Act of 2016, is providing
notice that it will hold a public meeting
by videoconference. The public is
invited to submit written statements to
the Committee.
DATES: The meeting will be held on
Friday, May 8, 2020, from 1 p.m. to 4
p.m. (ET) and will be open to the public.
Written statements should be received
on or before May 8, 2020.
ADDRESSES: The meeting will be
conducted by remote means
(videoconference). Members of the
public may attend the meeting by
viewing the webcast on the
Commission’s website at www.sec.gov.
Written statements may be submitted by
any of the following methods:
SUMMARY:
jbell on DSKJLSW7X2PROD with NOTICES
Electronic Statements
• Use the Commission’s internet
submission form (https://www.sec.gov/
rules/submitcomments.htm); or
• Send an email message to rulecomments@sec.gov. Please include File
Number 265–32 on the subject line; or
Paper Statements
• Send paper statements to Vanessa
A. Countryman, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File No.
265–32. This file number should be
included on the subject line if email is
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used. To help us process and review
your statement more efficiently, please
use only one method. The Commission
will post all statements on the SEC’s
website at www.sec.gov.
Statements also will be available for
website 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. (ET). All
statements received will be posted
without change; we do not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
FOR FURTHER INFORMATION CONTACT: Julie
Z. Davis, Senior Special Counsel, Office
of the Advocate for Small Business
Capital Formation, at (202) 551–5407,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–3628.
SUPPLEMENTARY INFORMATION: The
meeting will be open to the public.
Persons needing special
accommodations because of a disability
should notify the contact person listed
in the section above entitled FOR
FURTHER INFORMATION CONTACT. The
agenda for the meeting includes matters
relating to rules and regulations
affecting small and emerging companies
under the federal securities laws.
Dated: April 24, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–09083 Filed 4–28–20; 8:45 am]
BILLING CODE 8011–01–P
23875
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify its
application of the proxy delivery
requirements of NYSE Rule 451(b)(1)
through and including May 31, 2020.
The proposed rule change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88736; File No. SR–NYSE–
2020–38]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify Its
Application of the Proxy Delivery
Requirements of NYSE Rule 451(b)(1)
Through and Including May 31, 2020
April 23, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on April 23,
2020, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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NYSE Rule 452 provides for limited
circumstances in which a member
organization may vote shares it holds on
behalf of its ‘‘street’’ name customers
when the beneficial owner has not
provided voting instructions with
respect to certain ‘‘routine’’ matters.
This ability on the part of member
organizations is subject to certain
limitations, including the requirement
of Rule 451(b)(1) that the proxy
materials mailed to beneficial holders
include the following disclosure:
A request for voting instructions and, as to
matters which may be voted without
instructions under Rule 452, a statement to
the effect that, if such instructions are not
received by the tenth day before the meeting,
the proxy may be given at discretion by the
owner of record of the stock; provided,
however, that such statement may be made
only when the proxy soliciting material is
transmitted to the beneficial owner of the
stock or to the beneficial owner’s designated
investment adviser, at least fifteen days
before the meeting. When the proxy soliciting
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material is transmitted to the beneficial
owner of the stock or to the beneficial
owner’s designated investment adviser
twenty-five days or more before the meeting,
the statement accompanying such material
shall be to the effect that the proxy may be
given fifteen days before the meeting at the
discretion of the owner of record of the stock.
The ability of member organizations
to vote on ‘‘routine’’ matters serves an
important purpose for many public
companies. The low level of voting
response from ‘‘street’’ name account
holders to proxy solicitations means
that it is often difficult for companies to
meet applicable quorum requirements
under state law, the company’s
constitutive documents or stock
exchange rules. However, the ability of
member organizations to vote on routine
items in the absence of beneficial owner
proxy voting instructions enables
beneficial owners to be counted as
present for quorum purposes for the
meeting as a whole even if they do not
submit voting instructions and therefore
enables companies to conduct all
required business at their shareholder
meetings. Generally, Rule 452 does not
allow member organizations to vote
uninstructed shares on nonroutine
matters, so the voting of those shares by
member organizations with respect to
routine matters does not generally affect
the outcome of any vote of any
importance to the company and its
shareholders, while facilitating the
effective conduct of shareholder
meetings.
The Exchange has been made aware
that the recent ongoing spread of the
COVID–19 virus throughout the United
States and the social distancing and
stay-at-home measures imposed by
many state and local governments has
severely disrupted the operations of the
primary intermediary responsible for
distributing proxy materials on behalf of
member organizations. The primary
intermediary has informed the Exchange
that it is having difficulty in some cases
meeting the specification of Rule
451(b)(1) to transmit proxy materials to
beneficial owners at least 15 days prior
to shareholder meetings, due to delays
in receiving the printed materials from
issuers for distribution and also because
its own processing times have been
slowed down by reduced staffing levels
caused by the disruption associated
with the spread of COVID–19.
The Exchange is concerned about the
effect on the ability of companies to
hold shareholder meetings that may
arise out of the current difficulties being
experienced in transmitting proxy
materials no later than the 15 days in
advance of the meeting specified in Rule
451(b)(1). The Exchange notes that it has
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been the practice since at least the 1990s
to apply Rule 451(b)(1) on the basis that
member organizations may not vote any
uninstructed shares if the mailing of any
of the required physical proxy materials
is made later than 15 days before the
meeting, including shares whose
beneficial owner opted for electronic
delivery and to whom the materials are
transmitted electronically on a timely
basis.4 Consequently, many companies
may have difficulty meeting applicable
quorum requirements for their
scheduled shareholder meetings.
The primary intermediary has
informed the Exchange that it would
need to undertake significant systems
development work to be able to
differentiate for voting purposes those
shares whose beneficial owners are sent
timely electronic distributions from
those shares whose beneficial owners
are sent physical distributions that are
mailed fewer than fifteen days before a
shareholder meeting. As this
development work would likely take
months to complete, it is not possible
during the upcoming proxy season,
occurring during the current crisis, to
allow the voting of uninstructed shares
of a company where the materials are
transmitted no later than 15 days in
advance of the meeting and to disallow
the voting on uninstructed shares where
the materials were transmitted past that
deadline.
To alleviate the problem described
above, the Exchange proposes to modify
its application of Rule 451(b)(1)
temporarily for shareholder meetings
occurring on or before May 31, 2020. As
proposed, the Exchange would permit
member organizations to vote
uninstructed shares as long as proxy
materials are transmitted to beneficial
owners no later than 10 days prior to the
shareholder meeting, rather than the
fifteen day period required by the text
of the rule. All of the other requirements
and limitations associated with voting
by member organizations would
continue to be applied during this
period. The Exchange expects that best
efforts will be made to ensure that
transmissions of proxy materials will
continue to be made prior to the
fifteenth day before the meeting
whenever possible, either in whole or in
part. In particular, the Exchange expects
electronic transmissions of proxy
materials to continue to be made within
4 The Exchange understands that proxy materials
are delivered electronically to the beneficial owners
of approximately 84% of all shares and
approximately 43% of shares held by retail
investors, according to data provided by the
primary intermediary with respect to the 12 months
ended June 30, 2018.
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the normal time frames provided by the
rule.
In order to rely on the proposed relief,
the intermediary acting as agent for the
member organization will be required to
post prominently on its website the
following disclosures:
• that it is experiencing operational
challenges as a result of the disruptive
effects of COVID–19 and is therefore
experiencing difficulty in some cases in
transmitting proxy materials to
beneficial owners at least 15 days prior
to shareholder meeting dates;
• as a consequence, it is relying on
relief provided by the NYSE to shorten
from 15 days to 10 days the period
required under Rule 451(b)(1) that proxy
materials must be transmitted to
beneficial owners in order for the
member organization to be permitted to
vote its customers’ uninstructed shares
on routine matters; 5
• a list of the companies whose proxy
distributions are affected, including the
meeting date and the date on which the
transmission was completed; and
• a statement encouraging beneficial
owners to submit their voting
instructions through the electronic or
telephonic means, if any, described in
the request for voting instructions sent
by the member organization to ensure
that such instructions are received in
advance of the shareholder meeting.
While the Exchange believes that the
proposed temporary modification of
Rule 451(b)(1) would provide significant
relief to issuers during the ongoing
COVID–19 crisis by enabling them to
conduct their shareholder meetings as
planned, it does not believe that it
would have a significant effect on the
voting right of beneficial owners or the
outcome of any material proposals voted
on at those meetings. First, a high
percentage of ‘‘street’’ name
shareholders of most public companies
elect to receive electronic delivery of
proxy materials and vote by electronic
means. The electronic distributions to
those shareholders would not be
delayed as a result of the proposed
accommodation. Second, a significant
percentage of shareholders who receive
physical distributions of proxy materials
and vote, vote through the internet or by
phone,6 so the Exchange believes that
the rule as modified would continue to
provide adequate time for most
5 The intermediary should provide a link on its
website to this filing as posted on nyse.com.
6 Based on information provided by the primary
intermediary for the 12 months ended December 24,
2019, the Exchange understands that approximately
30% of the shares owned by retail shareholders are
voted. Of the voted amount, 26% are voted by paper
vote instruction form and 74% are voted by
electronic methods including internet or phone.
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beneficial owners to review their proxy
materials and vote on a timely basis.
The Exchange also notes that Rule 452
generally prohibits member
organizations from voting material
matters such as director elections (other
than an uncontested election of a
director of an investment company
registered under the Investment
Company Act of 1940 (the ‘‘Investment
Company Act’’)) 7 and equity
compensation plans and that member
organizations can vote only on routine
matters such as the ratification of
auditors (which is generally included on
a meeting agenda precisely to ensure the
presence of all shares held in brokerage
accounts for quorum purposes).
Rule 451(b) provides that the member
organization as record holder may give
a proxy to vote shares if the beneficial
owner has not provided voting
instructions before the tenth day
preceding the shareholder meeting.
However, the number of shares included
in the member organization’s proxy is
adjusted over the period right up to the
time of the meeting to reflect the ability
of beneficial owners to continue to
provide instructions throughout that
period. Supplementary Material .20 to
Rule 451 includes forms of letters to be
sent to beneficial owners when
soliciting voting instructions. The forms
of letters provided include the following
provision:
If we do not hear from you by the tenth day
before the meeting, we may vote your shares
in our discretion to the extent permitted by
the rules of the Exchange. If you are unable
to communicate with us by such date, we
will, nevertheless follow your voting
instructions, even if our discretionary vote
has already been given, provided your
instructions are received prior to the
stockholders’ meeting.
During the period of the proposed
relief from the 15-day requirement, the
forms of letters included in proxy
mailings must clearly emphasize the
ability of beneficial owners to provide
voting instructions right up to the time
of the meeting.
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2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the Act,8
in general, and furthers the objectives of
Section 6(b)(5) of the Act,9 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
7 See Rule 452, Supplementary Material .11,
subsections (2) and (19).
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
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in 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 proposed rule change is designed
to provide significant relief to issuers
during the ongoing COVID–19 crisis by
enabling them to conduct their
shareholder meetings as planned. The
Exchange believes that the proposed
rule change is consistent with the
protection of investors because it would
not have a significant effect on the
voting rights of beneficial owners or the
outcome of any material proposals voted
on at shareholder meetings. The
Exchange notes that a high percentage of
‘‘street’’ name shareholders of most
public companies elect to receive
electronic delivery of proxy materials
and vote by electronic means. Electronic
distributions to those shareholders
would not be delayed as a result of the
proposed accommodation. In addition, a
significant percentage of shareholders
who receive physical distributions of
proxy materials and vote, vote through
the internet or by phone, so the
Exchange believes that the rule as
modified would continue to provide
adequate time for beneficial owners to
review their proxy materials and vote on
a timely basis. The Exchange also notes
that Rule 452 generally prohibits
member organizations from voting
material matters such as director
elections and equity compensation
plans and that member organizations
can vote only on routine matters such as
the ratification of auditors (which is
generally included on a meeting agenda
precisely to ensure the presence of all
shares held in brokerage accounts for
quorum purposes).
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather is designed to provide limited
relief to member organizations and
issuers in relation to difficulties
experienced in distributing proxy
materials during the current ongoing
COVID–19 crisis.
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.
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23877
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 10 and Rule 19b–
4(f)(6) thereunder.11
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 12 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 13
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative
immediately upon filing. According to
the Exchange, the proposed rule change
would provide significant relief to
issuers during the ongoing COVID–19
crisis by enabling them to conduct their
shareholder meetings as planned given
the current difficulties being
experienced transmitting proxy
materials. As noted above, the proposed
rule change would temporarily permit
member organizations until May 31,
2020 to vote uninstructed shares on
routine matters pursuant to NYSE Rule
452 provided that such materials are
transmitted to beneficial owners no later
than 10 days prior to the shareholder
meeting, instead of 15 days in advance
of a meeting. The Exchange stated,
among other things, that member
organizations can only vote on routine
matters under its rules and that the
proposal would not have a significant
effect on the outcome of any material
proposals voted on at shareholder
meetings. The Exchange further stated
that the waiver of the 30-day operative
delay will help companies plan, and
meet quorum requirements, for
shareholder meetings during the
upcoming proxy season.
10 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
12 17 CFR 240.19b–4(f)(6).
13 17 CFR 240.19b–4(f)(6)(iii).
11 17
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The Commission notes that while the
proposed rule change provides
temporary relief in the event that there
are delays in distributing proxy
materials as a result of COVID–19, the
Exchange and the Commission expect
that best efforts will be made to ensure
that transmissions of proxy materials
will continue to be made prior to the
15th day before the meeting. To the
extent that materials cannot be
distributed prior to the 15th day, the
Commission notes that the conditions
set forth above requiring, in part, the
intermediary acting on behalf of a
member organization to disclose
prominently on its website that it is
experiencing operational challenges as a
result of COVID–19, identify the
companies whose proxy distributions
are affected, and encourage beneficial
owners to submit their vote by
electronic or telephone means to ensure
their instructions are received in
advance of the shareholder meeting
should help to ensure beneficial owners
have adequate time to review their
proxy material and vote on a timely
basis.
Moreover, the Commission notes that,
as discussed above, proxy materials are
delivered electronically to the beneficial
owners of 84% of all shares,14 and that
the Exchange expects electronic
transmissions of proxy materials to
continue to be made within the normal
time frames provided by its rule. In
addition, according to the Exchange, a
significant percentage of shareholders
who receive physical distributions of
proxy materials and vote, vote through
the internet or by phone, so the rule as
modified would continue to provide
adequate time for most beneficial
owners to review their proxy materials
and vote on a timely basis.15 The
proposal also only continues to allow
member organizations to vote
uninstructed shares on routine matters
in accordance with Exchange Rule 452.
The Commission also notes that the
proposal is a temporary measure
designed to respond to current, unusual
market conditions. For these reasons,
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposal as operative upon filing.16
14 See
supra note 4.
supra note 6 and accompanying text.
16 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
15 See
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At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments:
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2020–38 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2020–38. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
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cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2020–38 and should
be submitted on or before May 20, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09050 Filed 4–28–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33852; File No. 812–15117]
The Alger ETF Trust, et al.
April 23, 2020.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of an application for an order
under section 6(c) of the Investment
Company Act of 1940 (‘‘Act’’) for an
exemption from sections 2(a)(32),
5(a)(1), and 22(d) of the Act and rule
22c–1 under the Act, under sections 6(c)
and 17(b) of the Act for an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act, and under section 12(d)(1)(J) of the
Act for an exemption from sections
12(d)(1)(A) and 12(d)(1)(B) of the Act.
Applicants: The Alger ETF Trust (the
‘‘Trust’’), Fred Alger Management, LLC
(the ‘‘Adviser’’) and Fred Alger &
Company, LLC (the ‘‘Distributor’’).
Summary of Application: Applicants
request an order (‘‘Order’’) that permits:
(a) ActiveShares ETFs (as described in
the Reference Order (as defined below))
to issue shares (‘‘Shares’’) redeemable in
large aggregations only (‘‘creation
units’’); (b) secondary market
transactions in Shares to occur at
negotiated market prices rather than at
net asset value; (c) certain affiliated
persons of an ActiveShares ETF to
deposit securities into, and receive
securities from, the ActiveShares ETF in
connection with the purchase and
redemption of creation units; and (d)
certain registered management
investment companies and unit
investment trusts outside of the same
group of investment companies as the
ActiveShares ETFs to acquire Shares of
the ActiveShares ETFs. The Order
would incorporate by reference terms
and conditions of a previous order
17 17
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CFR 200.30–3(a)(12).
29APN1
]]>Agencies
[Federal Register Volume 85, Number 83 (Wednesday, April 29, 2020)]
[Notices]
[Pages 23875-23878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09050]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88736; File No. SR-NYSE-2020-38]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Its Application of the Proxy Delivery Requirements of NYSE Rule
451(b)(1) Through and Including May 31, 2020
April 23, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on April 23, 2020, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') 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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify its application of the proxy
delivery requirements of NYSE Rule 451(b)(1) through and including May
31, 2020. The proposed rule change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE Rule 452 provides for limited circumstances in which a member
organization may vote shares it holds on behalf of its ``street'' name
customers when the beneficial owner has not provided voting
instructions with respect to certain ``routine'' matters. This ability
on the part of member organizations is subject to certain limitations,
including the requirement of Rule 451(b)(1) that the proxy materials
mailed to beneficial holders include the following disclosure:
A request for voting instructions and, as to matters which may
be voted without instructions under Rule 452, a statement to the
effect that, if such instructions are not received by the tenth day
before the meeting, the proxy may be given at discretion by the
owner of record of the stock; provided, however, that such statement
may be made only when the proxy soliciting material is transmitted
to the beneficial owner of the stock or to the beneficial owner's
designated investment adviser, at least fifteen days before the
meeting. When the proxy soliciting
[[Page 23876]]
material is transmitted to the beneficial owner of the stock or to
the beneficial owner's designated investment adviser twenty-five
days or more before the meeting, the statement accompanying such
material shall be to the effect that the proxy may be given fifteen
days before the meeting at the discretion of the owner of record of
the stock.
The ability of member organizations to vote on ``routine'' matters
serves an important purpose for many public companies. The low level of
voting response from ``street'' name account holders to proxy
solicitations means that it is often difficult for companies to meet
applicable quorum requirements under state law, the company's
constitutive documents or stock exchange rules. However, the ability of
member organizations to vote on routine items in the absence of
beneficial owner proxy voting instructions enables beneficial owners to
be counted as present for quorum purposes for the meeting as a whole
even if they do not submit voting instructions and therefore enables
companies to conduct all required business at their shareholder
meetings. Generally, Rule 452 does not allow member organizations to
vote uninstructed shares on nonroutine matters, so the voting of those
shares by member organizations with respect to routine matters does not
generally affect the outcome of any vote of any importance to the
company and its shareholders, while facilitating the effective conduct
of shareholder meetings.
The Exchange has been made aware that the recent ongoing spread of
the COVID-19 virus throughout the United States and the social
distancing and stay-at-home measures imposed by many state and local
governments has severely disrupted the operations of the primary
intermediary responsible for distributing proxy materials on behalf of
member organizations. The primary intermediary has informed the
Exchange that it is having difficulty in some cases meeting the
specification of Rule 451(b)(1) to transmit proxy materials to
beneficial owners at least 15 days prior to shareholder meetings, due
to delays in receiving the printed materials from issuers for
distribution and also because its own processing times have been slowed
down by reduced staffing levels caused by the disruption associated
with the spread of COVID-19.
The Exchange is concerned about the effect on the ability of
companies to hold shareholder meetings that may arise out of the
current difficulties being experienced in transmitting proxy materials
no later than the 15 days in advance of the meeting specified in Rule
451(b)(1). The Exchange notes that it has been the practice since at
least the 1990s to apply Rule 451(b)(1) on the basis that member
organizations may not vote any uninstructed shares if the mailing of
any of the required physical proxy materials is made later than 15 days
before the meeting, including shares whose beneficial owner opted for
electronic delivery and to whom the materials are transmitted
electronically on a timely basis.\4\ Consequently, many companies may
have difficulty meeting applicable quorum requirements for their
scheduled shareholder meetings.
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\4\ The Exchange understands that proxy materials are delivered
electronically to the beneficial owners of approximately 84% of all
shares and approximately 43% of shares held by retail investors,
according to data provided by the primary intermediary with respect
to the 12 months ended June 30, 2018.
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The primary intermediary has informed the Exchange that it would
need to undertake significant systems development work to be able to
differentiate for voting purposes those shares whose beneficial owners
are sent timely electronic distributions from those shares whose
beneficial owners are sent physical distributions that are mailed fewer
than fifteen days before a shareholder meeting. As this development
work would likely take months to complete, it is not possible during
the upcoming proxy season, occurring during the current crisis, to
allow the voting of uninstructed shares of a company where the
materials are transmitted no later than 15 days in advance of the
meeting and to disallow the voting on uninstructed shares where the
materials were transmitted past that deadline.
To alleviate the problem described above, the Exchange proposes to
modify its application of Rule 451(b)(1) temporarily for shareholder
meetings occurring on or before May 31, 2020. As proposed, the Exchange
would permit member organizations to vote uninstructed shares as long
as proxy materials are transmitted to beneficial owners no later than
10 days prior to the shareholder meeting, rather than the fifteen day
period required by the text of the rule. All of the other requirements
and limitations associated with voting by member organizations would
continue to be applied during this period. The Exchange expects that
best efforts will be made to ensure that transmissions of proxy
materials will continue to be made prior to the fifteenth day before
the meeting whenever possible, either in whole or in part. In
particular, the Exchange expects electronic transmissions of proxy
materials to continue to be made within the normal time frames provided
by the rule.
In order to rely on the proposed relief, the intermediary acting as
agent for the member organization will be required to post prominently
on its website the following disclosures:
that it is experiencing operational challenges as a result
of the disruptive effects of COVID-19 and is therefore experiencing
difficulty in some cases in transmitting proxy materials to beneficial
owners at least 15 days prior to shareholder meeting dates;
as a consequence, it is relying on relief provided by the
NYSE to shorten from 15 days to 10 days the period required under Rule
451(b)(1) that proxy materials must be transmitted to beneficial owners
in order for the member organization to be permitted to vote its
customers' uninstructed shares on routine matters; \5\
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\5\ The intermediary should provide a link on its website to
this filing as posted on nyse.com.
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a list of the companies whose proxy distributions are
affected, including the meeting date and the date on which the
transmission was completed; and
a statement encouraging beneficial owners to submit their
voting instructions through the electronic or telephonic means, if any,
described in the request for voting instructions sent by the member
organization to ensure that such instructions are received in advance
of the shareholder meeting.
While the Exchange believes that the proposed temporary
modification of Rule 451(b)(1) would provide significant relief to
issuers during the ongoing COVID-19 crisis by enabling them to conduct
their shareholder meetings as planned, it does not believe that it
would have a significant effect on the voting right of beneficial
owners or the outcome of any material proposals voted on at those
meetings. First, a high percentage of ``street'' name shareholders of
most public companies elect to receive electronic delivery of proxy
materials and vote by electronic means. The electronic distributions to
those shareholders would not be delayed as a result of the proposed
accommodation. Second, a significant percentage of shareholders who
receive physical distributions of proxy materials and vote, vote
through the internet or by phone,\6\ so the Exchange believes that the
rule as modified would continue to provide adequate time for most
[[Page 23877]]
beneficial owners to review their proxy materials and vote on a timely
basis. The Exchange also notes that Rule 452 generally prohibits member
organizations from voting material matters such as director elections
(other than an uncontested election of a director of an investment
company registered under the Investment Company Act of 1940 (the
``Investment Company Act'')) \7\ and equity compensation plans and that
member organizations can vote only on routine matters such as the
ratification of auditors (which is generally included on a meeting
agenda precisely to ensure the presence of all shares held in brokerage
accounts for quorum purposes).
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\6\ Based on information provided by the primary intermediary
for the 12 months ended December 24, 2019, the Exchange understands
that approximately 30% of the shares owned by retail shareholders
are voted. Of the voted amount, 26% are voted by paper vote
instruction form and 74% are voted by electronic methods including
internet or phone.
\7\ See Rule 452, Supplementary Material .11, subsections (2)
and (19).
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Rule 451(b) provides that the member organization as record holder
may give a proxy to vote shares if the beneficial owner has not
provided voting instructions before the tenth day preceding the
shareholder meeting. However, the number of shares included in the
member organization's proxy is adjusted over the period right up to the
time of the meeting to reflect the ability of beneficial owners to
continue to provide instructions throughout that period. Supplementary
Material .20 to Rule 451 includes forms of letters to be sent to
beneficial owners when soliciting voting instructions. The forms of
letters provided include the following provision:
If we do not hear from you by the tenth day before the meeting,
we may vote your shares in our discretion to the extent permitted by
the rules of the Exchange. If you are unable to communicate with us
by such date, we will, nevertheless follow your voting instructions,
even if our discretionary vote has already been given, provided your
instructions are received prior to the stockholders' meeting.
During the period of the proposed relief from the 15-day
requirement, the forms of letters included in proxy mailings must
clearly emphasize the ability of beneficial owners to provide voting
instructions right up to the time of the meeting.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\8\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\9\ 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 mechanism of a free and open
market and a national market system.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is designed to provide significant relief
to issuers during the ongoing COVID-19 crisis by enabling them to
conduct their shareholder meetings as planned. The Exchange believes
that the proposed rule change is consistent with the protection of
investors because it would not have a significant effect on the voting
rights of beneficial owners or the outcome of any material proposals
voted on at shareholder meetings. The Exchange notes that a high
percentage of ``street'' name shareholders of most public companies
elect to receive electronic delivery of proxy materials and vote by
electronic means. Electronic distributions to those shareholders would
not be delayed as a result of the proposed accommodation. In addition,
a significant percentage of shareholders who receive physical
distributions of proxy materials and vote, vote through the internet or
by phone, so the Exchange believes that the rule as modified would
continue to provide adequate time for beneficial owners to review their
proxy materials and vote on a timely basis. The Exchange also notes
that Rule 452 generally prohibits member organizations from voting
material matters such as director elections and equity compensation
plans and that member organizations can vote only on routine matters
such as the ratification of auditors (which is generally included on a
meeting agenda precisely to ensure the presence of all shares held in
brokerage accounts for quorum purposes).
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to provide limited relief to member organizations and issuers in
relation to difficulties experienced in distributing proxy materials
during the current ongoing COVID-19 crisis.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \12\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposed rule change may become operative immediately upon filing.
According to the Exchange, the proposed rule change would provide
significant relief to issuers during the ongoing COVID-19 crisis by
enabling them to conduct their shareholder meetings as planned given
the current difficulties being experienced transmitting proxy
materials. As noted above, the proposed rule change would temporarily
permit member organizations until May 31, 2020 to vote uninstructed
shares on routine matters pursuant to NYSE Rule 452 provided that such
materials are transmitted to beneficial owners no later than 10 days
prior to the shareholder meeting, instead of 15 days in advance of a
meeting. The Exchange stated, among other things, that member
organizations can only vote on routine matters under its rules and that
the proposal would not have a significant effect on the outcome of any
material proposals voted on at shareholder meetings. The Exchange
further stated that the waiver of the 30-day operative delay will help
companies plan, and meet quorum requirements, for shareholder meetings
during the upcoming proxy season.
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
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[[Page 23878]]
The Commission notes that while the proposed rule change provides
temporary relief in the event that there are delays in distributing
proxy materials as a result of COVID-19, the Exchange and the
Commission expect that best efforts will be made to ensure that
transmissions of proxy materials will continue to be made prior to the
15th day before the meeting. To the extent that materials cannot be
distributed prior to the 15th day, the Commission notes that the
conditions set forth above requiring, in part, the intermediary acting
on behalf of a member organization to disclose prominently on its
website that it is experiencing operational challenges as a result of
COVID-19, identify the companies whose proxy distributions are
affected, and encourage beneficial owners to submit their vote by
electronic or telephone means to ensure their instructions are received
in advance of the shareholder meeting should help to ensure beneficial
owners have adequate time to review their proxy material and vote on a
timely basis.
Moreover, the Commission notes that, as discussed above, proxy
materials are delivered electronically to the beneficial owners of 84%
of all shares,\14\ and that the Exchange expects electronic
transmissions of proxy materials to continue to be made within the
normal time frames provided by its rule. In addition, according to the
Exchange, a significant percentage of shareholders who receive physical
distributions of proxy materials and vote, vote through the internet or
by phone, so the rule as modified would continue to provide adequate
time for most beneficial owners to review their proxy materials and
vote on a timely basis.\15\ The proposal also only continues to allow
member organizations to vote uninstructed shares on routine matters in
accordance with Exchange Rule 452. The Commission also notes that the
proposal is a temporary measure designed to respond to current, unusual
market conditions. For these reasons, the Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest. Therefore, the Commission hereby
waives the operative delay and designates the proposal as operative
upon filing.\16\
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\14\ See supra note 4.
\15\ See supra note 6 and accompanying text.
\16\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments:
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-38 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2020-38. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2020-38 and should be submitted on
or before May 20, 2020.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09050 Filed 4-28-20; 8:45 am]
BILLING CODE 8011-01-P
