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Summary
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 Rule
452 requires
brokers to give proxies
for stock held in street name
when directed by the beneficial owner of
the
stock
And
authorizes
brokers to vote shares held in street name
on routine proposals
- If the beneficial owner has not
provided specific voting instructions to the broker at least 10 days before a
scheduled meeting
- This practice helps companies meet quorum requirements
- Routinely used by brokers to vote for management
director nominees, when no instructions are given
Rule
452 itemizes 18 matters as non-routine
- Can't be voted on by brokers, when no instructions are given
- Listed under "When member organization may not vote without customer instructions"
section of Rule
- Non-routine matters will often require an active proxy
solicitation campaign to garner sufficient votes for shareholder approval
Matters
still considered to be routine proposals include
- Uncontested election of directors
- Ratification of auditors
- Increase in authorized common stock of an issuer
if there are no specific plans for the increased shares
NYSE
rule can affect NASDAQ-listed companies as well
- As NASDAQ rules defer to NYSE rules
for NYSE member brokers
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Developments
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 NYSE has
advised listed companies that Rule 452 will not be revised for 2008 proxy season
-
Report and Recommendations
of the Proxy Working Group to the NYSE 6. 5.06
-
Addendum 8.27.07
- Based on recent
conversations with SEC staff, NYSE has learned proposed rule filing will not be
approved for 2008 proxy season
- E-mails sent to
NYSE companies in September 2007:
- Dear ____:
In April 2005, the Proxy Working Group was created by the New York Stock
Exchange to review the proxy voting process, and more specifically to review and
make recommendations with respect to NYSE rules concerning this process. On June
5, 2006, the Proxy Working Group submitted its recommendations relating to NYSE
Rules 452 and 465 to the NYSE (see links below). Following receipt of the Proxy
Working Groups Report, and consistent with the recommendations in the Report,
the NYSE proposed an amendment to Rule 452 to eliminate broker discretionary
voting on the election of directors. It was our intention to have the rule
change in place and effective by January 1, 2008. Based on recent conversations
with SEC staff members, however, we learned that our proposed rule filing is
being considered by the Commission as part of a broader range of issues relating
to shareholder communications and proxy access. As a result, our rule filing
will not be approved for the 2008 proxy season. We will continue to work with
the SEC staff to move our proposed filing forward.
http://www.nyse.com/pdfs/PWG_REPORT.pdf
http://www.nyse.com/pdfs/PWGAddendumfinal.pdf
All our thanks to our companies for their continued interest and support on
important public policy issues.
Sincerely,
Catherine R. Kinney
President and Co-Chief Operating Officer,
NYSE Euronext
NYSE
proposal to amend Rule 452 to make
director elections non-routine
- So that brokers couldn't vote for management
nominees
in uncontested elections without getting voting instructions from beneficial
owners
- NYSE filed proposed rule change with SEC to postpone action until 2008 proxy season
- NYSE filed modified proposal with SEC to provide
that proposed rule change is not applicable to registered investment
companies
- Broker proxy voting was topic at
SEC Roundtable
on Proxy Voting Mechanics 5.24.07
- Could have significant impact for companies that
have adopted
majority voting
- Combination of an amended Rule 452 and a majority
voting requirement would make shares without
instructions
the equivalent of a no vote
- Compared to current practice, where shares without instructions are
typically voted for management nominees
- Compared to use of plurality voting
(instead of majority voting), where presence of non-votes has little practical
effect
NYSE
has changed Rule 452 for investment companies
- Change in an interpretation of Rule 452 makes shareholder approval of an investment
advisory contract with a new investment adviser non-routine
Committee
on Capital Markets Regulation clarifies position on NYSE proposal to amend Rule
452
- Committee issued its Interim Report and
recommendations on U.S. public equity markets competitiveness on
11.30.06
- It was erroneously reported that the Committee
was requesting the NYSE to reconsider its proposal to amend Rule 452
- Committee supports the proposed elimination of
broker discretionary voting in NYSE-listed companies' director elections
- But the Committee suggests that the NYSE
reconsider how the proposed rule should apply to voting by mutual fund
shareholders
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NYSE Rule 452 Giving Proxies by Member
Organization
A member organization shall give or authorize the giving
of a proxy for stock registered in its name, or in the name of its nominee, at
the direction of the beneficial owner If
the stock is not in the control or possession of the member organization,
satisfactory proof of the beneficial ownership as of the record date may be
required
 Voting member organization holdings as executor,
etc.
- A member organization may give or authorize the
giving of a proxy to vote any stock registered in its name, or in the name of
its nominee, if such member organization holds such stock as executor,
administrator, guardian, trustee, or in a similar representative or fiduciary
capacity with authority to vote
Voting procedure without instructions
- A member organization which has transmitted proxy
soliciting material to the beneficial owner of stock or to an investment
adviser, registered either under the Investment Advisers Act of 1940 or under
the laws of a state, who exercises investment discretion pursuant to an advisory
contract for the beneficial owner and has been designated in writing by the
beneficial owner of such stock (hereinafter "designated investment adviser") to
receive soliciting material in lieu of the beneficial owner and solicited voting
instructions in accordance with the provisions of Rule 451, and which has not
received instructions from the beneficial owner or from the beneficial owner's
designated investment adviser by the date specified in the statement
accompanying such material, may give or authorize the giving of a proxy to voted
such stock, provided the person in the member organization giving or authorizing
the giving of the proxy 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 other matter which may affect substantially the rights or privileges of such
stock
Instructions on stock in names of other member
organizations
- A member organization which has in its possession or control stock
registered in the name of another member organization, and which has solicited
voting instructions in accordance with the provisions of Rule 451(b)(1), shall
- - Forward to the second member organization any
voting instructions received from the beneficial owner, or
- if the proxy-soliciting material has been
transmitted to the beneficial owner of the stock in accordance with Rule 451 and
no instructions have been received by the date specified in the statement
accompanying such material, notify the second member organization of such fact
in order that such member organization may give the proxy as provided in the
third paragraph of this rule.
Signed proxies for stock in names of other
member
organizations
- A member organization which has in its possession
or control stock registered in the name of another member organization, and
which desires to transmit signed proxies pursuant to the provisions of Rule
451(b)(2), shall obtain the requisite number of signed proxies from such holder
of record
Amendments
- 1.11.68
- 8.25.94
- 3.06.03 NYSE-2002-50
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Supplementary Material |
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.10 Giving
a proxy to vote stock SEC_CODE_REF_0090001192884 -
When member organization may vote without customer instructions
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Rule 452,
above, provides that a member organization may give a proxy to vote stock
provided that:
- (1) It has transmitted proxy soliciting material
to the beneficial owner of stock or to the beneficial owner's designated
investment adviser in accordance with Rule 451, and
- (2) it has not received voting instructions from
the beneficial owner or from the beneficial owner's designated investment
adviser, by the date specified in the statement accompanying such material, and
- (3) the person in the member organization giving
or authorizing the giving of the proxy 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 of any matter which may affect substantially the rights or
privileges of such stock.
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.11 When
member organization may not vote without
 customer instructions -
In the list of meetings of stockholders appearing in the Weekly Bulletin,
after proxy material has been reviewed by the Exchange, each meeting will be
designated by an appropriate symbol to indicate either (a) that members may
vote a proxy without instructions of beneficial owners, (b) that members may
not vote specific matters on the proxy, or (c) that members may not vote the
entire proxy.
- Generally speaking, a member organization may not give a proxy to vote
without instructions from beneficial owners when the matter to be voted
upon:
- (1) is not submitted to stockholders by means of
a proxy statement comparable to that specified in Schedule 14-A of the
Securities and Exchange Commission;
- (2) is the subject of a counter-solicitation, or
is part of a proposal made by a stockholder which is being opposed by management
(i.e., a contest);
- (3) relates to a merger or consolidation (except
when the company's proposal is to merge with its own wholly owned subsidiary,
provided its shareholders dissenting thereto do not have rights of appraisal);
- (4) involves right of appraisal;
- (5) authorizes mortgaging of property;
- (6) authorizes or creates indebtedness or
increases the authorized amount of indebtedness;
- (7) authorizes or creates a preferred stock or
increases the authorized amount of an existing preferred stock;
- (8) alters the terms or conditions of existing
stock or indebtedness;
- (9) involves waiver or modification of preemptive
rights (except when the company's proposal is to waive such rights with respect
to shares being offered pursuant to stock option or purchase plans involving the
additional issuance of not more than 5% of the company's outstanding common
shares (see Item 12));
- (10) changes existing quorum requirements with
respect to stockholder meetings;
- (11) alters voting provisions or the
proportionate voting power of a stock, or the number of its votes per share
(except where cumulative voting provisions govern the number of votes per share
for election of directors and the company's proposal involves a change in the
number of its directors by not more than 10% or not more than one);
- (12) authorizes the implementation of any equity
compensation plan, or any material revision to the terms of any existing equity
compensation plan (whether or not stockholder approval of such plan is required
by subsection 8 of Section 303A of the Exchange's Listed Company Manual);
- (13) authorizes
a. a new profit-sharing or special remuneration plan, or a new retirement plan,
the annual cost of which will amount to more than 10% of average annual income
before taxes for the preceding five years, or
b. the amendment of an existing plan which would bring its cost above 10% of
such average annual income before taxes.
Exceptions may be made in cases of
a. retirement plans based on agreement or negotiations with labor unions (or
which have been or are to be approved by such unions); and
b. any related retirement plan for benefit of non-union employees having terms
substantially equivalent to the terms of such union-negotiated plan, which is
submitted for action of stockholders concurrently with such union-negotiated
plan;
- (14) changes the purposes or powers of a company
to an extent which would permit it to change to a materially different line of
business and it is the company's stated intention to make such a change;
- (15) authorizes the acquisition of property,
assets, or a company, where the consideration to be given has a fair value
approximating 20% or more of the market value of the previously outstanding
shares;
- (16) authorizes the sale or other disposition of
assets or earning power approximating 20% or more of those existing prior to the
transaction.
- (17) authorizes a transaction not in the ordinary
course of business in which an officer, director or substantial security holder
has a direct or indirect interest;
- (18) reduces earned surplus by 51% or more, or
reduces earned surplus to an amount less than the aggregate of three years'
common stock dividends computed at the current dividend rate.
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.12 Proportionate
voting for auction rate preferred
securities-
Notwithstanding any other provision of Rule 452, a member organization may
vote auction rate preferred securities
* with auction reset periods of one year or less in proportion to
the voting instructions received from holders of the same class (or of the
same series where the item must be voted upon separately by each series), in
accordance with the provisions established below:
- (1) It has transmitted proxy soliciting material
to the beneficial owner of the auction rate preferred securities or to the
beneficial owner's designated investment adviser in accordance with Rule 451,
and
- (2) It has not received voting instructions from
the beneficial owner or from the beneficial owner's designated investment
adviser, by the date specified in the statement accompanying such material, and
- (3) A minimum of 30% of the outstanding shares of
the same class or series (where a series vote may be required) has been voted by
preferred security holders, and
- (4) Less than 10% of the outstanding shares of
the same class or series (where a series vote may be required) voted against the
proposal, and
- (5) For any proposal as to which both the common
and preferred holders vote as a single class. Proportional voting will not be
allowed unless common shareholders approve the proposal, and
- (6) A majority of the independent directors of
the issuer's board of directors approved the matter, and
- (7) Adequate disclosure of proportional voting
has been provided to beneficial holders.
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.13 Discretionary
and non-discretionary proposals in
one proxy form-
In some cases, a proxy form may contain proposals, some of which may be
acted upon at the discretion of the member organization in the absence of
instructions, and others which may be voted only in accordance with the
directions of the beneficial owner
- This should be indicated in the letter of
transmittal. In such cases, the member organization may vote the proxy in the
absence of instructions if it physically crosses out those portions where it
does not have discretion
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.14 Cancellation
of discretionary proxy where
counter-solicitation develops-
Where a discretionary proxy has been given in good faith under the rules and
counter-solicitation develops at a later date, thereby creating a "contest,"
the question as to whether or not the discretionary proxy should then be
cancelled is a matter which each member organization must decide for itself
- After a contest has developed no further proxies
should be given except at the direction of beneficial owners
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.15 Subsequent
proxy-
Where a member organization gives a subsequent proxy, it should clearly
indicate whether the proxy is in addition to, in substitution for or in
revocation of any prior proxy
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.16 Signing
and dating a proxy - designating shares
covered-
All proxies should be dated and should show the number of shares voted
- Since manual signatures are sometimes illegible,
a member organization should also either type or rubber-stamp its name on such
proxy
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.17 Proxy
records- Records
covering the solicitation of proxies shall show the following:
- (1) The date of receipt of the proxy material
from the issuer or other person soliciting the proxies;
- (2) names of customers to whom the material is
sent together with date of mailing;
- (3) all voting instructions showing whether
verbal or written; and
- (4) a summary of all proxies voted by the member
organization clearly setting forth total shares voted for or against or not
voted for each proposal to be acted upon at the meeting.
- Verbal voting instructions may be
accepted provided a record is kept of the instructions of the beneficial
owner and the instructions are retained by the member organization. The
record shall also indicate the date of the receipt of the instructions and
the name of the recipient.
- Instructions from beneficial owners may also be accepted by member
organizations or their agents through the use of an automated telephone
voting system, which has been approved by the Exchange.
- Such a system shall utilize an identification
code for beneficial owners and provide an opportunity for beneficial owners to
validate votes to ensure that they were received correctly
- Records of voting including the date of receipt
of instructions and the name of the recipient must be retained by the member
organization or their agent
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.20 Retention
of records-
All proxy solicitation records, originals of all communications received and
copies of all communications sent relating to such solicitation, shall be
retained for a period of not less than three years, the first two years in
an easily accessible place
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