Adoption of an Amendment to the Interpretation of the Board of Governors on "Forwarding of Proxy and Other Materials"
TO: All NASD Members and Other Interested Persons
The Securities and Exchange Commission has recently approved an amendment to the Interpretation of the Board of Governors, "Forwarding of Proxy and Other Materials," under Article III, Section 1 of the NASD Rules of Fair Practice.1/ This amendment, which became effective on April 1, 1985, establishes a surcharge which may be charged by NASD members to issuers in connection with proxy solicitations.
The Interpretation requires member firms 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 amendment permits a member firm to charge an issuer an additional $.20 for each set of proxy material handled by the member. The amendment is temporary and, unless extended, the surcharge can be applied only until March 31, 1986.
The purpose of this amendment is to assist member firms in recouping the direct and indirect start-up costs incurred to comply with SEC Rules 14b-l(c) 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 whose securities are held in "street name" accounts with broker-dealers. Rule 17a-3(a)(9)(ii) requires that broker-dealers determine and maintain a record as to whether or not a customer objects to disclosure of his name, address 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 issuer's securities.
The text of the amendment is attached to this notice.
Questions regarding this notice should be directed to Craig L. Landauer, Office of General Counsel, at (202) 728-8291.
Frank J. Wilson
Executive Vice President and General Counsel
AMENDMENT TO INTERPRETATION OF THE BOARD OF GOVERNORS "FORWARDING OF PROXY AND OTHER MATERIALS" UNDER ARTICLE III, SECTION 1 OF THE 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 as a guide by members:
* * * *
Surcharge for Proxy Solicitation
Twenty 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 to March 31, 1986 as a surcharge in addition to the appropriate charges specified in this Appendix.
1/ NASD Manual (CCH) p. 2037-3.
* New language is underlined.