[Federal Register Volume 75, Number 169 (Wednesday, September 1, 2010)]
[Notices]
[Pages 53725-53727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21849]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62775; File No. SR-PHLX-2010-115]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Amendment to Rule
862 Relating to, Among Other Things, Eliminate Broker Discretionary
Voting for All Elections of Directors, Except for Companies Registered
Under the Investment Company Act of 1940
August 26, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on August 18, 2010, NASDAQ OMX PHLX, Inc. (``PHLX'' or
``Exchange'') 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 Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange, pursuant to Section 19(b)(1) of the Act \5\ and Rule
19b-4 thereunder,\6\ proposes to amend PHLX Rule 862 (Proxies at
Direction of Owner) to comport with the Chicago Board Options Exchange
(``CBOE'') Rule 31.85(b) and the New York Stock Exchange (``NYSE'')
Rule 452 to eliminate broker discretionary voting for all elections of
directors at shareholder meetings, whether contested or not, except for
companies registered under the Investment Company Act of 1940 (the
``1940 Act''),\7\ to amend PHLX Rule 862 to preclude broker
discretionary voting on a matter that materially amends an investment
advisory contract with an investment company, and to define that a
material amendment to an investment advisory contract would include any
proposal to obtain shareholder approval of an investment company's
investment advisory contract with a new investment advisor. In
addition, including the changes noted above, this proposal reorganizes
the broker voting rules to specifically include 20 instances where
member organizations may not vote without customer instructions, while
retaining the prohibition that the member organization may not vote
without instructions from the customer on matters that may
substantially affect the rights and privileges of the stockholders.
This proposal also clarifies proxy procedures and proxy record
retention.
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\5\ 15 U.S.C. 78s(b)(1).
\6\ 17 CFR 240.19b-4.
\7\ The Commission notes that the exception for companies
registered under the 1940 Act only apply to uncontested director
elections, i.e., when there is no counter solicitation. See proposed
Phlx Rule 862(b)(2).
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The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
at the principal office of the Exchange, and at the Commission's Public
Reference Room.
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 Exchange 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
PHLX Rule 862 provides instructions on how the proxies are voted.
The purpose of the proposed rule change is to amend PHLX Rule 862(2) to
comport with CBOE Rule 31.85(b) and NYSE Rule 452 to eliminate broker
discretionary voting for all elections of directors at shareholder
meetings, whether contested or not, except for companies registered
under the Investment Company Act of 1940 (the ``1940 Act''), to amend
PHLX Rule 862 to preclude broker discretionary voting on a matter that
materially amends an investment advisory contract with an investment
company, and to define that a material amendment to an investment
advisory contract would include any proposal to obtain shareholder
approval of an investment company's investment advisory contract with a
new investment advisor. In addition, including the changes noted above,
this proposal reorganizes the broker voting rules to specifically
include 20 instances where member organizations may not vote without
customer instructions, while retaining the prohibition that the member
organization may not vote without instructions from the customer on
matters that may substantially affect the rights and privileges of the
stockholders. This proposal also clarifies proxy procedures and proxy
record retention.
The proposed amendment does not materially change the proxy rules
with the exception of the changes made in this filing. Amending PHLX
Rule 862 to comport with CBOE Rule 31.85 (b) and NYSE Rule 452 provides
consistency among the exchanges to eliminate disparities regarding
proxy voting. The Exchange proposes this amendment in response to a
request by the Securities and Exchange Commission (the ``Commission'')
that self-regulatory organizations have uniform proxy rules regarding
broker discretionary voting.\8\ As a result, PHLX believes the broker
discretionary voting amendments will have little impact on the market
participants since the changes are in line with the rules of the other
self-regulatory organizations as defined within the meaning of Section
3(a)(26)
[[Page 53726]]
of the Act \9\ (otherwise known as ``SROs''). PHLX members with
customers are also members of one of the other SROs.
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\8\ See NYSE Approval Order, 74 FR at 33298, Commission Release
No. 34-60215 (July 1, 2009), note 69.
\9\ 15 U.S.C. 78c(a)(26).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \10\ in general, and furthers the objectives of Section
6(b)(5) of the Act \11\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest. Specifically, the Exchange believes that the proposed rule
change will protect investors and the public interest by ensuring
better corporate governance and transparency of the election process
for directors and by promoting greater uniformity with the proxy rules
of other SROs. In particular, for Exchange member organizations that
are also member firms of other SROs, confusion might arise as to which
SROs' proxy voting rules are applicable to a company listed on the
Exchange if there are disparities between the rules of the Exchange and
the other SROs.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The proposal should further the protection of investors and the
public interest by assuring that voting on matters as critical as the
election of directors can no longer be determined by member
organizations without specific instructions from the beneficial owner,
and thus should enhance corporate governance and accountability to
shareholders. Additionally, other changes enhance the proxy rules by
providing clarity to proxy handling and record retention matters which
also improves the protection to the investors.
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 not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) \13\ thereunder
because the proposal does not: (i) Significantly affect the protection
of investors or the public interest; (ii) impose any significant burden
on competition; and (iii) by its terms, become operative for 30 days
from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, provided that the Exchange has given the
Commission notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.\14\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ The Exchange has satisfied the five business day pre-filing
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay period. In making this
request, the Exchange noted that waiver of the 30-day operative delay
will conform to the Commission's desire to eliminate any disparities
with proxy voting.
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\15\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that the waiver of the 30-day operative
delay period is consistent with the protection of investors and the
public interest.\16\ The proposal would permit the Exchange to comply
with the Commission's stated goal that self-regulatory organizations
who currently allow members to use discretionary voting for director
elections conform their rules to the NYSE's rules to eliminate any
voting disparities depending on where the shares are held.\17\ In this
regard, Phlx's proposed changes to Rule 862 are substantively similar
to NYSE Rule 452 and CBOE Rule 31.85. Further, the proposal would
conform the Exchange's rule to the NYSE's rule with respect to voting
on investment advisory contracts. Moreover, the Commission notes that
the NYSE's adopted rule changes were subject to full notice and
comment, and considered and approved by the Commission.\18\ Finally,
the Commission notes that the clarification of proxy procedures, record
retention, and other changes to Phlx Rule 862 are based substantially
on CBOE's rules. Based on the above, the Commission finds that waiving
the 30-day operative delay period is consistent with the protection of
investors and the public interest, and the proposal is therefore deemed
operative upon filing.
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\16\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\17\ See supra note 8.
\18\ See id.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.\19\
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\19\ 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-PHLX-2010-115 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-PHLX-2010-115. This file
number should be included on the subject line if e-mail 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
[[Page 53727]]
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 the Exchange. 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 available publicly. All submissions should refer to
File Number SR-PHLX-2010-115 and should be submitted on or before
September 22, 2010.
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\20\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-21849 Filed 8-31-10; 8:45 am]
BILLING CODE 8010-01-P