Document ID: SEC-2011-2029-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2011-12-27T05:00Z

[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Notices]
[Pages 80989-80992]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33045]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66006; File No. SR-NYSEAmex-2011-97]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Order Granting Accelerated Approval of a Proposed Rule Amendment to 
NYSE Amex Rule 452 and Corresponding Section 723 of the Company Guide 
and Amex Rule 577 Relating to Discretionary Proxy Voting on Executive 
Compensation Matters

December 20, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 6, 2011, NYSE Amex LLC (``Exchange'' or ``NYSE Amex'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons and is approving the proposed rule change on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 452--NYSE Amex Equities and 
corresponding Section 723 of the NYSE Amex Company Guide (``Company 
Guide'') and to replace the text of Rule 577 of the NYSE Amex Rules 
with a cross-reference indicating that Rule 452--NYSE Amex Equities and 
Section 723 of the Company Guide apply to all NYSE Amex member 
organizations. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Amex is proposing to amend Rule 452--NYSE Amex Equities and 
corresponding Section 723 of the Company Guide, each entitled ``Giving 
Proxies by Member Organization,'' to prohibit member organizations from 
voting uninstructed shares if the matter voted on relates to executive 
compensation. The foregoing changes are required by the provisions of 
Section 957 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (``Dodd-Frank Act''), which was signed by the President 
on July 21, 2010. The Exchange is also proposing to add the words ``or 
authorize'' in certain places throughout the rules to clarify that the 
rules cover not only the giving of a proxy but also the authorization 
of such proxy.
    Under current NYSE Amex and Commission proxy rules, brokers must 
deliver proxy materials to beneficial owners and request voting 
instructions in return. If voting instructions have not been received 
by the tenth day preceding the meeting date, Rule 452--NYSE Amex 
Equities and corresponding Section 723 of the Company Guide provide 
that a broker may vote on certain matters when the broker has no 
knowledge of any contest as to the action to be taken at the meeting 
and provided such action is adequately disclosed to stockholders, and 
does not include authorization for a merger, consolidation or any 
matter which may affect substantially the rights or privileges of such 
stock. In addition, Rule 452.11--NYSE Amex Equities and Commentary .11 
to Section 723 of the Company Guide currently identify 20 matters with 
respect to which brokers may not vote without instructions from 
beneficial owners. Prior to the July 21, 2010 enactment of the Dodd-
Frank Act, under Rule 452--NYSE Amex Equities and corresponding Section 
723 of the Company Guide and the Exchange's prior interpretations, 
member organizations were permitted to cast votes on some matters, 
including some executive compensation proposals, without specific 
instructions from beneficial owners of the stock.
    Section 957 of the Dodd-Frank Act amends Section 6(b) \3\ of the 
Exchange Act to require the rules of each national securities exchange 
to prohibit any member organization that is not the beneficial owner of 
a security registered under Section 12 \4\ of the Exchange Act from 
granting a proxy to vote the security in connection with certain 
stockholder votes, unless the beneficial owner of the security has 
instructed the member organization to vote the proxy in accordance with 
the voting

[[Page 80990]]

instructions of the beneficial owner. The stockholder votes covered by 
Section 957 include any vote with respect to (i) the election of a 
member of the board of directors of an issuer (other than an 
uncontested election of a director of an investment company registered 
under the Investment Company Act), (ii) executive compensation or (iii) 
any other significant matter, as determined by the Commission, by rule.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78l.
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    Rule 452--NYSE Amex Equities and corresponding Section 723 of the 
Company Guide already prohibit member organizations from voting 
uninstructed shares if the matter voted on is the election of directors 
(other than in the case of an issuer registered under the Investment 
Company Act, provided the matter is not the subject of a counter-
solicitation). The Commission has not at this time determined by rule 
any other significant matters with respect to which a national 
securities exchange must prohibit member organizations from voting 
uninstructed shares. Accordingly, in order to carry out the 
requirements of Section 957 of the Dodd-Frank Act, the Exchange 
proposes to amend Rule 452--NYSE Amex Equities and corresponding 
Section 723 of the Company Guide to also prohibit member organizations 
from voting uninstructed shares if the matter voted on relates to 
executive compensation.
    Specifically, the Exchange is proposing to add to Rule 452.11--NYSE 
Amex Equities and corresponding Commentary .11 to Section 723 of the 
Company Guide (both entitled ``When member organization may not vote 
without customer instructions'') a new Item 21 and accompanying 
commentary to provide that a member organization may not give or 
authorize a proxy to vote without instructions from the beneficial 
owner when the matter to be voted upon relates to executive 
compensation. The proposed commentary to Item 21 of Rule 452.11--NYSE 
Amex Equities and corresponding Section 723 of the Company Guide would 
clarify that a matter relating to executive compensation would include, 
among other things, the items referred to in Section 14A of the 
Exchange Act (added by Section 951 of the Dodd-Frank Act), including 
(i) an advisory vote to approve the compensation of executives, (ii) a 
vote on whether to hold such an advisory vote every one, two or three 
years, and (iii) an advisory vote to approve any type of compensation 
(whether present, deferred, or contingent) that is based on or 
otherwise relates to an acquisition, merger, consolidation, sale, or 
other disposition of all or substantially all of the assets of an 
issuer and the aggregate total of all such compensation that may (and 
the conditions upon which it may) be paid or become payable to or on 
behalf of an executive officer. In addition, a member organization may 
not give or authorize a proxy to vote without instructions on a matter 
relating to executive compensation, even if such matter would otherwise 
qualify for an exception from the requirements of Item 12, Item 13 or 
any other Item under Rule 452.11--NYSE Amex Equities or corresponding 
Section 723 of the Company Guide. The Exchange proposes to add new 
Commentary to each of Item 12 and Item 13 under Rule 452.11--NYSE Amex 
Equities and corresponding Section 723 of the Company Guide to specify 
that any vote on these or similar executive compensation-related 
matters would be subject to the requirements of Rule 452--NYSE Amex 
Equities, as amended, or corresponding Section 723 of the Company 
Guide, as amended.
    The Exchange also proposes in this filing to delete the text of 
NYSE Amex Rule 577 (entitled ``Giving Proxies by Member 
Organizations'') from the NYSE Amex Rulebook and replace it with a 
cross-reference indicating that Rule 452--NYSE Amex and Section 723 of 
the Company Guide apply to all NYSE Amex member organizations. Rule 
452--NYSE Amex Equities and Section 723 of the Company Guide include 
all of the restrictions contained in NYSE Amex Rule 577 and some 
additional restrictions that have been added in recent years that have 
not been added to NYSE Amex Rule 577.\5\ In light of the fact that all 
of the requirements of NYSE Amex Rule 577 are duplicated in Rule 452--
NYSE Amex Equities and Section 723 of the Company Guide, the Exchange 
believes that it is appropriate to replace the text of NYSE Amex Rule 
577 with the proposed cross-reference and that doing so will avoid any 
confusion associated with having two duplicative rules governing the 
same activity.
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    \5\ In addition to the requirements of NYSE Amex Rule 577, Rule 
452--NYSE Amex Equities prohibits brokers from voting uninstructed 
shares with respect to (i) the election of directors (except an 
uncontested director election of an investment company registered 
under the Investment Company Act of 1940) and (ii) any material 
amendment to an investment advisory contract with an investment 
company.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Exchange Act,\6\ in general and 
with Section 6(b)(10) \7\ of the Exchange Act, in particular. 
Specifically, the Exchange believes the proposed rule change is 
consistent with the requirements of Section 6(b)(10) that all national 
securities exchanges adopt rules prohibiting members from voting, 
without receiving instructions from the beneficial owner of shares, on 
the election of a member of a board of directors of an issuer (except 
for a vote with respect to the uncontested election of a member of the 
board of directors of any investment company registered under the 
Investment Company Act of 1940), executive compensation, or any other 
significant matter, as determined by the Commission, by rule. The 
Exchange also believes that the proposed rule change is consistent with 
the requirements under Section 6(b)(5) \8\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest. The 
Exchange is adopting this proposed rule change to comply with the 
requirements of Section 957 of the Dodd-Frank Act, and therefore 
believes the proposed rule change to be consistent with the Exchange 
Act, particularly with respect to the protection of investors and the 
public interest. The requirements of NYSE Amex Rule 577 are all 
duplicative of Rule 452--NYSE Amex Equities and Section 723 of the 
Company Guide and its replacement by a simple cross-reference to those 
other rules serves the purpose of avoiding potential confusion without 
changing the substantive requirements in any way and is therefore 
consistent with the protection of investors and the public interest. 
The addition of the words ``or authorize'' in certain places throughout 
Rule 452--NYSE Amex and Section 723 of the Company Guide is a 
clarification and not a substantive change and is therefore consistent 
with the protection of investors and the public interest.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(10).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

[[Page 80991]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2011-97 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAmex-2011-97. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of Phlx. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make publicly available. All 
submissions should refer to File Number SR-NYSEAmex-2011-97 and should 
be submitted on or before January 17, 2012.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    In its filing, the Exchange requested that the Commission approve 
the proposal on an accelerated basis so that the Exchange could comply 
with the requirements of the Dodd-Frank Act. After careful 
consideration, the Commission finds that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
The Commission believes that the proposal is consistent with Section 
6(b)(10) \10\ of the Act, which requires that national securities 
exchanges adopt rules prohibiting members that are not beneficial 
holders of a security from voting uninstructed proxies with respect to 
the election of a member of the board of directors of an issuer (except 
for uncontested elections of directors for companies registered under 
the Investment Company Act), executive compensation, or any other 
significant matter, as determined by the Commission, by rule. The 
Commission also believes that the proposal is consistent with Section 
6(b)(5) \11\ of the Act, which provides, among other things, that the 
rules of the Exchange must be designed to promote just and equitable 
principles of trade, remove impediments to and perfect the mechanism of 
a free and open market and a national market system, and, in general, 
to protect investors and the public interest, and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \9\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(10).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal is consistent with 
Section 6(b)(10) of the Act because it adopts revisions that comply 
with that section. As noted in the accompanying Senate Report, Section 
957, which adopts Section 6(b)(10), reflects the principle that ``final 
vote tallies should reflect the wishes of the beneficial owners of the 
stock and not be affected by the wishes of the broker that holds the 
shares.'' \12\ The proposed rule change will make NYSE Amex rules 
compliant with the new requirements of Section 6(b)(10) by prohibiting 
broker-dealers, who are not beneficial owners of a security, from 
voting uninstructed shares with respect to any matter on executive 
compensation.\13\
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    \12\ See S. Rep. No. 111-176, at 136 (2010).
    \13\ As noted above, Section 6(b)(10) also prohibits broker 
voting for director elections, except for uncontested director 
elections of registered investment companies, and also ``any other 
significant matter, as determined by the Commission, by rule.'' NYSE 
Amex already prohibits broker voting in director elections except 
for uncontested director elections for registered investment 
companies. See NYSE Amex Rule 452.11(19) and corresponding Section 
723 of the Company Guide. As to other matters, the Commission has 
not, to date, adopted rules concerning other significant matters 
where uninstructed broker votes should be prohibited, although it 
may do so in the future. Should the Commission adopt such rules, we 
would expect NYSE Amex to adopt coordinating rules promptly to 
comply with the statute.
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    The Commission believes that the proposal is consistent with 
Section 6(b)(5) of the Act because the proposal will further investor 
protection and the public interest by assuring that shareholder votes 
on executive compensation matters are made by those with an economic 
interest in the company, rather than by a broker that has no such 
economic interest, which should enhance corporate governance and 
accountability to shareholders.\14\
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    \14\ As the Commission stated in approving NYSE rules 
prohibiting broker voting in the election of directors, having those 
with an economic interest in the company vote the shares, rather 
than the broker who has no such economic interest, furthers the goal 
of enfranchising shareholders. See Securities Exchange Act Release 
No. 60215 (July 1, 2009), 74 FR 33293 (July 10, 2009) (SR-NYSE-2006-
92).
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    The Commission notes that NYSE Amex's new rules prohibiting 
uninstructed broker votes on executive compensation covers the specific 
items identified in Section 951 of the Dodd-Frank Act, as well as any 
other matter concerning executive compensation, and has been drafted 
broadly to reflect the requirements of Section 6(b)(10) of the Act. The 
proposed rule language also specifically states that a broker vote on 
any executive compensation matter would not be permitted even if it 
would otherwise qualify for an exception from any item under NYSE Amex 
Rule 452 and corresponding Section 723 of the Company Guide. The 
Commission believes this provision will make clear that any past 
practice or interpretation that may have permitted a broker vote on an 
executive compensation matter, under existing rules, will no longer be 
applicable and is superseded by the newly adopted provisions.
    The Commission also notes that the Exchange will replace the text 
of Amex Rule 577 with Rule 452 NYSE Amex and corresponding Section 723 
of the Company Guide by cross-reference. The Exchange has represented 
that the requirements of NYSE Amex Rule 577 are duplicative of Rule 
452--NYSE Amex Equities and Section 723 of the

[[Page 80992]]

Company Guide. Accordingly, the Commission believes that the proposed 
change should avoid potential confusion associated with having 
duplicative rules and is therefore, consistent with Section 6 of the 
Act.
    Finally, the Commission notes that the change to reflect that NYSE 
Amex rules prohibit not only the giving of a proxy, but also the 
authorization of the proxy, should help to clarify the intent of NYSE 
Amex proxy rules and is consistent with the requirements of Section 6 
of the Act.
    Based on the above, the Commission believes that the NYSE Amex's 
proposal will further the purposes of Sections 6(b)(5) and 6(b)(10) of 
the Act by ensuring that brokers, holding shares on behalf of 
beneficial owners, are not voting uninstructed shares on matters 
relating to executive compensation, which should enhance corporate 
accountability to shareholders. The rule filing should also serve to 
fulfill the Congressional intent in adopting Section 6(b)(10) of the 
Act.
    The Commission also finds good cause, pursuant to Section 19(b)(2) 
of the Act,\15\ for approving the proposed rule change prior to the 
30th day after the date of publication of notice in the Federal 
Register. Section 6(b)(10) of the Act, enacted under Section 957 of the 
Dodd-Frank Act, does not provide for a transition phase, and requires 
rules of national securities exchanges to prohibit, among other things, 
broker voting on executive compensation. The Commission believes that 
good cause exists to grant accelerated approval to the Exchange's 
proposal, because it will conform NYSE Amex rules to the requirements 
of Section 6(b)(10) of the Act. Moreover, the Commission notes that the 
proposed changes are based on NYSE Rule 452.\16\
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    \15\ 15 U.S.C. 78s(b)(2).
    \16\ See NYSE Rule 452, Securities Exchange Act Release No. 34-
62874 (September 9, 2010), 75 FR 56152 (September 15, 2010) (SR-
NYSE-2010-59).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEAmex-2011-97) be, and it 
hereby is, approved on an accelerated basis.
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    \17\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Trading and Markets, pursuant to 
delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.

[FR Doc. 2011-33045 Filed 12-23-11; 8:45 am]
BILLING CODE 8011-01-P