Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Notices 27055 

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

2 17 CFR 240.19b–4. 

3See Nasdaq Rule IM–5101–2(b). 

4The Exchange also proposed to delete a 

duplicative paragraph from the rule text and alter 

the paragraph’s formatting within certain provisions 

in order to enhance the rule’s readability. 

5See Securities Exchange Act Release No. 81816 

(October 4, 2017), 82 FR 47269 (October 11, 2017) 

(‘‘Notice’’). 

6See Letters to Brent J. Fields, Secretary, 

Commission, from Jeffrey M. Solomon, Chief 

Executive Officer, Cowen and Company, LLC, dated 

October 19, 2017 (‘‘Cowen Letter’’); Jeffrey P. 

Mahoney, General Counsel, Council of Institutional 

Investors, dated October 25, 2017 (‘‘CII Letter’’); 

Sean Davy, Managing Director, Capital Markets 

Division, SIFMA, dated October 31, 2017 (‘‘SIFMA 

Letter’’); Akin Gump Strauss Hauer & Feld LLP, 

dated November 1, 2017 (‘‘Akin Gump Letter’’); 

Steven Levine, Chief Executive Officer, 

EarlyBirdCapital, Inc., dated November 3, 2017 

(‘‘EarlyBird Letter’’); and Christian O. Nagler and 

David A. Curtiss, Kirkland & Ellis LLP, dated 

November 9, 2017 (‘‘Kirkland Letter’’). 

7See Securities Exchange Act Release No. 82142 

(November 22, 2017), 82 FR 56293 (November 28, 

2017). 8See Securities Exchange Act Release No. 82478 

(January 9, 2018), 83 FR 2278 (January 16, 2018). 9See Letters to Brent J. Fields, Secretary, 

Commission, from Jeffrey P. Mahoney, General 

Counsel, Council of Institutional Investors, dated 

January 25, 2018 (‘‘CII Letter II’’); Paul D. Tropp, 

Freshfields Bruckhaus Deringer US LLP, dated 

January 30, 2018 (‘‘Freshfields Letter’’); and Arnold 

Golub, Deputy General Counsel, Nasdaq, dated 

February 23, 2018 (‘‘Nasdaq Response Letter’’ or 

‘‘Response Letter’’). 

10See Securities Exchange Act Release No. 83010 

(April 6, 2018), 83 FR 15880 (April 12, 2018). 

11 17 CFR 200.30–3(a)(12). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83383; File No. SR– 

NASDAQ–2017–087] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Withdrawal of Proposed Rule Change 

To Modify the Listing Requirements 

Related to Special Purpose Acquisition 

Companies Listing Standards To 

Reduce Round Lot Holders on Nasdaq 

Capital Market for Initial Listing From 

300 to 150 and Eliminate Public 

Holders for Continued Listing From 

300 to Zero, Require $5 Million in Net 

Tangible Assets for Initial and 

Continued Listing on Nasdaq Capital 

Market, and Impose a Deadline To 

Demonstrate Compliance With Initial 

Listing Requirements on All Nasdaq 

Markets Within 30 Days Following 

Each Business Combination 

June 5, 2018. 

On September 20, 2017, The 

NASDAQ Stock Market LLC (‘‘Nasdaq’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

modify the listing requirements for 

securities of Special Purpose 

Acquisition Companies (‘‘SPACs’’) 

listed on the Nasdaq Capital Market by 

reducing the number of round lot 

holders required for initial listing from 

300 to 150, and eliminating the 

continued listing requirement for a 

minimum number of holders, which is 

also currently 300, that applies until the 

SPAC completes one or more business 

combinations.3 Nasdaq also proposed to 

require that a SPAC maintain at least $5 

million net tangible assets for initial and 

continued listing of its securities on the 

Nasdaq Capital Market. Finally, Nasdaq 

proposed to allow SPACs listed on any 

of its three listing tiers (Nasdaq Global 

Select Market, Nasdaq Global Market, 

and Nasdaq Capital Market) 30 days to 

demonstrate compliance with initial 

listing requirements following each 

business combination.4

The proposed rule change was 

published for comment in the Federal 

Register on October 11, 2017.5 In 

response, the Commission received six 

comments on the proposal.6 On 

November 22, 2017, the Commission 

extended the time period within which 

to approve the proposed rule change, 

disapprove the proposed rule change, or 

institute proceedings to determine 

whether to approve or disapprove the 

proposed rule change, to January 9, 

2018.7 On January 9, 2018, the 

Commission issued an order instituting 

proceedings under Section 19(b)(2)(B) of 

the Act to determine whether to approve 

or disapprove the proposed rule change 

(‘‘OIP’’).8 The Commission received 

three additional comments, one of 

which included a response from 

Nasdaq.9 On April 6, 2018, the 

Commission designated a longer period 

for the Commission to issue an order 

approving or disapproving the proposed 

rule change.10 On June 1, 2018, the 

Exchange withdrew the proposed rule 

change (SR–NASDAQ–2017–087). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–12431 Filed 6–8–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meetings 

TIME AND DATE: 12:00 p.m. on 

Wednesday, June 13, 2018. 

PLACE: SEC’s Atlanta Regional Office, 

Multipurpose Room 1061. 

STATUS: This meeting will be closed to 

the public. 

MATTERS TO BE CONSIDERED: 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the closed meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) 

and (10) and 17 CFR 200.402(a)(3), 

(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and 

(a)(10), permit consideration of the 

scheduled matters at the closed meeting. 

Commissioner Jackson, as duty 

officer, voted to consider the items 

listed for the closed meeting in closed 

session. 

The subject matters of the closed 

meeting will be: 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings; and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information and to ascertain 

what, if any, matters have been added, 

deleted or postponed; please contact 

Brent J. Fields from the Office of the 

Secretary at (202) 551–5400. 

Dated: June 6, 2018. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–12547 Filed 6–7–18; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release Nos. 33–10505; 34–83379; IC– 

33114; File No. S7–13–18] 

Request for Comments on the 

Processing Fees Charged by 

Intermediaries for Distributing 

Materials Other Than Proxy Materials 

To Fund Investors 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Request for comment. 

SUMMARY: The Securities and Exchange 

Commission is seeking public comment 

on the framework under which 

intermediaries may charge fees for 

distributing certain non-proxy 

disclosure materials to fund investors, 

such as shareholder reports and 


daltland on DSKBBV9HB2PROD with NOTICES
27056 Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Notices 

1 15 U.S.C. 80a–1 et seq.; Optional internet 

Availability of Investment Company Shareholder 

Reports, Investment Company Act Release No. 

33115 (June 5, 2018). 

2 Investment Company Reporting Modernization, 

Investment Company Act Release No. 31610 (May 

20, 2015) [80 FR 33590 (June 12, 2015)]. 

3FINRA has noted that its rules ‘‘correspond, in 

virtually identical language’’ to NYSE rules already 

adopted. FINRA Regulatory Notice 14–03 (Jan. 

2014), available at http://finra.complinet.com/net_

file_store/new_rulebooks/f/i/FINRANotice_14_

03.pdf. As discussed below, these rules establish 

the maximum amount that a member of the 

respective organization may receive for distributing 

fund materials to beneficial owners as ‘‘reasonable 

expenses’’ eligible for reimbursement under rules 

14b–1 and 14b–2 under the Exchange Act of 1934 

(‘‘Exchange Act’’) [15 U.S.C. 78a et seq.]. See infra 

Part II.B. Rules of other SROs also correspond to 

NYSE rules 451 and 465 and FINRA rule 2251 

governing the maximum reimbursement that 

intermediaries are permitted to seek for forwarding 

Fund Materials, and throughout this Release unless 

the context requires otherwise, when referring to 

NYSE and/or FINRA rules, we are also referring to 

these related SRO rules. See, e.g., NASDAQ rule 

2251; NYSE MKT rule 576. Historically when NYSE 

initiates a rule change with respect to these fees, 

other SROs, including FINRA, follow with 

corresponding changes. Additionally, non-broker 

intermediaries, such as banks, generally rely on the 

NYSE rule 451 fee schedule. See internet 

Availability of Proxy Materials, Securities Exchange 

Act Release No. 55146 (Jan. 22, 2007) [72 FR 4147, 

4157 n.118 (Jan. 29, 2007)]. 

4See Comment Letter of the Investment Company 

Institute (Mar. 14, 2016) on File No. S7–08–15, 

available at http://www.sec.gov/comments/s7-08- 

15/s70815.shtml (‘‘2016 ICI Comment Letter’’). 

Stakeholders have also discussed many of the 

concerns raised in connection with proposed rule 

30e–3 in connection with other Commission 

releases. See infra Parts II–III. 

5See Exchange Act Release No. 78589 (Aug. 16, 

2016) [81 FR 56717 (Aug. 22, 2016)] (Notice) (‘‘2016 

Amendments Notice’’). We discuss below the 

changes made to the NYSE rule. See infra note 30 

and accompanying text. 6 2016 Amendments Notice, supra note 5, at 

56720. 7 Id.; see also infra note 10 and accompanying 

text. 8See Order Approving Proposed Rule Change and 

Amendment No. 1 Thereto by the New York Stock 

Exchange, Inc. Amending Its Rules Regarding the 

Transmission of Proxy and Other Shareholder 

Communication Material and the Proxy 

Reimbursement Guidelines, Exchange Act Release 

No. 45644 (Mar. 25, 2002) [67 FR 15440, 15444 

(Apr. 1, 2002)] (‘‘2002 Amendments Approval’’); 

Order Granting Approval to Proposed Rule Change 

Amending NYSE Rules 451 and 465, and the 

Related Provisions of Section 402.10 of the NYSE 

Listed Company Manual, Which 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, and to Establish a FiveYear Fee for the Development of an Enhanced 

Brokers internet Platform, Exchange Act Release 

No. 70720 (Oct. 18, 2013) [78 FR 63530, 63531 (Oct. 

24, 2013)] (‘‘2013 Amendments Approval’’). 

9 2002 Amendments Approval, supra note 8, at 

63531. 

prospectuses (‘‘Fund Materials’’), 

particularly where those fees may be 

borne by the fund and, in turn, its 

investors. 

DATES: Comments should be received by 

October 31, 2018. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/other.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File No. S7–13– 

18 on the subject line. 

Paper Comments 

• Send paper comments to Secretary, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–13–18. 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 of submission. The 

Commission will post all comments on 

the Commission’s website (http://

www.sec.gov). Comments are also 

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. 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 publicly available. 

FOR FURTHER INFORMATION CONTACT: J. 

Matthew DeLesDernier and John Lee, 

Senior Counsels, or Michael C. Pawluk, 

Senior Special Counsel, at (202) 551– 

6792, Investment Company Regulation 

Office, Division of Investment 

Management, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–8549. 

SUPPLEMENTARY INFORMATION: The 

Securities and Exchange Commission 

(‘‘Commission’’) is seeking public 

comment on the framework for fees 

charged by intermediaries for the 

distribution of Fund Materials to 

investors that are beneficial owners of 

registered investment company (‘‘fund’’) 

shares held in ‘‘street name’’ through an 

intermediary. 

I. Introduction 

In a contemporaneous release, the 

Commission adopted rule 30e–3 under 

the Investment Company Act of 1940 

(‘‘Investment Company Act’’).1 The rule 

provides certain funds with the ability 

to satisfy their obligations under the 

Investment Company Act to transmit 

shareholder reports by making the 

report and other materials accessible at 

a website address specified in a notice 

to investors. 

In connection with the proposal of 

rule 30e–3,2 some commenters 

expressed concerns about the rules of 

the New York Stock Exchange (‘‘NYSE’’) 

and other self-regulatory organizations 

(‘‘SROs’’) such as the Financial Industry 

Regulatory Authority (‘‘FINRA’’) under 

which intermediaries are permitted to 

seek reimbursement for forwarding 

shareholder reports and other fund 

materials to investors that are beneficial 

owners of shares held in ‘‘street name’’ 

through the intermediary.3 One 

commenter particularly noted that the 

NYSE rules could result in increased 

processing fees that could negate 

potential costs savings related to the 

implementation of rule 30e–3.4 In light 

of these concerns, in 2016 the NYSE 

submitted certain amendments to its 

rules concerning the application of 

these processing fees.5 As part of that 

submission, the NYSE stated that the 

amendments were intended solely to 

facilitate the new delivery method for 

fund shareholder reports permitted by 

rule 30e–3 as proposed by the 

Commission.6 The NYSE did not, at that 

time, propose to make additional 

changes to its rules to address the other 

concerns expressed by the commenter 

and further stated that those concerns 

should be given separate consideration.7

In the past when we have approved 

changes to the NYSE’s rules governing 

processing fees, we have emphasized 

that we expected the NYSE to continue 

to periodically review these fees to 

ensure they are related to reasonable 

expenses.8 In particular, we observed 

that such monitoring is essential 

because technological advances should 

help to reduce processing costs in the 

future.9

With the adoption of rule 30e–3, we 

believe it is appropriate to consider 

more broadly the overall framework for 

the fees that broker-dealers and other 

intermediaries charge funds, as 

reimbursement for distributing Fund 

Materials to investors. A number of 

industry participants have expressed 

views regarding the appropriateness of 

the current framework as it relates to 

Fund Materials—which was designed 

primarily for delivery of operating 

company proxy materials. Specifically, 

commenters have raised issues 

including the clarity of SRO rules as 

they apply to Fund Materials; the value 

of the services provided in exchange for 

the processing fees assessed; the degree 


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Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Notices 27057 

10See, e.g., 2016 ICI Comment Letter, supra note 

4; Comment Letter of Ariel Investment Trust (Sept. 

8, 2016) on File No. SR–NYSE–2016–55, available 

at https://www.sec.gov/comments/sr-nyse-2016-55/ 

nyse201655.shtml (‘‘2016 Ariel Letter’’); Comment 

Letter of AST Fund Solutions (May 16, 2013) on 

File No. SR–NYSE–2013–07, available at https://

www.sec.gov/comments/sr-nyse-2013-07/ 

nyse201307.shtml (‘‘2013 AST Letter’’); Comment 

Letter of Columbia Mutual Funds (Sept. 15, 2016) 

on File No. SR–NYSE–2016–55, available at https:// 

www.sec.gov/comments/sr-nyse-2016-55/ 

nyse201655.shtml (‘‘2016 Columbia Letter’’); 

Comment Letter of Dimensional Fund Advisors LP 

(Sept. 12, 2016) on File No. SR–NYSE–2016–55, 

available at https://www.sec.gov/comments/sr-nyse2016-55/nyse201655.shtml (‘‘2016 Dimensional 

Letter’’); Comment Letter of Invesco Advisers, Inc. 

(Sept. 12, 2016) on File No. SR–NYSE–2016–55, 

available at https://www.sec.gov/comments/sr-nyse2016-55/nyse201655.shtml (‘‘2016 Invesco Letter’’); 

Comment Letter of the Investment Company 

Institute (Sept. 12, 2016) on File No. SR–NYSE– 

2016–55, available at https://www.sec.gov/ 

comments/sr-nyse-2016-55/nyse201655.shtml 

(‘‘2016 ICI Letter II’’); Comment Letter of the 

Investment Company Institute (Mar. 15, 2013) on 

File No. SR–NYSE–2013–07, available at https://

www.sec.gov/comments/sr-nyse-2013-07/ 

nyse201307.shtml (‘‘2013 ICI Letter’’); Comment 

Letter of MFS Investment Management (Sept. 12, 

2016) on File No. SR–NYSE–2016–55, available at 

https://www.sec.gov/comments/sr-nyse-2016-55/ 

nyse201655.shtml (‘‘2016 MFS Letter’’); Comment 

Letter of T. Rowe Price Associates (Sept. 12, 2016) 

on File No. SR–NYSE–2016–55, available at https:// 

www.sec.gov/comments/sr-nyse-2016-55/ 

nyse201655.shtml (‘‘2016 T. Rowe Letter’’). 

11See Comment Letter of the Independent 

Directors of the BlackRock Equity-Liquidity Funds 

(Sept. 27, 2016) on File No. SR–NYSE–2016–55, 

available at https://www.sec.gov/comments/sr-nyse2016-55/nyse201655.shtml; 2016 ICI Letter II, supra 

note 10. 

12For purposes of this release, we use the terms 

‘‘intermediary’’ to refer to a ‘‘securities 

intermediary’’ and ‘‘investors’’ to refer to beneficial 

owners of fund shares held through intermediaries. 

See 17 CFR 240.17Ad–20; Concept Release on the 

U.S. Proxy System, Exchange Act Release No. 62495 

(July 14, 2010) [75 FR 42982, 42985 n.30 (July 22, 

2010)] (‘‘Proxy Mechanics Concept Release’’); 

compare rule 22c–2 under the Investment Company 

Act (recognizing a number of different types of 

‘‘financial intermediaries,’’ such as broker-dealers, 

banks, insurance companies, and retirement plan 

administrators). 

Approximately 75 percent of accounts in mutual 

funds are estimated to be held in street name. See 

Comment Letter of the Securities Industry and 

Financial Markets Association (Aug. 11, 2015) on 

Investment Company Reporting Modernization, File 

No. S7–08–15, available at http://www.sec.gov/ 

comments/s7-08-15/s70815.shtml. In 2010, we 

estimated that 70 to 80 percent of all public issuers’ 

shares are held in street name. Proxy Mechanics 

Concept Release, at 42999. 

13 17 CFR 240.14b–1(b); 17 CFR 240.14b–2(b). 

14See Proxy Mechanics Concept Release, supra 

note 12, at 42999. Estimates of shares held by OBOs 

range from 52 to 60 percent of all shares. Id. 

Rule 22c–2 under the Investment Company Act, 

which we adopted to help address abuses 

associated with short-term trading of fund shares, 

generally requires funds to enter into shareholder 

information agreements with certain intermediaries 

that submit orders to purchase or redeem fund 

shares on behalf of beneficial owners, but the rule 

and such agreements do not require the information 

that would be necessary to enable the fund to 

deliver or transmit materials directly to beneficial 

owners. 17 CFR 270.22c–2(a)(2)(i). These 

agreements provide the fund with certain limited 

information about transactions by beneficial owners 

whose shares are held in street name or ‘‘omnibus’’ 

accounts through those financial intermediaries. 17 

CFR 270.22c–2(c)(5). However, the rule does not 

require this information provided under the terms 

of a shareholder information agreement to include, 

for example, the name and address of the beneficial 

owner. We excepted money market funds, funds 

that issue securities that are listed on a national 

securities exchange, and funds that affirmatively 

permit short-term trading of their securities from 

the requirements of 22c–2 unless they elect to 

impose a redemption fee under the rule. 17 CFR 

270.22c–2(b). 

15 In the proxy context, these service providers 

are sometimes characterized as ‘‘proxy service 

providers.’’ See 2013 Amendments Approval, supra 

note 8. Because the scope of this Request for 

Comment does not include delivery of fund proxy 

materials, we generally refer to this type of service 

provider as a ‘‘fulfillment service provider.’’ 

16 17 CFR 240.14b–1(b); 17 CFR 240.14b–2(b). 

17See NYSE rule 465 of listed company manual. 

to which SROs have tailored fees to 

reflect delivery of Fund Materials—as 

distinct from operating company proxy 

or other materials; the degree to which 

competition or its absence may affect 

the amount of the fees assessed; and the 

appropriate SRO to maintain oversight 

of such fees.10

The SRO rules governing processing 

fees and related out-of-pocket expenses 

are meant to reimburse intermediaries 

for the ‘‘reasonable expenses’’ they 

incur in forwarding materials to 

beneficial shareholders. These 

reimbursable amounts include the 

amounts intermediaries pay under 

contract to third-party service providers 

who deliver shareholder materials on 

their behalf. We understand that funds 

generally pay these reimbursements 

from their own assets as expenses of the 

fund.11 We are seeking public comment 

and additional data on the framework 

for the fees charged by broker-dealers 

and other intermediaries for the 

distribution of Fund Materials to 

investors to better understand the 

potential effects on funds and their 

investors. 

II. Overview of Current Framework for 

Forwarding Fund Materials 

A. ‘‘Street Name’’ Account 

Arrangements 

Today, most fund investors are 

beneficial owners of shares held in 

‘‘street name’’ through a ‘‘securities 

intermediary,’’ such as a broker-dealer 

or bank.12 When investors hold shares 

directly with their fund as registered or 

‘‘record’’ owners, the fund’s transfer 

agent maintains the names and 

addresses of the investors in its records. 

On the other hand, when an investor’s 

shares are held in street name through 

an intermediary, the intermediary 

maintains the records of beneficial 

ownership. Such an investor has the 

ability to instruct its intermediary to 

withhold his or her personally 

identifying information from the issuers 

of securities that he or she owns. 

A fund required or wishing to 

communicate with those investors has 

to rely on the intermediary to either 

forward the materials to the investor or, 

at the fund’s request, the intermediary 

provides a list of non-objecting investors 

to the fund so that it may do so. To 

promote direct communication between 

funds (and other issuers of securities) 

and their investors, we have adopted 

rules to require intermediaries to 

provide funds, at their request, with 

lists of the names and addresses of 

investors who did not object to having 

such information provided to issuers, 

often referred to as ‘‘non-objecting 

beneficial owners’’ (or ‘‘NOBOs’’).13

However, many investors whose shares 

are held in street name accounts are 

‘‘objecting beneficial owners’’ (or 

‘‘OBOs’’) and may be contacted only 

through the intermediary (or its agent) 

that has the relationship with and is 

servicing the investor.14

Intermediaries generally outsource 

their fund delivery obligations to a 

third-party service provider that 

provides fulfillment services.15 The 

fulfillment service provider enters into 

a contract with the intermediary and 

acts as a billing and collection agent for 

that intermediary. 

B. Current Commission Rules 

Concerning Delivery or Transmission of 

Issuer Materials to Intermediated 

Accounts 

Under Exchange Act rules 14b–1 and 

14b–2, respectively, broker-dealers and 

banks must distribute certain materials 

received from an issuer or other 

soliciting party to their customers who 

are beneficial owners of securities of 

that issuer only if the broker-dealers and 

banks are assured reimbursement of 

reasonable expenses, both direct and 

indirect, from the issuer. These rules 

provide that such materials may include 

proxy statements, information 

statements, annual reports, proxy cards, 

and other proxy soliciting materials.16

In addition, NYSE rule 465 requires 

NYSE member firms to forward interim 

reports and other material being sent to 

stockholders by issuers if the member 

firm is assured it will be reimbursed for 

all out-of-pocket costs, including 

reasonable clerical expenses.17 In the 


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27058 Federal Register / Vol. 83, No. 112 / Monday, June 11, 2018 / Notices 

18Proxy Mechanics Concept Release, supra note 

12, at 42995. 

19See, e.g., NYSE rule 451.90(3); Supplementary 

Material .01(a)(4) to FINRA rule 2251. 

20See Order Granting Accelerated Approval to 

Amendment No. 1 to Proposed Rule Change 

Relating to a One-Year Pilot Program for 

Transmission of Proxy and Other Shareholder 

Communication Material, Exchange Act Release No. 

38406 (Mar. 14, 1997) [62 FR 13922 (Mar. 24, 

1997)]. This belief was in part attributed to SRO 

exchanges acting as ‘‘representatives of both issuers 

and brokers,’’ however we recognize that FINRA, as 

the sole national securities association, has often 

led in promulgating fund-specific SRO rules in 

certain areas that govern broker-dealers. See id.; 

infra note 36 and accompanying text. 

21See NYSE Supplementary Material to rule 

451.93. Since 1937, the NYSE has required issuers, 

as a matter of policy, to reimburse its members for 

out of pocket costs of forwarding materials. See 

Proxy Mechanics Concept Release, supra note 12, 

at 42995. Rules formally established reimbursement 

rates in 1952, and such rules have been revised 

periodically since then. Id. 

22See Proxy Mechanics Concept Release, supra 

note 12, at 42995. 

23See NYSE rule 451.90(3); Supplementary 

Material .01(a)(4) to FINRA rule 2251. 

24See NYSE rule 451.90(4); Supplementary 

Material .01(a)(5) to FINRA rule 2251. For 

additional discussion of the preference management 

fee, see infra Part III.D. The preference management 

fee is, however, higher—up to 32 cents—for certain 

proxy materials. NYSE rule 451.90(4). 

25See, e.g., Use of Electronic Media for Delivery 

Purposes, Investment Company Act Release No. 

21399 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)] 

(providing Commission views on the use of 

electronic media to deliver information to investors, 

with a focus on electronic delivery of prospectuses, 

annual reports, and proxy solicitation materials); 

Use of Electronic Media by Broker-Dealers, Transfer 

Agents, and Investment Advisers for Delivery of 

Information, Investment Company Act Release No. 

21945 (May 9, 1996) [61 FR 24644 (May 15, 1996)] 

(providing Commission views on electronic 

delivery of required information by broker-dealers, 

transfer agents, and investment advisers); Use of 

Electronic Media, Investment Company Act Release 

No. 24426 (Apr. 28, 2000) [65 FR 25843 (May 4, 

2000)] (providing updated interpretive guidance on 

the use of electronic media to deliver documents on 

matters such as telephonic and global consent, 

issuer liability for website content, and legal 

principles that should be considered in conducting 

online offerings). 

26See, e.g., rule 154 under the Securities Act of 

1933 (permitting householding of prospectuses) [17 

CFR 230.154]; rules 30e–1(f) and 30e–2(b) under the 

Investment Company Act (permitting householding 

of shareholder reports); rules 14a–3(e) and 14c–3(c) 

under the Exchange Act (permitting householding 

of annual reports to security holders, proxy 

statements and information statements, and Notices 

of internet Availability of Proxy Statements) [17 

CFR 240.14a–3(e); 17 CFR 240.14c–3(c)]. See 

generally Delivery of Disclosure Documents to 

Households, Investment Company Act Release No. 

24123 (Nov. 4, 1999) [64 FR 62540 (Nov. 16, 1999)] 

(adopting householding rules with respect to 

prospectuses and shareholder reports); Delivery of 

Proxy Statements and Information Statements to 

Households, Investment Company Act Release No. 

24715 (Oct. 27, 2000) [65 FR 65736 (Nov. 2, 2000)] 

(adopting householding rules with respect to proxy 

statements and information statements). 

27See NYSE rule 451.90(4); Supplementary 

Material .01(a)(5) to FINRA rule 2251. 

28See NYSE rule 451.90(5); Supplementary 

Material .01(a)(6) to FINRA rule 2251. The notice 

and access model for the delivery of proxy materials 

permits issuers to send investors a ‘‘notice of 

internet availability of proxy materials’’ in lieu of 

the traditional paper mailing of proxy materials. See 

2013 Amendments Approval, supra note 15, at 

63535. 

29See NYSE rule 451.90(5); Supplementary 

Material .01(a)(6) to FINRA rule 2251. Under the 

schedule, every fund will pay the highest rate (i.e., 

25 cents) for the first 10,000 accounts, or portion 

thereof, with decreasing rates applicable only on 

additional accounts in the additional tiers, with 

rates gradually falling to the fee of 5 cents for each 

account over 500,000 accounts. See id. 

30See Exchange Act Release Nos. 83378 (June 5, 

2018) (Order Affirming Action by Delegated 

Authority Approving SR–NYSE–2016–55 and 

Discontinuing Stay); 79370 (Nov. 21, 2016) [81 FR 

85655 (Nov. 28, 2016)] (Stay Order); 79355 (Nov. 

18, 2016) [81 FR 85291 (Nov. 25, 2016)] (Approval 

Order) (‘‘2016 Amendments Approval’’); supra note 

5. For purposes of calculating rates for distribution 

of fund shareholder reports under rule 30e–3, all 

accounts holding shares of any class of stock of the 

applicable fund are aggregated in determining the 

appropriate pricing tier. See NYSE rule 451.90(5). 

31 Id. 

fund context, we understand that 

industry participants have used the 

framework established by the Exchange 

Act rules and NYSE rules to deliver 

materials including prospectuses, 

summary prospectuses, and annual and 

semiannual reports to investors. 

In adopting our rules, we did not 

determine what constituted ‘‘reasonable 

expenses’’ that were eligible for 

reimbursement.18 Rather, as discussed 

below, the rules of SROs set forth these 

amounts.19 We believed at the time that 

SROs would be best positioned to make 

a fair evaluation and allocation of the 

costs associated with the distribution of 

shareholder materials.20 Accordingly, it 

is the SRO rules that establish the 

maximum amount that an SRO member 

may receive for distributing materials to 

beneficial owners. 

C. Current NYSE Regulation of Fees for 

Forwarding Fund Materials to Investors 

Currently, NYSE rules 451 and 465 

establish the fee structure for which an 

NYSE member organization may be 

reimbursed for expenses incurred in 

connection with the forwarding of 

certain issuer materials to investors. 

Under these rules, members may request 

reimbursement of expenses at less than 

the approved rates; however, no 

member may seek reimbursement at 

rates higher than the approved rates or 

for items or services not specifically 

listed without the prior notification to 

and consent of the issuer.21 Issuers 

reimburse the vast majority of firms that 

distribute their material to investors at 

the NYSE fee schedule rates because the 

vast majority of the intermediaries are 

NYSE members or members of FINRA, 

which has a rule that is similar to the 

NYSE’s rules.22

Currently, the NYSE rules set forth 

the following processing and other fees 

that are applied to the forwarding of 

Fund Materials: 

• Interim Report Fee. A processing 

fee up to 15 cents for each account for 

fund annual reports processed 

separately from proxy materials, for 

‘‘interim reports,’’ and for ‘‘other 

material.’’ 23 In the fund context, we 

understand that this rule has been 

interpreted to apply, for example, to 

each distribution of fund annual and 

semiannual reports, as well as annual 

mailings of summary prospectuses, 

statutory prospectuses, and other 

materials sent to investors that are not 

proxy distributions. 

• Preference Management Fee. A fee 

of up to 10 cents per distribution of 

Fund Materials listed above for each 

‘‘suppressed’’ account for which the 

intermediary has eliminated the need to 

send the materials in paper format 

through the mails.24 This may include, 

for example, documents delivered 

electronically 25 and ‘‘householded’’ 

accounts where no distribution takes 

place.26 This fee is in addition to, and 

not in lieu of, other fees permitted 

under the NYSE rule, including the 

interim report fee.27 Thus, the aggregate 

processing fee for distributing Fund 

Materials to suppressed accounts is 25 

cents per distribution (15 cents for an 

interim report fee plus 10 cents for a 

preference management fee). 

• Notice and Access Fee. When a 

fund elects to send proxy materials via 

the notice and access method, the rules 

permit an additional notice and access 

fee.28 The notice and access fee is a 

tiered fee based on the number of 

accounts per distribution with a 

schedule that begins at 25 cents per 

account and ultimately declines to 5 

cents per account.29 The Commission 

approved amendments specifying the 

applicability of notice and access fees to 

distributions of fund shareholder 

reports under Investment Company Act 

rule 30e–3.30 For distribution of fund 

shareholder reports under rule 30e–3, 

an intermediary may not charge a notice 

and access fee for any account with 

respect to which a fund pays a 

preference management fee for the same 

distribution.31

In addition to the processing, 

preference management, and notice and 

access fees described above, the NYSE 

rules provide for reimbursement for 

actual postage costs, the actual cost of 

envelopes unless they are provided by 

the fund, and any actual communication 

expenses incurred in receiving voting 

returns (in the case of proxy 

distributions). 

The NYSE rules also provide for the 

form of a billing document to be used 


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32NYSE rule 465.30. 

33 2016 Amendments Notice, supra note 5, at 

56718. 

34 Id.; see also 2016 Ariel Letter, supra note 10; 

2016 Columbia Letter, supra note 10; 2016 

Dimensional Letter, supra note 10; 2016 Invesco 

Letter, supra note 10; 2016 ICI Comment Letter, 

supra note 4; 2016 ICI Letter II, supra note 10; 2016 

MFS Letter, supra note 10; 2016 T. Rowe Letter, 

supra note 10. 

35Compare FINRA rule 2251 with NYSE rule 451; 

see supra note 19 and accompanying text. 

36For example, FINRA rules bar broker-dealers 

who are members from selling funds that impose 

combined sales charges that exceed certain limits, 

including ‘‘asset-based sales charges’’ and 

shareholder servicing fees. FINRA rule 2341; see 

also Mutual Fund Distribution Fees, Investment 

Company Act Release No. 29367 (July 21, 2010) [75 

FR 47064, 47069 (Aug. 4, 2010)]. FINRA also 

requires the filing of certain fund advertising 

material. FINRA rule 2210. 

37See Proxy Mechanics Concept Release, supra 

note 12, at 42997. 

38See 2013 ICI Letter, supra note 10; Comment 

Letter of the Securities Transfer Association (Mar. 

4, 2013) on File No. SR–NYSE–2013–07, available 

at https://www.sec.gov/comments/sr-nyse-2013-07/ 

nyse201307.shtml (‘‘2013 STA Letter’’); but see 

Continued 

by its members to seek 

reimbursement.32 For each category of 

distribution, such as ‘‘interim reports,’’ 

the NYSE member specifies the number 

of reports mailed, the service fee, the 

number of envelopes not supplied by 

the issuer used, the U.S. postage, the 

foreign postage, the cost of mail, and the 

total cost assessed. 

III. Discussion and Request for 

Comment 

A. General Framework 

As discussed above, we are seeking 

public comment and additional data on 

the framework for fees charged by 

intermediaries for the distribution of 

shareholder reports and other Fund 

Materials to investors. 

Request for Comment 

• Should the current rules regulating 

processing fees for distributing materials 

to beneficial owners apply to forwarding 

Fund Materials? Do the differences 

between proxy distributions and nonproxy distributions create significant 

differences in the costs? Would 

considering those types of fees 

separately help improve the evaluation 

of what constitutes ‘‘reasonable 

expenses’’ in situations other than proxy 

distributions? 

• Are our rules under Section 14 of 

the Exchange Act (e.g., rules 14b–1 and 

14b–2) well-tailored for the distribution 

of Fund Materials? Would additional or 

other Commission rules be preferable? If 

so, what should they provide? For 

example, should there be a different set 

of rules that applies to the distribution 

of all types of fund materials, including 

proxy materials? Should these rules 

apply only to certain materials such as 

shareholder reports and/or 

prospectuses? 

• We understand that processing fees 

and other expenses connected with 

distributing Fund Materials to investors 

are considered and treated as direct 

fund expenses. Is our understanding 

correct? If not, who pays these fees and 

expenses and under what 

circumstances? How are fund payments 

for forwarding material to beneficial 

shareholders different from similar 

payments made by operating 

companies? Are fund investors more 

directly affected by the payments than 

operating company investors? 

• Is the current fee and remittance 

structure for the distribution of Fund 

Materials to investors reasonable? 

Should the fees be presented differently 

to better explain how they are applied 

and allow funds to verify that they are 

correct? 

• Does the current fee framework 

encourage, discourage, or not affect fund 

communications with investors beyond 

those communications that are 

required? 

• Do intermediaries and their agents 

provide funds with invoices for 

processing fees assessed on Fund 

Material distributions? If so, are they 

sufficiently detailed and transparent for 

the fund to be able to evaluate their 

accuracy and whether they have been 

assessed in a manner consistent with 

SRO rules? If such invoices are not 

sufficiently detailed or transparent, 

what additional information should be 

provided? Does a fund need information 

about any remittances that the 

fulfillment service provider will pay to 

the intermediary in connection with the 

services encompassed by the invoice? 

• Do funds challenge fees assessed by 

intermediaries or their agents for 

distribution of Fund Materials on the 

basis that the fees are not reasonable? If 

so, under what circumstances? If not, 

what are the impediments, if any, to 

doing so? How, if at all, would 

withholding fees deemed to be 

unreasonable affect the fund or its 

investors? 

• With what frequency do funds 

make requests for the names and 

addresses of NOBOs? What percentage 

of fund beneficial accounts are NOBO 

accounts? Would low percentages of 

NOBOs relative to all fund beneficial 

owners be a disincentive to use such 

lists? With what frequency do funds 

make such requests to facilitate the 

distribution of Fund Materials, or for 

other purposes? How can more direct 

communication between funds and 

NOBOs be facilitated? Do funds 

currently rely on intermediaries to 

forward materials to investors rather 

than requesting a list of NOBOs? Does 

the current NYSE NOBO fee structure 

discourage funds from directly sending 

Fund Materials to NOBOs? 

B. SRO Rules 

Although the NYSE’s rules currently 

apply to the forwarding of Fund 

Materials to investors, the NYSE has 

observed that it ‘‘has no involvement in 

the mutual fund industry’’ and that it 

‘‘may not be best positioned to take on 

the regulatory role in setting fees for 

mutual funds.’’ 33 The NYSE and some 

commenters have recommended that 

FINRA should take on this role.34 As 

noted above, FINRA has adopted rules 

that generally mirror the previously 

adopted NYSE rules.35 FINRA also has 

adopted rules governing broker-dealers’ 

sales practices and other conduct with 

respect to funds.36

Request for Comment 

• Should FINRA be the SRO for 

setting the structure and level of 

processing fees for funds? If not, should 

another entity other than an SRO be 

responsible? If so, who? 

• Are there particular areas of 

expertise such as funds’ operations, 

distribution methods, and sales 

practices that would be most relevant in 

setting processing fees? If so, what 

expertise and does this expertise vary 

from one SRO to another? 

C. Fulfillment Service Providers 

We understand that while the fund 

typically pays the processing fees 

charged by an intermediary’s fulfillment 

service provider, the fund has little or 

no control over the process by which 

the fulfillment service provider is 

selected, the terms of the contract 

between the intermediary and the 

service provider, or the fees that are 

ultimately incurred and billed for the 

distribution of Fund Materials to 

investors.37

It remains our understanding that the 

fulfillment service provider generally 

bills funds the maximum fees allowed 

by the NYSE rules, and in some cases, 

the fulfillment service provider is 

contractually obligated to its 

intermediary clients to do so. However, 

commenters have stated that the fees 

that the fulfillment service provider 

charges certain intermediary clients for 

its services sometimes are less than the 

fees charged to funds on the 

intermediaries’ behalf. The result is a 

remittance or rebate from the fulfillment 

service provider to those 

intermediaries.38 Some commenters 


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Comment Letter of Broadridge Financial Solutions 

(Sep. 12, 2106) on File No. SR–NYSE–2016–55, 

available at https://www.sec.gov/comments/sr-nyse2016-55/nyse201655-8.pdf. Under rule 14b–1 under 

the Exchange Act, intermediaries are permitted to 

seek reimbursement of not only ‘‘direct’’ reasonable 

expenses but also ‘‘indirect’’ reasonable expenses. 

See 17 CFR 240.14b–1(c)(2)(i). 

39See supra note 38. 

40Rules 14b–1 and 14b–2 also do not require 

reasonable reimbursement for activities related to 

sending these materials. 

41None of the questions in this release should be 

interpreted to reflect any conclusion regarding the 

appropriate role, if any, of the Commission in 

setting fees in this area. 

42See Proxy Mechanics Concept Release. The 

NYSE rules provide that, for this purpose a 

‘‘managed account’’ ‘‘shall mean an account at [an 

intermediary] which is invested in a portfolio of 

securities selected by a professional advisor, and for 

which the account holder is charged a separate 

asset-based fee for a range of services which may 

include ongoing advice, custody[,] and execution 

services.’’ See NYSE rule 451.90(6). 

have asserted that fees charged for 

distribution of materials to 

intermediated accounts ‘‘far exceed’’ the 

costs a fund incurs for distributing the 

same materials to investors whose 

shares are registered directly with the 

fund’s transfer agent.39

We are interested in commenters’ 

views on such remittance and rebate 

practices. 

Request for Comment 

• Is the current framework for the 

distribution of Fund Materials to fund 

investors—in which the fulfillment 

service provider is selected by an 

intermediary but costs incurred are paid 

by the fund—appropriate? Does the 

current framework encourage 

intermediaries to reduce costs for funds? 

Should funds have more control over 

the selection of, services billed to, and 

payments made to fulfillment service 

providers? What are the potential 

benefits and drawbacks of such 

alternatives? 

• How do fees charged to funds on an 

intermediary’s behalf for delivery of 

Fund Materials compare with fees 

negotiated for comparable services 

between funds and their service 

providers for distributions of similar 

materials to investors holding shares 

directly with the fund or NOBOs known 

to the fund? If they are different, are 

they higher or lower, and by how much? 

If they are different, why are they 

different? For example, are the services 

provided also different, such as in 

quality or complexity? If so, is the 

magnitude of the difference in 

processing methods or services 

provided commensurate with the 

difference in fees? Does the magnitude 

of the difference vary depending on the 

manner in which the materials are 

delivered, such as in paper through the 

mail, by electronic delivery, or through 

a notice and access system? 

• What factors may affect the level of 

competition in the market for 

fulfillment service providers and their 

fees? Does the presence or absence of 

competition affect the level of fees 

assessed or the size of remittances? 

• What steps, if any, should the 

Commission take to promote 

competition in the market for the 

distribution of Fund Materials to 

investors? 

• To what extent do intermediaries 

receive remittances or rebates from 

fulfillment service providers for nonproxy deliveries? What, if any, 

additional related costs do 

intermediaries incur in connection with 

non-proxy distributions? Do 

intermediaries and/or their fulfillment 

service providers inform funds as to the 

amounts and related costs and services 

associated with such remittances? 

D. Preference Management Fee 

Under the current framework, once a 

paper mailing is suppressed, the 

intermediary, or its agent, collects a 

preference management fee for each 

distribution of Fund Materials, even 

though the continuing role of the 

intermediary, or its agent, with respect 

to subsequent delivery of documents to 

investors, is limited to keeping track of 

the investor’s election. While corporate 

issuers typically only incur this fee 

annually in connection with soliciting 

proxies for their annual meeting, funds 

often pay this fee multiple times per 

year for the distribution of a fund’s 

annual and semiannual reports to 

shareholders, prospectuses, and other 

Fund Materials. 

We understand that tracking an 

investor’s preferences or elections 

typically occurs at the account level for 

all securities held for all types of 

issuers. The elections, moreover, may 

also apply to other customer 

communications, including account 

statements, confirmation statements, tax 

documents, and other materials. The 

costs of maintaining customer elections 

for those latter materials would not 

generally be subject to reimbursement 

by issuers under Exchange Act rules 

14b–1 and 14b–2 and NYSE rules 451 

and 465, but would instead be borne by 

the intermediaries themselves.40 In 

addition, we understand that this fee is 

applied for each distribution of Fund 

Materials, not only where the need to 

send materials in paper format has been 

eliminated due to the procurement by 

the intermediary of affirmative consent 

to electronic delivery of those materials, 

but also when our rules concerning 

‘‘householding’’ are relied upon. 

Request for Comment 41

• Should the application of the 

preference management fee for Fund 

Materials be eliminated on an ongoing 

basis once an investor elects electronic 

delivery? Should the fee continue to be 

permitted to be assessed on a perdistribution basis or with some other 

frequency, such as annually? How often 

does a typical investor change a delivery 

preference once paper deliveries have 

stopped with respect to that investor? 

Do delivery preferences depend on type 

of document? Does the difference in 

frequency between proxy deliveries and 

non-proxy deliveries justify separating 

preference management fees for 

forwarding of proxy materials from 

preference management fees for 

forwarding non-proxy materials? 

• How, if at all, does the application 

of the preference management fee affect 

overall electronic delivery rates for 

Fund Materials distributions? How, if at 

all, does it affect the level of processing 

fees and aggregate costs that funds pay? 

Is it appropriate that aggregate 

processing fees (exclusive of expenses 

such as printing and mailing) are greater 

for Fund Materials that are 

‘‘suppressed’’ (e.g., sent by email or not 

sent at all in the case of householded 

accounts) than for those delivered in 

paper? 

• What proportion of the total 

expense of maintaining delivery 

preference elections is reimbursed by 

issuers in the context of individual 

distributions of forwarded materials? 

What proportion of those total expenses 

does the securities intermediary bear in 

the course of sending its own materials 

to its customers? Are those proportions 

commensurate with the effort and 

expense involved in carrying out each 

type of distribution? 

• Compared with other issuers, do 

funds pay more in preference 

management fees on either a peraccount or per-distribution basis? If so, 

why? 

E. Processing Fees to Managed Accounts 

For certain ‘‘managed accounts,’’ the 

processing fees are assessed for all 

accounts, even though the fund 

materials are only required to be 

distributed to the investment manager.42

The NYSE rules apply a smaller 

preference management fee for 

distributions of certain proxy materials 

to managed accounts than they do to 

other types of intermediated accounts. 

Also, the rules prohibit the application 

of any fees, including a preference 


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43The preference management fee, which is 

otherwise permitted to be up to 32 cents for each 

such distribution per ‘‘suppressed’’ account, is 16 

cents instead. NYSE rule 451.90(4). The preference 

management fee for distributing interim reports, 

annual reports mailed separately and other material 

is 10 cents irrespective of whether it is being 

charged for a regular account or a managed account. 

44See id. 

45See supra note 12. See rule 22c–2 under the 

Investment Company Act [17 CFR 270.22c–2] 

(permitting certain funds to impose redemption fees 

for holders redeeming securities within seven 

calendar days after purchase). We understand, 

however, that certain funds whose shares are traded 

in the secondary market, such as exchange-traded 

funds and closed-end funds, may be intermediated 

in the same manner as operating companies and 

thus do not have the same contractual relationships 

with the intermediary that many open-end funds 

do. 

46See generally Division of Investment 

Management Guidance Update No. 2016–01 (Jan. 

2016) (discussing mutual fund distribution and subaccounting fees); rule 12b–1 under the Investment 

Company Act [17 CFR 270.12b–1]. 

47See, e.g., 2013 ICI Letter, supra note 10 

(questioning, ‘‘for example, the extent to which 

preference management fees might be duplicative in 

light of contractual arrangements between [funds] 

and broker-dealers holding street name accounts 

that already provide for compensation to the brokerdealer to maintain distribution preferences’’). 

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

2 17 CFR 240.19b–4. 

3An Electronic Complex Order is any Complex 

Order, as defined in Exchange Rule 900.3NY(e), that 

is entered into the Exchange’s electronic order 

delivery, execution and reporting System. See 

Exchange Rules 980NY and 900.2NY(48). A 

Complex Order is ‘‘any order involving the 

simultaneous purchase and/or sale of two or more 

different option series in the same underlying 

security, for the same account, in a ratio that is 

equal to or greater than one-to-three (.333) and less 

than or equal to three-to-one (3.00) and for the 

purpose of executing a particular investment 

strategy.’’ See Exchange Rule 900.3NY(e). 

4See Securities Exchange Act Release No. 82802 

(March 2, 2018), 83 FR 9769 (‘‘Notice’’). 

management fee, for managed accounts 

with five or fewer shares.43

Request for Comment 

• How are processing fees for Fund 

Materials assessed with respect to 

managed accounts? Should certain 

kinds of accounts, such as separately 

managed accounts, where multiple 

investors may delegate their investment 

decisions to a single investment 

manager, be eligible for further different 

treatment under the current fee 

structure? If so, why and how should 

they be treated differently? 

• Is the current application of 

processing fees for distributions of Fund 

Materials to managed account investors 

appropriate? Should such distributions 

to managed accounts be charged at a 

reduced rate as they are in the proxy 

distribution context? 44 If so, what rate? 

• What services do intermediaries or 

fulfillment service providers typically 

provide to managed account investors? 

F. Other Arrangements Between a Fund 

and Intermediary 

As discussed above, unlike in the 

operating company context, a 

‘‘securities intermediary’’ through 

which shares are held in street name is 

also generally a ‘‘financial 

intermediary’’ under Investment 

Company Act rule 22c–2. Therefore, a 

fund is required to contract with the 

financial intermediary to share 

information about the submission of 

purchase and redemption orders.45 In 

some cases, financial intermediaries 

may enter into ‘‘sub-transfer agent’’ or 

‘‘sub-accounting’’ servicing 

arrangements with funds to provide 

administrative or shareholder services 

to investors whose shares are held in 

‘‘omnibus accounts.’’ Many funds also 

have ‘‘selling’’ agreements with certain 

intermediaries for the distribution of 

fund shares.46 An operating company, 

by contrast, may have no direct 

relationship with the intermediary. 

Some commenters have questioned 

whether fund payments under the SRO 

rules may be duplicative of payments 

made for similar services under 

contractual arrangements between a 

fund and an intermediary.47

Request for Comment 

• Do funds present facts and 

circumstances that merit differentiating 

them from other types of issuers as to 

appropriate levels of processing fees for 

the distribution of Fund Materials to 

beneficial owners? How, if at all, are 

fund payments to intermediaries 

pursuant to plans adopted by funds 

pursuant to rule 12b–1 under the 

Investment Company Act (‘‘12b–1 

plans’’), shareholder service agreements, 

or other similar arrangements with 

intermediaries relevant considerations 

in differentiating Fund Material 

distributions from distributions of 

operating company materials? 

• Does this framework result in 

duplicative payments from a fund to an 

intermediary for the same services? 

Does the presence of any such 

arrangement bear on the 

appropriateness of the practice of 

paying remittances? 

• Do operating companies have 

arrangements with intermediaries 

similar to agreements related to 12b–1 

plans? 

• How does the presence of subtransfer agent, sub-accounting, or selling 

arrangements affect the appropriateness 

of the payment of a preference 

management fee or notice and access 

fees? Are such payments duplicative? 

• Would some funds be more 

adversely impacted by potential fee 

duplication than others? 

• Are the costs of distributing 

shareholder reports and other materials 

to fund investors covered by 

administrative services, recordkeeping, 

or other similar contractual 

arrangements? If the fee schedule did 

not apply in such cases, would the costs 

of distributing Fund Materials to fund 

investors increase or decrease? Why? 

IV. General Request for Comment 

This request for comment is not 

intended to limit the scope of 

comments, views, issues, or approaches 

to be considered. In addition to 

investors and funds, we welcome 

comment from other market participants 

and particularly welcome statistical, 

empirical, and other data from 

commenters that may support their 

views or support or refute the views or 

issues raised by other commenters. 

By the Commission. 

Dated: June 5, 2018. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–12422 Filed 6–8–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83384; File No. SR– 

NYSEAMER–2018–05] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing of 

Amendment No. 1 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 1, To Establish an 

Electronic Price Improvement Auction 

for Complex Orders 

June 5, 2018. 

I. Introduction 

On February 15, 2018, NYSE 

American LLC (the ‘‘Exchange’’ or 

‘‘NYSE American’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

adopt new Exchange Rule 971.2NY to 

establish the Complex Customer Best 

Execution Auction (‘‘Complex CUBE 

Auction’’ or ‘‘Auction’’), a price 

improvement auction for Electronic 

Complex Orders (referred to herein as 

‘‘Complex Orders’’), and to make related 

changes to other rules.3 The proposed 

rule change was published for comment 

in the Federal Register on March 7, 

2018.4 On April 18, 2018, pursuant to 


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