Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, May 21, 2012

NYSE Panel Recommends Changes to Proxy Distribution Fees

On May 16 the Proxy Fee Advisory Committee (PFAC), formed by the New York Stock Exchange, published its recommendations for changes to the fees paid by public companies to banks and brokers for the distribution of proxy materials to shareholders who hold their stock in "street name."  Composed of issuers, broker dealers and investors, the PFAC was formed in September 2010 to review the existing proxy distribution fee structure and make recommendations for change. Any changes to these fees are subject to SEC approval. (Download NYSE.ProxyAdvisoryPanelReport)
Overall, the Committee's recommendations would streamline proxy fees and make them more transparent to issuers as well as result in a modest decrease in total fees paid of approximately 4%  

The goals of the Committee have been to support the current proxy distribution system, including continued support for the elimination of mailings; to encourage and facilitate active voting participation by retail beneficial owners; improve transparency of the fee structure and ensure that fees are as fair as possible and aligned with the work involved.
Principal Recommendations:

Streamline the proxy fee categories into three basic fee categories - a nominee fee, a basic processing fee and a preference management fee - to increase transparency.
Provide a more gradual tiering of the basic processing fee to smooth the "cliff effect" that occurs between large/small issuers.
Reduce preference management fees for managed accounts to half the normal rate, and eliminate all processing fees for managed account positions of five shares or less.
Increase modestly the processing fees for special meetings and contests.
Reduce by half the fee for annual meeting reminder notices, to support improved shareholder communication.
Subject the Notice & Access fees to the proxy fee rules.
Allow issuers to stratify their NOBO lists, rather than require issuers to pay for complete lists as is currently industry practice (see below). 

The PFAC also recommended that the NYSE:
Explore the impact of allowing issuers to request stratified NOBO lists, including an extra fee for stratification. 
Discuss the proposal to create an investor mailbox as a possible means to increase voting participation by retail shareholders with additional industry representatives so it can be determined whether the proposed "success fee" is at an appropriate level. 
Create an ongoing process to review proxy fees and services more frequently going forward.

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