17728 Federal Register / Vol. 76, No. 61 / Wednesday, March 30, 2011 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78f(b). 

4 15 U.S.C. 781. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64121; File No. SR–CHX– 

2011–01] 

Self-Regulatory Organizations; 

Chicago Stock Exchange, Inc.; Notice 

of Filing and Order Granting 

Accelerated Approval of a Proposed 

Change to Rules Regarding Proxy 

Voting by Participants 

March 24, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b-4 thereunder,2

notice is hereby given that on March 15, 

2011, the Chicago Stock Exchange, Inc. 

(‘‘CHX’’ 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 CHX. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons and is approving the proposed 

rule change on an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

CHX proposes to amend Article 8, 

Rule 14 regarding proxy voting by 

Participants which hold stock on behalf 

of the beneficial owner. Specifically, the 

Exchange would like to enumerate in its 

rules that Participants are prohibited 

from voting uninstructed shares if the 

matter voted on relates to executive 

compensation, in accordance with 

provisions of Section 957 of the DoddFrank Act, which was signed by the 

President on July 21, 2010. The text of 

this proposed rule change is available 

on the Exchange’s Web site at (http:// 

www.chx.com) and in 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 

CHX included statements concerning 

the purpose of and basis for the 

proposed rule changes and discussed 

any comments it received regarding the 

proposal. The text of these statements 

may be examined at the places specified 

in Item III below. The CHX 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 

Changes 

1. Purpose 

CHX proposes to amend Article 8, 

Rule 14 regarding proxy voting by 

Participants which hold stock on behalf 

of the beneficial owner. Specifically, the 

Exchange would like to enumerate in its 

rules that Participants are prohibited 

from voting uninstructed shares if the 

matter voted on relates to executive 

compensation, in accordance with 

provisions of Section 957 of the DoddFrank Act, which was signed by the 

President on July 21, 2010. Because 

Section 957 of the Dodd-Frank Act does 

not provide for a transition phase, the 

Exchange is proposing to adopt the 

proposed rule changes pursuant to 

Section 19(b) of the Act to comply with 

Section 957 of the Dodd-Frank Act and 

is requesting that the Commission 

approve the proposal on an accelerated 

basis. We are also proposing to correct 

an incorrect cross reference in 

subsection (a) as well as adding the 

words ‘‘or authorize’’ in certain places 

throughout the rule to clarify that the 

rule includes not only the giving of a 

proxy but also the authorization of such 

proxy. 

Current Requirements of CHX Article 8, 

Rule 14 

Under current CHX and Commission 

proxy rules, brokers must deliver proxy 

materials to beneficial owners and 

request voting instructions in return. If 

voting instructions have not been 

received by the tenth day preceding the 

meeting date, Rule 14 provides that a 

broker may vote on certain matters 

when the broker has no knowledge of 

any contest as to the action to be taken 

at the meeting and provided such action 

is adequately disclosed to stockholders, 

and does not include authorization for 

a merger, consolidation or any matter 

which may affect substantially the rights 

or privileges of such stock. In addition, 

the Rule currently identifies 20 matters 

with respect to which brokers may not 

vote without instructions from 

beneficial owners. 

Enactment of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act 

Prior to the July 21, 2010 enactment 

of the Dodd-Frank Act, under Rule 14 

and the Exchange’s prior 

interpretations, Participants were 

permitted to cast votes on some matters, 

including some executive compensation 

proposals, without specific instructions 

from beneficial owners of the stock. 

However, the Dodd-Frank Act contains 

a provision explicitly requiring the 

elimination of broker discretionary 

voting on matters related to executive 

compensation. 

Section 957 of the Dodd-Frank Act 

amends Section 6(b) 3 of the Exchange 

Act to require the rules of each national 

securities exchange to prohibit any 

member organization that is not the 

beneficial owner of a security registered 

under Section 12 4 of the Exchange Act 

from granting a proxy to vote the 

security in connection with certain 

stockholder votes, unless the beneficial 

owner of the security has instructed the 

member organization to vote the proxy 

in accordance with the voting 

instructions of the beneficial owner. The 

stockholder votes covered by Section 

957 include any vote (i) with respect to 

the election of a member of the board of 

directors of an issuer (other than an 

uncontested election of a director of an 

investment company registered under 

the Investment Company Act of 1940 

(the ‘‘Investment Company Act’’)), (ii) 

executive compensation or (iii) any 

other significant matter, as determined 

by the Commission, by rule. 

The Exchange prohibits Participants 

from voting uninstructed shares if the 

matter voted on is the election of 

directors (other than in the case of an 

issuer registered under the Investment 

Company Act, provided the matter is 

not the subject of a counter-solicitation). 

In addition, the Commission has not at 

this time identified other significant 

matters with respect to which the 

Exchange must prohibit member 

organizations from voting uninstructed 

shares. Accordingly, in order to carry 

out the requirements of Section 957 of 

the Dodd-Frank Act, the Exchange 

proposes to amend CHX Article 8, Rule 

14 to prohibit Participants from voting 

uninstructed shares if the matter voted 

on relates to executive compensation. 

Specifically, the Exchange is 

proposing to add a new Item (u) and 

accompanying commentary to CHX 

Article 8, Rule 14 (Proxies) to provide 

that a Participant may not give or 

authorize a proxy to vote without 

instructions from the beneficial owner 

when the matter to be voted upon 

relates to executive compensation. 

The proposed commentary to Item (u) 

would clarify that a matter relating to 

executive compensation would include, 

among other things, the items referred to 

in Section 14A of the Exchange Act 

(added by Section 951 of the DoddFrank Act), including (i) an advisory 

vote to approve the compensation of 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 76, No. 61 / Wednesday, March 30, 2011 / Notices 17729 

5See Securities Act Release No. 62874 

(September 9, 2010), 75 FR 56152 (September 15, 

2010) (SR–NYSE–2010–59). 6 15 U.S.C. 78a et seq. 7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(10). 

9 15 U.S.C. 78f(b)(5). 

10 In approving this rule change, the Commission 

notes that it has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 11 15 U.S.C. 78f(b)(10). 

12 15 U.S.C. 78f(b)(5). 

executives, (ii) a vote on whether to 

hold such an advisory vote every one, 

two or three years, and (iii) an advisory 

vote to approve any type of 

compensation (whether present, 

deferred, or contingent) that is based on 

or otherwise relates to an acquisition, 

merger, consolidation, sale, or other 

disposition of all or substantially all of 

the assets of an issuer and the aggregate 

total of all such compensation that may 

(and the conditions upon which it may) 

be paid or become payable to or on 

behalf of an executive officer. In 

addition, a Participant may not give or 

authorize a proxy to vote without 

instructions on a matter relating to 

executive compensation, even if such 

matter would otherwise qualify for an 

exception from the requirements of Item 

(l), Item (m) or any other Item under 

CHX Article 8, Rule 14. The Exchange 

also proposes to add cross reference 

commentary to Items (l) and (m) to 

further clarify this point. Any vote on 

these or similar executive 

compensation-related matters would be 

subject to the requirements of CHX 

Article 8, Rule 14, as amended. 

The Exchange notes that the foregoing 

change is based upon the change that 

has been adopted by the New York 

Stock Exchange and that has been 

previously approved by the 

Commission.5

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 6 and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.7

Specifically, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(10) 8 requirements that 

all national securities exchanges adopt 

rules prohibiting members from voting, 

without receiving instructions from the 

beneficial owner of shares, on the 

election of a member of a board of 

directors of an issuer (except for a vote 

with respect to the uncontested election 

of a member of the board of directors of 

any investment company registered 

under the Investment Company Act of 

1940), executive compensation, or any 

other significant matter, as determined 

by the Commission, by rule. The 

Exchange also believes the proposed 

rule change is consistent with the 

Section 6(b)(5) 9 requirements that an 

exchange have rules that are designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. The Exchange is 

adopting the proposed rule changes to 

comply with the requirements of 

Section 957 of the Dodd-Frank Act, and 

therefore believes the proposed rule 

changes to be consistent with Section 

6(b)(5) of the Act, particularly with 

respect to the protection of investors 

and the public interest. 

B. Self-Regulatory Organization’s 

Statement of Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments Regarding the 

Proposed Rule Changes Received From 

Members, Participants or Others 

No written comments were either 

solicited or received. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–CHX–2011–01 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CHX–2011–01. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of CHX. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make publicly available. All 

submissions should refer to File 

Number SR–CHX–2011–01 and should 

be submitted on or before April 20, 

2011. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

In its filing, the Exchange requested 

that the Commission approve the 

proposal on an accelerated basis. The 

Exchange stated that it believed good 

cause existed to grant accelerated 

approval because Section 957 of the 

Dodd-Frank Act does not provide for a 

transition period. 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.10 The 

Commission believes that the proposal 

is consistent with Section 6(b)(10) 11 of 

the Act, which requires that national 

securities exchanges adopt rules 

prohibiting members that are not 

beneficial holders of a security from 

voting uninstructed proxies with respect 

to the election of a member of the board 

of directors of an issuer (except for 

uncontested elections of directors for 

companies registered under the 

Investment Company Act), executive 

compensation, or any other significant 

matter, as determined by the 

Commission, by rule. The Commission 

also believes that the proposal is 

consistent with Section 6(b)(5) 12 of the 

Act, which provides, among other 

things, that the rules of the Exchange 

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17730 Federal Register / Vol. 76, No. 61 / Wednesday, March 30, 2011 / Notices 

13See S. Rep. No. 111–176, at 136 (2010). 

14As noted above, Section 6(b)(10) also prohibits 

broker voting for director elections, except for 

uncontested director elections of registered 

investment companies, and also ‘‘any other 

significant matter, as determined by the 

Commission, by rule.’’ CHX already prohibits broker 

voting in director elections except for uncontested 

director elections for registered investment 

companies. See CHX Article 8, Rule 14(c)(4)(s) and 

note 15, infra. As to other matters, the Commission 

has not, to date, adopted rules concerning other 

significant matters where uninstructed broker votes 

should be prohibited, although it may do so in the 

future. Should the Commission adopt such rules, 

we would expect CHX to adopt coordinating rules 

promptly to comply with the statute. 

15As the Commission stated in approving NYSE 

rules prohibiting broker voting in the election of 

directors, having those with an economic interest in 

the company vote the shares, rather than the broker 

who has no such economic interest, furthers the 

goal of enfranchising shareholders. See Securities 

Exchange Act Release No. 60215 (July 1, 2009), 74 

FR 33293 (July 10, 2009) (SR–NYSE–2006–92). 

16 15 U.S.C. 78s(b)(2). 

17See supra note 5. 

18 15 U.S.C. 78s(b)(2). 

19 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. 

must be designed to promote just and 

equitable principles of trade, remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest, and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Commission believes that the 

proposal is consistent with Section 

6(b)(10) of the Act because it adopts 

revisions that comply with that section. 

As noted in the accompanying Senate 

Report, Section 957, which adopts 

Section 6(b)(10), reflects the principle 

that ‘‘final vote tallies should reflect the 

wishes of the beneficial owners of the 

stock and not be affected by the wishes 

of the broker that holds the shares.’’ 13

The proposed rule change will make 

CHX rules compliant with the new 

requirements of Section 6(b)(10) by 

prohibiting broker-dealers, who are not 

beneficial owners of a security, from 

voting uninstructed shares with respect 

to any matter on executive 

compensation.14

The Commission believes that the 

proposal is consistent with Section 

6(b)(5) of the Act because the proposal 

will further investor protection and the 

public interest by assuring that 

shareholder votes on executive 

compensation matters are made by those 

with an economic interest in the 

company, rather than by a broker that 

has no such economic interest, which 

should enhance corporate governance 

and accountability to shareholders.15

The Commission notes that the CHX’s 

new rule prohibiting uninstructed 

broker votes on executive compensation 

covers the specific items identified in 

Section 951 of the Dodd-Frank Act, as 

well as any other matter concerning 

executive compensation, and has been 

drafted broadly to reflect the 

requirements of Section 6(b)(10) of the 

Act. The proposed rule language also 

specifically states that a broker vote on 

any executive compensation matter 

would not be permitted even it would 

otherwise qualify for an exception from 

any item under Article 8, Rule 14. The 

Commission believes this provision will 

make clear that any past practice or 

interpretation that may have permitted 

a broker vote on an executive 

compensation matter, under existing 

rules, will no longer be applicable and 

is superseded by the newly adopted 

provisions. 

Finally, the Commission notes that 

the change to reflect that the CHX rules 

prohibit not only the giving of a proxy, 

but also the authorization of the proxy, 

should help to clarify the intent of the 

CHX proxy rules and is consistent with 

the requirements of Section 6 of the Act. 

Based on the above, the Commission 

believes that CHX’s proposal will 

further the purposes of Sections 6(b)(5) 

and 6(b)(10) of the Act by ensuring that 

brokers, holding shares on behalf of 

beneficial owners, are not voting 

uninstructed shares on matters relating 

to executive compensation, which 

should enhance corporate 

accountability to shareholders. The rule 

filing should also serve to fulfill the 

Congressional intent in adopting 

Section 6(b)(10) of the Act. 

The Commission also finds good 

cause, pursuant to Section 19(b)(2) of 

the Act,16 for approving the proposed 

rule change prior to the 30th day after 

the date of publication of notice in the 

Federal Register. As noted above, 

Section 6(b)(10) of the Act, enacted 

under Section 957 of the Dodd-Frank 

Act, does not provide for a transition 

phase, and requires rules of national 

securities exchanges to prohibit, among 

other things, broker voting on executive 

compensation. The Commission 

believes that good cause exists to grant 

accelerated approval to the Exchange’s 

proposal, because it will conform 

Article 8, Rule 14 to the requirements of 

Section 6(b)(10) of the Act. Moreover, 

the Commission notes that the proposed 

changes are based on NYSE Rule 452.17

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,18 that the 

proposed rule change (SR–CHX–2011– 

01) be, and it hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–7458 Filed 3–29–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64122; File No. SR–Phlx– 

2011–03] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Order Granting Accelerated 

Approval of a Proposed Rule 

Amendment to Rule 862 Relating to 

Discretionary Proxy Voting on 

Executive Compensation Matters 

March 24, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 16, 

2011, NASDAQ OMX PHLX LLC (‘‘Phlx’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons and is 

approving the proposed rule change on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 

thereunder,4 proposes to amend Phlx 

Rule 862 (Proxies at Direction of Owner) 

to prohibit member organizations from 

voting on matters related to executive 

compensation, or any other significant 

matter, as determined by the Securities 

and Exchange Commission 

(‘‘Commission’’) by rule unless 

instructed by the beneficial owner of the 

shares. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES