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.