February 2, 1998
Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: File No. S7-27-97
Dear Mr. Katz:
We appreciate the opportunity to provide comments in connection with the proposed addition of a new Rule 154 under the Securities Act of 1933 and amendments to Rules 14a-3, 14c-3 and 14c-7 under the Securities Exchange Act of 1934. Lucent Technologies supports those "householding" proposals, which are intended to reduce the time and expense of printing and delivering documents to stockholders, with a few suggested changes discussed below to insure that the Rules proposed will deliver the expected cost savings. As a major issuer with over 3.5 million stockholders, we applaud the efforts of the Commission to promote efficiency and cost savings for the benefit of corporations and their stockholders.
To be effective, the householding rules should be free of any conditions or requirements that would add to the basic costs of implementation. On a per document mailed basis, the cost of printing, processing and mailing prospectuses and annual reports is modest, but when multiplied by a large number of stockholders the costs become substantial. Similarly, any condition or requirement that involves additional processing or handling of each item could add costs that exceed the expected cost savings and erode the benefit of the proposals even though the added expense on a per stockholder basis is not significant.
Thus, the condition in proposed Rule 154(b)(5)(i) and (iii) that the address for sending a single copy is an address "that you reasonably believe is a residence," should be eliminated. Subsection (c) of Rule 154, which defines what constitutes reasonable belief, would then be unnecessary and could be deleted. Even if an address were in a commercial or business zip code, today many residences in small cities and large are co-located in business or commercial buildings or areas. As long as the shareholders use the same address the nature of the address should not be relevant. The last sentence of Rule 154(f), which imposes requirements if you have reason to believe an address is a multi-unit building, also should be deleted. At this time, our vendors have not been able to furnish an automated system that can analyze the nature of an address or whether an address is a multi-unit building by zip code, and we would be interested in more information on the availability of such a system. Finally, there is still the requirement for notice with an opportunity to request individual copies which further reduces the importance of a residence address or multi-unit address.
Accordingly, Lucent urges the Commission to adopt proposed Rule 154 with the deletion of the "reasonable belief" condition in Rule 154(b)(5)(i) and (iii) and the deletion of Rule 154(c) and the last sentence of Rule 154(f). The same analysis and conclusions apply to the "reasonable belief" and multi-unit address requirements in the proposed changes to Rule 14a-3(e)(1)(ii)(E)(1) and (3), Rule 14a-3(e)(1)(iii) and the Note to Rule 14a-3(e)(1). Therefore, Lucent similarly urges the Commission to adopt the proposed changes to Rules 14a-3, 14c-3 and 14c-7 with the deletion of the "reasonable belief" condition and multi-unit address requirement.
The Commission requested comment on the exclusion from proposed Rule 154 of Form S-4 and other prospectuses in connection with business combinations, exchange offers or reclassifications of securities. While those usually are not repeated transactions that offer the same potential for cost savings as other prospectuses or annual reports to shareholders, we see no reason why they should be excluded from the benefit of Rule 154. The same protection of requiring written notice with an opportunity to request individual copies in the case of previous accounts, or the requirement for consent in the case of new accounts, would provide reasonable assurance that shareholders will have copies of the documents available. The same considerations apply to proxy statements in the ordinary course, such as proxy statements for regular annual meetings, and argue for permitting householding of all proxy statements and prospectuses.
We believe the Commission should extend the benefit of the householding amendments in the Proxy Rules to proxy statements in the same manner as annual reports to shareholders. Of course, each account will receive a proxy card, but eliminating duplicate proxies is still a significant cost savings. If the Commission does not see fit to include proxy statements at this time, we urge the Commission to institute a new rulemaking to extend the benefit of householding to proxy statements.
Also, the Commission asked for comments on whether the rules should require investors to specify the name of the investor to receive the document. We believe the rules as proposed provide adequate protection to investors, and that adding a requirement for each stockholder to specify the individual investor would complicate the process unnecessarily and could raise cost concerns that would make the proposals uneconomic.
Finally, the Commission expects that the requirement to transmit the document to a natural person would preclude companies from householding reports to a street name intermediary. However, we read the proposals to permit householding to beneficial owners at the address of the beneficial owners as opposed to the address of the street name intermediary. This is significant because a large part of the cost of distributing annual reports and other documents involves the handling of beneficial accounts in street name. We would appreciate any efforts the Commission could make to encourage the brokerage industry and Automatic Data Processing, Inc. and any other firms servicing beneficial accounts to develop procedures to permit householding of beneficial owners on an economic basis.
We recognize that today's proposal is but one of many initiatives by the Commission to bring the benefits of technology to the investment community, corporate issuers and securities markets, and that the success of these initiatives depends upon the active cooperation of all the different parties involved. We at Lucent Technologies, as a corporate issuer with one of the largest and most diverse stockholder bodies in the world, would be happy to assist the Commission in any way we can to achieve these objectives. Please call me (908-582-7897) if you have any questions or if we can provide further information.
Very truly yours,
Pamela F. Craven
Vice President - Law