Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend Its Rules To Prohibit Member Organizations From Seeking Reimbursement, in Certain Circumstances, From Issuers for Forwarding Proxy and Other Materials to Beneficial Owners, 82539-82541 [2020-27836]
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Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices
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–CboeBZX–2020–070 and
should be submitted by January 8, 2021.
Rebuttal comments should be submitted
by January 22, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27840 Filed 12–17–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90653; File No. SR–NYSE–
2020–98]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend Its Rules To Prohibit Member
Organizations From Seeking
Reimbursement, in Certain
Circumstances, From Issuers for
Forwarding Proxy and Other Materials
to Beneficial Owners
December 14, 2020.
khammond on DSKJM1Z7X2PROD with NOTICES
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 30, 2020, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules to prohibit member organizations
from seeking reimbursement from
issuers for forwarding proxy and other
materials to beneficial owners who
received shares from their broker at no
cost or at a price substantially less than
the market price in connection with a
promotion by the broker. The proposed
26 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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22:22 Dec 17, 2020
Jkt 253001
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 451 requires NYSE
member organizations that hold
securities for beneficial owners in street
name to solicit proxies from, and deliver
proxy and issuer communication
materials to, beneficial owners on behalf
of issuers.4 For this service, issuers
reimburse NYSE member organizations
for out-of-pocket, reasonable clerical,
postage and other expenses incurred for
a particular distribution. This
reimbursement structure stems from
SEC Rules 14b–1 and 14b–2 under the
Act,5 which impose obligations on
companies and nominees to ensure that
beneficial owners receive proxy
materials and are given the opportunity
to vote. These rules require companies
to send their proxy materials to
nominees, i.e., broker-dealers or banks
that hold securities in street name, for
forwarding to beneficial owners and to
pay nominees for reasonable expenses,
both direct and indirect, incurred in
providing proxy information to
beneficial owners. Similarly, Rule 465
requires member organizations to
forward issuer communications to
4 The ownership of shares in street name means
that a shareholder, or ‘‘beneficial owner,’’ has
purchased shares through a broker-dealer or bank,
also known as a ‘‘nominee.’’ In contrast to direct
ownership, where shares are directly registered in
the name of the shareholder, shares held in street
name are registered in the name of the nominee, or
in the nominee name of a depository, such as the
Depository Trust Company. For more detail
regarding share ownership, see Securities Exchange
Act Release No. 62495 (July 14, 2010), 75 FR 42982
(July 22, 2010) (Concept Release on the U.S. Proxy
System) (‘‘Proxy Concept Release’’).
5 17 CFR 240.14b–1; 17 CFR 240.14b–2.
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
82539
beneficial owners on behalf of issuers
subject to receipt of reimbursement of
expenses.
Recently, brokers providing retail
brokerage services have developed a
practice in which customers are given
securities without charge as a
commercial incentive (for example,
upon opening a new account or
referring a new customer to the broker).
Typically, these incentives involve the
transfer of a small number of shares to
benefiting customers and result in the
customer having a position in the
company whose shares they receive that
has a very small dollar value. Rule 451
does not distinguish between these
beneficial owners and beneficial owners
that have paid for their shares, so
brokers are required to solicit proxies
from these accounts and are entitled to
reimbursement of their expenses under
Rules 451 and 465, as well as pursuant
to the applicable rules of any other
national securities exchange or national
securities association of which the
NYSE member organization is a
member.6 As a consequence, issuers are
billed under Exchange rules and the
rules of other SROs for the
reimbursement of expenses the broker
incurs in making distributions to these
beneficial owners who have very small
positions, which they acquired from
their broker without any payment by the
customer. In certain cases, the issuer
can experience a significant increase in
its distribution reimbursement expenses
solely due to its shares being included
in these broker promotional schemes.
While the distribution of shares in
these broker promotions may result in a
significant increase in the number of
beneficial owners of an issuer’s stock,
the generally very small size of each of
these positions means that they usually
represent a very small percentage of the
voting power. As such, the costs the
issuer incurs in reimbursing the broker
for distributing proxies to these
accounts is very disproportionate to the
maximum potential vote such shares
represent. By contrast, the broker using
such a scheme chooses to engage in it
because it believes that it will result in
a commercial benefit to the broker.
Consequently, the Exchange believes
that it is more appropriate for the broker
to bear these proxy distribution costs.
Accordingly, the Exchange proposes
new Rule 451A, which would provide
that, notwithstanding the applicable
provisions of Rules 451 or 465 or what
may be permitted by the rules of any
other national securities exchange or
national securities association of which
a member organization is also a
6 See,
E:\FR\FM\18DEN1.SGM
for example, FINRA Rule 2251.
18DEN1
82540
Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
member, no member shall seek to be
reimbursed for expenses incurred in
connection with the distribution of
proxies or other materials on behalf of
issuers to the beneficial owners of
shares or units of an issuer’s securities
in a nominee account if those shares or
units were transferred to the account
holder by the member organization at no
cost or at a price substantially less than
the market price.
As proposed, Rule 451A would not
limit a broker’s right to reimbursement
for distributions to any beneficial owner
if any part of that beneficial owner’s
position in an issuer’s securities was
received by any means other than a
transfer without charge or at a price
substantially less than the market price
from the broker. Rules 451 and 465
would continue to apply to all
distributions, so the broker would
continue to be fully obligated to solicit
votes from, and make other distributions
on behalf of issuers to, all beneficial
owners notwithstanding the limitations
on reimbursement of expenses imposed
by Rule 451A.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(the ‘‘Act’’) generally.7 Section 6(b)(4) 8
requires that exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using the facilities of an exchange.
Section 6(b)(5) 9 requires, among other
things, that exchange rules are 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, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect the public interest
and the interests of investors, promote
just and equitable principles of trade
and that they are not designed to permit
unfair discrimination between issuers,
brokers or dealers.
The Exchange believes that the
proposal is consistent with Sections
6(b)(4) and 6(b)(5) of the Act as it would
only limit the reimbursement of
distribution expenses in circumstances
where a broker distributes the shares to
its customers as part of a voluntary
promotional strategy by the broker from
which it derives a commercial benefit.
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
9 15 U.S.C. 78f(b)(5).
The Exchange notes that the recipients
of shares without charge or at a price
substantially less than the market price
from the broker as part of such schemes
typically will not be given any choice as
to which shares they receive and are
therefore not making any investment
decision. As the broker typically has
sole control over the allocation of these
shares to its customers and derives a
commercial benefit from doing so, the
Exchange believes that the proposal is
not unfairly discriminatory and does not
represent an inequitable allocation of
the costs of the distribution of proxy
and other issuer materials. The
Exchange also notes that brokers will
continue to be required to distribute
proxy and other materials on behalf of
issuers notwithstanding the fact that
brokers will not be entitled to any
reimbursement of expenses and believes
that the proposal is therefore consistent
with Rules 14b–1 and 14b–2 under the
Act,10 which impose obligations on
companies and nominees to ensure that
beneficial owners receive proxy
materials and are given the opportunity
to vote.
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 not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed limitation on distribution
expense reimbursement would apply to
any broker that adopts a commercial
strategy of distributing shares to account
holders free of charge or at a substantial
discount to the market price. Brokers
that adopt this strategy do so because
they believe that they derive a
commercial and competitive advantage
from doing so. As such, the Exchange
believes that any burden on competition
associated with this proposal is
appropriate in light of the fact that
brokers will only be subject to any such
burden as a consequence of voluntarily
adopting a strategy that they believe is
beneficial for their business. There
would be no effect on the competition
among issuers resulting from the
proposed rule change, as all issuers
would benefit from the proposed
restriction in the same manner if their
shares have been distributed without
charge as part of such a commercial
arrangement.
7 15
8 15
VerDate Sep<11>2014
22:22 Dec 17, 2020
10 17
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PO 00000
CFR 240.14b–1; 17 CFR 240.14b–2.
Frm 00115
Fmt 4703
Sfmt 4703
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or up to 90 days (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2020–98 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–2020–98. 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
E:\FR\FM\18DEN1.SGM
18DEN1
82541
Federal Register / Vol. 85, No. 244 / Friday, December 18, 2020 / Notices
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–2020–98 and should
be submitted on or before January 8,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27836 Filed 12–17–20; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–90655; File No. SR–BX–
2020–037]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing of Proposed
Rule Change To Amend BX Options 7,
Section 2 and Section 3
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend BX
Options 7, Section 2, ‘‘BX Options
Market—Fees and Rebates,’’ and
Options 7, Section 3, ‘‘BX Options
Market—Ports and other Services.’’
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/bx/rules, 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
SECURITIES AND EXCHANGE
COMMISSION
December 14, 2020.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
1, 2020, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
BX’s Pricing Schedule at Options 7,
Section 2, ‘‘BX Options Market—Fees
and Rebates,’’ and Options 7, Section 3,
‘‘BX Options Market—Ports and other
Services.’’ Each change will be
described in detail below.
Options 7, Section 2
The Exchange proposes to remove the
options tier schedules applicable to
Select Symbols 3 and SPY pricing. With
this proposal, all pricing within Options
7, Section 2 would be subject to either
the Penny Symbol or Non-Penny
Symbol pricing tier schedules.
Today, the Exchange assesses fees and
rebates for Penny Symbols and NonPenny Symbols, excluding Select
Symbols and SPY. Today, both Select
Symbols and options overlying ‘‘SPY’’
are subject to alternative pricing as
detailed below.
Today, the Exchange assesses fees and
pays rebates for Penny and Non-Penny
Symbols in accordance with the below
table and corresponding Penny and
Non-Penny tier schedules.
FEES AND REBATES
[per executed contract]
Customer
khammond on DSKJM1Z7X2PROD with NOTICES
Penny Symbols (Excluding Options in Select Symbols):
Rebate to Add Liquidity ............................................................................
Fee to Add Liquidity .................................................................................
Rebate to Remove Liquidity .....................................................................
Fee to Remove Liquidity ...........................................................................
Non-Penny Symbols:
Rebate to Add Liquidity ............................................................................
Fee to Add Liquidity .................................................................................
Rebate to Remove Liquidity .....................................................................
Fee to Remove Liquidity ...........................................................................
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
22:22 Dec 17, 2020
*
*
*
N/A
3 The following are current Select Symbols within
Options 7, Section 2: ASHR, DIA, DXJ, EEM, EFA,
EWJ, EWT, EWW, EWY, EWZ, FAS, FAZ, FXE, FXI,
FXP, GDX, GLD, HYG, IWM, IYR, KRE, OIH, QID,
1 15
VerDate Sep<11>2014
#
#
#
N/A
Jkt 253001
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
BX options
market maker
2 $0.10
3 0.39
N/A
#
N/A
5 0.50/0.95
N/A
*
Noncustomer 1
Firm
N/A
$0.45
N/A
0.46
N/A
$0.45
N/A
0.46
N/A
0.98
N/A
0.89
N/A
0.98
N/A
0.89
QLD, QQQ, RSX, SDS, SKF, SLV, SRS, SSO, TBT,
TLT, TNA, TZA, UNG, URE, USO, UUP, UVXY,
UYG, VXX, XHB, XLB, XLE, XLF, XLI, XLK, XLP,
XLU, XLV, XLY, XME, XOP, XRT.
E:\FR\FM\18DEN1.SGM
18DEN1
]]>Agencies
[Federal Register Volume 85, Number 244 (Friday, December 18, 2020)]
[Notices]
[Pages 82539-82541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27836]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90653; File No. SR-NYSE-2020-98]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Amend Its Rules To Prohibit
Member Organizations From Seeking Reimbursement, in Certain
Circumstances, From Issuers for Forwarding Proxy and Other Materials to
Beneficial Owners
December 14, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on November 30, 2020, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules to prohibit member
organizations from seeking reimbursement from issuers for forwarding
proxy and other materials to beneficial owners who received shares from
their broker at no cost or at a price substantially less than the
market price in connection with a promotion by the broker. 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 451 requires NYSE member organizations that hold
securities for beneficial owners in street name to solicit proxies
from, and deliver proxy and issuer communication materials to,
beneficial owners on behalf of issuers.\4\ For this service, issuers
reimburse NYSE member organizations for out-of-pocket, reasonable
clerical, postage and other expenses incurred for a particular
distribution. This reimbursement structure stems from SEC Rules 14b-1
and 14b-2 under the Act,\5\ which impose obligations on companies and
nominees to ensure that beneficial owners receive proxy materials and
are given the opportunity to vote. These rules require companies to
send their proxy materials to nominees, i.e., broker-dealers or banks
that hold securities in street name, for forwarding to beneficial
owners and to pay nominees for reasonable expenses, both direct and
indirect, incurred in providing proxy information to beneficial owners.
Similarly, Rule 465 requires member organizations to forward issuer
communications to beneficial owners on behalf of issuers subject to
receipt of reimbursement of expenses.
---------------------------------------------------------------------------
\4\ The ownership of shares in street name means that a
shareholder, or ``beneficial owner,'' has purchased shares through a
broker-dealer or bank, also known as a ``nominee.'' In contrast to
direct ownership, where shares are directly registered in the name
of the shareholder, shares held in street name are registered in the
name of the nominee, or in the nominee name of a depository, such as
the Depository Trust Company. For more detail regarding share
ownership, see Securities Exchange Act Release No. 62495 (July 14,
2010), 75 FR 42982 (July 22, 2010) (Concept Release on the U.S.
Proxy System) (``Proxy Concept Release'').
\5\ 17 CFR 240.14b-1; 17 CFR 240.14b-2.
---------------------------------------------------------------------------
Recently, brokers providing retail brokerage services have
developed a practice in which customers are given securities without
charge as a commercial incentive (for example, upon opening a new
account or referring a new customer to the broker). Typically, these
incentives involve the transfer of a small number of shares to
benefiting customers and result in the customer having a position in
the company whose shares they receive that has a very small dollar
value. Rule 451 does not distinguish between these beneficial owners
and beneficial owners that have paid for their shares, so brokers are
required to solicit proxies from these accounts and are entitled to
reimbursement of their expenses under Rules 451 and 465, as well as
pursuant to the applicable rules of any other national securities
exchange or national securities association of which the NYSE member
organization is a member.\6\ As a consequence, issuers are billed under
Exchange rules and the rules of other SROs for the reimbursement of
expenses the broker incurs in making distributions to these beneficial
owners who have very small positions, which they acquired from their
broker without any payment by the customer. In certain cases, the
issuer can experience a significant increase in its distribution
reimbursement expenses solely due to its shares being included in these
broker promotional schemes.
---------------------------------------------------------------------------
\6\ See, for example, FINRA Rule 2251.
---------------------------------------------------------------------------
While the distribution of shares in these broker promotions may
result in a significant increase in the number of beneficial owners of
an issuer's stock, the generally very small size of each of these
positions means that they usually represent a very small percentage of
the voting power. As such, the costs the issuer incurs in reimbursing
the broker for distributing proxies to these accounts is very
disproportionate to the maximum potential vote such shares represent.
By contrast, the broker using such a scheme chooses to engage in it
because it believes that it will result in a commercial benefit to the
broker. Consequently, the Exchange believes that it is more appropriate
for the broker to bear these proxy distribution costs. Accordingly, the
Exchange proposes new Rule 451A, which would provide that,
notwithstanding the applicable provisions of Rules 451 or 465 or what
may be permitted by the rules of any other national securities exchange
or national securities association of which a member organization is
also a
[[Page 82540]]
member, no member shall seek to be reimbursed for expenses incurred in
connection with the distribution of proxies or other materials on
behalf of issuers to the beneficial owners of shares or units of an
issuer's securities in a nominee account if those shares or units were
transferred to the account holder by the member organization at no cost
or at a price substantially less than the market price.
As proposed, Rule 451A would not limit a broker's right to
reimbursement for distributions to any beneficial owner if any part of
that beneficial owner's position in an issuer's securities was received
by any means other than a transfer without charge or at a price
substantially less than the market price from the broker. Rules 451 and
465 would continue to apply to all distributions, so the broker would
continue to be fully obligated to solicit votes from, and make other
distributions on behalf of issuers to, all beneficial owners
notwithstanding the limitations on reimbursement of expenses imposed by
Rule 451A.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act'') generally.\7\
Section 6(b)(4) \8\ requires that exchange rules provide for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using the facilities of an
exchange. Section 6(b)(5) \9\ requires, among other things, that
exchange rules are 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, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect the public interest and the
interests of investors, promote just and equitable principles of trade
and that they are not designed to permit unfair discrimination between
issuers, brokers or dealers.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposal is consistent with Sections
6(b)(4) and 6(b)(5) of the Act as it would only limit the reimbursement
of distribution expenses in circumstances where a broker distributes
the shares to its customers as part of a voluntary promotional strategy
by the broker from which it derives a commercial benefit. The Exchange
notes that the recipients of shares without charge or at a price
substantially less than the market price from the broker as part of
such schemes typically will not be given any choice as to which shares
they receive and are therefore not making any investment decision. As
the broker typically has sole control over the allocation of these
shares to its customers and derives a commercial benefit from doing so,
the Exchange believes that the proposal is not unfairly discriminatory
and does not represent an inequitable allocation of the costs of the
distribution of proxy and other issuer materials. The Exchange also
notes that brokers will continue to be required to distribute proxy and
other materials on behalf of issuers notwithstanding the fact that
brokers will not be entitled to any reimbursement of expenses and
believes that the proposal is therefore consistent with Rules 14b-1 and
14b-2 under the Act,\10\ which impose obligations on companies and
nominees to ensure that beneficial owners receive proxy materials and
are given the opportunity to vote.
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\10\ 17 CFR 240.14b-1; 17 CFR 240.14b-2.
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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 not necessary or appropriate in
furtherance of the purposes of the Act. The proposed limitation on
distribution expense reimbursement would apply to any broker that
adopts a commercial strategy of distributing shares to account holders
free of charge or at a substantial discount to the market price.
Brokers that adopt this strategy do so because they believe that they
derive a commercial and competitive advantage from doing so. As such,
the Exchange believes that any burden on competition associated with
this proposal is appropriate in light of the fact that brokers will
only be subject to any such burden as a consequence of voluntarily
adopting a strategy that they believe is beneficial for their business.
There would be no effect on the competition among issuers resulting
from the proposed rule change, as all issuers would benefit from the
proposed restriction in the same manner if their shares have been
distributed without charge as part of such a commercial arrangement.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-98 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-2020-98. 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
[[Page 82541]]
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-2020-98 and should be
submitted on or before January 8, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27836 Filed 12-17-20; 8:45 am]
BILLING CODE 8011-01-P
