FINRA Amends Rule On Reimbursement Rates For Proxy Materials Distribution – Corporate/Commercial Law

FINRA amended provisions
of FINRA Rule 2251 (“Processing and Forwarding
of Proxy and Other Issuer-Related Materials”) regarding
reimbursement rates for incurred expenses in processing and
forwarding proxy and other issuer-related materials.

The rule requires firms “to transmit proxy materials and
other communications to beneficial owners of securities and limits
the circumstances in which FINRA member firms may vote proxies
without instructions from those beneficial owners.” It also
sets the “rate reimbursement provisions pursuant to which
firms are entitled to receive fees in connection with the
rule’s forwarding obligations.”

The amendments, which are effective immediately, (i) apply the
notice and access fees to investment company shareholder report
distributions, and (ii) prohibit fees on accounts that only contain
shares that the member transferred for free to the account
holder.

This rule change conforms to two amendments the SEC approved on
the NYSE’s rate reimbursement provisions. The notice and access
fees provision under FINRA Rule 2251.01(a)(6) is designed to
correspond with NYSE Rule 451.90(5). The prohibition on processing
fees provision under FINRA 2251.01(a)(7) is designed to correspond
with NYSE Rule 451A.

Primary Sources

1. Regulatory
   Notice 22-02: FINRA Amends Rule 2251 regarding Reimbursement Rates
   for Processing and Forwarding Proxy and Other Issuer-Related
   Materials




2. NYSE Rule 451: Processing and Transmission of
   Proxy Material




3. NYSE Rule 451A: Fee Exclusion for Shares
   Distributed by Member Organizations without
   Charge

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