Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Notices 83119 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The 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. 

6 In adopting the direct shareholder 

communications rules in the early 1980s, the 

Commission left the determination of reasonable 

costs to the self-regulatory organizations (‘‘SROs’’) 

because they were deemed to be in the best position 

to make fair evaluations and allocations of costs 

associated with these rules. See Securities Exchange 

Act Release No. 20021 (July 28, 1983), 48 FR 35082 

(August 3, 1983); see also Securities Exchange Act 

Release No. 45644 (March 25, 2002), 67 FR 15440, 

15440 n.8 (April 1, 2002). 

7See, e.g., BZX Exchange, Inc. Rule 13.3; see also 

Investors Exchange Rulebook 6.130. 

8See FINRA Rule 2251. The Exchange notes that 

FINRA Rule 2251 differs from Rule 451 in one 

respect. Section 5 (Notice and Access Fees) of 

Supplementary Material .90 of Rule 451 provides 

that the Notice and Access fees set forth therein will 

also be charged with respect to the distribution of 

investment company shareholder reports pursuant 

to any ‘‘notice and access’’ rules adopted by the 

SEC in relation to such distributions and that such 

fee will not be charged for any account with respect 

to which an investment company pays a Preference 

Management Fee in connection with a distribution 

of investment company shareholder reports. It 

further provides that, in calculating the rates at 

which the issuer will be charged Notice and Access 

fees for investment company shareholder report 

distributions, all accounts holding shares of any 

class of stock of the applicable issuer eligible to 

receive the same distribution will be aggregated in 

determining the appropriate pricing tier under this 

Section 5 (Notice and Access Fees) of 

Supplementary Material .90 of Rule 451. FINRA has 

not adopted this text as part of FINRA Rule 2251. 

Pursuant to Rule 30e–3 under the Investment 

Company Act of 1940, the SEC has adopted a 

‘‘notice and access’’ rule for investment companies. 

Investment companies that have met the 

requirements of Rule 30e–3(i)(1)(i) are permitted to 

utilize this ‘‘notice and access’’ approach for 

distributions to beneficial owners beginning 

January 1, 2021. See also Rule 30e–3(i)(1)(ii) for 

other transition period requirements. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90677; File No. SR–NYSE– 

2020–96] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change 

Amending Its Rules Establishing 

Maximum Fee Rates To Be Charged by 

Member Organizations for Forwarding 

Proxy and Other Materials to Beneficial 

Owners 

December 15, 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 December 

2, 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 selfregulatory 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 establishing maximum fee rates to 

be charged by member organizations for 

forwarding proxy materials to beneficial 

owners. 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 

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. The Commission’s 

rules do not specify the fees that 

nominees can charge issuers for proxy 

distribution; rather, they state that 

issuers must reimburse the nominees for 

‘‘reasonable expenses’’ incurred.6

Currently, the Supplementary 

Material to NYSE Rules 451 and 465 

establish the fee structure for which a 

NYSE member organization may be 

reimbursed for expenses incurred in 

connection with distributing proxy 

materials to beneficial shareholders. 

This fee structure is also replicated in 

Section 402.10 of the NYSE Listed 

Company Manual. The NYSE fee 

structure represents the maximum 

approved rates that an issuer can be 

billed for proxy distribution services 

absent prior notification to and consent 

of the issuer. 

All the SROs whose member 

organizations hold securities on behalf 

of street name holders have rules 

requiring their member organizations to 

forward proxy materials and other 

distributions on behalf of companies to 

street name account holders. The rules 

of all other exchanges simply provide 

that member organizations must 

undertake this activity if they receive 

‘‘reasonable’’ reimbursement, without 

specifying any schedule of maximum 

permitted charges.7 By contrast, FINRA 

includes a specific schedule of 

maximum charges that is substantively 

identical to that of the NYSE.8

Given the significant evolution of the 

securities industry during the period in 

which the NYSE has taken the lead in 

establishing proxy distribution 

reimbursement rates, the NYSE does not 

believe that it is best positioned to 

retain this responsibility going forward. 

All the NYSE member organizations that 

are subject to the NYSE fee schedule are 

also members of FINRA. In addition, all 

of the brokers who are not NYSE 

members but who hold shares on behalf 

of street name account holders are also 

FINRA members. Furthermore, a large 

percentage of the affected listed issuers 

are listed on Nasdaq, CBOE or other 

non-NYSE Group exchanges or are not 

listed on any national securities 

exchange, while the development of the 

83120 Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Notices 

9See Securities Exchange Act Release No. 70720 

(October 18, 2013), 78 FR 63530 (October 24, 2013) 

(SR–NYSE–2013–07) (order approving the most 

recent comprehensive amendments to the NYSE fee 

schedule). 

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

11 15 U.S.C. 78f(b)(4). 

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

13 15 U.S.C. 78f(b)(8). 

mutual fund industry has led to the 

existence of a huge number of issuers 

who must pay these costs but have no 

relationship with any listing exchange. 

The current fee schedule has been in 

place since 2013 9 and a comprehensive 

review of fee levels may be necessary in 

the near future to respond to the 

continuing evolution in both technology 

and the securities ownership patterns of 

investors since that time. All of the 

brokers who hold shares on behalf of 

street name account holders are FINRA 

members, while only a subset of them 

are members of the NYSE. Furthermore, 

a large and increasing number of the 

affected issuers are listed on Nasdaq, 

CBOE or other non-NYSE Group 

exchanges or are traded solely over the 

counter, while the development of the 

mutual fund industry has led to the 

existence of a huge number of issuers 

who are not listed on any exchange. 

In response to the developments 

described above. the NYSE proposes to 

amend Rule 451 by deleting the fee 

schedule and replacing it with text 

comparable to that of other exchanges 

providing that member organizations are 

entitled to receive fair and reasonable 

rates of reimbursement for all out-ofpocket expenses, including reasonable 

clerical expenses, incurred in 

connection with proxy solicitations and 

the processing of proxy and other 

material required under Rule 451. In 

addition, the amended rule text will 

provide that member organizations must 

comply with any schedule of approved 

charges set forth in the rules of any 

other national securities exchange or 

association of which such member 

organization is a member. As all NYSE 

member organizations subject to the 

NYSE fee schedule are also members of 

FINRA, this provision will effectively 

require member organizations to comply 

with the fee schedule set forth in FINRA 

Rule 2551. 

The Exchange proposes to delete 

Section 402.10 of the Manual in its 

entirety as it is identical to provisions 

with respect to issuers other than 

mutual funds as set forth in Rule 451 

and is therefore redundant. 

Rule 465 governs the role of NYSE 

member organizations in distributing on 

behalf of issuers interim reports and 

other materials to ‘‘street name’’ account 

holders. Supplementary Material .20 to 

Rule 465 specifies that these 

distributions are subject to the fee 

schedule set forth in Supplementary 

Material 90–95 to Rule 451. The 

Exchange proposes to delete the current 

text of Supplementary Material .20 to 

Rule 465 and replace it with a paragraph 

that parallels the proposed new form of 

Supplementary Material .90 to Rule 451, 

providing that, in determining fair and 

reasonable rates of reimbursement for 

all out-of-pocket expenses, including 

reasonable clerical expenses, incurred 

in connection with copies of interim 

reports of earnings or other material 

being sent to stockholders pursuant to 

Rule 465, member organizations must 

comply with any schedule of approved 

charges set forth in the rules of any 

other national securities exchange or 

association of which such member 

organization is a member. 

The Exchange notes that this proposal 

is in no way intended to take a position 

on the appropriateness of the fee 

schedules for proxy and other 

distributions currently set forth in Rules 

451 and 465 or in the rules of any other 

national securities exchange or national 

securities association. The sole purpose 

of this proposal is obtain approval to 

delete the fee schedules from the NYSE 

rules and establish in their place a 

requirement to comply with the fee 

provisions set forth in the rules of any 

other national securities organization or 

national securities association of which 

an NYSE member organization is a 

member. 

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.10 Section 

6(b)(4) 11 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) 12 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. Section 6(b)(8) 13

prohibits any exchange rule from 

imposing any burden on competition 

that is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The Exchange believes that the 

proposal is consistent with Sections 

6(b)(4) and 6(b)(5) of the Act as it will 

not result in any substantive change in 

the reimbursement rates received by 

member organizations for proxy and 

other document distributions on behalf 

of issuers, as all NYSE member 

organizations are also subject to the fee 

schedule set forth in FINRA rules. 

The Exchange believes that the 

proposal is also consistent with Section 

6(b)(5) of the Act in that it is designed 

to promote just and equitable principles 

of trade, perfect the mechanism of a free 

and open market and promote just and 

equitable principles of trade. The 

maximum reimbursement rates brokers 

receive for making distributions of 

proxies and other materials on behalf of 

issuers will continue to be determined 

by FINRA, the self-regulatory 

organization of which all affected 

brokers are members. 

As discussed above, all NYSE member 

organizations subject to these rules are 

also members of FINRA and, 

consequently, subject to the fee 

schedule set forth in FINRA Rule 2251. 

As the schedule set forth in FINRA Rule 

2251 is substantively identical to the 

NYSE’s current fee schedule, there will 

be no substantive change in the 

maximum rates NYSE member 

organizations may charge as a result of 

the proposed amendments. 

All of the brokers who hold shares on 

behalf of street name account holders 

are FINRA members, while only a 

subset of them are also members of the 

NYSE. Furthermore, a large and 

increasing number of the affected 

issuers are listed on Nasdaq, CBOE or 

other non-NYSE Group exchanges or are 

traded solely over the counter, while the 

development of the mutual fund 

industry has led to the existence of a 

huge number of issuers who must pay 

these costs but have no relationship 

with any listing exchange. Notably, 

while mutual funds are not listed on 

any exchange, they are all held 

primarily in ‘‘street name’’ accounts at 

brokers that are members of FINRA. 

The Exchange believes that the 

proposal is consistent with Section 

6(b)(8), as it does not impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. All of the 

NYSE member organizations that are 

subject to the fee schedule in the current 

forms of Rules 451 and 465 are also 

subject to the identical provisions of 

FINRA Rule 2251. Consequently, the 

proposed rule change will have no effect 

Federal Register / Vol. 85, No. 245 / Monday, December 21, 2020 / Notices 83121 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

on competition among brokers, as they 

will all continue to be subject to the 

same maximum fee schedule. For the 

same reason there will be no effect on 

the competition among issuers resulting 

from the proposed rule change, as all 

issuers will remain subject to the same 

maximum fee schedule as applied under 

the FINRA rule. As all of the issuers 

listed on all of the national securities 

exchanges are currently obligated to pay 

the same maximum fees under the 

current NYSE rules and FIRNA Rule 

2251, the proposal will also have no 

effect on the competition for listings 

among the national securities 

exchanges. For the foregoing reasons, 

the Exchange believes that the proposal 

does not impose any burden on 

competition that that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. All of the 

NYSE member organizations that are 

subject to the fee schedule in the current 

forms of Rules 451 and 465 are also 

subject to the identical provisions of 

FINRA Rule 2251. Consequently, the 

proposed rule change will have no effect 

on competition among brokers, as they 

will all continue to be subject to the 

same maximum fee schedule. For the 

same reason there will be no effect on 

the competition among issuers resulting 

from the proposed rule change, as all 

issuers will remain subject to the same 

maximum fee schedule as applied under 

the FINRA rule. As all of the issuers 

listed on all of the national securities 

exchanges are currently obligated to pay 

the same maximum fees under the 

current NYSE rules and FIRNA Rule 

2251, the proposal will also have no 

effect on the competition for listings 

among the national securities 

exchanges. For the foregoing reasons, 

the Exchange believes that the proposal 

does not impose any burden on 

competition that that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSE–2020–96 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–2020–96. 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 (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 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–2020–96 and should 

be submitted on or before January 11, 

2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–28010 Filed 12–18–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90675; File No. SR– 

NYSEArca–2020–54] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of 

Amendment No. 1 and Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change, as Modified by 

Amendment No. 1, To Amend NYSE 

Arca Rule 5.3–E To Exempt Registered 

Investment Companies That List 

Certain Categories of the Securities 

Defined as Derivative and Special 

Purpose Securities Under NYSE Arca 

Rules From Having To Obtain 

Shareholder Approval Prior to the 

Issuance of Securities in Connection 

With Certain Acquisitions of the Stock 

or Assets of an Affiliated Company 

December 15, 2020. 

I. Introduction 

On August 28, 2020, NYSE Arca, Inc. 

(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’ or 

‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend NYSE Arca Rule 5.3–E 

(Corporate Governance and Disclosure 

Policies) to exempt certain categories of 

derivative and special purpose 

securities from the requirement to 

obtain shareholder approval prior to the 

issuance of securities in connection 

with certain acquisitions of the stock or 

assets of another company. The