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86-35 Adoption of Amendments to the Interpretation of the NASD Board of Governors on "Forwarding of Proxy and Other Materials"
TO: All NASD Members and Other Interested Persons
The Securities and Exchange Commission (SEC) recently approved amendments to the Interpretation of the NASD Board of Governors on "Forwarding of Proxy and Other Materials," under Article III, Section 1 of the NASD Rules of Fair Practice. 1/ These amendments, which became effective on April 29, 1986, provide for a surcharge and an ongoing fee, which may be charged by NASD members to issuers in connection with proxy solicitations.
The Interpretation requires members to forward proxy materials to their customers promptly upon receipt of sufficient copies of the materials and satisfactory assurance that the issuer will reimburse the member for expenses incurred. The Appendix to the Interpretation sets out suggested rates of reimbursement.
The recently approved amendments permit a member to charge an issuer a second surcharge of 18 1/2 cents for each set of proxy materials handled by the member. (The surcharge adopted in 1985 expired earlier this year.) The amendment concerning the second surcharge is temporary, and unless the effectiveness of the amendment is extended, the second surcharge can be applied only until March 31, 1987.
The SEC also approved an ongoing fee of 6 1/2 cents per shareholder name provided to the issuer pursuant to the issuer's request.
The purpose of these amendments is to assist members in recouping the direct and indirect start-up costs incurred to comply with SEC Rules 14b-l(e) and 17a-3(a)(9)(ii) under the Securities Exchange Act of 1934. These SEC rules were adopted to improve the ability of issuers to identify and communicate with their shareholders who hold securities in "street name" accounts with broker-dealers.
Rule 17a-3(a)(9)(ii) requires that broker-dealers determine and maintain records of whether customers object to disclosure of their names, addresses and securities positions to issuers. Rule 14b-l(c) requires firms to provide issuers, upon request and assurance of reimbursement of reasonable expenses, with names, addresses and securities positions of non-objecting beneficial shareholders of the issuers' securities.
The text of the amendments are attached to this notice.
Questions regarding this notice should be directed to Craig L. Landauer, NASD Office of the General Counsel, at (202) 728-8291.
Frank J. Wilson
Executive Vice President and General Counsel
AMENDMENTS TO THE INTERPRETATION OF THE NASD BOARD OF GOVERNORS ON "FORWARDING OF PROXY AND OTHER MATERIALS" UNDER ARTICLE III, SECTION 1 OF THE NASD RULES OF FAIR PRACTICE*
FORWARDING OF PROXY AND OTHER MATERIALS
The Board of Governors has determined that the following suggested rates of reimbursement for expenses incurred in forwarding proxy material, annual reports, information statements and other material are to be used as a guide by members:
* * * *
Surcharge for Proxy Solicitation
[Twenty cents] Eighteen and one-half cents for each set of proxy material, i.e., proxy statement, form of proxy and annual report when mailed as a unit, for the period from [April 1, 1985] April 1, 1986 to [March 31, 1986] March 31, 1987 as a surcharge in addition to the appropriate charges specified in this appendix.
Additional Fee for Proxy Solicitation
Six and one-half cents per shareholder name provided to the issuer pursuant to the issuer's request.
1/ NASD Manual (CCH), p. 2037-3.
* New language is underlined. Deleted language is bracketed. These amendments were effective April 29, 1986.