27050 Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Notices 

36 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Notice of Filing of Proposed Rule Change 

Adopting Maximum Fees Member Organizations 

may Charge in Connection with the Distribution of 

Investment Company Shareholder Reports Pursuant 

to Any Electronic Delivery Rules Adopted by the 

Securities and Exchange Commission, Securities 

Exchange Act Release No. 78589 (August 16, 2016), 

81 FR 56717 (August 22, 2016) (SR–NYSE–2016– 

55). 

4Notice of Designation of a Longer Period for 

Commission Action on Proposed Rule Change 

Adopting Maximum Fees Member Organizations 

May Charge in Connection with the Distribution of 

Investment Company Shareholder Reports Pursuant 

to Any Electronic Delivery Rules Adopted by the 

Securities and Exchange Commission, Securities 

Exchange Act Release No. 79051 (October 5, 2016), 

81 FR 70449 (October 12, 2016). 

5Order Granting Approval of Proposed Rule 

Change Adopting Maximum Fees Member 

Shares and may obtain information via 

ISG from other exchanges that are 

members of ISG or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement. In addition, investors will 

have ready access to information 

regarding the IIV and quotation and last 

sale information for the Shares. Trade 

price and other information relating to 

municipal bonds is available through 

the MSRB’s EMMA system. 

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 that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change will 

facilitate the continued listing and 

trading of exchange-traded products that 

hold municipal securities and that will 

enhance competition among market 

participants, to the benefit of investors 

and the marketplace. 

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– 

NYSEArca–2018–38 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–NYSEArca–2018–38. 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 (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–NYSEArca–2018–38 and 

should be submitted on or before July 2, 

2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–12430 Filed 6–8–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Securities Exchange Act of 1934; Release 

No. 83378/June 5, 2018] 

Order Affirming Action by Delegated 

Authority Approving SR–NYSE–2016– 

55 and Discontinuing Stay 

In the Matter of the New York Stock 

Exchange LLC 

For an Order Granting the Approval of 

Proposed Rule Change Adopting 

Maximum Fees Member 

Organizations May Charge in 

Connection with the Distribution of 

Investment Company Shareholder 

Reports Pursuant to Any Electronic 

Delivery Rules Adopted by the 

Securities and Exchange Commission 

I. 

On August 15, 2016, the New York 

Stock Exchange LLC (’’NYSE’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Exchange 

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

proposed rule change to adopt 

maximum fees NYSE member 

organizations may charge in connection 

with the distribution of investment 

company shareholder reports pursuant 

to any ‘‘notice and access’’ electronic 

delivery rules adopted by the 

Commission. The proposed rule change 

was published for comment in the 

Federal Register on August 22, 2016.3

The Commission received fourteen 

comment letters on the proposal. On 

October 5, 2016, the Commission 

extended the time period for 

Commission action on the proposal to 

November 20, 2016.4

On November 18, 2016, the Division 

of Trading and Markets took action, 

pursuant to delegated authority, 17 CFR 

200.30–3(a)(12), approving the proposed 

rule change (‘‘Approval Order’’).5


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Notices 27051 

Organizations May Charge in Connection with the 

Distribution of Investment Company Shareholder 

Reports Pursuant to Any Electronic Delivery Rules 

Adopted by the Securities and Exchange 

Commission, Securities Exchange Act Release No. 

79355 (November 18, 2016), 81 FR 85291 

(November 25, 2016). 

6 15 U.S.C. 78d–1 

7 17 CFR 201.431. 

8 In the Matter of the New York Stock Exchange 

LLC for an Order Granting the Approval of 

Proposed Rule Change Adopting Maximum Fees 

Member Organizations May Charge in Connection 

With the Distribution of Investment Company 

Shareholder Reports Pursuant to Any Electronic 

Delivery Rules Adopted by the Securities and 

Exchange Commission; Order Scheduling Filing of 

Statements on Review, Securities Exchange Act 

Release No. 79370 (November 21, 2016), 81 FR 

85655 (November 28, 2016). 

9See 17 CFR 201.431(d). 

10See 17 CFR 201.431(a). The Approval Order is 

attached. 

11See 17 CFR 201.431(e). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 78589 

(August 16, 2016), 81 FR 56717 (‘‘Notice’’). 

4See letters to Brent J. Fields, Secretary, 

Commission from: James R. Rooney, Chief Financial 

Officer and Treasurer, Ariel Investment Trust, dated 

September 8, 2016 (‘‘Ariel Letter’’); Mortimer J. 

Buckley, Chief Investment Officer, Vanguard, dated 

September 12, 2016 (‘‘Vanguard Letter’’); Barbara 

Novick, Vice Chairman, and Benjamin Archibald, 

Managing Director, BlackRock, Inc., dated 

September 12, 2016 (‘‘BlackRock Letter’’); Charles 

V. Callan, SVP Regulatory Affairs, Broadridge 

Financial Solutions, Inc., dated September 12, 2016 

(‘‘Broadridge Letter’’); John Zerr, Managing Director 

and General Counsel, Invesco Advisers, Inc., dated 

September 12, 2016 (‘‘Invesco Letter’’); Amy B.R. 

Lancellotta, Managing Director, Independent 

Directors Council, dated September 12, 2016 (‘‘IDC 

Letter’’); David G. Booth, President and Co-Chief 

Executive Officer, Dimensional Fund Advisers LP, 

dated September 12, 2016 (‘‘Dimensional Letter’’); 

David W. Blass, General Counsel, Investment 

Company Institute, dated September 12, 2016 (‘‘ICI 

Letter’’); Darrell N. Braman, Vice President & 

Managing Counsel, T. Rowe Price Associates, Inc., 

dated September 12, 2016 (‘‘T. Rowe Letter’’); Mark 

N. Polebaum, Executive Vice President and General 

Counsel, MFS Investment Management, dated 

September 12, 2016 (‘‘MFS Letter’’); Thomas E. 

Faust Jr., Chairman and Chief Executive Officer, 

Eaton Vance Corp., dated September 12, 2016 

(‘‘Eaton Vance Letter’’); Ellen Greene, Managing 

Director, Securities Industry and Financial Markets 

Association, dated September 15, 2016 (‘‘SIFMA 

Letter’’); Christopher O. Petersen, President, 

Columbia Mutual Funds, Columbia Threadneedle 

Investments, dated September 15, 2016 (‘‘Columbia 

Letter’’); and Rodney D. Johnson, Chairman, The 

Independent Directors of the Blackrock EquityLiquidity Funds, dated September 27, 2016 

(‘‘Blackrock Directors Letter’’). 

5See Securities Exchange Act Release No. 79051 

(October 5, 2016), 81 FR 70449 (October 12, 2016). 6The ownership of shares in street name means 

that a shareholder, or ‘‘beneficial owner,’’ holds the 

shares through a broker-dealer or bank, also known 

as a ‘‘nominee.’’ In contrast to registered ownership 

(also known as record holders), where shares are 

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’’). 

7 In this order, we refer to ‘‘issuer’’ to mean an 

investment company registered under the 

Investment Company Act of 1940 (the ‘‘Investment 

Company Act’’) and an issuer of a class of securities 

registered pursuant to Section 12 of the Exchange 

Act. 

8See NYSE Rules 451(a)(2) and 451.90. See also 

infra note 9. 

9 In addition to the specified charges discussed in 

this order and as set forth in NYSE Rule 451, 

member organizations also are entitled to receive 

reimbursement for: (i) actual postage costs 

(including return postage at the lowest available 

rate); (ii) the actual cost of envelopes (provided they 

are not furnished by the person soliciting proxies); 

and (iii) any actual communication expenses 

(excluding overhead) incurred in receiving voting 

returns either telephonically or electronically. See 

NYSE Rule 451.90. 

10See NYSE Rules 451.90 (schedule of approved 

charges by member organizations in connection 

Continued 

Pursuant to Exchange Act Section 4A 6

and Commission Rule of Practice 431,7

the Approval Order has been stayed, 

and the Commission has reviewed the 

delegated action. 

On November 21, 2016, the 

Commission issued an Order 

Scheduling Filing of Statements on 

Review of the Approval Order (‘‘Order 

for Review’’).8 The Order for Review 

ordered that the Approval Order remain 

stayed pending further order by the 

Commission and that by December 7, 

2016, any party or other person may file 

any additional statement.9 The 

Commission received no additional 

statements. 

II. 

On review, the Commission affirms 

the issuance of the Approval Order and 

adopts the findings and reasoning set 

forth in the Approval Order. The 

Commission also is ordering that the 

stay of the Approval Order be 

discontinued. 

Accordingly, IT IS ORDERED that the 

Approval Order be, and hereby is, 

affirmed.10

It is further ORDERED that the stay of 

the Approval Order be, and hereby is, 

discontinued.11

By the Commission. 

Brent J. Fields, 

Secretary. 

SECURITIES AND EXCHANGE 

COMMISSION 

(Release No. 34–79355; File No. SR– 

NYSE–2016–55) 

November 18, 2016 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Granting Approval of Proposed Rule 

Change Adopting Maximum Fees 

Member Organizations May Charge in 

Connection with the Distribution of 

Investment Company Shareholder 

Reports Pursuant to Any Electronic 

Delivery Rules Adopted by the 

Securities and Exchange Commission 

I. Introduction 

On August 15, 2016, New York Stock 

Exchange LLC (‘‘NYSE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to adopt maximum fees NYSE 

member organizations may charge in 

connection with the distribution of 

investment company shareholder 

reports pursuant to any ‘‘notice and 

access’’ electronic delivery rules 

adopted by the Commission. The 

proposed rule change was published for 

comment in the Federal Register on 

August 22, 2016.3 The Commission 

received fourteen comment letters on 

the proposal.4 On October 5, 2016, the 

Commission extended the time period 

for Commission action on the proposal 

to November 20, 2016.5 This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

A. Background 

Pursuant to NYSE Rule 451, NYSE 

member organizations that hold 

securities in street name 6 are required 

to deliver, on behalf of an issuer, proxy 

and other materials to beneficial owners 

if they are assured they will receive 

reasonable reimbursement of expenses 

for such distributions from the issuer.7

For this service, issuers reimburse NYSE 

member organizations for all out-ofpocket expenses, including reasonable 

clerical expenses, as well as actual 

postage costs and other actual costs 

incurred for a particular distribution.8

NYSE Rule 451 establishes the 

maximum approved rates 9 that a 

member organization can charge an 

issuer for distribution of proxies and 

other materials absent prior notification 

to and consent of the issuer.10 Although 


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with proxy solicitations and the processing of proxy 

and other material) and 451.93 (stating that a 

member organization may request reimbursement of 

expenses at less than the approved rates; however, 

no member organization may seek reimbursement at 

rates higher than the approved rates without the 

prior notification and consent of the person 

soliciting proxies or the company). 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’’) (subject to submission of an 

SRO rule proposal to the Commission pursuant to 

Section 19(b) of the Exchange Act), stating that ‘‘the 

Commission continues to believe that, because the 

[SROs] represent the interests of both issuers and 

brokers, they are in the best position to make a fair 

allocation of all the expenses associated with the 

amendments, including start-up and overhead 

costs.’’ 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) (order approving NYSE program 

revising reimbursement rates) (‘‘2002 Approval 

Order’’). 

11See NYSE Rule 451.93. 

12See Securities Exchange Act Release No. 70720 

(October 18, 2013), 78 FR 63530, 63531 (October 24, 

2013) (order approving an amendment to the fees 

set forth in NYSE Rules 451 and 465). 

13See FINRA Rule 2251. See also Proxy Concept 

Release, 75 FR at 42995, n.110. 

14See 2002 Approval Order, 67 FR at 15540. 

According to the NYSE, this shift was attributable 

to the fact that NYSE member firms believed that 

these distributions were not a core broker-dealer 

business and that capital could be better used 

elsewhere. Id. At the present time, a single 

intermediary, Broadridge Financial Solutions, Inc. 

(‘‘Broadridge’’), handles almost all processing and 

distribution of proxy and other material to 

beneficial owners holding shares in the United 

States. See Notice, 81 FR at 56719; see also Proxy 

Concept Release, 75 FR at 42988, n. 57, and at 

42996, n.129. 

15See NYSE Rules 451.10 and 451.90(3); see also 

NYSE Rule 465 (Processing and Transmission of 

Interim Reports and Other Material). 

16See Notice, 81 FR at 56718. In its filing, NYSE 

stated that mutual funds are not listed on NYSE but 

that the fees in Rule 451 are applied by NYSE 

members in relation to distributions in beneficial 

owners of mutual funds and operating company 

shares. See also 402.07 (A) under the NYSE’s Listed 

Company Manual, which states that Exchange Rules 

450–460 apply to both listed and unlisted securities 

unless the context otherwise limits application. 

17See NYSE Rule 451.90(4); see also Notice, 81 

FR at 56718. The preference management fee 

applies to each shareholder account for which the 

nominee has eliminated the need to send materials 

in paper format through the mails or by courier 

service. See NYSE Rule 451.90(4); see also Notice, 

81 FR at 56719. 

18See NYSE Rule 451.90(3); see also Notice, 81 

FR at 56718. Pursuant to Rule 14a–16 under the 

Exchange Act, issuers may distribute proxy material 

electronically through the ‘‘notice and access’’ 

method. See 17 CFR 240.14a–16; see also Proxy 

Concept Release, 75 FR at 42986, n.32. The ‘‘notice 

and access’’ method for proxy distributions permits 

issuers to send shareholders what is called a 

‘‘Notice of Internet Availability of Proxy Materials’’ 

in lieu of the traditional paper mailing of proxy 

materials. See Proxy Concept Release, 75 FR at 

42986, n.32. The notice and access model works in 

tandem with electronic delivery—although an 

issuer electing to send a notice in lieu of a full 

proxy package would be required to send a paper 

copy of that notice, it may send that notice 

electronically to a shareholder who has provided to 

its broker an affirmative consent to electronic 

delivery. Id. 

19Specifically, when an issuer elects to utilize 

notice and access for a proxy distribution, there is 

an incremental fee based on all nominee accounts 

through which the issuer’s securities are 

beneficially owned as follows: (1) 25 cents for each 

account up to 10,000 accounts; (2) 20 cents for each 

account over 10,000 accounts, up to 100,000 

accounts; (3) 15 cents for each account over 100,000 

accounts, up to 200,000 accounts; (4) 10 cents for 

each account over 200,000 accounts, up to 500,000 

accounts; (5) 5 cents for each account over 500,000 

accounts. Under this schedule, every issuer will pay 

the tier one rate for the first 10,000 accounts, or 

portion thereof, with decreasing rates applicable 

only on additional accounts in the additional tiers. 

See NYSE Rule 451.90(5). 

20See Notice, 81 FR at 56718; see also Securities 

Act Release No. 9776, Securities Exchange Act 

Release No. 75002, Investment Company Act 

Release No. 316180, 80 FR 33590 (June 12, 2015) 

(Investment Company Reporting Modernization; 

Proposed Rule). 

21See Notice, 81 FR at 56718 

22See proposed NYSE Rule 451.90(5). 

23See Notice, 81 FR at 56718–19. The Exchange 

stated that the proposed notice and access fees for 

fund distributions will be effective only if the 

Commission adopts Rule 30e–3. See Notice, 81 FR 

at 56718, n.8. 

24See proposed Rule 451.90(5). 

25See Notice, 81 FR at 56719. The Exchange 

stated that this is a departure from the current 

practice under NYSE Rule 451.90(5), where an 

issuer utilizing notice and access for proxy 

distributions pays the notice and access fee for all 

member organizations may seek 

reimbursement from an issuer for less 

than the established rates,11 the 

Commission understands that in 

practice most issuers are billed at the 

established rates.12

The vast majority of broker-dealers 

that distribute issuer proxy and other 

materials to beneficial owners are 

entitled to reimbursement at the NYSE 

fee schedule rates because most are 

NYSE members, and those that are not 

are members of the Financial Industry 

Regulatory Authority (‘‘FINRA’’), which 

has similar rules.13 Over time, NYSE 

member organizations increasingly have 

outsourced their proxy delivery and 

other distribution obligations to thirdparty service providers, which are 

generally called ‘‘intermediaries,’’ rather 

than handling this processing 

internally.14

In addition to the distribution of 

proxy materials, the reimbursement 

rates set forth in NYSE Rule 451 apply 

to the distribution of annual and semiannual shareholder reports.15 In this 

regard, the reimbursement rates set forth 

in Rule 451 apply to the distribution of 

investment company (‘‘fund’’) 

shareholder reports and other materials 

to the beneficial owners of fund 

shares.16 For example, as the Exchange 

noted, a fund pays an interim report fee 

of 15 cents per account when a broker 

distributes an annual or semi-annual 

report to the accounts of shareholders 

holding its shares as beneficial owners. 

Funds also pay a preference 

management fee of 10 cents for every 

account with respect to which a member 

organization has eliminated the need to 

send paper materials.17

While NYSE Rule 451 also establishes 

the fees that member firms can charge 

issuers for proxy materials distributed 

through the notice and access method,18

those fees would not apply to the 

electronic distribution of investment 

company shareholder reports. With 

respect to notice and access 

distributions of proxy materials, NYSE 

Rule 451 sets forth an incremental, 

tiered fee structure based on the number 

of nominee broker-dealer accounts 

through which the issuer’s securities are 

beneficially owned.19

On May 20, 2015, the Commission 

proposed new Rule 30e–3 under the 

Investment Company Act, which, 

among other things, would permit, but 

not require, funds to satisfy their annual 

and semi-annual shareholder report 

delivery obligations by making 

shareholder reports available 

electronically on a website.20 Funds 

relying on this provision would be 

required, among other things, to meet 

conditions relating to the provision of 

notice to shareholders of the internet 

availability of shareholder reports.21

B. Proposed Changes to NYSE Rule 

451.90(5) 

Accordingly, the Exchange has 

proposed to amend Rule 451.90(5) to 

specify that the notice and access fees 

set forth therein for distribution of 

proxy materials also will be charged 

with respect to distributions of fund 

shareholder reports pursuant to any 

notice and access rules adopted by the 

Commission in relation to such 

distributions.22 The Exchange noted 

that the notice and access process under 

proposed Rule 30e–3 is similar to the 

existing proxy notice and access process 

for which the Exchange has already 

adopted a fee schedule in Rule 451, and 

thus the Exchange believes that it would 

be appropriate to apply the existing 

notice and access fees, with certain 

modifications, to fund shareholder 

report distributions, if the Commission 

ultimately adopts proposed Rule 30e– 

3.23

The Exchange also has proposed to set 

forth in Rule 451 that the notice and 

access fee will not be charged for any 

account with respect to which a fund 

pays a ‘‘preference management fee’’ in 

connection with a distribution of fund 

reports.24 As a result, funds would be 

charged notice and access fees only with 

respect to accounts that actually receive 

a notice and access mailing.25


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shareholder accounts, including those for which it 

also pays a preference management fee. Id. See also 

supra note 17 (describing the current application of 

the preference management fee). 

26See Notice, 81 FR at 56719. 

27See proposed Rule 451.90(5). 

28See supra note 4. 

29 Id. 

30See SIFMA Letter; Broadridge Letter. 

31See ICI Letter; Eaton Vance Letter; Vanguard 

Letter; Blackrock Letter; Invesco Letter; IDC Letter; 

Dimensional Letter; MFS Letter; Blackrock Directors 

Letter. 

32See ICI Letter; Blackrock Directors Letter; 

Blackrock Letter; Invesco Letter; Colombia Letter. 

33See ICI Letter. See also MFS Letter (stating that 

NYSE’s proposal would clarify certain ambiguities 

of Rule 451 and provide a reasonable means of 

conformance to proposed Rule 30e–3). 

34See ICI Letter. 

35 Id. See also Eaton Vance Letter. 

36See MFS Letter. 

37 Id. 

38See Vanguard Letter. 

39See SIFMA Letter. 

40See Broadridge Letter. While the commenter 

stated that NYSE’s proposal would generally 

support the development of notice and access 

services for annual and semi-annual fund reports 

held by beneficial owners, the commenter noted 

that ultimately the work and costs involved are 

dependent on several factors including the final 

requirements of proposed Rule 30e–3, the number 

and size of fund distributions pursuant to a notice 

and access method, and the number and mode of 

investor requests for hard copy reports. 

41Several commenters supported the transition of 

responsibility for setting shareholder distribution 

fees from the NYSE to FINRA. See ICI Letter; Ariel 

Letter; T. Rowe Letter; MFS Letter; Invesco Letter; 

Dimensional Letter; Columbia Letter. The other 

comments outside the scope of the proposal are as 

follows: Invesco Letter (the reasonableness and 

application of the current fee structure); Ariel Letter 

(reasonableness of the current fee structure); 

Columbia Letter (reasonableness of the current fee 

structure); MFS Letter (preference management fee 

in the context of managed accounts); Dimensional 

Letter (due to a virtual monopoly in the market for 

third-party service providers, funds have little to no 

control over the fees incurred for shareholder report 

distribution). Further, the Blackrock Directors Letter 

commented about providing a one year or 

reasonable transition period for to shift to on-line 

delivery of reports and providing a phone number 

for shareholders to call if they prefer to receive 

paper. We note that this comment also does not 

refer to the NYSE fee proposal being considered 

herein. 

42 In approving the proposed rule changes, the 

Commission has considered their impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

43 15 U.S.C. 78f(b)(4). 

44 15 U.S.C. 78f(b)(5). 

45 15 U.S.C. 78f(b)(8). 

46See proposed NYSE Rule 451.90(5). The 

Commission notes that the proposed fees for notice 

and access delivery of fund shareholder reports 

would only become applicable if the Commission 

adopts rules providing for notice and access 

delivery of investment company shareholder 

reports. Such rules could be in the form of Rule 

30e–3, if adopted, or another Commission 

rulemaking establishing notice and access as an 

Continued 

In addition, because funds often issue 

multiple classes of shares, the Exchange 

believes it is necessary to be clear how 

the pricing tiers in Rule 451 would be 

applied to fund shareholder reports.26

Specifically, the Exchange has proposed 

to set forth in Rule 451 that, in 

calculating the rates at which a fund 

will be charged notice and access fees 

for shareholder report distributions, all 

accounts holding shares of any class of 

stock of the fund eligible to receive the 

same report distribution will be 

aggregated in determining the 

appropriate pricing tier.27

III. Summary of Comments Received 

As noted above, the Commission 

received a total of fourteen comment 

letters on the Exchange’s proposed rule 

change.28 In general, commenters 

broadly supported the proposed rule 

change.29 Two commenters, however, 

expressed concern about making a 

determination on the fees without a 

final Commission rule in place that 

permitted notice and access for fund 

report distributions.30

Several commenters took the position 

that the proposed rates set forth in 

NYSE’s proposal would help realize the 

cost savings meant to be achieved 

through notice and access delivery of 

fund shareholder reports.31 Some 

pointed out that shareholder report 

delivery is an expense that fund 

shareholders bear, and asserted that the 

cost savings would directly benefit fund 

shareholders.32 One commenter also 

noted that the three changes being 

proposed by the NYSE would resolve 

ambiguity in the NYSE’s fee schedule as 

it would apply to notice and access 

delivery of fund shareholder reports, 

potentially paving the way for the 

Commission to move forward with its 

proposal.33 According to this 

commenter, the NYSE’s proposal would 

ensure significant cost savings for fund 

shareholders if the Commission were to 

adopt a notice and access proposal.34

This commenter also suggested that, 

absent NYSE’s proposed rule change, 

these cost savings could be erased.35

Similarly, another commenter asserted 

that, absent adoption of NYSE’s 

proposal, Rule 451 would be applied in 

a manner that diminished Rule 30e–3 

shareholder cost savings, or even 

increased shareholder costs.36 In 

addition, this commenter was of the 

view that each element of proposed 

Rule 451.90(5) was logical and fair.37

Another commenter believed that the 

proposed rule would ensure cost 

savings under proposed Rule 30e–3 and 

provide needed explanation on how 

Rule 451 would apply to electronic 

delivery of fund shareholder reports.38

Two commenters, however, expressed 

concerns about commenting on the 

NYSE fee proposal before proposed Rule 

30e–3 was finally adopted. One 

commenter indicated that it could not 

definitively conclude whether the 

proposed fee structure was appropriate 

without a final rule specifying the 

details of the broker-dealer processing 

requirements for notice and access 

delivery.39 Another commenter, the 

largest provider of shareholder 

communication services, stated that it 

performed an analysis in order to 

estimate the costs of a notice and access 

distribution of fund shareholder reports, 

but noted that it had to make certain 

assumptions that could change based on 

the final requirements of proposed Rule 

30e–3.40

Finally, several commenters 

commented on issues concerning the 

fees and the Exchange’s role in setting 

those fees that are outside the scope of 

the Exchange’s proposal.41

IV. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Exchange Act and rules and regulations 

thereunder applicable to a national 

securities exchange.42 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(4) of the Exchange Act,43 which 

requires that an exchange have rules 

that provide for the equitable allocation 

of reasonable dues, fees and other 

charges among its members, issuers and 

other persons using its facilities; Section 

6(b)(5) of the Exchange Act,44 which 

requires that the rules of an exchange be 

designed, among other things, 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 a national market system and, in 

general, to protect investors and the 

public interest, and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers; 

and Section 6(b)(8) of the Exchange 

Act,45 which prohibits any exchange 

rule from imposing a burden on 

competition that is not necessary or 

appropriate in furtherance of the 

Exchange Act. 

Under the Exchange’s proposal, the 

reimbursement rates set forth in NYSE 

Rule 451.90(5), which currently only 

apply to proxy distributions where the 

issuer elects to use notice and access, 

would become applicable to 

distributions of fund shareholder 

reports, pursuant to any notice and 

access rules adopted by the 

Commission.46 Although the 


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27054 Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Notices 

acceptable distribution method for fund reports, 

should Rule 30e–3 not be adopted. 

47See Notice, 81 FR at 56718–19. 

48See Notice, 81 FR at 56719; see also NYSE Rule 

451.90(4); Securities Exchange Act Release No. 

68936 (February 15, 2013), 78 FR 12381, 12386 

(‘‘2013 Proxy Fee Notice’’). 

49See supra note 17. For example, if a beneficial 

account holder has affirmatively consented to 

receive fund shareholder material electronically, 

such accounts would, under the NYSE’s proposal, 

be charged a preference management fee, but not a 

notice and access fee, since no paper mailings of a 

notice of internet availability would be sent to such 

account holder. 

50See 2013 Proxy Fee Notice, 78 FR at 12386. 

51See Notice, 81 FR at 56719. 

52The Commission notes that the Exchange and 

certain commenters suggested that FINRA may be 

better positioned than the Exchange to perform the 

regulatory role of setting the reimbursement rates 

for mutual fund report distributions. See Notice, 81 

FR at 56718; see also ICI Letter; Ariel Letter; T. 

Rowe Letter; MFS Letter; Invesco Letter; 

Dimensional Letter; Columbia Letter. The issue of 

whether FINRA would be better positioned than the 

Exchange to perform this regulatory role is outside 

the scope of the Commission’s consideration of 

whether to approve the Exchange’s proposed rule 

change. See Section 19(b)(2)(C) of the Exchange Act 

(‘‘The Commission shall approve a proposed rule 

change of a self-regulatory organization if it finds 

that such proposed rule change is consistent with 

the requirements of this title and the rules and 

regulations applicable to such organization.’’). 

53See supra note 4. 

54See Broadridge Letter (stating that processing 

work for investment company shareholder report 

distribution using notice and access is functionally 

similar in many respects to proxy report 

distribution through notice and access, although 

many of the underlying systems and production 

operations would be different). 

55 15 U.S.C. 78f(b)(2). 

56 17 CFR 200.30–3(a)(12). 

Commission has not adopted a notice 

and access rule, the Commission 

believes that it is appropriate and 

consistent with the Exchange Act to 

have in place rules that set forth the 

maximum reimbursement rates that 

funds may be charged for notice and 

access distributions should the 

Commission adopt a notice and access 

rule for fund shareholder reports. 

The Commission believes that the 

application of the currently approved 

reimbursement rates for notice and 

access proxy distributions to fund 

shareholder report distributions, with 

the proposed amendments described 

herein, should establish a reasonable 

and practical reimbursement structure, 

if notice and access distribution of fund 

shareholder reports is authorized. In 

this regard, the Commission notes that 

the notice and access process for proxy 

distributions is similar in many respects 

to the notice and access process for fund 

shareholder report distributions 

proposed under Rule 30e–3.47 In 

addition, the approval of the NYSE’s fee 

proposal should facilitate any future 

Commission consideration of notice and 

access distributions for fund 

shareholder reports, by providing clarity 

on the maximum reimbursement rates 

for such distributions. 

The Commission also believes that it 

is reasonable and appropriate for 

proposed Rule 451.90(5) to specify that 

funds utilizing notice and access will 

not be charged a notice and access fee 

for any account with respect to which 

they are being charged a preference 

management fee in connection with a 

distribution of shareholder reports. 

Today under NYSE Rule 451.90(4), 

issuers, including funds, are charged a 

preference management fee for each 

account for which the need to send 

materials in paper format through the 

mails (or by courier service) has been 

eliminated.48 In the context of notice 

and access distributions of proxy 

materials under Rule 451.90(5), 

however, issuers are charged a notice 

and access fee for all accounts through 

which the issuer’s securities are 

beneficially owned, with the result that 

issuers could be charged both 

preference management fees and notice 

and access fees with respect to the same 

account. The Exchange’s proposal 

would eliminate this potential doublecharging in the context of fund 

distributions of shareholder reports, in 

that the notice and access fee will not 

be charged for any account for which a 

preference management fee is already 

paid due to the elimination of the need 

for a paper mailing.49 The Commission 

understands that the preference 

management fee generally is intended to 

reimburse intermediaries for the 

processing work and costs involved in 

keeping track of each account holder’s 

election to eliminate paper mailings.50

Accordingly, as the Exchange noted, 

funds will only pay notice and access 

fees with respect to accounts that 

actually receive notice and access 

mailings.51 The Commission believes 

that this result is consistent with 

Section 6(b) of the Exchange Act. 

In addition, the Commission believes 

that it is consistent with the Exchange 

Act for proposed Rule 451.90(5) to 

clarify that, in determining the 

appropriate pricing tier for notice and 

access fees in connection with 

investment company shareholder report 

distributions, all accounts holding 

shares of any share class that is eligible 

to receive the same report distribution 

will be aggregated. This clarification 

should resolve the ambiguity as to 

whether pricing tiers would be 

calculated by share class, resulting in 

potentially higher fees than if the 

accounts are aggregated as proposed. 

The Commission further believes this 

clarification is reasonable because it 

recognizes the unique nature of the fund 

industry in treating distributions with 

respect to a common group of 

shareholders as a single distribution for 

purposes of the fee tiers. 

The Commission understands that, in 

setting the reimbursement rates in Rule 

451.90, the Exchange balances the 

competing interests of issuers who must 

pay for distributions of shareholder 

reports and brokers who need assurance 

of adequate reimbursement for making 

such distributions on their behalf.52 The 

Commission notes that all commenters 

broadly supported NYSE’s proposal.53

As discussed above, two commenters 

expressed some concern with assessing 

the details of the NYSE’s proposal 

before a final decision is made on 

proposed Rule 30e–3. However, given 

that the Exchange’s rule is applicable to 

the ‘‘distribution of investment 

company shareholder reports pursuant 

to any ‘notice and access’ rules adopted 

by the [Commission] in relation to such 

distributions’’ as well as the functional 

similarities between notice and access 

processing for proxy and investment 

company report distributions,54 the 

Commission believes, for the reasons 

discussed above, that it is appropriate at 

this time to approve substantially 

similar reimbursement rates, with the 

proposed amendments described herein, 

which should establish a reasonable and 

practical reimbursement structure, if 

notice and access distribution of 

investment company shareholder 

reports is authorized. 

For the reasons discussed above, the 

Commission believes that the proposed 

rule change is consistent with the 

Exchange Act. 

V. Conclusion 

IT IS THEREFORE ORDERED, 

pursuant to Section 19(b)(2) of the 

Exchange Act 55 that the proposed rule 

change (SR–NYSE–2016–55) be, and 

hereby is, approved. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.56

Brent J. Fields, 

Secretary 

[FR Doc. 2018–12435 Filed 6–8–18; 8:45 am] 

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