Subject: File No. SR-NYSE-2013-07
From: Loren Hanson
Affiliation: Otter Tail Corporation
June 17, 2013
My name is Loren Hanson and I’m the Assistant Secretary for Otter Tail Corporation. Otter Tail Corporation is an investor owned utility and is the issuer/transfer agent for its stock, which is traded on the NASDAQ OMX under the trading symbol OTTR.
I’m offering comments for our company concerning the proposed rule change to amend fees set forth in NYSE Rules 451 and 465, and the related provisions of section 402.10 of the NYSE Listed Company Manual, for the reimbursement of expenses by issuers to NYSE member organizations for the processing of proxy materials and other issuer communications provided to investors holding securities in street name, and to establish a five-year fee for development of an enhanced brokers internet platform.
Let me first of all acknowledge appreciation for the efforts the Commission is taking to fully evaluate whether the fees under the proposed rule are “fair and reasonable” as well “equitable” among all members, including issuers. Proxy-related fees represent a significant portion of our company’s budget for shareholder-related expenses and we continually look for ways to use our resources more efficiently in order to enhance shareholder value in our company.
With that background, we do have some concerns with the fees set forth in the proposed rule change as noted below:
- The proposed fee structure, in our opinion, is unnecessarily complex. In addition to the “basic processing fee” and “supplemental fees” both of which have tiered rates, there are “incentive fees”, which would be changed to “preference management fees” and would be charged as a flat rate for all issuers, unless they are managed accounts, in which case there would be a reduced rate assessed. In one instance tiered rates are advocated as being more equitable for issuers, however, in the case of the preference management fees they are not. How can tiered rates be beneficial in one set of rates and not in another? In addition, there are “notice and access fees” which were not even addressed in the intimal study. As a side note, our company adapted the notice and access model in 2008 with the expectation that our proxy-related expenses would decrease with the reduction in printing and mailing expense. However, most of the printing cost reductions we’ve experienced to date have, to a large degree, been offset by increased notice and access fees assessed by Broadridge. In our view, the rate structure needs to be simplified to eliminate all of the different “fee categories” and have an independent review of the tiered rates to make sure they are fair and equitable for all issuer sizes.
- As a small issuer, we are concerned that our fees would increase, not decrease, under the new rate structure. That concern is based on our previous experience with Broadridge’s fees, as well as analysis provided by the Securities Transfer Association(STA), as noted in their comments to the Commission on March 4, 2013, where their study showed issuers with less than 300,000 beneficial owner positions would have an increase of over 25% in their fees as proposed under the rule change.
- In our view, the proposed rule favors the interests of broker-dealers. This is especially true since Broadrdige is the largest “player in town” to act as the intermediary for beneficial positions and based on the special relationship they have with the brokerage community with their rebate program, makes it “challenging” for them to fairly represent issuers as well.
- We have concerns on how the analysis for the proposed rule was carried out by the Proxy Fee Advisory Committee(PFAC). Based on our review of the information provided by that committee, we question if there was a thorough, independent analysis of costs and benefits with the proposed rule. The mere fact that much of the data supplied for the study came exclusively from Broadridge without an independent review and without additional sources of information …i.e. more issuer input …discredits, in our opinion, the results of their research. If we look at the notice and access model alone, common sense would dictate that if you are able to eliminate a majority of printing and mailing expenses under this approved model, then total proxy-related expenses should drop dramatically as well. And yet our experience has been that with notice and access fees assessed by Broadridge, a good majority of those savings go away.
In conclusion, we feel the proposed rule should be rejected by the Commission since the analysis performed was not done with an independent and thorough review and, in the end, can be no assurances that the rates assessed to issuers would be fair and reasonable nor equitable based on issuer size.
Thank you for the opportunity to respond to this proposed rule. If you have any questions or would like additional information, please don’t hesitate to contact me directly.
Assistant Secretary/Assistant Treasurer
Otter Tail Corporation
215 South Cascade Street
Fergus Falls MN 56537
Phone: 218-739-8481 or Toll Free 800-664-1259