Computershare Trust Company, Inc.
6th February 2002
Securities and Exchange Commission
450 Fifth Street NW
Washington DC 20549-0609
Re: File Number SR-NYSE-2001-53
Proposed Amendments to New York Stock Exchange Rules 451 & 465
I refer to the above-mentioned proposed rule amendments lodged by the New York Stock Exchange (`NYSE') and made public on January 16 2002, relating to proxy vote distribution and fees for nominee or `street name' holders. Please find below our comments on the proposed amendments.
Computershare welcomes the review of this area by the NYSE and the SEC, and endorses the reduction in fees for some issuers provided by the proposed rules. However, we firmly believe there remains scope for further cost improvement in the proxy distribution system for `street names'. We are therefore pleased to note that the NYSE and SEC both remain open to the potential for further regulatory reform in this area.
Computershare is a leading financial services and technology provider for the global securities industry. We are the largest and only global share registry/transfer agent, managing more than 69 million shareholder accounts for over 7,500 corporations in nine countries on five continents. We also provide sophisticated trading technology to financial markets in each major time zone.
In North America, Computershare Investor Services acts for 3500 clients and employs 1500 staff. Our clients in the United States include Apple, Hewlett Packard, Intel, Texas Instruments, Household International and Walgreen Corporation as well as other leading US corporate issuers.
PARTICIPATION IN PROXY VOTING REVIEW COMMITTEE DISCUSSIONS
As the leading international transfer agent, with experience in proxy distribution and administration in a diverse range of international markets, Computershare was invited to make a presentation to the Proxy Voting Review Committee at its meeting on 17 October 2001.
In our presentation, we argued that US issuers should have the same right to choose the party that administers the proxy process for `street names' as they presently have for the registered portion of their investor base. This would foster competition and enable market forces, not regulation, to establish lower prices, as it does in international markets.
Computershare is also participating in the review of proxy distribution and administrative processes in Canada and the development of proposed legislative amendments under NI 54-10, which would provide control over the process to the issuer.
NYSE PROPOSED AMENDMENTS TO RULES 451 & 465
The proposed amendments will reduce the current fees paid by `large' issuers (as defined in the proposed rules) while leaving the fees for small issuers unchanged. The net effect of the amendments would reduce the basic mailing fees paid by large issuers by 5 cents to 45 cents, and reduce the `suppression' fee that large issuers pay to member organisations by 50% to 25 cents.
Computershare endorses these changes as providing an immediate measure of relief for large issuers. We also endorse the change in the rules from pilot to permanent rules, noting that the rules (like other NYSE rules) could be amended again by the NYSE Board in the future.
However, we submit that there remains scope for further reductions in costs if the proxy administration system is deregulated. A deregulated environment could be delivered for example, if the legal obligation to communicate with street name holders was transferred from brokers to issuers. This would enable issuers to determine which service provider (e.g. its Transfer Agent, ADP, or other approved party) may administer the proxy process for that company's entire investor base, including those held in `street names'. Importantly, this would give issuers the ability to choose service providers - a choice that they do not currently have - and allow the cost of the service to be set by market forces.
Our experience, in a diverse range of international markets, shows that, outside North America:
A deregulated system of issuer choice of service provider would remove the need for the NYSE to determine appropriate prices (perhaps other than to set a maximum price threshold) for the distribution of proxies for `street names'. Our experience in international markets has shown that the cost of proxy processing is lower, often substantially so, where the issuer is allowed to choose service provider and greater competition exists in the market. In our view this can be achieved without affecting the integrity of the proxy voting system.
For example, in the United States, issuers are charged a `premium' for electronic distribution whereas elsewhere in the world electronic distribution is offered at a discount.
We suggest that a deregulated system for proxy distribution to `street names' could be developed in a way that remains consistent with the NYSE's obligations under the Securities Exchange Act of 1934, and delivers the benefits of competition to issuers and their investors. In our view, a deregulated approach will deliver cost savings to a broader range of issuers than the current proposed rule amendments, while also maintaining the integrity of the proxy distribution system. There are precedents for this in other international markets.
REPRESENTING THE VIEWS OF OUR CLIENTS
Throughout our participation in this debate, we have liaised closely with a number of our key clients in the United States to ensure that a competition based "choice" is not inconsistent with their views and interests. These clients have all supported our position on the proposed amendments, as presented in this submission by Computershare to SEC, and agreed that we should seek further debate about de-regulation of the proxy system to determine whether further changes to the proxy system can be delivered.
ONGOING REVIEW OF PROXY DISTRIBUTION SERVICES
In its submission to the SEC regarding the rule amendments, the NYSE stated that this issue would be subject to continuing review and that it intended to continue to meet with the Committee to consider possible approaches to broader reform of the proxy distribution system. We welcome the NYSE and the SEC's willingness to engage in continuing discussions and review in this area.
Computershare looks forward to working with the NYSE and SEC, and relevant market participants, to continue to improve the system and deliver greater cost savings to issuers and their investors. We suggest that discussions should be continued as soon as possible, so that every effort can be made to deliver broader reforms from 2003.
Should you wish to discuss any aspect of this submission in further detail, please contact Paul Conn on (212) 701 7604 or at email@example.com.
Executive Vice President
Computershare Investor Services (US)