The Proxy

Fee Advisory Committee (PFAC), formed by the New York Stock Exchange, has released recommendations for changing 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.” 

The recommendations

propose to streamline proxy fees and make them more transparent to issuers. It

lays out steps that it says could result in a “modest” decrease in total fees paid

of approximately 4 percent.

“Proxy

distribution fees have been part of the NYSE's rules since 1937 and have been reviewed

and changed periodically over that time,” Scott Cutler, Co-Head of U.S. Listings

and Cash Execution and member of the PFAC Committee, said in a statement. “The NYSE has long operated under

the assumption that these fees should represent a consensus view of the issuers

and the broker-dealers involved.”

Although it “recognizes

that there is a reliable, accurate, and secure proxy distribution process in

place today,” the committee seeks to “bring proxy distribution fees in line

with the work performed and add increased transparency,” the May 16

announcement says.

PFAC's

stated goals 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.  The fee recommendations

do not take into account potential changes to SEC rules that are being

discussed as part of its “proxy plumbing” effort.

The PFAC recommendations

include:

Streamlining

proxy fees into three basic fee categories (a nominee fee, a basic processing

fee, and a preference management fee).

Providing a

more gradual tiering of the basic processing fee to smooth the “cliff effect” that

occurs between large and small issuers.

Reducing

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.

A “modest”

increase of the processing fees for special meetings and contests.

Reducing by

half the fee for annual meeting reminder notices.

Allowing

issuers to segment non-objecting beneficial owners (NOBO) lists, rather than

require issuers to pay for complete lists, the current industry practice.

Creating an

ongoing process for reviewing proxy fees and services more frequently.

The NYSE

will initiate discussions regarding the PFAC's recommendations with the SEC, after

which it expects to submit a rule change proposal that would be

published for public comment.