NYSE Proposes Modifications To Charges To Issuers For Proxy Distributions

by Stinson Leonard Street - Dodd-Frank and the Jobs Act
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The NYSE has proposed amendments to  NYSE Rules 451 and 465, and the related provisions of Section 402.10 of the NYSE Listed Company Manual.  Those rules provide a schedule for the reimbursement of expenses by issuers to NYSE member organizations for the processing of proxy materials and other issuer communications provided to investors holding securities in street name.  Some of the basic changes being proposed are:

  • More significant stratification of charges, providing economies of scale to larger issuers.
  • Notice and access fees, which were previously unregulated, will now be regulated.
  • A new Enhanced Brokers’ Internet Platform fee, or EBIP fee.  The EBIP fee is meant to encourage the development of systems to facilitate retail voting that allow investors to receive notices of upcoming corporate votes and the ability to access proxy materials and vote, through their own broker’s web site.

A side-by-side comparison of existing charges and proposed charges on some of the basic portions of the proposal is set forth below:

Fee Type Current Rate Proposed Rate Comments
       
Basic Processing Fee 40 cents for each account beneficially owning shares in the issuer that is distributing proxy material –50 cents for each account up to 10,000 accounts

 –47 cents for each account above 10,000 accounts, up to 100,000 accounts

 –39 cents for each account above 100,000 accounts, up to 300,000 accounts

 –34 cents for each account above 300,000 accounts, up to 500,000 accounts

 –32 cents for each account above 500,000 accounts

Charge made according to the number of nominee accounts through which the issuer’s securities are beneficially owned.  Proposed rule refers to it as a “Processing Unit Fee”
       
Nominee Fee $20 per nominee served by an intermediary $22.00 for each nominee served by the intermediary that has at least one account beneficially owning shares in the issuer The average issuer is held by approximately 100 nominees per the rule proposal
       
Additional Fee (to compensate the intermediary based on the number of accounts at nominees served by the intermediary that beneficially own shares in the issuer) –5 cents per account for issuers owned by 200,000 or more street name accounts;

–10 cents per account for issuers owned by fewer than 200,000 street name accounts.

–14 cents for each account up to 10,000 accounts

 –13 cents for each account above 10,000 accounts, up to 100,000 accounts

 –11 cents for each account above 100,000 accounts, up to 300,000 accounts

 –9 cents for each account above 300,000 accounts, up to 500,000 accounts

 –7 cents for each account above 500,000 accounts

 

Proposed rule refers to it as an “Intermediary Unit Fee”
       
Incentive Fee (applies whenever the need to mail materials in paper format to an account has been eliminated) –25 cents per account for issuers owned by 200,000 or more street name accounts

 

–50 cents per account for issuers owned by fewer than 200,000 street name accounts

32 cents per position affected (16 cents for positions in managed accounts) Proposed rule refers to it as a “Preference Management Fee”
       
Notice and Access Fee Currently unregulated Incremental fee based on all nominee accounts through which the issuer’s securities are beneficially owned as follows:

 –25 cents for each account up to 10,000 accounts

 –20 cents for each account over 10,000 accounts, up to 100,000 accounts

 –15 cents for each account over 100,000 accounts, up to 200,000 accounts

 –10 cents for each account over 200,000 accounts, up to 500,000 accounts

 –5 cents for each account over 500,000 accounts

Follow up notices will not incur an incremental fee for Notice and Access.

No incremental fee will be imposed for fulfillment transactions (i.e., a full package sent to a notice recipient at the recipient’s request), although out of pocket costs such as postage will be passed on as in ordinary distributions

       
Enhanced Brokers’ Internet Platform Fee (EBIP) None For five years after the effective date of the rule, there shall be a supplemental fee of 99 cents for each new account that elects, and each full package recipient among a brokerage firm’s accounts that converts to, electronic delivery while having access to an EBIP This is a one-time fee, meaning that an issuer may be billed this fee by a particular member organization only once for each account covered by this rule. Billing for this fee should be separately indicated on the issuer’s invoice and must await the next proxy or consent solicitation by the issuer that follows the triggering election of electronic delivery by an eligible account. For the avoidance of doubt it is noted that accounts receiving a notice pursuant to the use of notice and access by the issuer, and accounts to which mailing is suppressed by householding, will not trigger the fee under this provision
       

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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