65736 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

FDC date State City Airport FDC No. SIAP

10/19/00 ... NC Greenville .............................................. Pitt-Greenville ........................................ FDC 0/2889 VOR/DME RNAV Rwy

25, Amdt 3B...

10/20/00 ... GA Savannah .............................................. Savannah Intl ........................................ FDC 0/3003 ILS Rwy 36 Amdt

6B...

10/20/00 ... MD Baltimore ............................................... Baltimore-Washington Intl ..................... FDC 0/2980 RNAV Y Rwy 28

Orig...

10/20/00 ... NM Albuquerque .......................................... Albuquerque Intl Sunport ...................... FDC 0/2978 Radar-1. Amdt 20A...

10/20/00 ... OR Portland ................................................. Portland-Hillsboro .................................. FDC 0/3011 ILS Rwy 12, Amdt

5A...

10/20/00 ... TX Borger .................................................... Hutchinson County ................................ FDC 0/2994 VOR/DME or GPS

Rwy 35, Amdt 3...

10/20/00 ... VA Richmond/Ashland ................................ Hanover County Muni ........................... FDC 0/2998 VOR Rwy 16 Orig–

D...

10/23/00 ... IA Boone .................................................... Boone Muni ........................................... FDC 0/3090 NDB Rwy 32, Amdt

6...

10/23/00 ... IA Boone .................................................... Boone Muni ........................................... FDC 0/3092 NDB Rwy 14, Amdt

9A...

10/24/00 ... MO St Louis ................................................. Lambert-St Louis Intl ............................. FDC 0/3151 ILS Rwy 30L, Amdt

11...

10/24/00 ... ND Grand Forks .......................................... Grand Forks Intl .................................... FDC 0/3170 LOC BC Rwy 17R,

Amdt 12C...

10/24/00 ... SD Rapid City .............................................. Rapid City Regional .............................. FDC 0/3157 VOR or TACAN or

GPS Rwy 32, Amdt

24A...

10/25/00 ... AR Fort Smith .............................................. Fort Smith Regional .............................. FDC 0/3220 ILS Rwy 25, Amdt

20...

10/25/00 ... AR Fort Smith .............................................. Fort Smith Regional .............................. FDC 0/3221 NDB Rwy 25, Amdt

24A...

10/25/00 ... AR Rogers ................................................... Rogers Muni-Carter Field ...................... FDC 0/3229 VOR Rwy 1, Amdt

13...

10/25/00 ... MN Fairmont ................................................ Fairmont Muni ....................................... FDC 0/3218 IRS Rwy 31, Orig-A...

10/25/00 ... MN Rochester .............................................. Rochester Intl ........................................ FDC 0/3228 VOR or GPS Rwy 2,

Amdt 16...

10/25/00 ... MO Kansas City ........................................... Kansas City Intl ..................................... FDC 0/3205 ILS Rwy 19R (Cat. I,

II, III), Amdt 9B...

10/25/00 ... ND Grand Forks .......................................... Grand Forks Intl .................................... FDC 0/3225 ILS Rwy 35L, Amdt

11A...

10/25/00 ... NJ Trenton .................................................. Trenton Mercer ...................................... FDC 0/3233 GPS Rwy 16 Orig-A...

10/25/00 ... TX College Station ...................................... Easterwood Field .................................. FDC 0/3222 ILS Rwy 3A, Amdt

11A...

10/25/00 ... TX College Station ...................................... Easterwood Field .................................. FDC 0/3223 NDB Rwy 34, Amdt

11C...

10/25/00 ... WI Eau Claire ............................................. Chippewa Valley Regional .................... FDC 0/3230 LOC/DME BC Rwy 4,

Amdt 8...

[FR Doc. 00–28186 Filed 11–1–00; 8:45 am]

BILLING CODE 4910–13–M

FEDERAL TRADE COMMISSION

16 CFR Part 305

Rule Concerning Disclosures

Regarding Energy Consumption and

Water Use of Certain Home Appliances

and Other Products Required Under

the Energy Policy and Conservation

Act

CFR Correction

In Title 16 of the Code of Federal

Regulations, parts 0 to 999, revised as of

January 1, 2000, on page 288, in the

appendices to Part 305, the second

‘‘Appendix A1 to Part 305’’ is removed.

[FR Doc. 00–55517 Filed 11–1–00; 8:45 am]

BILLING CODE 1505–01–D

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Parts 230 and 240

[Release Nos. 33–7912, 34–43487, IC–24715;

File No. S7–26–99]

RIN 3235–AH66

Delivery of Proxy Statements and

Information Statements to Households

AGENCY: Securities and Exchange

Commission.

ACTION: Final rule.

SUMMARY: We are adopting amendments

to the proxy rules under the Securities

Exchange Act of 1934. These

amendments permit companies and

intermediaries to satisfy the delivery

requirements for proxy statements and

information statements with respect to

two or more security holders sharing the

same address by delivering a single

proxy statement or information

statement to those security holders. This

method of delivery, often referred to as

‘‘householding,’’ will reduce the amount

of duplicative information that security

holders receive and lower printing and

mailing costs for companies. These

amendments also modify the rules for

householding annual reports. Finally,

we are amending Rule 154 under the

Securities Act of 1933 to permit

householding of proxy statements

combined with prospectuses.

EFFECTIVE DATE: The rule amendments

will be effective December 4, 2000. This

is the date on which companies can rely

on these rules to begin householding.

Companies may begin to solicit consents

to householding prior to the effective

date of these rules.

FOR FURTHER INFORMATION CONTACT:

Heather Maples, Attorney-Adviser,

Division of Corporation Finance, at

(202) 942–2900.

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65737

1 17 CFR 230.154.

2 15 U.S.C. 77a et seq.

3 17 CFR 240.14a–2.

4 17 CFR 240.14a–3.

5 17 CFR 240.14a–7.

6 17 CFR 240.14b–1.

7 17 CFR 240.14b–2.

8 17 CFR 240.14c–3.

9 17 CFR 240.14a–101 and 240.14c–101.

10 15 U.S.C. 78a et seq.

11The proxy rules apply only to companies with

equity securities registered under Section 12 of the

Exchange Act and to investment companies

registered under the Investment Company Act of

1940 [15 U.S.C. 80a et seq.].

12Rule 14a–3(b) [17 CFR 240.14a–3(b)].

13See Delivery of Disclosure Documents to

Households, Securities Act Release No. 7475 (Nov.

13, 1997) [62 FR 61933 (Nov. 20, 1997)], at nn.1–

6 and accompanying text.

14We proposed these amendments in Delivery of

Proxy Statements and Information Statements to

Households, Securities Act Release No. 7767 (Nov.

4, 1999) [64 FR 62548 (Nov. 16, 1999)] (‘‘Proposing

Release’’).

15See Delivery of Disclosure Documents to

Households, Securities Act Release No. 7766 (Nov.

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

16The commenters included one individual, one

corporate issuer, four financial institutions

(investment advisers, mutual fund complexes and

broker-dealers), six trade associations, one state

regulatory commission, one consultant and two

providers of security holder communication

services. Some commenters endorsed letters

submitted by other commenters. These comment

letters and a summary of comments prepared by our

staff are available for public inspection and copying

in our Public Reference Room, 450 Fifth Street,

N.W., Washington, D.C. 20549, in File No. S7–26–

99. Public comments submitted by electronic mail

are on our website, www.sec.gov.

17 17 CFR 239.23.

18 17 CFR 239.25.

19 17 CFR 239.34.

20See Rule 14a–3(a) [17 CFR 240.14a–3(a)].

21Under Rules 14b–1 and 14b–2, an intermediary

is required to forward proxy soliciting materials and

forms of proxy or requests for voting instructions

to beneficial owners on whose behalf the

Continued

SUPPLEMENTARY INFORMATION: We are

adopting amendments to Rule 154 1

under the Securities Act of 1933 2 and

Rules 14a–2,3 14a–3,4 14a–7,5 14b–1,6

14b–2,7 14c–3,8 and Schedules 14A and

14C9 under the Securities Exchange Act

of 1934.10

I. Background

The federal securities laws generally

require public companies to deliver a

‘‘proxy statement’’ when they solicit

proxy voting authority from their

security holders.11 Even when they are

not soliciting proxy voting authority,

these companies must deliver an

‘‘information statement’’ to security

holders when they are taking certain

corporate actions. Lastly, in connection

with the delivery of a proxy statement

or information statement, when

directors are being elected, these

companies must send security holders

an annual report.12 As a result of

ownership of securities by individuals

through different types of accounts,

such as brokerage accounts, individual

retirement accounts and custodial

accounts for minors, duplicate copies of

these documents often are delivered to

a single household.13

We are adopting amendments to the

proxy rules to reduce the amount of this

duplicative information that security

holders receive.14 Today’s amendments

expand upon rules we adopted in

November 1999 that permit companies

to household prospectuses, annual

reports and investment company semiannual reports if the document is

delivered to a shared address and

security holders properly consent to

householding.15

At the time we originally proposed

those rules, we did not propose rules to

permit householding of proxy

statements and information statements.

However, in response to those original

proposals, several commenters

suggested that we consider further

action to permit the householding of

proxy materials. A number of

commenters noted that householding

proxy materials would facilitate the

common practice of mailing the annual

report together with the proxy statement

or information statement. A few

commenters further suggested that we

extend the proposed householding

provisions expressly to permit brokerdealers and banks (‘‘intermediaries’’) to

household delivery of annual reports,

proxy statements and information

statements to beneficial owners of

equity securities.

In response to these comments, when

we adopted the rules to permit the

householding of prospectuses, annual

reports and investment company semiannual reports, we also proposed to

permit delivery of one proxy statement

or information statement to security

holders who share an address. We

proposed these rules to reduce the

number of duplicate documents

delivered to security holders and

conform the provisions regarding the

householding of proxy statements and

information statements to the

amendments that permit the

householding of prospectuses, annual

reports and investment company semiannual reports.

We received 16 comment letters in

response to the proposals.16

Commenters generally supported

householding of proxy statements and

information statements, but many

suggested changes that would affect the

scope and conditions of the rules. We

are adopting the proposed amendments,

with a number of modifications that

address issues raised by commenters.

The adopted rules differ from the

proposed rules in that they will

• Expand the permitted forms of

addressing householded annual reports

and proxy statements or information

statements to include any form to which

each security holder included in a

householded group consents in writing;

• Shorten the notification period for

householding by implied consent to 60,

rather than 90, days;

• Eliminate the proposed requirement

that the notice of intent to household by

implied consent be delivered separately

from any other communications; and

• Permit intermediaries to household

only if the company does not object.

Rule 154, as originally adopted,

prohibited the householding of

combination proxy statementprospectuses delivered for business

combinations, exchange offers or

reclassifications of securities registered

on Forms N–14,17 S–4 18 and F–4.19 To

coordinate Rule 154 with today’s

amendments to the proxy rules, we are

adopting, as proposed, an amendment to

Rule 154 that removes the prohibition

on householding of those combination

proxy statement-prospectuses.

I. Discussion

A. Purpose of the Amendments

Companies, intermediaries and

security holders have indicated to us in

the past that the distribution of multiple

copies of the same document to security

holders who share the same address

often inundates security holders with

unwanted mail and causes the company

to incur higher than necessary printing

and mailing costs. Today’s amendments

will alleviate these concerns by

allowing companies and intermediaries

to household proxy statements and

information statements to both record

and beneficial security holders in the

same manner as they may household

prospectuses and annual reports to

security holders.

B. Delivery of Proxy Statements and

Information Statements to a Household

1. Today’s Amendments

Exchange Act Rule 14a–3 requires a

company to furnish a proxy statement to

security holders before soliciting proxy

voting authority for a matter submitted

to a security holder vote.20 Companies

are able to deliver proxy statements

directly only to their security holders of

record; they generally must deliver

proxy statements to their beneficial

security holders indirectly through

intermediaries.21

65738 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

intermediary holds securities. In Regulation of

Communications Among Shareholders, Exchange

Act Release No. 31326 (Oct. 16, 1992) [57 FR 48276

(Oct. 22, 1992)], we indicated that companies and

their security holders may mail proxy soliciting

materials directly to non-objecting or consenting

beneficial owners, provided that they also

disseminate the materials through the record

holders and provide adequate disclosure

concerning the need for the record holders to

execute the proxies. 22See Rule 14a–3(b). 23Some companies have chosen to deliver proxy

statements and annual reports in electronic rather

than paper format. Section II.B.2.d. of this release

discusses householding of electronic documents. 24A company may household annual reports,

proxy statements or information statements to a

single security holder holding the same securities

in two or more accounts with the same address

without having to comply with the householding

provisions relating to annual reports, proxy

statements or information statements. This also is

true when a security holder is acting as custodian

for securities (1) in an account created under a state

Uniform Gifts to Minors Act or Uniform Transfers

to Minors Act and the security holder also holds the

same security in his or her own account, with the

same address; or (2) in two or more accounts

created under a state UGMA or UTMA. See Delivery

of Disclosure Documents to Households, Securities

Act Release No. 7766 (Nov. 4, 1999) [64 FR 62540

(Nov. 16, 1999)], at n. 6. 25Rule 14a–3(e)(1) [17 CFR 240.14a–3(e)(1)].

26Rule 14c–3(c) [17 CFR 240.14c–3(c)].

27Rule 14a–3(e)(1)(i)(C) [17 CFR 240.14a–

3(e)(1)(i)(C)].

28Rule 14a–3(e)(1)(ii) [17 CFR 240.14a–

3(e)(1)(ii)].

29Securities Act Rule 154, Exchange Act Rule

14a–3(e)(1) and Investment Company Act Rule 30d–

1 do not prevent security holders from consenting

or revoking consent electronically.

30Rule 14a–3(e)(1)(ii)(B) [17 CFR 240.14a–

3(e)(1)(ii)(B)].

31Rule 14a–3(e)(1)(ii)(B)(1) [17 CFR 240.14a–

3(e)(1)(ii)(B)(1)]. Some commenters expressed

concern about the ability to discern whether certain

security holders residing at the same address are

members of the same family (e.g., a husband and

wife with different surnames). We believe that

companies relying on the rule may, in many cases,

be able to base their reasonable belief on

information already provided by the security holder

(e.g., in an account agreement).

32See Note to Rule 14a–3(e)(1)(ii)(B)(2) [17 CFR

240.14a–3(e)(1)(ii)(B)(2)]. This Note refers to

Securities Act Rule 421(d)(2) [17 CFR

230.421(d)(2)].

33An intermediary may household proxy

statements or information statements to beneficial

owners of the company’s securities so long as the

company does not object. In that event, the

intermediary, rather than the company, must send

the required written notice of its intention to

household. See the Notes to Rules 14b–1(b)(2) [17

CFR 240.14b–1(b)(2)] and 14b–2(b)(3) [17 CFR

240.14b–2(b)(3)] and Section II.C. of this release.

34Rule 14a–3(e)(1)(ii)(B)(2)(vii) [17 CFR 240.14a–

3(e)(1)(ii)(B)(2)(vii)].

35Rule 14a–3(e)(1)(ii)(B)(2)(iii) [17 CFR 240.14a–

3(e)(1)(ii)(B)(2)(iii)]. In addition to providing a reply

form or toll-free telephone number, the notice also

may provide supplemental methods of opting out

of householding, such as sending the reply form to

a facsimile telephone number or responding by email. Reply forms to be returned by mail must be

pre-addressed and returnable by business reply

mail or by another method in which the person

relying on the rule pays the postage.

36Rule 14a–3(e)(1)(ii)(B)(2)(iv) and (v) [17 CFR

240.14a–3(e)(1)(ii)(B)(2)(iv) and (v)].

37Rule 14a–3(e)(1)(ii)(B)(3) [17 CFR 240.14a–

3(e)(1)(ii)(B)(3)]. If the company receives notice that

one or more security holders object to householding

within the 60-day waiting period, but there are two

or more security holders at the shared address who

do not object, the company would be able to

household to the non-objecting security holders.

If the proxy solicitation relates to a

meeting at which directors will be

elected, an annual report to security

holders must accompany or precede the

proxy statement. That annual report to

security holders must include specified

financial information about the

company.22

In November 1999, we adopted

amendments to Rule 14a–3 to permit

companies to household the annual

report to security holders. When the

annual report must accompany or

precede the proxy statement, companies

generally mail the annual report with

the proxy statement in the same

envelope.23 As a result, a company’s

inability to household its proxy

statement limits its ability to reduce

costs by householding the annual

report.

Under today’s amendments, a proxy

statement is considered delivered to all

security holders at a shared address,24

for purposes of the federal securities

laws, if 25

• The company or intermediary

relying on the rules delivers the

document to the shared address;

• The company or intermediary

relying on the rules addresses the

document in accordance with the rules;

• The security holders consent to

delivery of a single document in

accordance with the rules;

• If the document is a proxy

statement, the company includes a

separate proxy card for each security

holder sharing an address; and

• The company includes an

undertaking regarding prompt delivery

of separate copies of the document in

the proxy statement.

We are amending Rule 14c–3 to

permit companies to household

information statements in the same

manner as they may household proxy

statements under Rule 14a–3.26

2. Conditions to Today’s Amendments

a. Consent.

Amended Rule 14a–3 requires a

company to obtain consent from each

security holder who will be included in

a householded group.27 A company

could either obtain an affirmative

written consent from a security holder

or rely on an implied consent obtained

in accordance with the rules we adopt

today.28

i. Affirmative written consent.

A company may household the proxy

statement or information statement to

related or unrelated security holders

sharing an address if each of the

security holders consents in writing 29 to

the company’s delivery of one proxy

statement or information statement to

the shared address. In order to satisfy

the written consent requirement, a

security holder would need to consent

specifically to householding of proxy

statements and information statements.

In addition, in order for a written

consent to be considered valid, a

security holder must be informed of the

following, prior to giving written

consent:

• The duration of the consent,

• The procedures the security holder

must follow to revoke consent, and

• The company’s obligation to begin

sending individual copies to a security

holder within 30 days after the security

holder revokes consent.

ii. Implied consent.

Today’s amendments permit a

company to deliver a single proxy

statement or information statement to

multiple security holders who share an

address without obtaining affirmative

written consent to householding from

those security holders, if all of the

following conditions are met.30

• Each security holder at the shared

address has the same last name as the

other security holders (or the company

reasonably believes that they all are

members of the same family).31

• At least 60 days before beginning

delivery by householding, the company

sends each record security holder at the

shared address a separate written notice

in plain English 32 of its intention to

household proxy statements and

information statements.33

• The notice or envelope in which the

notice is mailed includes the following

prominent statement, or similar clear

and understandable statement, in

boldface type: ‘‘Important Notice

Regarding Delivery of Security Holder

Documents.’’ If the notice is mailed with

other security holder communications,

both the notice and the envelope

containing the notice must include this

prominent statement.34

• The notice provides security

holders who object to householding

with a reply form or toll-free telephone

number to object to householding.35

• The notice states the duration of the

consent and explains how a security

holder can revoke consent to

householding.36

• The company does not receive

notice that the security holders object to

householding within the 60-day waiting

period.37

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65739

38Rule 14a–3(e)(1)(ii)(B)(4) [17 CFR 240.14a–

3(e)(1)(ii)(B)(4)]. One of the conditions to

householding proxy statements and information

statements by implied consent requires delivery of

the householded document to a post office box or

residential street address. As a result, the rules do

not permit householding by implied consent to an

electronic address. Section II.B.2.d. of this release

discusses householding of electronic documents.

39See comment letters of ADP Investor

Communication Services, the American Society of

Corporate Secretaries, the Corporate Actions

Division of the Securities Industry Association,

Fidelity Management & Research Company, the

Investment Company Institute, Prudential

Securities, and the Association of Publicly Traded

Companies. These commenters noted that

individuals often share a household without

sharing the same last name or otherwise belonging

to the same family. In addition, these commenters

were concerned that the process of gathering

information necessary to form a reasonable belief

that security holders are members of the same

family may offend some individuals’ sense of

privacy and, in any event, may not yield a clear

indication that two clients sharing the same

residence are related. These commenters generally

believed that security holders sharing a residence

would be more than adequately protected by the

rules’ notice and consent revocation procedures.

40See comment letters of the Alabama Securities

Commission and the North American Securities

Administrators Association.

41As explained in the release adopting Rule 154,

we believe companies may use information they

have previously obtained from security holders or

other sources to form a reasonable belief that

security holders are members of the same family.

However, a company may not form a reasonable

belief that security holders are members of the same

family based solely on the fact that the security

holders reside at the same address.

42A company should not mail householded

materials until the 60-day waiting period for

implied consent has run and the company has

processed any objections received during the 60-

day waiting period. Also, companies should

consider how their obligations under Rule 14a–13

[17 CFR 240.14a–13] affect their schedule. Rule

14a–13 generally requires companies to request the

number of sets of materials needed by

intermediaries for delivery to beneficial owners 20

business days before the company’s record date.

The number of security holders receiving

householded documents will affect the number of

sets of materials needed by intermediaries.

43Although the notice may be mailed in the same

package with other communications, it must be a

separate written document.

44Rule 14a–3(e)(1)(ii)(B)(2)(vii).

45See Note to Rule 14a–3(e)(1)(ii)(B)(4).

46Rule 14a–3(e)(1)(ii)(B)(2)(iv). Even if a

company solicits ‘‘perpetual’’ consent to

householding from all of its security holders, it will

have to solicit consent from new security holders

as they open their accounts or at a later time.

• The company delivers householded

proxy statements or information

statements only to a post office box or

residential street address.38

(A) Same last name or members of

same family.

Almost all of the commenters

supported householding by implied

consent, noting that an implied consent

procedure will reduce the costs of

obtaining householding consents.

Although several commenters urged us

to relax this requirement for

householding by implied consent,39 two

commenters supported the requirement

that a company could only use implied

consent for members of the same

household who share the same last

name or who the company reasonably

believes are members of the same

family. This, they thought, is a useful

safeguard to ensure that all security

holders at a shared address have access

to the proxy statement or information

statement.40

As discussed in the proposing release

for Rule 154, we designed the

prospectus householding rule so that

householding by implied consent would

be limited to circumstances suggesting

that the security holders not receiving a

separate disclosure document would

wish to consent and that they would

have access to the disclosure document

if delivered to another security holder.

This was because householding without

affirmative consent creates the risk that

a security holder who wishes to receive

a document will not receive one. Due to

these concerns, and in response to the

comments supporting the restrictions as

necessary to safeguard security holders,

we are retaining the requirement as

proposed and will limit householding

by implied consent to circumstances

where the security holders share the

same last name or the company

reasonably believes they are members of

the same family.41 This approach also

will help ensure consistency with the

procedures required by Rule 154

regarding householding of prospectuses.

(B) 60-day waiting period.

We originally proposed that

companies be required to send the

notice of their intention to household at

least 90 days before beginning delivery

of householded documents. The

majority of commenters felt that a 90-

day waiting period would be too long.

Today’s amendments require that

companies send the notice at least 60

days in advance of beginning

householding. In addition to

maintaining consistency with Rule 154,

we believe the 60-day waiting period

adequately protects security holders by

allowing them a reasonable time to

respond. We caution companies,

however, to carefully examine their

schedules for proxy printing and

delivery so that they can allow

additional time necessary to avoid

interfering with the proxy statement

mailing schedule.42

(C) Required legend on the notice.

The proposed proxy statement and

information statement householding

rules would have required companies to

mail the notice of intent to household

separately from other security holder

communications. We have relaxed that

requirement to allow those notices to be

mailed with other communications,

such as, for example, account

statements, dividend checks or security

holder reports.43 However, because of

this change, we also have revised the

legending requirement from the

proposal.44 We proposed to require

companies to include a prominent

statement reading ‘‘Important Notice

Regarding Delivery of Security Holder

Documents,’’ or a similar clear and

understandable statement, in bold-face

type on either the notice itself or the

envelope in which the notice was

mailed. Because the notice may now be

included in the same package as other

materials, we believe it is appropriate to

revise this section to make it consistent

with Rule 154, which requires the

legend to appear on both the notice and

the envelope containing it if the notice

is mailed with other security holder

communications.

(D) Implied consent only for post

office boxes or residential street

addresses.

There was limited objection to the

proposed requirement that companies

deliver documents householded by

implied consent only to a residential

street address or post office box. Under

Rule 14a–3(e)(1), a company can assume

that any street address is residential

unless the company has information

indicating that the address is a

business.45 We have adopted the

requirement as originally proposed. We

intend that the residential street address

requirement will prevent companies,

absent affirmative written consent, from

householding a proxy statement or

information statement to security

holders with the same last name who

share a business address but are not

related.

b. Duration of consent.

Companies could solicit from security

holders a consent to householding of

perpetual duration that is valid until

revoked, or a consent of limited

duration such as one year or a specified

number of years. If a company relies on

implied consent to householding, the

required 60-day notice to security

holders must state clearly whether the

company intends to household

indefinitely or for a specified period.46

Security holders may revoke their

consent to householding at any time by

instructing the company orally or in

writing. A company could not continue

to household the proxy statement or

information statement more than 30

65740 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

47Rule 14–3(e)(1)(iii) [17 CFR 240.14a–

3(e)(1)(iii)].

48Rule 14a–3(e)(1)(i)(B) [17 CFR 240.14a–

3(e)(1)(i)(B)].

49Note, however, that Rule 154, as amended, does

not allow companies to use an alternative

addressing format.

50 In response to our proposals regarding

householding of prospectuses and annual reports to

security holders, none of the comments stated that

householding electronically delivered documents

would save money or that security holders had been

requesting this form of delivery. See Delivery of

Proxy Statements and Information Statements to

Households, Securities Act Release No. 7767 (Nov.

4, 1999) [64 FR 62548 (Nov. 16, 1999)] at n. 43.

51Those procedures were set forth in Use of

Electronic Media, Securities Act Release No. 7856

(April 28, 2000) [65 FR 25843 (May 4, 2000)]; Use

of Electronic Media for Delivery Purposes,

Securities Act Release No. 7233 (Oct. 6, 1995) [60

FR 53548 (Oct. 13, 1995)]; and Use of Electronic

Media by Broker-Dealers, Transfer Agents, and

Investment Advisers for Delivery of Information,

Securities Act Release No. 7288 (May 9, 1996) [61

FR 24644 (May 15, 1996)].

52Electronic Signatures in Global and National

Commerce Act, Pub. L. No. 106–229 (2000).

53We would not consider two security holders

who have separate electronic addresses under one

internet service provider account to share an

electronic address. For example, a security holder

using the electronic address johndoe@isp.com does

not share an electronic address with a security

holder using the electronic address

janedoe@isp.com, even though the two addresses

may be provided under the same internet service

account. 54The security holder must be allowed to request

an extra copy orally or in writing. See Rule 14a–

3(e)(1)(i)(E) [17 CFR 240.,14a–3(e)(1)(i)(E)], Item 23

of Schedule 14A [17 CFR 240.14a–101]; and Item

5 of Schedule 14C [17 CFR 240.14c–101].

days after receiving a revocation

instruction from a security holder.47

c. Addressing.

We are adopting, as proposed,

provisions that allow companies the

flexibility to address the householded

copy of the proxy statement or

information statement either to security

holders as a group (e.g., ‘‘ABC

Corporation Security Holders,’’ ‘‘Jane

Doe and Household’’ or ‘‘Household of

Jane Doe’’) or to each of the security

holders sharing the address (e.g., ‘‘Jane

Doe and Mary Doe’’).48 We understand

from the comments received that it may

be less costly in some instances for

companies to address the householded

proxy materials using an existing

account title (e.g., to one individual in

the household), rather than using a

group address. In response to these

comments, the final rule allows an

additional alternative; security holders

may consent to an alternative, specific

means of addressing, if the company so

requests.49 The alternative addressing

provision will allow companies to vary

only the recipient line of the address;

companies may not use this provision to

deliver a householded document to an

address that is not shared by each

security holder included in the

householded group. A company may

rely on the alternative addressing

provision only if each security holder to

be included in the householded group

consents, in writing, to the specific form

of address the company will use. A

company will not be required to comply

with security holder requests to address

the materials in any format not

suggested by the company. However, if

a security holder indicates that his or

her consent is contingent on a particular

form of addressing, that consent will not

be valid unless the company addresses

the materials in the format requested by

the security holder.

Companies may request that those

security holders to be included in a

householded group consent to

addressing the materials to only one of

the security holders. However, before

using that form of address, a company

must receive a written consent to using

the company-suggested form of address

from each security holder to be included

in the householded group.

The term ‘‘address,’’ for purposes of

today’s amendments, means a street

address, post office box number, an

electronic mail address, facsimile

telephone number or similar destination

to which paper or electronic documents

are delivered. If a company has reason

to believe that an address is a street

address of a multi-unit building, the

address also would have to include the

unit number.

d. Electronic householding.

Some companies have chosen to

deliver proxy statements and annual

reports in electronic rather than paper

format. Because the potential benefits of

householding electronic documents

appeared to be minimal,50 we did not

propose and the amendments we adopt

today will not allow companies or

intermediaries to rely on implied

consent to household electronically

delivered proxy statements and

information statements.

However, a company may household

documents delivered electronically,

provided it obtains a valid consent to

electronic delivery of documents and a

valid affirmative written consent to

householding. We have previously

issued interpretive guidance on the

procedures a company should follow to

obtain valid consent to electronic

delivery of documents.51 In this regard,

we note that the recently enacted

Electronic Signatures Act 52 also

addresses consenting to receive

information electronically. We are still

considering that legislation and will

address how it may impact our previous

interpretive guidance at a later time.

Under Rule 14a–3(e)(1)(i)(B), a

company must address a householded

document to the security holders as a

group, to each of the security holders

individually, or to the security holders

in a form to which each of the security

holders has consented in writing.

Securities Act Rule 154 and Investment

Company Act Rule 30d–1 require a

company to address a householded

document to the security holders as a

group or to each of the security holders

individually. A company householding

electronically delivered documents may

satisfy those provisions by including

either of the two specified group

address formats in the subject line of the

electronically delivered document. A

company householding electronically

under Rule 14a–3(e)(1) may, in the

alternative, obtain the affirmative

written consent of each security holder

at the shared electronic address to

deliver the documents to that electronic

address (e.g., jdoe@isp.com).53

Companies and intermediaries should

also note that because householded

documents must be delivered to a

shared address, they may not deliver

householded documents electronically

to security holders who share the same

street address but who do not share the

same electronic address.

3. Disclosure Regarding Householding

and Undertaking to Provide Additional

Copies of Householded Documents

When a company households an

annual report, proxy statement or

information statement, it must

undertake, in its proxy statements and

information statements, to deliver a

separate copy of the document to any

security holder who did not receive an

individual copy of the householded

document and who requests an extra

copy.54 The company must provide

instructions as to how a security holder

may notify the company that the

security holder wishes to receive an

additional copy of an annual report,

proxy statement or information

statement. Although the proposed rules

did not include a requirement that

companies include specific instructions

to inform security holders how to

request additional copies, we believe

this information is necessary for the

required undertaking to adequately

protect security holders. Providing a

single point of contact for security

holders requesting additional copies

also will allow companies to respond

more efficiently to these requests. The

company would have to deliver the

separate copy promptly after receiving a

security holder request.

This undertaking requirement ensures

that a security holder who has

consented to householding, but then

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65741

55See Item 23 of Schedule 14A.

56See Item 5 of Schedule 14C.

57See Item 23 of Schedule 14A.

58See Item 5 of Schedule 14C.

59Some commenters said that we should be more

flexible as to the location of the required

disclosures. The information will be more useful to

security holders if it is included in a document that

is actually delivered to security holders, rather than

in a document that is filed with the Commission but

not delivered. We, therefore, think the more

appropriate location for the disclosure is in proxy

statements and information statements.

60See Section II.C. of this release for a further

discussion.

61 17 CFR 240.14a–4(f).

62 8 Del. C. Section 222 (1999). 63See comment letters of Lucent and the

American Society of Corporate Secretaries.

64See comment letter of Charles Schwab.

65This prohibition was in paragraph (e) of Rule

154 [17 CFR 230.154(e)]. That paragraph prohibited

reliance on Rule 154 in connection with the

delivery of a prospectus filed as part of a

registration statement on Forms N–14, S–4 or F–4

or delivered in connection with a business

combination transaction, exchange offer or

reclassification of securities. As part of today’s

amendments, we are rescinding paragraph (e) of

Rule 154.

66 Delivery of Disclosure Documents to

Households, Securities Act Release No. 7475 (Nov.

13, 1997) [62 FR 61933 (Nov. 20, 1997)].

experiences a change in circumstances

that makes sharing a householded

document impractical, still has access to

the annual report, proxy statement or

information statement. Although the

1999 amendment to Rule 14a–3 did not

require this undertaking, today’s

amendments impose the requirement

not only for proxy statements and

information statements but also for

annual reports.

We have revised Rule 14a–3(e)(1)(i)(E)

from the proposal to clarify that a

company must include the undertaking

in each proxy statement or information

statement if the company or any

intermediary delivers annual reports,

proxy statements or information

statements in householded form to

either record or beneficial security

holders. In addition, at the company’s

option, it may restate the undertaking in

any document delivered in householded

form. We have amended Schedules

14A 55 and 14C56 to require the

undertaking.

We also have amended Schedules

14A 57 and 14C58 to require a company

that chooses to household the annual

report, proxy statement or information

statement to include the following

information in the proxy statement or

information statement:

• A statement that only one annual

report, proxy statement or information

statement is being delivered to multiple

security holders sharing an address

unless the company has received

contrary instructions from one or more

of the security holders;

• The phone number and mailing

address of a point of contact the security

holder can use to notify the company

that the security holder wishes to

receive a separate annual report, proxy

statement or information statement in

the future; and

• Instructions as to how security

holders can request householding if

they are receiving multiple copies of the

annual report, proxy statement or

information statement.

We received no comments objecting

to the proposed content of the required

disclosure.59 Companies should note

that they will be responsible for

providing this disclosure if any

intermediary households proxy

statements or information statements to

beneficial owners.60

4. Inclusion of Multiple Proxy Cards

with Single Proxy Statement

Rule 14a–4(f) 61 forbids any person

conducting a proxy solicitation to

deliver a form of proxy, often referred to

as a ‘‘proxy card,’’ to a security holder

unless it is accompanied or preceded by

a proxy statement. Therefore, security

holders generally receive the proxy card

in the same envelope that contains the

company’s proxy statement and annual

report. Proxy cards are addressed based

on the security holder account titles

appearing on a company’s list of

registered holders.

Under today’s amendments, a

company would need to continue

sending a separate proxy card with the

householded proxy statement for each

separate security holder account with

respect to which proxy authority is

being solicited. For example, if a

husband and wife each hold the same

company’s securities in their own

individual accounts, a company could

deliver a single proxy statement and

annual report to them but would have

to provide two separate proxy cards and

designate the proxy cards individually

based on the two account titles.

We understand that inserting multiple

proxy cards with a single set of proxy

materials may not be the best solution

for all companies or intermediaries.

Several commenters indicated, for

instance, that they may include one

proxy card with the householded

materials and mail the remaining proxy

cards in separate envelopes. In order to

comply with Rule 14a–4(f), which

requires a definitive proxy statement to

accompany or precede any proxy card

delivered, companies may presume that

they meet the requirements of that rule

if any proxy cards to be delivered

separately are mailed after the

householded definitive proxy statement

is mailed and the proxy cards and proxy

statement are mailed using the same

method of delivery (e.g., first class

mail).

5. State Law Requirements

Concerning Notice of Meeting

Many state corporate codes contain

provisions requiring companies to

provide security holders of record with

written notices of meetings and

adjourned meetings. The provisions

generally state that written notice of a

meeting at which security holders are

required or permitted to take action

must be sent to each security holder of

record a specified number of days before

the meeting date. For example, the

Delaware General Corporate Code states

that written notice of any meeting shall

be given not less than 10 nor more than

60 days before the date of the meeting

to each security holder entitled to vote

at the meeting.62 This notice typically is

transmitted with the proxy statement.

Because it is unclear whether a

householded proxy statement that

includes the meeting notice would

satisfy state law requirements that

companies deliver a notice to each

record security holder, we solicited

comment on whether and how

companies could meet state law notice

requirements under the proposed rules.

Although two commenters indicated

that state law meeting notice

requirements present neither legal nor

practical obstacles to householding, 63

one commenter expressed the view that

the Commission should work with the

states to make clear that the

householding rules apply to security

holder meeting notices delivered

pursuant to state law.64 We wish to

clarify that the requirements for security

holder meeting notices are governed by

state law, rather than by the

Commission’s proxy rules, and these

rule amendments are not intended to

preempt state law. Therefore, any

company choosing to household the

proxy statement will have to consider

the possible need to deliver separately

the notice of meeting to each security

holder in the household to satisfy state

law requirements.

6. Business Combination Proxy

Statement-Prospectuses

As adopted in November 1999,

Securities Act Rule 154 prohibited the

householding of prospectuses delivered

in connection with business

combination transactions, exchange

offers and reclassifications of

securities.65 In the release proposing

Rule 154,66 we requested comment on

whether companies should be permitted

to household those types of

prospectuses, given that they generally

65742 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

67See comment letters of the American Society of

Corporate Secretaries, the Corporate Actions

Division of the Securities Industry Association,

Charles Schwab, the Investment Company Institute,

and Fidelity Management & Research Company.

68See comment letters of ADP Investor

Communication Services, the American Society of

Corporate Secretaries, the Corporate Actions

Division of the Securities Industry Association,

Fidelity Management & Research Company, the

Securities Industry Association, the Investment

Company Institute, Charles Schwab, Prudential

Securities, and Lucent. We received no comments

objecting to householding by intermediaries.

69Fidelity Management & Research Company and

the Investment Company Institute supported a

requirement that intermediaries obtain company

consent before householding, noting concerns that

companies be able to control their expenses and

that companies ultimately retain the responsibility

to provide the disclosure documents. The American

Society of Corporate Secretaries, ADP Investor

Communication Services, Charles Schwab,

Prudential Securities and the Securities Industry

Association thought that intermediaries should not

have to obtain company consent, with some noting

that the requirement to obtain each company’s

consent might prevent the most cost-effective

implementation of householding.

70Lucent, the Investment Company Institute,

Fidelity Management & Research Company and the

American Society of Corporate Secretaries indicated

that companies should be able to direct

intermediaries to household. These commenters

cited maximum realization of savings and control

of company or fund expenses as support for their

views. In contrast, ADP Investor Communication

Services and the Corporate Actions Division of the

Securities Industry Association opposed giving

companies the ability to direct intermediaries to

household. These commenters noted that

intermediaries would potentially face differing

instructions from various companies. They also

indicated that intermediaries would have to make

substantial changes to their systems in order to

accommodate householding at the company level.

71ADP Investor Communication Services and the

American Society of Corporate Secretaries

commented that companies should reimburse

intermediaries for the cost of soliciting consents to

householding if the company requests the

solicitation. Charles Schwab and Prudential felt that

companies should be required to reimburse

intermediaries for implementing householding

irrespective of whether the company consents to

householding. The Corporate Actions Division of

the Securities Industry Association argued that

companies should reimburse intermediaries for

expenses incurred in obtaining consents to

householding, but did not clearly indicate whether

intermediaries should be required to obtain

company consent before householding.

72Pursuant to today’s amendment to Rule 154,

intermediaries also would be able to household

combined proxy statement-prospectuses to

beneficial owners.

73A signature on a new bank or broker-dealer

account agreement will not satisfy the written

consent requirement if the agreement merely refers

to or incorporates by reference another document,

such as the proxy statement or information

statement, and does not describe the householding

procedures.

74 Intermediaries generally use a form of voting

instruction rather than a form of proxy to facilitate

automated processing of the beneficial owners’

voting instructions regarding non-routine matters.

The voting instruction form contains the same

information as the proxy card with respect to the

items presented for security holder vote. Once the

intermediary tabulates the results from the voting

instruction forms, it executes a proxy card in its

own name and returns it to the company or the

company’s designated agent. An intermediary

would have to include a separate voting instruction

form for each beneficial owner who will receive a

householded proxy statement in order to fulfill the

requirement of Rule 14a–3(e)(1)(i)(D), as required by

the Notes to Rules 14b–1(b)(2) and 14b–2(b)(3).

are accompanied by proxy cards or

tender offer material that must be

executed by each security holder.

Several commenters on the proposed

proxy householding rules supported

broadening Rule 154 to permit

householding of those types of

prospectuses.67

Upon consideration of these

comments, and because the proposals

described in this release would permit

the householding of proxy statements,

we are amending Rule 154 to expand its

coverage to include combined proxy

statement-prospectuses delivered in

connection with business combinations,

exchange offers or reclassifications of

securities. As with householding of

proxy statements that are not combined

with prospectuses, companies

householding the combined proxy

statement-prospectuses would continue

to have to include separate proxy cards

that need to be executed by each

individual security holder in the

household. Similarly, amended Rule

154 does not affect any other applicable

requirement of state or federal law

concerning the delivery of any

document that requires individual

execution, such as a security holder

response to a tender offer.

C. Householding of Proxy Statements

and Information Statements by

Intermediaries to Beneficial Owners

Rule 14b–1 sets forth obligations of

registered brokers and dealers to

forward company communications to

beneficial owners. Rule 14b–2 sets forth

similar obligations of banks,

associations and other entities that

exercise fiduciary powers. We proposed

changes to Rules 14b–1 and 14b–2 that

would have permitted these

intermediaries, on their own initiative

or at the request of a company, to

household the annual report, proxy

statement or information statement to

beneficial owners sharing an address if

the householding requirements were

met.

We received significant comment on

this proposal. Commenters agreed that it

was appropriate to allow intermediaries

to household materials in the same

manner as companies.68 However,

comment was divided regarding

whether intermediaries should be

permitted to household without the

consent of companies,69 whether

companies may require intermediaries

to household 70 and whether

intermediaries or companies should

bear the expense related to the gathering

of consents to householding. 71

In response to the commentary on this

proposal, we believe that it is

appropriate that companies and

intermediaries mutually agree to the

householding of materials. Therefore,

we are adding notes to Rules 14b–1(b)(2)

and 14b–2(b)(3) to permit, but not

require, an intermediary to household

annual reports, proxy statements and

information statements 72 either

• At the request of the company, or

• On its own initiative, but only if the

company does not object.

An intermediary need not obtain an

affirmative consent from a company

before beginning householding. We

think it is sufficient if the intermediary

provides advance notice to a company

that it intends to begin householding,

with specific instructions as to how the

company may object to householding.

The intermediary should direct this

notice to the company’s senior officer in

charge of security holder

communications or other person the

company specifies for this purpose. If a

company objects, the intermediary may

not household that company’s

documents. An intermediary must cease

householding a company’s documents if

the company objects at any time.

Under amended Rules 14b–1(b)(2)

and 14b–2(b)(3), an intermediary, rather

than the company, would follow the

procedures described in Rule 14a–

3(e)(1), with the exception of Rule 14a–

3(e)(1)(i)(E), and obtain consent to

householding from beneficial owners.73

Intermediaries using voting instruction

forms to elicit information from

beneficial owners as to how their shares

should be voted would have to include

a separate form for each beneficial

owner who will receive a householded

proxy statement.74 This is similar to the

requirement that companies must

include a separate proxy card for each

individual record holder who receives a

householded proxy statement.

Several commenters discussed

whether the company or the

intermediary should be responsible for

satisfying the undertaking to provide an

additional copy of the householded

materials upon request from a security

holder. We believe that the company

should bear this responsibility.

However, as today’s amendments permit

intermediaries to household only when

there is mutual agreement between the

company and the intermediary, those

two parties may agree otherwise.

Under today’s amendments,

intermediaries or their agents may offer

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65743

75Rules 14b–1(c)(3) and 14b–2(c)(4) [17 CFR

240.14b–1(c)(3) and 240.14b–2(c)(4)].

76See Rules 14b–1(c)(2) and 14b–2(c)(2) [17 CFR

240.14b–1(c)(2) and 240.14b–2(c)(2)].

77See, e.g., 2 NYSE Guide (CCH), Rules of Board,

Rules 451 and 465; NASD Manual (CCH), Conduct

Rules, Rules 2260 and IM–2260.

78See the Note to Rule 14a–3(e)(1) [17 CFR

240.14a–3(e)(1)].

79See Rules 14a–7(a)(2)(i) and (ii) [17 CFR

240.14a–7(a)(2)(i) and (ii)].

80For example, the soliciting party agrees to

reimburse the intermediary for reasonable expenses

incurred by the intermediary to forward the proxy

statement to beneficial owners even though these

rules are silent with respect to any such obligations.

81See Order Approving Proposed Rule Changes

by the NASD, Exchange Act Release No. 35681

(May 5, 1995) [60 FR 25749 (May 12, 1995)]; Order

Approving Proposed Rule Changes by the New York

Stock Exchange, Exchange Act Release No. 34596

(Aug. 25, 1994) [59 FR 45050 (Aug. 31, 1994)]; and

Order Approving Proposed Rule Changes by the

American Stock Exchange, Exchange Act Release

No. 34294 (July 1, 1994) [59 FR 35152 (July 8,

1994)]. The SRO rules require the beneficial owner

to notify the member organization in writing of the

name of the investment adviser and specify that the

investment adviser has been designated to receive

the proxy and related materials and vote the proxy.

In an Information Memo to its member

organizations, the NYSE stated that the member

organizations may wish to provide consolidated

proxies and related materials to investment advisers

designated by beneficial owners to exercise voting

discretion.

security holders the option of

consenting to householding of proxy

statements and information statements

relating only to a particular company or

to householding of all proxy statements

or information statements the

intermediary is required to forward to

the security holder. Today’s

amendments, however, do not require

that intermediaries give security holders

the option of limiting their consent to a

particular company.

Today’s amendments state that

intermediaries must exclude annual

reports, proxy statements and

information statements that will be

eliminated pursuant to householding

procedures in responding to company

requests concerning the number of the

intermediaries’ customers that are

beneficial owners of the companies’

securities.75

Because intermediaries will be

permitted to household unless a

company objects, we believe it is

appropriate that they bear the burden of

the consent solicitation expenses, unless

the company affirmatively agrees to pay

these expenses. In particular, we note

that intermediaries may receive

consents from security holders to

household materials from numerous

companies. That being the case, it is not

clear how intermediaries would

apportion the costs of the consent

solicitations between companies.

Furthermore, we note that

intermediaries are under no obligation

to household and that including the

implied consent notice with other

security holder communications will

allow the intermediaries to conduct the

consent solicitation at a much lower

cost than under our proposed rules. We

also note that companies will retain the

obligation to provide additional copies

of householded documents and include

appropriate disclosure regarding

householding in their proxy statements

and information statements.

The proxy rules do not require

intermediaries to forward information

promptly to beneficial security holders

if a company does not provide

assurance of reasonable reimbursement

of the intermediaries’ reasonable

expenses, both direct and indirect,

incurred in performing those

obligations.76 The proxy rules do not

include a schedule of ‘‘reasonable fees,’’

but the NYSE rules and rules of other

self-regulatory organizations do include

a fee schedule.77 Nearly all large broker

and many bank intermediaries currently

outsource the proxy material

distribution function for beneficial

security holders to ADP Investor

Communications Services. ADP, as

agent for intermediaries, is able to

charge companies for the proxy

distribution services in accordance with

applicable fee schedules. Today’s

amendments will not affect the fees that

ADP or other security holder

communication agents may charge

companies on behalf of intermediaries.

Fees for forwarding proxy statements,

information statements and annual

reports must be charged in accordance

with any applicable self-regulatory

organization fee schedules.

D. Householding of Proxy Statements by

Security Holders

Today’s amendments permit security

holders who deliver a proxy statement

to other security holders to household

the proxy statement to record and

beneficial holders if the company or

intermediary previously has obtained

security holder consent to householding

in accordance with the procedures in

Rule 14a–3(e)(1).78 Rule 14a–7 sets forth

the obligations of companies either to

provide a security holder list to a

requesting security holder or to mail the

security holder’s proxy materials. The

rule provides that the company has the

option to provide the list or mail the

security holder’s materials, except when

the company is soliciting proxies in

connection with going private or roll-up

transactions. In those cases, the security

holder has the option to request the list

or have the company mail its materials.

In addition to requiring that the

company supply householding

information that it previously has

obtained when providing the security

holder list, today’s amendments require

companies to share the benefit of

written or implied consents to

householding that they have obtained

when mailing materials on a security

holder’s behalf.79

Intermediaries generally deliver proxy

materials on behalf of soliciting parties

other than the company under the

conditions set forth in Exchange Act

Rules 14b–1 and 14b–2.80 We requested

but received no supportive comment as

to whether Rules 14b–1 and 14b–2

should be revised explicitly to require

this practice. We, therefore, have not

included such a requirement at this

time. Nonetheless, under today’s

amendments, an intermediary would

still be permitted to household proxy

materials delivered on behalf of

soliciting parties other than the

company.

III. Delivery of Proxy Materials to

Registered Investment Advisers and

Investment Managers

Many of the self-regulatory

organizations have adopted rules that

allow registered investment advisers

designated by beneficial owners and

investment managers designated by

named fiduciaries of ERISA plans to

vote proxies and receive proxy material

on behalf of the beneficial owners or

ERISA plans.81 Our proposed

householding rules did not include any

specific provisions regarding

householding of proxy materials to

these designated advisers and plan

managers. We did, however, request

comment on whether

• Companies and intermediaries

should be able to household proxy

materials to these investment advisers

and investment managers without

having to rely on the proposed

householding rules since it is unlikely

that a single person or entity making the

proxy voting decision on behalf of

others would need more than one copy

of the proxy materials; and

• Companies and intermediaries

should be allowed to household proxy

material without written or implied

consent to trustees, executors,

administrators, guardians or persons

who act in similar capacities and who

have been vested with proxy voting

authority.

Two commenters supported

householding by implied consent to

65744 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

82See comment letters of Prudential Securities

and the Corporate Actions Division of the Securities

Industry Association.

83See comment letters of the Investment

Company Institute, Fidelity Management &

Research Company and Charles Schwab.

84 44 U.S.C. 3501 et seq.

85 Delivery of Proxy and Information Statements

to Households, Securities Act Release No. 7767

(Nov. 4, 1999) [64 FR 62548 (Nov. 16, 1999)].

86See Revision of the Commission’s Auditor

Independence Requirements, Securities Act Release

No. 7870 (June 30, 2000) [65 FR 43148 (July 12,

2000)].

87The OMB control numbers for the rules are as

follows: Rules 14a–2, 14a–3, 14a–7, 14b–1, 14b–2

and Schedule 14A, contained in Regulation 14A

(3235–0059, expires September 30, 2003); Rules

14c–3 and Schedule 14C, contained in Regulation

14C (3235–0057, expires September 30, 2003). An

agency may not conduct or sponsor, and a person

is not required to respond to, a collection of

information unless it displays a currently valid

OMB control number.

88We estimate that registrants will prepare 25%

of the required notices and householding

disclosures and that outside counsel will prepare

the remaining 75%. Accordingly, 25% of the total

burden resulting from our householding rules is

reflected as burden hours and the remaining 75%

is reflected in the total cost of complying with the

information collection requirements. We used an

estimated hourly rate of $175 to determine the

estimated cost to the respondent of the disclosure

prepared by outside counsel. The Commission

arrived at that hourly rate estimate after consulting

with several private law firms.

investment advisers 82 and three

commenters indicated we should permit

householding to investment advisers

without requiring compliance with the

householding rules.83 The commenters

did not indicate what procedures

companies and intermediaries have

followed in implementing householding

to investment advisers. While we

believe that companies and

intermediaries could easily comply with

the householding rules by obtaining

either written or implied consent from

investment advisers, we are also

persuaded that, in most cases,

companies and intermediaries should be

allowed to continue to household to

investment advisers as they have in the

past. Thus, we will allow such

householding to continue outside the

scope of the rules we adopt today,

provided that the investment adviser is

eligible to vote the proxies under the

self-regulatory organization rules and

does not object to householding.

In contrast, we are not persuaded that

companies and intermediaries should be

able to household proxy materials to

trustees, executors, administrators,

guardians or persons who act in similar

capacities and who have been vested

with proxy voting authority without

first obtaining their written or implied

consent. Given the lack of a

supplementary regulatory regime and

the uncertainty as to whether all of

these individuals would share the same

level of sophistication as investment

advisers covered by the self-regulatory

organization rules, we conclude that

these categories of individuals should

be covered by the provisions of the rules

we adopt today.

IV. Paperwork Reduction Act

Certain provisions of the rule

amendments adopted today contain

‘‘collection of information’’

requirements within the meaning of the

Paperwork Reduction Act of 1995.84 We

published notice soliciting comments

on the collection of information

requirements relating to Schedules 14A

and 14C in the proposing release,85 and

submitted these requirements to the

Office of Management and Budget

(‘‘OMB’’) for review in accordance with

44 U.S.C. 3507(d) and 5 CFR 1320.11.

The titles for those collections of

information are: ‘‘Regulation 14A

(Commission Rules 14a–1 through 14b–

2 and Schedule 14A)’’; and ‘‘Regulation

14C (Commission Rules 14c–1 through

14c–7 and Schedule 14C).’’ OMB

approved the regulations’ information

collection requirements and

subsequently approved a revision to the

regulations’ collection of information

requirements in connection with our

proposal to revise the Commission’s

auditor independence requirements.86

All burden estimates in this section

have been revised from the proposing

release to include the increased

paperwork burdens approved in the

subsequent revision.87

We did not receive any comments that

address specifically the estimated

paperwork burdens associated with the

proposed collections of information.

The comments we received primarily

addressed the costs and benefits of the

proposals in general terms, rather than

issues relating to the collection of

information. Those concerns are

addressed more fully in the cost-benefit

and other sections of this release.

The rule amendments permit delivery

of a single annual report, prospectus,

proxy statement or information

statement to a household to satisfy the

delivery requirements with respect to

two or more security holders in the

household. A person relying on one of

the rules must obtain either written or

implied consent to householding from

each security holder who will no longer

receive a separate copy of the document.

The rules require persons who wish to

household with implied consent to send

a notice to each security holder stating

that the security holders in the

household will receive one annual

report, prospectus, proxy statement or

information statement in the future

unless the security holders provide

contrary instructions. The purpose of

this requirement is to give reasonable

assurance that all security holders have

access to the annual report, prospectus,

proxy statement or information

statement.

The rule amendments also require

companies choosing to household proxy

statements or information statements to

provide disclosure in their proxy

statements or information statements

informing security holders how they can

revoke their consent to householding,

request householding or request extra

copies of any householded document.

The purpose of this requirement is to

allow security holders whose

circumstances have changed to revise

their delivery arrangements in order to

ensure that they continue to have

convenient access to the disclosure

documents.

Preparing and sending the initial

notice that a company intends to

household by implied consent and

preparing the proxy statement and

information statement householding

disclosure are collections of

information. Companies and

intermediaries are the primary

respondents. The information collection

requirements imposed by the rule

amendments are required for those

companies, banks or broker-dealers that

decide to rely on the rules to obtain the

benefit of sending fewer documents to

each household. Those companies,

banks, and broker-dealers that decide

not to obtain that benefit are not

required to rely on or comply with the

rule amendments. Responses to the

collection of information will not be

kept confidential.

We estimate that 9,892 respondents

are subject to Regulation 14A and 253

respondents are subject to Regulation

14C. We estimate that 10% of these

respondents will deliver the notice that

they intend to household by implied

consent and prepare the Schedule 14A

or Schedule 14C householding

disclosure. Taking into account today’s

amendments, we estimate that the total

respondent reporting burdens for

Schedules 14A and 14C, in terms of

hours, are 179,966 hours and 4632

hours, respectively, or approximately 18

hours per respondent under each

schedule. These estimates include 5,192

and 131 hours for respondents subject to

Regulations 14A and 14C, respectively,

to prepare and deliver the notice of

intent to household and to prepare and

include the required proxy statement

and information statement disclosure

regarding householding.88 In addition to

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65745

89 Delivery of Disclosure Documents to

Households, Securities Act Release No. 7475 (Nov.

13, 1997) [62 FR 61933 (Nov. 20, 1997)].

90See Delivery of Disclosure Documents to

Households, Securities Act Release No. 7766 (Nov.

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

91 In connection with our adoption of Rule 154,

we submitted the collection of information

requirements contained in Rule 154, as originally

adopted, to the Office of Management and Budget.

The title for that collection of information is ‘‘Rule

154 under the Securities Act of 1933, Delivery of

prospectuses to investors at the same address.’’

(OMB control number 3235–0495, expires Feb. 28,

2001).

the internal hours they will expend, we

expect that issuers will hire outside

counsel to help prepare the required

disclosures. The internal hours issuers

will require to comply with Regulations

14A and 14C are reflected as Hours in

the table below; the additional costs

they will incur to comply with those

regulations are reflected as Cost. The

total dollar costs of complying with

Regulations 14A and 14C, revised to

include the additional outside counsel

costs expected from today’s

amendments, are estimated to be

$92,461,000 and $2,395,000,

respectively. The increases in the

burden hours and total costs required to

comply with the regulations are

primarily attributable to increases in the

number of respondents subject to

Regulations 14A and 14C.

Hours Cost

Schedule 14A ......... 179,966 $92,461,000

Schedule 14C ......... 4,632 2,935,000

When the Commission proposed rules

in 1997 to permit householding of

annual reports by implied consent,89 it

submitted a request for approval of

revisions to Regulations 14A and 14C to

OMB. OMB approved the revisions and

they were adopted with some

modification.90 In that submission, the

Commission estimated that the time

required to prepare and arrange delivery

of the notice (required to be mailed by

companies choosing to solicit implied

consent to householding of the annual

report from security holders) would be

approximately 20 hours per respondent

per year. Because the annual report and

proxy statement or information

statement generally are mailed to

security holders together in the same

package, it is likely that companies and

intermediaries will be able to mail only

one notice to obtain consent to

householding of both the annual report

and the proxy statement or information

statement. In connection with our 1997

proposals, we increased our estimated

paperwork burden associated with

Regulations 14A and 14C to include 20

hours per respondent for the time they

would spend preparing and mailing the

notice of implied consent to household

annual reports. Because we anticipate

that respondents will mail only one

notice of implied consent to household

both annual reports and proxy

statements or information statements,

we do not believe the requirement that

companies and intermediaries send out

this notice if they intend to rely on

implied consent to household proxy

statements and information statements

will result in a greater paperwork

burden than previously approved.

We have, however, adjusted our

estimate of the paperwork burden

associated with Regulations 14A and

14C to reflect the increased number of

respondents required to file proxy

statements and information statements

in compliance with those regulations. In

1997, when we proposed to allow

companies to household annual reports

by implied consent, there were only

9321 respondents subject to Regulation

14A and 150 respondents subject to

Regulation 14C. There are now 9892 and

253 respondents subject to regulations

14A and 14C, respectively. We have,

therefore, increased the burden hours

companies will require to prepare and

deliver the notices that they intend to

household by implied consent under

Regulations 14A and 14C by 285 hours

and 50 hours, respectively. We

calculated the increase in burden hours

under Regulation 14A by multiplying

the difference in the number of

estimated householders by 20, our

estimate of the total amount of time it

will take a company and its outside

counsel to prepare and deliver the

notices. We then increased our estimate

of the company’s total burden hours by

25% of that figure, as we estimate

companies will bear approximately 25%

of the increased reporting burden. The

remaining 75% is attributed to the total

cost of complying with the regulation,

as we assume that outside counsel will

be responsible for approximately 75% of

the reporting burden increase. Thus, we

have also increased the total costs

associated with Regulations 14A and

14C by approximately $150,000 and

$26,000, respectively.

We believe that it would be

inappropriate to increase our previously

approved burden estimate for

complying with Rule 154,91 as

companies and intermediaries can

inform security holders of their intent to

household combination proxy

statement-prospectuses delivered for

business combinations, exchange offers,

or reclassifications of securities

registered on Forms N–14, S–4 and F–

4 using the same implied consent notice

that they would send to notify security

holders of their intent to household

proxy statements, information

statements and annual reports.

We estimate that the time to respond

to the disclosure requirements of

Schedules 14A and 14C will be

approximately one hour per respondent

per year. We previously increased our

estimate of the burden hours and

approximate cost associated with

Regulation 14A by 247 hours and

$130,000 to reflect the increased burden

respondents will face as a result of the

disclosure requirements. Our estimates

of the burden hours and approximate

cost associated with Regulation 14C

were likewise previously increased by 6

hours and $3,000, respectively.

V. Cost-Benefit Analysis

The Commission is sensitive to the

costs and benefits imposed by its rules

on affected persons and entities. In

November 1999, the Commission

adopted rules allowing companies to

deliver one copy of an annual report or

prospectus (except those required to be

delivered for business combinations,

exchange offers or reclassifications of

securities) to consenting security

holders at a shared residential address.

We refer to the shared delivery of a

disclosure document as householding.

Several commenters on the rules

adopted in November 1999 noted that

the ability of companies to household

annual reports would be limited by their

inability also to household proxy

statements and information statements,

as annual reports are often delivered in

the same package as proxy statements or

information statements. Those

commenters encouraged the

Commission to adopt similar rules

permitting the householding of proxy

and information statements. We are now

adopting rules that will permit

companies and intermediaries to

household proxy and information

statements, as well as prospectuses

delivered in connection with business

combinations, exchange offers and

reclassifications of securities. The rules

we adopt today will permit companies

and intermediaries to send fewer copies

of disclosure documents than they

currently must send, and therefore

should result in savings in printing,

postage, and other delivery costs.

Security holders will benefit from the

decrease in delivery costs paid by

companies and from no longer being

burdened with duplicate documents.

The rules require companies and

intermediaries who rely on the rules to

comply with certain procedures,

including obtaining either written

65746 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

92New York Stock Exchange members may also

incur a $.50 fee for each eliminated proxy mailing

under the NYSE fee schedule for proxy mailings.

Payment of that fee would result in those

companies saving $.50 less on each eliminated

mailing.

consents from security holders or

delivering notices 60 days in advance of

householding. In addition, companies

relying on the rules will need to include

certain householding disclosure in their

proxy and information statements.

Because householding is voluntary, the

Commission expects that the rules will

not have any negative impact on small

businesses and that companies, banks,

and broker-dealers generally will rely on

the rules only if the benefits of

householding outweigh the costs.

In the proposing release, the

Commission noted that companies

would incur costs in obtaining consents

and sending notices to security holders,

and estimated that the cost savings to

companies would far exceed the costs of

obtaining the consents and mailing

notices. The Commission also noted that

the cost of providing proxy statement or

information statement disclosure

regarding householding would be

minimal, as the disclosure would be

included in proxy statements or

information statements already being

prepared by each company. The

Commission requested comment on the

costs and benefits of the rules.

Commenters generally supported the

goals of the proposal but advocated

certain changes that they believed

would decrease the costs and increase

the benefits of the rules.

A. Benefits

Several respondents commented on

the potential benefits of the amended

rules. Every commenter who addressed

the issue indicated that allowing

companies and intermediaries to

household proxy statements,

information statements and

prospectuses used in connection with

business combinations would allow

companies to significantly reduce the

costs of printing and mailing those

documents. Many of those commenters

also indicated that they had received

numerous complaints from security

holders expressing disapproval of

duplicative wasteful mailings.

One commenter estimated that U.S.

security holders would save somewhere

between $200 and $400 million

annually if companies and

intermediaries were allowed to

household proxy and information

statements. He extrapolated that range

from his estimate that almost every

company would save at least 10% of

their printing and mailing costs and that

companies with ‘‘household names’’

could save as much as 60% of their

printing and mailing costs. He assumed

that the advance notices would not be

delivered separately and the company

or intermediary could address the

package of householded materials to any

one security holder in the household.

He did not explain the precise

methodology and assumptions he used

to obtain that figure, and one of his

assumptions was inconsistent with the

rules we adopt today. As discussed

below, the rules we adopt today will

allow companies and intermediaries to

include the notice of householding with

other security holder communications.

However, the rules will not allow

companies to address the materials to

any one security holder without

obtaining the written consent of each

security holder in the household. That

would impact the above estimate as

some commenters noted that the group

addressing requirement would increase

the cost of complying with the required

householding procedures.

Charles Schwab estimated that if its

proprietary fund family were allowed to

household a hypothetical proxy

statement, fund shareholders could save

approximately $862,000, or 16% of total

expenses for a shareholder meeting, in

printing, packaging and mailing

expenses.

ADP Investor Communication

Services, a company that handles the

proxy material distribution function for

nearly all large broker and many bank

intermediaries, commented that each

percentage point reduction in mailings

that results from householding, using

ADP’s base of anticipated proxy

mailings, equates to a savings of

approximately $11.6 million in the

aggregate to companies, assuming a unit

cost of $5 for the printing of an annual

report, notice of proxy and proxy

statement, and postage of $1.30. Other

commenters stated more generally that

allowing the householding rules to be in

place for the last proxy season would

have produced consequent savings of

many millions of dollars, and that they

expect the cost savings to companies to

far exceed the cost of obtaining the

consents and mailing the advance

notices required for householding by

implied consent. While some

commenters noted that they might need

to continue to separately deliver each

security holder’s proxy voting card, they

noted that the savings likely to be

generated from the reduction in printing

and postage expenses would fully

justify the householding of proxy

statements even if the proxy voting

cards continued to be mailed separately.

Relying on the savings estimates

provided by Charles Schwab and ADP,

the Commission estimates that the

incremental benefit from each

eliminated mailing would be

approximately $6, assuming a savings of

$5 from printing and $1.30 from mailing

a proxy package, and $.32 cost for

mailing the proxy card separately.92

B. Costs

The Commission requested, but did

not receive, any estimates of the total

cost of soliciting and obtaining consent

and providing the required

householding disclosure in a company’s

proxy and information statements.

Likewise, the Commission did not

receive any comment estimating the cost

of determining which security holders

could be householded by implied

consent or implementing programming

or software changes necessary to track

consents or print and mail proxy

packages.

Most of the comments the

Commission received on the costs of the

rules were qualitative comments

identifying provisions which

commenters felt needlessly raised the

costs of householding. In particular,

most commenters who addressed the

issue argued that the rules should

permit householding based on implied

consent for all security holders sharing

a household, whether or not the security

holders shared the same last name.

These commenters indicated their belief

that security holders would be

adequately protected by the implied

consent notice and revocation

disclosure procedures. As adopted, the

rules will not permit householding by

implied consent to security holders who

do not share the same last name, unless

the company or intermediary relying on

the rules reasonably believes the

security holders are members of the

same family. However, the rules will

allow companies or intermediaries to

encourage those security holders who

must give written consent to submit

their consents via electronic mail. This

procedure should enable companies and

intermediaries to minimize compliance

costs associated with the rules while

still ensuring that, absent their

affirmative consent, security holders

who wish to receive separate copies of

the disclosure documents will continue

to receive them.

Several commenters also indicated

their view that requiring companies to

address the householded materials to

the group of security holders, rather

than any one of them, would

unnecessarily increase the cost of

householding without providing

additional security holder protection.

These commenters noted that in order to

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65747

93For example, a security holder might not

receive a disclosure document if the security holder

changes his or her mailing address without

notifying the company or intermediary, or if the

security holder neglects to read and respond to a

notice that the company intends to household using

the implied consent procedures.

comply with the group addressing

requirement, they may need to print and

include an extra sheet of paper in the

householded proxy materials package,

and would thus face higher printing and

possibly higher mailing costs than they

would if they could simply show one of

the security holder’s names through the

envelope window. One commenter

indicated that requiring group

addressing might result in fewer

companies adopting the benefits of

householding. Another indicated that

group addressing may require transfer

agents to implement costly

programming changes and changes in

the processes used to place proxy

materials in envelopes, with the costs of

those changes passed on to companies.

That commenter noted that addressing

the householded material to any one of

the individual stockholders would

require much more modest and

manageable programming and

operational changes.

The Commission is sensitive to these

concerns but believes the householded

materials should be addressed in such a

manner that security holders will be

aware that the householded package is

intended for the group of security

holders included in the household.

Therefore, we have decided to allow

alternative forms of addressing but only

if each security holder in the household

has consented in writing to the

alternative form of address. We believe

that the non-quantifiable benefit from

security holders being easily able to

understand that documents are to be

shared by the household fully justifies

the costs of the addressing

requirements, as adopted.

Many commenters opposed the

proposed requirement that the company

mail separately its advance notice of its

intention to deliver documents in

householded form. These commenters

argued that separate delivery of the

notice would unnecessarily increase

costs without providing additional

security holder protection. They

recommended that companies and

intermediaries be allowed to include the

notice with other security holder

communications, as they may do when

they distribute an advance notice of

their intention to household

prospectuses under Securities Act Rule

154. In response to those comments, we

have modified the rule; as adopted, the

rule will permit companies and

intermediaries to mail the notice of their

intent to household with other security

holder communications, so long as the

notices are mailed to each individual in

the household and both the notice and

the envelope in which it is mailed

contain a prominent legend alerting

security holders of the importance of the

contents. The elimination of the

separate delivery requirement will

reduce the cost to companies and

intermediaries of complying with the

rules.

Finally, some commenters thought

that requiring intermediaries to obtain

the consent of each company to

household its materials would increase

the costs of compliance with the rule.

ADP noted that attempting to limit the

householding option on a company-bycompany basis is operationally very

difficult and impractical to implement

for nominee intermediaries. ADP argued

that without widespread support of

intermediaries, which will come with

standardized practices and operations,

costs for implementation could offset

benefits and perhaps stall the initiative.

ADP also indicated that it anticipated

there would be very limited requests

from companies to suppress

householding to their security holders.

Another commenter stated that having

to limit its ability to household only

where the company consents would add

unnecessary complexity and expense

and that placing restrictions on an

intermediary’s ability to household

would increase the costs and reduce the

benefits of householding. The Securities

Industry Association also indicated that

it would oppose any provision that

makes householding contingent on

approval by each company, because

requiring specific procedures for

individual holdings within an account

would result in less efficiency and

higher costs. Conversely, one company

indicated that in order for the rules to

generate the intended savings,

companies must have ways to require

intermediaries to household at a

reasonable cost to companies. The

Investment Company Institute

commented that the Commission should

allow intermediaries to household only

at the direction of the company, as

companies bear the ultimate

responsibility to provide the disclosure

document and reimburse the

intermediaries’ expenses of distributing

the proxy materials. Fidelity

Management and Research Co. also

believes that fund companies should

have the right to decide whether

intermediaries household proxy

statements, as the decision of whether to

household could affect fund expenses.

We had originally proposed that

intermediaries be able to household to

beneficial owners at their own

discretion.

Because of the importance of the

required proxy and information

statement disclosure, the necessity of

some entity retaining an inventory of

extra copies of the disclosure

documents, as well as our agreement

that companies must have ways to

control their expenses, we ultimately

concluded that companies should be

able to object to intermediary

householding. However, as there is not

yet enough empirical data to determine

the true cost of householding, from the

perspectives of both companies and

intermediaries, we believe it is

appropriate for all entities involved to

retain the ability to opt out of

householding. We recognize that many

intermediaries will incur large start-up

costs to implement householding.

However, we note that companies

remain required to reimburse

intermediaries for their reasonable

proxy distribution expenses, and that

many intermediaries may be able to

recoup some of their expenses through

the imposition of a paper and postage

elimination fee.

The Commission estimates that the

cost of obtaining a security holder’s

consent, using the implied consent

procedure allowed by the amendments,

would be less than $.80 per implied

consent notice. The actual cost of

obtaining an implied consent may in

fact be less, as the above estimate

assumes that the notice will be mailed

separately from other communications.

Under the rules adopted today,

companies and intermediaries may mail

the notice with other security holder

communications as long as a prominent

legend is included on both the notice

and the envelope containing the notice.

Companies and intermediaries will also

incur costs in determining which

security holders may be mailed

materials in householded form,

implementing programming or software

changes necessary to track consents,

implementing programming changes

necessary for the printing and mailing of

householded packages, and providing

the proxy and information statement

disclosure required under today’s rules.

Other nonquantifiable costs will include

the costs to security holders who, for

whatever reason, wish to but do not

receive disclosure documents 93 and the

costs that companies and intermediaries

will incur in responding to security

holder consent revocations. We do not

expect those costs to be significant. The

Commission anticipates that the only

recurring cost of today’s rules would be

the cost of including the required

65748 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

94See Self-Regulatory Organizations; Notice of

Filing and Immediate Effectiveness of Proposed

Rule Change by the New York Stock Exchange, Inc.,

Extending the Pilot Fee Structure Governing the

Reimbursement of Member Organizations for Costs

Incurred in the Transmission of Proxy and Other

Shareholder Communication Materials, Exchange

Act Release No. 42433 (Feb. 16, 2000) [65 FR 10137

(Feb. 25, 2000)].

95See Self-Regulatory Organizations; New York

Stock Exchange, Inc., Exchange Act Release No.

41177 (Mar. 16, 1999) [64 FR 14294 (Mar. 24, 1999)]

(stating that research provided by the NYSE

indicates that approximately 70 to 80 percent of all

outstanding shares are held in street name).

96See also comment letter of Lucent.

97 15 U.S.C. 78w(a).

98 15 U.S.C. 77b(b).

99 15 U.S.C. 78c(f). 100 17 CFR 240.0–10.

disclosure in the proxy and information

statements, and that such cost will be

marginal as the disclosure will be

included in documents that would

otherwise be required. The Commission

estimated in the proposing release that

the time required to prepare this

disclosure would be approximately one

hour per respondent per year. Assuming

that the disclosure is prepared by

outside counsel, the Commission

estimates that the disclosure

requirement would cost companies who

elect to household an additional $175

per year.

We understand companies and

intermediaries will incur costs to revise

their proxy printing and mailing

systems to comply with the rules we

adopt today. We have not received

enough information to estimate those

costs with any reliability. However, as

discussed above, the cost savings from

householding are potentially

substantial. Assuming a cost savings of

$6 for each set of materials eliminated

through householding, that

approximately 245 million sets of proxy

materials are mailed annually, that

companies and intermediaries will be

able to household 16 percent of the

mailings they would otherwise be

required to deliver individually, and

that 10% of all companies will choose

to household their proxy statements and

information statements, householding

could result in aggregate cost savings of

up to $23.5 million annually. The

Commission derived its estimate of the

total annual proxy mailings by assuming

that ADP’s mailings represent

approximately 75% of the total annual

proxy mailings. That assumption is

based on the Commission’s recognition

that ADP controls nearly 100% of the

market 94 for delivery of proxy materials

to security holders whose securities are

held in street name and that

approximately 70–80% of all

outstanding securities are held in street

name.95 ADP Investor Communication

Services commented that, assuming a

unit cost of $6.30 for each eliminated

mailing, companies could save

approximately $11.6 million in the

aggregate for each percentage point

reduction in ADP’s base of anticipated

proxy mailings. Using those figures, the

Commission estimated ADP’s

anticipated base of mailings to be

approximately 184 million. The percent

of estimated consents was based on the

comment letter of Charles Schwab &

Co., which estimated that if Schwab’s

proprietary fund family were allowed to

household a hypothetical proxy

statement, fund security holders could

save approximately 16% of total

expenses, in printing, packaging and

mailing expenses for a security holder

meeting.96 We assume that the

reduction in expenses would be

proportional to the reduction in

eliminated mailings.

Based on information provided in the

comment letters and its own analysis,

the Commission believes that the rule

amendments adopted today will permit

companies and intermediaries to costeffectively reduce the number of

mailings they are required to distribute

to security holders and that, in the long

term, the benefits of the rules adopted

today will justify the costs of

implementing householding and

complying with the householding rules.

VI. Effects on Efficiency, Competition,

and Capital Formation

As required by Section 23(a) of the

Exchange Act,97 we considered the

impact any new Exchange Act rule

would have on competition. We

requested comment on any anticompetitive effects of the proposals. We

received one comment letter responding

to that request. That commenter noted

its belief that the proposals would not

have an adverse effect on competition.

We believe that the amendments will

not have any anti-competitive effect, as

the rules are voluntary and are designed

to allow companies and intermediaries

to decrease their current printing and

mailing costs.

In addition, Section 2(b) of the

Securities Act 98 and Section 3(f) of the

Exchange Act 99 require us, in adopting

a rule that requires a public interest

finding, to consider whether the

proposed rule will promote efficiency,

competition and capital formation. We

sought comment on how these changes

would affect competition, capital

formation and market efficiency. The

sole commenter on these issues

indicated its view that the proposals

would promote efficiency, not adversely

affect competition, and have no effect

on capital formation. Because the

householding of proxy and information

statements will eliminate many

unwanted duplicate mailings and allow

companies to save printing and mailing

costs, we believe the amendments will

have a positive effect on efficiency and

capital formation. We do not believe the

amendments will have any effect on

competition.

VII. Final Regulatory Flexibility

Analysis

This Final Regulatory Flexibility

Analysis (‘‘FRFA’’) has been prepared in

accordance with the Regulatory

Flexibility Act. It relates to amendments

to: Securities Act Rule 154, Exchange

Act Rules 14a–2, 14a–3, 14a–7, 14b–1,

14b–2, 14c–3, and Schedules 14A and

14C.

A. Need for the Rule Amendments

The new rule amendments are

designed to enable companies and

intermediaries to reduce the number of

identical mailings sent to security

holders sharing the same household.

The Commission is adopting the rule

amendments in order to permit

companies and intermediaries to

household proxy and information

statements as well as prospectuses

delivered in connection with business

combinations, exchange offers and

reclassifications of securities.

B. Significant Issues Raised by Public

Comment

The Initial Regulatory Flexibility

Analysis (‘‘IRFA’’), which was prepared

in accordance with 5 U.S.C. 603, was

published in the proposing release. We

received no comments on the IRFA.

C. Small Entities Subject to the Rule

Amendments

Rule 0–10 under the Exchange Act

defines the term ‘‘small business’’ as a

company whose total assets on the last

day of its most recent fiscal year were

$5 million or less.100 The only small

businesses subject to the proxy rules are

those that have securities registered

under Section 12 of the Exchange Act.

There are approximately 771 reporting

companies that have assets of $5 million

or less. The actual number of reporting

companies affected by the proxy rules

may be less than 771, as not all

reporting companies are subject to the

proxy rules. As stated above, the

proposed householding rules would be

optional. Under amended Rules 14b–1

and 14b–2, broker-dealers and banks are

required to forward security holder

communications to beneficial owners on

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65749

101See 5 U.S.C. 601.

102See 13 CFR 121.201.

whose behalf they hold securities.

Under Exchange Act Rule 0–10, a broker

or dealer is considered a small business

if it has less than $500,000 total capital,

calculated in accordance with Rule 0–

10(c)(1). In addition, a broker or dealer

will not be considered a small business

if it is affiliated with any person (other

than a natural person) that is not a small

business or small organization as

defined in Rule 0–10. The Exchange Act

rules do not contain a definition of

small banks. The Regulatory Flexibility

Act defines the term ‘‘small entity’’ by

reference to definitions published by the

Small Business Administration.101 The

Small Business Administration has

defined a ‘‘small entity’’ for banking

purposes as a national or commercial

bank, savings institution or credit union

with less than $100 million in assets.102

The rule amendments would define

the circumstances under which brokerdealers and banks could household

materials to security holders on whose

behalf they hold securities. There are

approximately 913 broker-dealers

registered with the Commission that

would be considered small businesses

under Rule 0–10. We estimate that there

are approximately 4946 entities

potentially subject to Rule 14b–2 that

could be considered small businesses

under the Small Business

Administration’s size regulations.

An indeterminable number of entities

could be affected by the amendment to

Rule 154, as companies who have not

previously registered with the

Commission can use the forms

prescribed for business combinations,

exchange offers, or reclassifications of

securities. However, as discussed above,

there are approximately 771 reporting

companies that have assets of $5 million

or less.

D. Projected Reporting, Recordkeeping,

and Other Compliance Requirements

The primary goal of the rule

amendments is to remove unnecessary

regulatory requirements. The amended

rules, however, will require a company

or other party choosing to solicit

implied consent to householding from

security holders to mail a separate

written notice of its intention to

household proxy and information

statements. The proposed rules also will

require companies to undertake in the

proxy statement or information

statement to provide, upon written or

oral request, a separate copy of the

annual report, proxy statement or

information statement to a security

holder residing at an address to which

the company or intermediary delivered

a householded copy. Additionally,

companies choosing to household the

annual report and proxy statement or

information statement would have to

provide instructions in the proxy

statement or information statement as to

how: (1) a security holder can revoke

consent to householding; (2) security

holders sharing an address can request

householding; and (3) security holders

can request extra copies of the annual

report, proxy statement or information

statement. It is likely that the company’s

notice of its intent to household

generally would not exceed one page,

and the proxy statement or information

statement disclosure would be only a

paragraph or two in length.

E. Agency Action To Minimize Effects

on Small Entities

As required by Sections 603 and 604

of the Regulatory Flexibility Act, the

Commission has considered the

following alternatives to minimize the

economic impact of the rule

amendments on small entities: (1) the

establishment of differing compliance or

reporting requirements or timetables

that take into account the resources

available to small entities; (2) the

clarification, consolidation or

simplification of compliance and

reporting requirements under the rule

amendments for small entities; (3) the

use of performance rather than design

standards; and (4) an exemption from

the coverage of the rule, or any part

thereof, for small entities.

The adopted rules are intended to

remove regulatory requirements for all

companies, including those that are

small entities. Because householding is

voluntary, the Commission expects that

the rules will not have any negative

impact on small businesses and that

companies, banks, and broker-dealers

generally will rely on the rules only if

the benefits of householding outweigh

the costs. The Commission considered

exempting small entities that are

reporting companies from the notice,

undertaking, and disclosure

requirements, but believes that security

holders in companies of all sizes should

be notified that a company intends to

household any disclosure document and

have the opportunity to object. Because

the proposed rules will be optional and

should benefit small entities, it was

unnecessary to consider exempting

them from coverage of the adopted

rules.

VIII. Statutory Authority

We are amending Rule 154 pursuant

to the authority set forth in Section 19(a)

of the Securities Act. We are amending

Rules 14a–2, 14a–3, 14a–7, 14a–101,

14b–1, 14b–2, 14c–3, and 14c–101

under the authority set forth in sections

12, 14 and 23(a) of the Exchange Act.

List of Subjects

17 CFR Part 230

Investment companies, Reporting and

recordkeeping requirements, Securities.

17 CFR Part 240

Reporting and recordkeeping

requirements, Securities.

Text of Rules

For the reasons set out in the

preamble, Title 17, Chapter II of the

Code of Federal Regulations is amended

as follows:

PART 230—GENERAL RULES AND

REGULATIONS, SECURITIES ACT OF

1933

1. The authority citation for Part 230

continues to read, in part, as follows:

Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j,

77r, 77s, 77sss, 77z–3, 78c, 78d, 78l, 78m,

78n, 78o, 78w, 78ll(d), 79t, 80a–8, 80a–24,

80a–28, 80a–29, 80a–30, and 80a–37, unless

otherwise noted.

* * * * *

§ 230.154 [Amended]

2. Section 230.154 is amended by

removing paragraph (e).

PART 240—GENERAL RULES AND

REGULATIONS, SECURITIES

EXCHANGE ACT OF 1934

3. The authority citation for Part 240

continues to read, in part, as follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j,

77s, 77z–2, 77eee, 77ggg, 77nnn, 77sss, 77ttt,

78c, 78d, 78f, 78i, 78j, 78j–1, 78k, 78k–1, 78l,

78m, 78n, 78o, 78p, 78q, 78s, 78u–5, 78w,

78x, 78ll(d), 78mm, 79q, 79t, 80a–20, 80a–23,

80a–29, 80a–37, 80b–3, 80b–4 and 80b–11,

unless otherwise noted.

* * * * *

4. Section 240.14a–2 is amended by

revising paragraph (a)(1)(ii) to read as

follows:

§ 240.14a–2 Solicitations to which

§ 240.14a–3 to § 240.14a–15 apply.

(a) * * *

(1) * * *

(ii) Furnishes promptly to the person

solicited (or such person’s household in

accordance with § 240.14a–3(e)(1)) a

copy of all soliciting material with

respect to the same subject matter or

meeting received from all persons who

shall furnish copies thereof for such

purpose and who shall, if requested,

defray the reasonable expenses to be

65750 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

incurred in forwarding such material,

and

* * * * *

5. Section 240.14a–3 is amended by

revising paragraph (e)(1) to read as

follows:

§ 240.14a–3 Information to be furnished to

security holders.

* * * * *

(e)(1)(i) A registrant will be

considered to have delivered an annual

report or proxy statement to all security

holders of record who share an address

if:

(A) The registrant delivers one annual

report or proxy statement, as applicable,

to the shared address;

(B) The registrant addresses the

annual report or proxy statement, as

applicable, to the security holders as a

group (for example, ‘‘ABC Fund [or

Corporation] Security Holders,’’ ‘‘Jane

Doe and Household,’’ ‘‘The Smith

Family’’), to each of the security holders

individually (for example, ‘‘John Doe

and Richard Jones’’) or to the security

holders in a form to which each of the

security holders has consented in

writing;

Note to paragraph (e)(1)(i)(B): Unless the

company addresses the annual report or

proxy statement to the security holders as a

group or to each of the security holders

individually, it must obtain, from each

security holder to be included in the

householded group, a separate affirmative

written consent to the specific form of

address the company will use.

(C) The security holders consent, in

accordance with paragraph (e)(1)(ii) of

this section, to delivery of one annual

report or proxy statement, as applicable;

(D) With respect to delivery of the

proxy statement, the registrant delivers,

together with or subsequent to delivery

of the proxy statement, a separate proxy

card for each security holder at the

shared address; and

(E) The registrant includes an

undertaking in the proxy statement to

deliver promptly upon written or oral

request a separate copy of the annual

report or proxy statement, as applicable,

to a security holder at a shared address

to which a single copy of the document

was delivered.

(ii) Consent. (A) Affirmative written

consent. Each security holder must

affirmatively consent, in writing, to

delivery of one annual report or proxy

statement, as applicable. A security

holder’s affirmative written consent will

only be considered valid if the security

holder has been informed of:

(1) The duration of the consent;

(2) The specific types of documents to

which the consent will apply;

(3) The procedures the security holder

must follow to revoke consent; and

(4) The registrant’s obligation to begin

sending individual copies to a security

holder within thirty days after the

security holder revokes consent.

(B) Implied consent. The registrant

need not obtain affirmative written

consent from a security holder for

purposes of paragraph (e)(1)(ii)(A) of

this section if all of the following

conditions are met:

(1) The security holder has the same

last name as the other security holders

at the shared address or the registrant

reasonably believes that the security

holders are members of the same family;

(2) The registrant has sent the security

holder a notice at least 60 days before

the registrant begins to rely on this

section concerning delivery of annual

reports and proxy statements to that

security holder. The notice must:

(i) Be a separate written document;

(ii) State that only one annual report

or proxy statement, as applicable, will

be delivered to the shared address

unless the registrant receives contrary

instructions;

(iii) Include a toll-free telephone

number, or be accompanied by a reply

form that is pre-addressed with postage

provided, that the security holder can

use to notify the registrant that the

security holder wishes to receive a

separate annual report or proxy

statement;

(iv) State the duration of the consent;

(v) Explain how a security holder can

revoke consent;

(vi) State that the registrant will begin

sending individual copies to a security

holder within thirty days after the

security holder revokes consent; and

(vii) Contain the following prominent

statement, or similar clear and

understandable statement, in bold-face

type: ‘‘Important Notice Regarding

Delivery of Security Holder

Documents.’’ This statement also must

appear on the envelope in which the

notice is delivered. Alternatively, if the

notice is delivered separately from other

communications to security holders,

this statement may appear either on the

notice or on the envelope in which the

notice is delivered.

Note to paragraph (e)(1)(ii)(B)(2): The

notice should be written in plain English. See

§ 230.421(d)(2) of this chapter for a

discussion of plain English principles.

(3) The registrant has not received the

reply form or other notification

indicating that the security holder

wishes to continue to receive an

individual copy of the annual report or

proxy statement, as applicable, within

60 days after the registrant sent the

notice; and

(4) The registrant delivers the

document to a post office box or

residential street address.

Note to paragraph (e)(1)(ii)(B)(4): The

registrant can assume that a street address is

residential unless the registrant has

information that indicates the street address

is a business.

(iii) Revocation of consent. If a

security holder, orally or in writing,

revokes consent to delivery of one

annual report or proxy statement to a

shared address, the registrant must

begin sending individual copies to that

security holder within 30 days after the

registrant receives revocation of the

security holder’s consent.

(iv) Definition of address. Unless

otherwise indicated, for purposes of this

section, address means a street address,

a post office box number, an electronic

mail address, a facsimile telephone

number or other similar destination to

which paper or electronic documents

are delivered, unless otherwise

provided in this section. If the registrant

has reason to believe that the address is

a street address of a multi-unit building,

the address must include the unit

number.

Note to paragraph (e)(1): A person other

than the registrant making a proxy

solicitation may deliver a single proxy

statement to security holders of record or

beneficial owners who have separate

accounts and share an address if: (a) the

registrant or intermediary has followed the

procedures in this section; and (b) the

registrant or intermediary makes available

the shared address information to the person

in accordance with § 240.14a–7(a)(2)(i) and

(ii).

* * * * *

6. Section 240.14a–7 is amended by

revising paragraphs (a)(2)(i) and (ii) and

designating the existing note to

§ 240.14a–7 as Note 1, revising the

heading to the notes and adding Note 2,

to read as follows:

§ 240.14a–7 Obligations of registrants to

provide a list of, or mail soliciting materials

to, security holders.

* * * * *

(a) * * *

(2) * * *

(i) Mail copies of any proxy statement,

form of proxy or other soliciting

material furnished by the security

holder to the record holders, including

banks, brokers, and similar entities,

designated by the security holder. A

sufficient number of copies must be

mailed to the banks, brokers, and

similar entities for distribution to all

beneficial owners designated by the

security holder. If the registrant has

received affirmative written or implied

consent to deliver a single proxy

Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations 65751

statement to security holders at a shared

address in accordance with the

procedures in § 240.14a–3(e)(1), a single

copy of the proxy statement furnished

by the security holder shall be mailed to

that address. The registrant shall mail

the security holder material with

reasonable promptness after tender of

the material to be mailed, envelopes or

other containers therefor, postage or

payment for postage and other

reasonable expenses of effecting such

mailing. The registrant shall not be

responsible for the content of the

material; or

(ii) Deliver the following information

to the requesting security holder within

five business days of receipt of the

request: a reasonably current list of the

names, addresses and security positions

of the record holders, including banks,

brokers and similar entities holding

securities in the same class or classes as

holders which have been or are to be

solicited on management’s behalf, or

any more limited group of such holders

designated by the security holder if

available or retrievable under the

registrant’s or its transfer agent’s

security holder data systems; the most

recent list of names, addresses and

security positions of beneficial owners

as specified in § 240.14a–13(b), in the

possession, or which subsequently

comes into the possession, of the

registrant; and the names of security

holders at a shared address that have

consented to delivery of a single copy of

proxy materials to a shared address, if

the registrant has received written or

implied consent in accordance with

§ 240.14a–3(e)(1). All security holder

list information shall be in the form

requested by the security holder to the

extent that such form is available to the

registrant without undue burden or

expense. The registrant shall furnish the

security holder with updated record

holder information on a daily basis or,

if not available on a daily basis, at the

shortest reasonable intervals, provided,

however, the registrant need not provide

beneficial or record holder information

more current than the record date for

the meeting or action.

* * * * *

Notes to § 240.14a–7.

1. * * *

2. When providing the information

required by § 240.14a–7(a)(1)(ii), if the

registrant has received affirmative

written or implied consent to delivery of

a single copy of proxy materials to a

shared address in accordance with

§ 240.14a–3(e)(1), it shall exclude from

the number of record holders those to

whom it does not have to deliver a

separate proxy statement.

7. Section 240.14a–101 is amended by

adding Item 23 to read as follows:

§ 240.14a–101 Schedule 14A Information

required in proxy statement.

* * * * *

Item 23. Delivery of documents to

security holders sharing an address.

If one annual report or proxy

statement is being delivered to two or

more security holders who share an

address in accordance with § 240.14a–

3(e)(1), furnish the following

information:

(a) State that only one annual report

or proxy statement, as applicable, is

being delivered to multiple security

holders sharing an address unless the

registrant has received contrary

instructions from one or more of the

security holders;

(b) Undertake to deliver promptly

upon written or oral request a separate

copy of the annual report or proxy

statement, as applicable, to a security

holder at a shared address to which a

single copy of the documents was

delivered and provide instructions as to

how a security holder can notify the

registrant that the security holder

wishes to receive a separate copy of an

annual report or proxy statement, as

applicable;

(c) Provide the phone number and

mailing address to which a security

holder can direct a notification to the

registrant that the security holder

wishes to receive a separate annual

report or proxy statement, as applicable,

in the future; and

(d) Provide instructions how security

holders sharing an address can request

delivery of a single copy of annual

reports or proxy statements if they are

receiving multiple copies of annual

reports or proxy statements.

8. Section 240.14b–1 is amended by

adding a note following paragraph (b)(2)

and by adding paragraph (c)(3) to read

as follows:

§ 240.14b–1 Obligation of registered

brokers and dealers in connection with the

prompt forwarding of certain

communications to beneficial owners.

* * * * *

(b)(2) * * *

Note to paragraph (b)(2): At the request of

a registrant, or on its own initiative so long

as the registrant does not object, a broker or

dealer may, but is not required to, deliver one

annual report, proxy statement or

information statement to more than one

beneficial owner sharing an address if the

requirements set forth in § 240.14a–3(e)(1)

(with respect to annual reports and proxy

statements) and § 240.14c–3(c) (with respect

to annual reports and information

statements) applicable to registrants, with the

exception of § 240.14a–3(e)(1)(i)(E), are

satisfied instead by the broker or dealer.

* * * * *

(c) * * *

(3) In its response pursuant to

paragraph (b)(1) of this section, a broker

or dealer shall not include information

about annual reports, proxy statements

or information statements that will not

be delivered to security holders sharing

an address because of the broker or

dealer’s reliance on the procedures

referred to in the Note to paragraph

(b)(2) of this section.

9. Section 240.14b–2 is amended by

adding a note following paragraph (b)(3)

and by adding paragraph (c)(4) to read

as follows:

§ 240.14b–2 Obligation of banks,

associations and other entities that

exercise fiduciary powers in connection

with the prompt forwarding of certain

communications to beneficial owners.

* * * * *

(b)(3) * * *

Note to paragraph (b)(3): At the request of

a registrant, or on its own initiative so long

as the registrant does not object, a bank may,

but is not required to, deliver one annual

report, proxy statement or information

statement to more than one beneficial owner

sharing an address if the requirements set

forth in § 240.14a–3(e)(1) (with respect to

annual reports and proxy statements) and

§ 240.14c–3(c) (with respect to annual reports

and information statements) applicable to

registrants, with the exception of § 240.14a–

3(e)(1)(i)(E), are satisfied instead by the bank.

* * * * *

(c) * * *

(4) In its response pursuant to

paragraph (b)(1)(ii)(A) of this section, a

bank shall not include information

about annual reports, proxy statements

or information statements that will not

be delivered to security holders sharing

an address because of the bank’s

reliance on the procedures referred to in

the Note to paragraph (b)(3) of this

section.

10. Section 240.14c–3 is amended by

revising paragraph (c) to read as follows:

§ 240.14c–3 Annual report to be furnished

security holders.

* * * * *

(c) A registrant will be considered to

have delivered an annual report or

information statement to security

holders of record who share an address

if the requirements set forth in

§ 240.14a–3(e)(1) are satisfied with

respect to the annual report or

information statement, as applicable.

11. Section 240.14c–101 is amended

by adding Item 5 to read as follows:

65752 Federal Register / Vol. 65, No. 213 / Thursday, November 2, 2000 / Rules and Regulations

1Collaborative Procedures for Energy Facility

Applications, Order No. 608, 64 FR 51209 (Sept. 22,

1999); FERC Stats. & Regs., Regulations Preambles

¶ 31,080 (Sept. 15, 1999).

2Composed of Chevron U.S.A., Inc., Shell

Offshore Inc., and Marathon Oil Company.

3Mr. Frederick W. Martin filed a letter supporting

Indicated Shippers’ rehearing request. In addition,

Travis Kenneth Bynum, I, filed a Motion to Deny

Rehearing in this docket that raises no issues

relevant to this proceeding. 4 42 U.S.C. 4321–4307a.

§ 240.14c–101 Schedule 14C. Information

required in information statement.

* * * * *

Item 5. Delivery of documents to

security holders sharing an address.

If one annual report or information

statement is being delivered to two or

more security holders who share an

address, furnish the following

information in accordance with

§ 240.14a–3(e)(1):

(a) State that only one annual report

or information statement, as applicable,

is being delivered to multiple security

holders sharing an address unless the

registrant has received contrary

instructions from one or more of the

security holders;

(b) Undertake to deliver promptly

upon written or oral request a separate

copy of the annual report or information

statement, as applicable, to a security

holder at a shared address to which a

single copy of the documents was

delivered and provide instructions as to

how a security holder can notify the

registrant that the security holder

wishes to receive a separate copy of an

annual report or information statement,

as applicable;

(c) Provide the phone number and

mailing address to which a security

holder can direct a notification to the

registrant that the security holder

wishes to receive a separate annual

report or proxy statement, as applicable,

in the future; and

(d) Provide instructions how security

holders sharing an address can request

delivery of a single copy of annual

reports or information statements if they

are receiving multiple copies of annual

reports or information statements.

Dated: October 27, 2000.

By the Commission.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–28137 Filed 11–1–00; 8:45 am]

BILLING CODE 8010–01–P

DEPARTMENT OF ENERGY

Federal Energy Regulatory

Commission

18 CFR Part 157

[Docket No. RM98–16–001; Order No. 608–

A]

Collaborative Procedures for Energy

Facility Applications; Order on

Rehearing

Issued October 27, 2000.

AGENCY: Federal Energy Regulatory

Commission.

ACTION: Final rule, order on rehearing.

SUMMARY: The Federal Energy

Regulatory Commission (Commission)

affirms, modifies, and clarifies its final

rule, Order No. 608.1 The final rule

implemented procedural regulations

that offer prospective applicants seeking

to construct, operate or abandon natural

gas facilities or services the option, in

appropriate circumstances and prior to

filing an application, of designing a

collaborative process that includes

environmental analysis and issue

resolution. This pre-filing collaborative

process is optional, is designed to be

adaptable to the facts and circumstances

of each particular case, and is expected

to result in improvements in filed

applications.

EFFECTIVE DATE: Changes to Order No.

608 made in this order on rehearing will

become effective on December 4, 2000.

FOR FURTHER INFORMATION CONTACT:

Richard Hoffmann, Office of Energy

Projects, 888 First Street, NE.,

Washington, D.C. 20426, (202) 208–

0066

Gordon Wagner, Office of the General

Counsel, 888 First Street, NE.,

Washington, D.C. 20426, (202) 219–

0122

SUPPLEMENTARY INFORMATION:

Introduction

On September 15, 1999, the

Commission issued a final rule

providing prospective applicants for

natural gas facilities or services the

option, in appropriate circumstances

and prior to filing an application, to

employ a collaborative process to

identify and address significant issues.1

Indicated Shippers 2 filed a timely

request for rehearing.3

We will deny in part and grant in part

the request for rehearing, for the reasons

discussed below.

Background

Order No. 608 sets forth regulations to

govern certain discussions that take

place prior to the submission of an

application to the Commission. Under

these regulations, a prospective

applicant that seeks to construct,

operate, or abandon natural gas facilities

or services may, in appropriate

circumstances and prior to filing an

application, design a collaborative

process to address and resolve issues

raised by its proposal.

The Commission anticipates that if a

natural gas company invites entities that

might be interested in new facilities or

services, or in the abandonment of

existing facilities or services, to identify

issues and discuss resource impacts as

part of the process of developing a

proposal, this will facilitate the filing of

a complete application. A project

sponsor that is able to submit an

application that addresses and resolves

issues, along with a preliminary draft

environmental assessment (EA) or

environmental impact statement (EIS) in

accordance with the National

Environmental Policy Act (NEPA),4 may

be processed expeditiously.

Applications that are incomplete, or that

are amended in response to issues

identified only after filing, or that

require the submission of additional

information or studies or resource

impacts before the Commission is able

to consider the merits, generally take

longer to process than applications that

are uncontentious and complete.

As noted in the final rule, this prefiling collaborative process is optional

and voluntary and is intended to be

flexible, adaptable, and responsive to

the facts and circumstances of each

particular case. The collaborative

regulations do not delete or replace any

existing regulations. Thus, a prospective

gas facility applicant that elects to

forego pre-filing collaborative

consultation may continue to use the

standard authorization procedures.

A project sponsor that seeks to

undertake a pre-filing collaboration

pursuant to the new regulations must

demonstrate to the Commission that it

has made reasonable efforts to contact

and invite all potentially interested

entities to participate and that it has

developed a communications protocol

to govern how the applicant and

participants will communicate. The

Commission will give public notice in

the Federal Register of the requested

collaboration and invite comments. The

Commission will review the adequacy

of the applicant’s outreach efforts,

consider comments, and weigh whether

pre-filing discussions are likely to be

productive. If the request to collaborate

is approved, then Commission staff will

be assigned to help guide the pre-filing

process, which can include the

preparation of a preliminary draft NEPA

document. The applicant will maintain

a file, available to the public, of all

relevant documentation of the

collaboration, including minutes or

summaries of meetings.