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FINAL RULE:
DELIVERY OF PROXY STATEMENTS AND INFORMATION STATEMENTS TO HOUSEHOLDS




SECURITIES AND EXCHANGE COMMISSION


17 CFR PARTS 230 AND 240


[RELEASE NOS. 33-7912, 34-43487, IC-24715; FILE NO. S7-26-99]


RIN 3235-AH66

DELIVERY OF PROXY STATEMENTS AND INFORMATION STATEMENTS TO HOUSEHOLDS

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: We are adopting amendments to the proxy rules under the Securities
Exchange Act of 1934. These amendments permit companies and intermediaries to
satisfy the delivery requirements for proxy statements and information
statements with respect to two or more security holders sharing the same address
by delivering a single proxy statement or information statement to those
security holders. This method of delivery, often referred to as "householding,"
will reduce the amount of duplicative information that security holders receive
and lower printing and mailing costs for companies. These amendments also modify
the rules for householding annual reports. Finally, we are amending Rule 154
under the Securities Act of 1933 to permit householding of proxy statements
combined with prospectuses.

EFFECTIVE DATE: The rule amendments will be effective December 4, 2000. This is
the date on which companies can rely on these rules to begin householding.
Companies may begin to solicit consents to householding prior to the effective
date of these rules.

FOR FURTHER INFORMATION CONTACT: Heather Maples, Attorney-Adviser, Division of
Corporation Finance, at (202) 942-2900.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Rule 1541 under the
Securities Act of 19332 and Rules 14a-2,3 14a-3,4 14a-7,5 14b-1,6 14b-2,7
14c-3,8 and Schedules 14A and 14C9 under the Securities Exchange Act of 1934.10


I. BACKGROUND

The federal securities laws generally require public companies to deliver a
"proxy statement" when they solicit proxy voting authority from their security
holders.11 Even when they are not soliciting proxy voting authority, these
companies must deliver an "information statement" to security holders when they
are taking certain corporate actions. Lastly, in connection with the delivery of
a proxy statement or information statement, when directors are being elected,
these companies must send security holders an annual report.12 As a result of
ownership of securities by individuals through different types of accounts, such
as brokerage accounts, individual retirement accounts and custodial accounts for
minors, duplicate copies of these documents often are delivered to a single
household.13

We are adopting amendments to the proxy rules to reduce the amount of this
duplicative information that security holders receive. 14 Today's amendments
expand upon rules we adopted in November 1999 that permit companies to household
prospectuses, annual reports and investment company semi-annual reports if the
document is delivered to a shared address and security holders properly consent
to householding.15

At the time we originally proposed those rules, we did not propose rules to
permit householding of proxy statements and information statements. However, in
response to those original proposals, several commenters suggested that we
consider further action to permit the householding of proxy materials. A number
of commenters noted that householding proxy materials would facilitate the
common practice of mailing the annual report together with the proxy statement
or information statement. A few commenters further suggested that we extend the
proposed householding provisions expressly to permit broker-dealers and banks
("intermediaries") to household delivery of annual reports, proxy statements and
information statements to beneficial owners of equity securities.

In response to these comments, when we adopted the rules to permit the
householding of prospectuses, annual reports and investment company semi-annual
reports, we also proposed to permit delivery of one proxy statement or
information statement to security holders who share an address. We proposed
these rules to reduce the number of duplicate documents delivered to security
holders and conform the provisions regarding the householding of proxy
statements and information statements to the amendments that permit the
householding of prospectuses, annual reports and investment company semi-annual
reports.

We received 16 comment letters in response to the proposals.16 Commenters
generally supported householding of proxy statements and information statements,
but many suggested changes that would affect the scope and conditions of the
rules. We are adopting the proposed amendments, with a number of modifications
that address issues raised by commenters. The adopted rules differ from the
proposed rules in that they will

   

 * expand the permitted forms of addressing householded annual reports and proxy
   statements or information statements to include any form to which each
   security holder included in a householded group consents in writing;
   
   
   
   

 * shorten the notification period for householding by implied consent to 60,
   rather than 90, days;
   
   
   
   

 * eliminate the proposed requirement that the notice of intent to household by
   implied consent be delivered separately from any other communications; and
   
   
   
   

 * permit intermediaries to household only if the company does not object.
   
   

Rule 154, as originally adopted, prohibited the householding of combination
proxy statement-prospectuses delivered for business combinations, exchange
offers or reclassifications of securities registered on Forms N-14,17 S-418 and
F-4.19 To coordinate Rule 154 with today's amendments to the proxy rules, we are
adopting, as proposed, an amendment to Rule 154 that removes the prohibition on
householding of those combination proxy statement-prospectuses.


II. DISCUSSION




A. PURPOSE OF THE AMENDMENTS



Companies, intermediaries and security holders have indicated to us in the past
that the distribution of multiple copies of the same document to security
holders who share the same address often inundates security holders with
unwanted mail and causes the company to incur higher than necessary printing and
mailing costs. Today's amendments will alleviate these concerns by allowing
companies and intermediaries to household proxy statements and information
statements to both record and beneficial security holders in the same manner as
they may household prospectuses and annual reports to security holders.




B. DELIVERY OF PROXY STATEMENTS AND INFORMATION STATEMENTS TO A HOUSEHOLD



1. Today's Amendments

Exchange Act Rule 14a-3 requires a company to furnish a proxy statement to
security holders before soliciting proxy voting authority for a matter submitted
to a security holder vote.20 Companies are able to deliver proxy statements
directly only to their security holders of record; they generally must deliver
proxy statements to their beneficial security holders indirectly through
intermediaries.21

If the proxy solicitation relates to a meeting at which directors will be
elected, an annual report to security holders must accompany or precede the
proxy statement. That annual report to security holders must include specified
financial information about the company.22

In November 1999, we adopted amendments to Rule 14a-3 to permit companies to
household the annual report to security holders. When the annual report must
accompany or precede the proxy statement, companies generally mail the annual
report with the proxy statement in the same envelope.23 As a result, a company's
inability to household its proxy statement limits its ability to reduce costs by
householding the annual report.

Under today's amendments, a proxy statement is considered delivered to all
security holders at a shared address,24 for purposes of the federal securities
laws, if 25

   

 * the company or intermediary relying on the rules delivers the document to the
   shared address;
   
   
   
   

 * the company or intermediary relying on the rules addresses the document in
   accordance with the rules;
   
   
   
   

 * the security holders consent to delivery of a single document in accordance
   with the rules;
   
   
   
   

 * if the document is a proxy statement, the company includes a separate proxy
   card for each security holder sharing an address; and
   
   
   
   

 * the company includes an undertaking regarding prompt delivery of separate
   copies of the document in the proxy statement.
   
   

We are amending Rule 14c-3 to permit companies to household information
statements in the same manner as they may household proxy statements under Rule
14a-3.26

2. Conditions to Today's Amendments

a. Consent

Amended Rule 14a-3 requires a company to obtain consent from each security
holder who will be included in a householded group.27 A company could either
obtain an affirmative written consent from a security holder or rely on an
implied consent obtained in accordance with the rules we adopt today.28

i. Affirmative written consent

A company may household the proxy statement or information statement to related
or unrelated security holders sharing an address if each of the security holders
consents in writing29 to the company's delivery of one proxy statement or
information statement to the shared address. In order to satisfy the written
consent requirement, a security holder would need to consent specifically to
householding of proxy statements and information statements. In addition, in
order for a written consent to be considered valid, a security holder must be
informed of the following, prior to giving written consent:

   

 * the duration of the consent,
   
   

 * the procedures the security holder must follow to revoke consent, and
   
   
   
   
   
   
   the company's obligation to begin sending individual copies to a security
   holder within 30 days after the security holder revokes consent.
   
   

ii. Implied consent

Today's amendments permit a company to deliver a single proxy statement or
information statement to multiple security holders who share an address without
obtaining affirmative written consent to householding from those security
holders, if all of the following conditions are met.30

   

 * Each security holder at the shared address has the same last name as the
   other security holders (or the company reasonably believes that they all are
   members of the same family).31
   
   
   
   

 * At least 60 days before beginning delivery by householding, the company sends
   each record security holder at the shared address a separate written notice
   in plain English32 of its intention to household proxy statements and
   information statements.33
   
   
   
   

 * The notice or envelope in which the notice is mailed includes the following
   prominent statement, or similar clear and understandable statement, in
   boldface type: "Important Notice Regarding Delivery of Security Holder
   Documents." If the notice is mailed with other security holder
   communications, both the notice and the envelope containing the notice must
   include this prominent statement. 34
   
   
   
   

 * The notice provides security holders who object to householding with a reply
   form or toll-free telephone number to object to householding.35
   
   
   
   

 * The notice states the duration of the consent and explains how a security
   holder can revoke consent to householding.36
   
   
   
   

 * The company does not receive notice that the security holders object to
   householding within the 60-day waiting period.37
   
   
   
   

 * The company delivers householded proxy statements or information statements
   only to a post office box or residential street address.38
   
   




(A) SAME LAST NAME OR MEMBERS OF SAME FAMILY



Almost all of the commenters supported householding by implied consent, noting
that an implied consent procedure will reduce the costs of obtaining
householding consents. Although several commenters urged us to relax this
requirement for householding by implied consent,39 two commenters supported the
requirement that a company could only use implied consent for members of the
same household who share the same last name or who the company reasonably
believes are members of the same family. This, they thought, is a useful
safeguard to ensure that all security holders at a shared address have access to
the proxy statement or information statement.40

As discussed in the proposing release for Rule 154, we designed the prospectus
householding rule so that householding by implied consent would be limited to
circumstances suggesting that the security holders not receiving a separate
disclosure document would wish to consent and that they would have access to the
disclosure document if delivered to another security holder. This was because
householding without affirmative consent creates the risk that a security holder
who wishes to receive a document will not receive one. Due to these concerns,
and in response to the comments supporting the restrictions as necessary to
safeguard security holders, we are retaining the requirement as proposed and
will limit householding by implied consent to circumstances where the security
holders share the same last name or the company reasonably believes they are
members of the same family.41 This approach also will help ensure consistency
with the procedures required by Rule 154 regarding householding of prospectuses.




(B) 60-DAY WAITING PERIOD



We originally proposed that companies be required to send the notice of their
intention to household at least 90 days before beginning delivery of householded
documents. The majority of commenters felt that a 90-day waiting period would be
too long. Today's amendments require that companies send the notice at least 60
days in advance of beginning householding. In addition to maintaining
consistency with Rule 154, we believe the 60-day waiting period adequately
protects security holders by allowing them a reasonable time to respond. We
caution companies, however, to carefully examine their schedules for proxy
printing and delivery so that they can allow additional time necessary to avoid
interfering with the proxy statement mailing schedule.42




(C) REQUIRED LEGEND ON THE NOTICE



The proposed proxy statement and information statement householding rules would
have required companies to mail the notice of intent to household separately
from other security holder communications. We have relaxed that requirement to
allow those notices to be mailed with other communications, such as, for
example, account statements, dividend checks or security holder reports.43
However, because of this change, we also have revised the legending requirement
from the proposal.44 We proposed to require companies to include a prominent
statement reading "Important Notice Regarding Delivery of Security Holder
Documents," or a similar clear and understandable statement, in bold-face type
on either the notice itself or the envelope in which the notice was mailed.
Because the notice may now be included in the same package as other materials,
we believe it is appropriate to revise this section to make it consistent with
Rule 154, which requires the legend to appear on both the notice and the
envelope containing it if the notice is mailed with other security holder
communications.




(D) IMPLIED CONSENT ONLY FOR POST OFFICE BOXES OR RESIDENTIAL STREET ADDRESSES



There was limited objection to the proposed requirement that companies deliver
documents householded by implied consent only to a residential street address or
post office box. Under Rule 14a-3(e)(1), a company can assume that any street
address is residential unless the company has information indicating that the
address is a business.45 We have adopted the requirement as originally proposed.
We intend that the residential street address requirement will prevent
companies, absent affirmative written consent, from householding a proxy
statement or information statement to security holders with the same last name
who share a business address but are not related.

b. Duration of Consent

Companies could solicit from security holders a consent to householding of
perpetual duration that is valid until revoked, or a consent of limited duration
such as one year or a specified number of years. If a company relies on implied
consent to householding, the required 60-day notice to security holders must
state clearly whether the company intends to household indefinitely or for a
specified period.46 Security holders may revoke their consent to householding at
any time by instructing the company orally or in writing. A company could not
continue to household the proxy statement or information statement more than 30
days after receiving a revocation instruction from a security holder. 47

c. Addressing

We are adopting, as proposed, provisions that allow companies the flexibility to
address the householded copy of the proxy statement or information statement
either to security holders as a group (e.g., "ABC Corporation Security Holders,"
"Jane Doe and Household" or "Household of Jane Doe") or to each of the security
holders sharing the address (e.g., "Jane Doe and Mary Doe").48 We understand
from the comments received that it may be less costly in some instances for
companies to address the householded proxy materials using an existing account
title (e.g., to one individual in the household), rather than using a group
address. In response to these comments, the final rule allows an additional
alternative; security holders may consent to an alternative, specific means of
addressing, if the company so requests.49 The alternative addressing provision
will allow companies to vary only the recipient line of the address; companies
may not use this provision to deliver a householded document to an address that
is not shared by each security holder included in the householded group. A
company may rely on the alternative addressing provision only if each security
holder to be included in the householded group consents, in writing, to the
specific form of address the company will use. A company will not be required to
comply with security holder requests to address the materials in any format not
suggested by the company. However, if a security holder indicates that his or
her consent is contingent on a particular form of addressing, that consent will
not be valid unless the company addresses the materials in the format requested
by the security holder.

Companies may request that those security holders to be included in a
householded group consent to addressing the materials to only one of the
security holders. However, before using that form of address, a company must
receive a written consent to using the company-suggested form of address from
each security holder to be included in the householded group.

The term "address," for purposes of today's amendments, means a street address,
post office box number, an electronic mail address, facsimile telephone number
or similar destination to which paper or electronic documents are delivered. If
a company has reason to believe that an address is a street address of a
multi-unit building, the address also would have to include the unit number.

d. Electronic Householding

Some companies have chosen to deliver proxy statements and annual reports in
electronic rather than paper format. Because the potential benefits of
householding electronic documents appeared to be minimal,50 we did not propose
and the amendments we adopt today will not allow companies or intermediaries to
rely on implied consent to household electronically delivered proxy statements
and information statements.

However, a company may household documents delivered electronically, provided it
obtains a valid consent to electronic delivery of documents and a valid
affirmative written consent to householding. We have previously issued
interpretive guidance on the procedures a company should follow to obtain valid
consent to electronic delivery of documents. 51 In this regard, we note that the
recently enacted Electronic Signatures Act52 also addresses consenting to
receive information electronically. We are still considering that legislation
and will address how it may impact our previous interpretive guidance at a later
time.

Under Rule 14a-3(e)(1)(i)(B), a company must address a householded document to
the security holders as a group, to each of the security holders individually,
or to the security holders in a form to which each of the security holders has
consented in writing. Securities Act Rule 154 and Investment Company Act Rule
30d-1 require a company to address a householded document to the security
holders as a group or to each of the security holders individually. A company
householding electronically delivered documents may satisfy those provisions by
including either of the two specified group address formats in the subject line
of the electronically delivered document. A company householding electronically
under Rule 14a-3(e)(1) may, in the alternative, obtain the affirmative written
consent of each security holder at the shared electronic address to deliver the
documents to that electronic address (e.g., jdoe@isp.com).53 Companies and
intermediaries should also note that because householded documents must be
delivered to a shared address, they may not deliver householded documents
electronically to security holders who share the same street address but who do
not share the same electronic address.

3. Disclosure Regarding Householding and Undertaking To Provide Additional
Copies of Householded Documents

When a company households an annual report, proxy statement or information
statement, it must undertake, in its proxy statements and information
statements, to deliver a separate copy of the document to any security holder
who did not receive an individual copy of the householded document and who
requests an extra copy.54 The company must provide instructions as to how a
security holder may notify the company that the security holder wishes to
receive an additional copy of an annual report, proxy statement or information
statement. Although the proposed rules did not include a requirement that
companies include specific instructions to inform security holders how to
request additional copies, we believe this information is necessary for the
required undertaking to adequately protect security holders. Providing a single
point of contact for security holders requesting additional copies also will
allow companies to respond more efficiently to these requests. The company would
have to deliver the separate copy promptly after receiving a security holder
request.

This undertaking requirement ensures that a security holder who has consented to
householding, but then experiences a change in circumstances that makes sharing
a householded document impractical, still has access to the annual report, proxy
statement or information statement. Although the 1999 amendment to Rule 14a-3
did not require this undertaking, today's amendments impose the requirement not
only for proxy statements and information statements but also for annual
reports.

We have revised Rule 14a-3(e)(1)(i)(E) from the proposal to clarify that a
company must include the undertaking in each proxy statement or information
statement if the company or any intermediary delivers annual reports, proxy
statements or information statements in householded form to either record or
beneficial security holders. In addition, at the company's option, it may
restate the undertaking in any document delivered in householded form. We have
amended Schedules 14A55 and 14C56 to require the undertaking.

We also have amended Schedules 14A57 and 14C58 to require a company that chooses
to household the annual report, proxy statement or information statement to
include the following information in the proxy statement or information
statement:

   

 * A statement that only one annual report, proxy statement or information
   statement is being delivered to multiple security holders sharing an address
   unless the company has received contrary instructions from one or more of the
   security holders;
   
   
   
   

 * The phone number and mailing address of a point of contact the security
   holder can use to notify the company that the security holder wishes to
   receive a separate annual report, proxy statement or information statement in
   the future; and
   
   
   
   

 * Instructions as to how security holders can request householding if they are
   receiving multiple copies of the annual report, proxy statement or
   information statement.
   
   

We received no comments objecting to the proposed content of the required
disclosure.59 Companies should note that they will be responsible for providing
this disclosure if any intermediary households proxy statements or information
statements to beneficial owners.60

4. Inclusion of Multiple Proxy Cards With Single Proxy Statement

Rule 14a-4(f)61 forbids any person conducting a proxy solicitation to deliver a
form of proxy, often referred to as a "proxy card," to a security holder unless
it is accompanied or preceded by a proxy statement. Therefore, security holders
generally receive the proxy card in the same envelope that contains the
company's proxy statement and annual report. Proxy cards are addressed based on
the security holder account titles appearing on a company's list of registered
holders.

Under today's amendments, a company would need to continue sending a separate
proxy card with the householded proxy statement for each separate security
holder account with respect to which proxy authority is being solicited. For
example, if a husband and wife each hold the same company's securities in their
own individual accounts, a company could deliver a single proxy statement and
annual report to them but would have to provide two separate proxy cards and
designate the proxy cards individually based on the two account titles.

We understand that inserting multiple proxy cards with a single set of proxy
materials may not be the best solution for all companies or intermediaries.
Several commenters indicated, for instance, that they may include one proxy card
with the householded materials and mail the remaining proxy cards in separate
envelopes. In order to comply with Rule 14a-4(f), which requires a definitive
proxy statement to accompany or precede any proxy card delivered, companies may
presume that they meet the requirements of that rule if any proxy cards to be
delivered separately are mailed after the householded definitive proxy statement
is mailed and the proxy cards and proxy statement are mailed using the same
method of delivery (e.g., first class mail).

5. State Law Requirements Concerning Notice of Meeting

Many state corporate codes contain provisions requiring companies to provide
security holders of record with written notices of meetings and adjourned
meetings. The provisions generally state that written notice of a meeting at
which security holders are required or permitted to take action must be sent to
each security holder of record a specified number of days before the meeting
date. For example, the Delaware General Corporate Code states that written
notice of any meeting shall be given not less than 10 nor more than 60 days
before the date of the meeting to each security holder entitled to vote at the
meeting.62 This notice typically is transmitted with the proxy statement.

Because it is unclear whether a householded proxy statement that includes the
meeting notice would satisfy state law requirements that companies deliver a
notice to each record security holder, we solicited comment on whether and how
companies could meet state law notice requirements under the proposed rules.
Although two commenters indicated that state law meeting notice requirements
present neither legal nor practical obstacles to householding,63 one commenter
expressed the view that the Commission should work with the states to make clear
that the householding rules apply to security holder meeting notices delivered
pursuant to state law.64 We wish to clarify that the requirements for security
holder meeting notices are governed by state law, rather than by the
Commission's proxy rules, and these rule amendments are not intended to preempt
state law. Therefore, any company choosing to household the proxy statement will
have to consider the possible need to deliver separately the notice of meeting
to each security holder in the household to satisfy state law requirements.

6. Business Combination Proxy Statement-Prospectuses

As adopted in November 1999, Securities Act Rule 154 prohibited the householding
of prospectuses delivered in connection with business combination transactions,
exchange offers and reclassifications of securities.65 In the release proposing
Rule 154,66 we requested comment on whether companies should be permitted to
household those types of prospectuses, given that they generally are accompanied
by proxy cards or tender offer material that must be executed by each security
holder. Several commenters on the proposed proxy householding rules supported
broadening Rule 154 to permit householding of those types of prospectuses.67

Upon consideration of these comments, and because the proposals described in
this release would permit the householding of proxy statements, we are amending
Rule 154 to expand its coverage to include combined proxy statement-prospectuses
delivered in connection with business combinations, exchange offers or
reclassifications of securities. As with householding of proxy statements that
are not combined with prospectuses, companies householding the combined proxy
statement-prospectuses would continue to have to include separate proxy cards
that need to be executed by each individual security holder in the household.
Similarly, amended Rule 154 does not affect any other applicable requirement of
state or federal law concerning the delivery of any document that requires
individual execution, such as a security holder response to a tender offer.




C. HOUSEHOLDING OF PROXY STATEMENTS AND INFORMATION STATEMENTS BY INTERMEDIARIES
TO BENEFICIAL OWNERS



Rule 14b-1 sets forth obligations of registered brokers and dealers to forward
company communications to beneficial owners. Rule 14b-2 sets forth similar
obligations of banks, associations and other entities that exercise fiduciary
powers. We proposed changes to Rules 14b-1 and 14b-2 that would have permitted
these intermediaries, on their own initiative or at the request of a company, to
household the annual report, proxy statement or information statement to
beneficial owners sharing an address if the householding requirements were met.

We received significant comment on this proposal. Commenters agreed that it was
appropriate to allow intermediaries to household materials in the same manner as
companies.68 However, comment was divided regarding whether intermediaries
should be permitted to household without the consent of companies,69 whether
companies may require intermediaries to household70 and whether intermediaries
or companies should bear the expense related to the gathering of consents to
householding.71

In response to the commentary on this proposal, we believe that it is
appropriate that companies and intermediaries mutually agree to the householding
of materials. Therefore, we are adding notes to Rules 14b-1(b)(2) and
14b-2(b)(3) to permit, but not require, an intermediary to household annual
reports, proxy statements and information statements72either

   

 * at the request of the company, or
   
   

 * on its own initiative, but only if the company does not object.
   
   

An intermediary need not obtain an affirmative consent from a company before
beginning householding. We think it is sufficient if the intermediary provides
advance notice to a company that it intends to begin householding, with specific
instructions as to how the company may object to householding. The intermediary
should direct this notice to the company's senior officer in charge of security
holder communications or other person the company specifies for this purpose. If
a company objects, the intermediary may not household that company's documents.
An intermediary must cease householding a company's documents if the company
objects at any time.

Under amended Rules 14b-1(b)(2) and 14b-2(b)(3), an intermediary, rather than
the company, would follow the procedures described in Rule 14a-3(e)(1), with the
exception of Rule 14a-3(e)(1)(i)(E), and obtain consent to householding from
beneficial owners.73 Intermediaries using voting instruction forms to elicit
information from beneficial owners as to how their shares should be voted would
have to include a separate form for each beneficial owner who will receive a
householded proxy statement.74 This is similar to the requirement that companies
must include a separate proxy card for each individual record holder who
receives a householded proxy statement.

Several commenters discussed whether the company or the intermediary should be
responsible for satisfying the undertaking to provide an additional copy of the
householded materials upon request from a security holder. We believe that the
company should bear this responsibility. However, as today's amendments permit
intermediaries to household only when there is mutual agreement between the
company and the intermediary, those two parties may agree otherwise.

Under today's amendments, intermediaries or their agents may offer security
holders the option of consenting to householding of proxy statements and
information statements relating only to a particular company or to householding
of all proxy statements or information statements the intermediary is required
to forward to the security holder. Today's amendments, however, do not require
that intermediaries give security holders the option of limiting their consent
to a particular company.

Today's amendments state that intermediaries must exclude annual reports, proxy
statements and information statements that will be eliminated pursuant to
householding procedures in responding to company requests concerning the number
of the intermediaries' customers that are beneficial owners of the companies'
securities.75

Because intermediaries will be permitted to household unless a company objects,
we believe it is appropriate that they bear the burden of the consent
solicitation expenses, unless the company affirmatively agrees to pay these
expenses. In particular, we note that intermediaries may receive consents from
security holders to household materials from numerous companies. That being the
case, it is not clear how intermediaries would apportion the costs of the
consent solicitations between companies. Furthermore, we note that
intermediaries are under no obligation to household and that including the
implied consent notice with other security holder communications will allow the
intermediaries to conduct the consent solicitation at a much lower cost than
under our proposed rules. We also note that companies will retain the obligation
to provide additional copies of householded documents and include appropriate
disclosure regarding householding in their proxy statements and information
statements.

The proxy rules do not require intermediaries to forward information promptly to
beneficial security holders if a company does not provide assurance of
reasonable reimbursement of the intermediaries' reasonable expenses, both direct
and indirect, incurred in performing those obligations.76 The proxy rules do not
include a schedule of "reasonable fees," but the NYSE rules and rules of other
self-regulatory organizations do include a fee schedule.77 Nearly all large
broker and many bank intermediaries currently outsource the proxy material
distribution function for beneficial security holders to ADP Investor
Communications Services. ADP, as agent for intermediaries, is able to charge
companies for the proxy distribution services in accordance with applicable fee
schedules. Today's amendments will not affect the fees that ADP or other
security holder communication agents may charge companies on behalf of
intermediaries. Fees for forwarding proxy statements, information statements and
annual reports must be charged in accordance with any applicable self-regulatory
organization fee schedules.




D. HOUSEHOLDING OF PROXY STATEMENTS BY SECURITY HOLDERS



Today's amendments permit security holders who deliver a proxy statement to
other security holders to household the proxy statement to record and beneficial
holders if the company or intermediary previously has obtained security holder
consent to householding in accordance with the procedures in Rule 14a-3(e)(1).78
Rule 14a-7 sets forth the obligations of companies either to provide a security
holder list to a requesting security holder or to mail the security holder's
proxy materials. The rule provides that the company has the option to provide
the list or mail the security holder's materials, except when the company is
soliciting proxies in connection with going private or roll-up transactions. In
those cases, the security holder has the option to request the list or have the
company mail its materials. In addition to requiring that the company supply
householding information that it previously has obtained when providing the
security holder list, today's amendments require companies to share the benefit
of written or implied consents to householding that they have obtained when
mailing materials on a security holder's behalf.79

Intermediaries generally deliver proxy materials on behalf of soliciting parties
other than the company under the conditions set forth in Exchange Act Rules
14b-1 and 14b-2.80 We requested but received no supportive comment as to whether
Rules 14b-1 and 14b-2 should be revised explicitly to require this practice. We,
therefore, have not included such a requirement at this time. Nonetheless, under
today's amendments, an intermediary would still be permitted to household proxy
materials delivered on behalf of soliciting parties other than the company.


III. DELIVERY OF PROXY MATERIALS TO REGISTERED INVESTMENT ADVISERS AND
INVESTMENT MANAGERS

Many of the self-regulatory organizations have adopted rules that allow
registered investment advisers designated by beneficial owners and investment
managers designated by named fiduciaries of ERISA plans to vote proxies and
receive proxy material on behalf of the beneficial owners or ERISA plans.81 Our
proposed householding rules did not include any specific provisions regarding
householding of proxy materials to these designated advisers and plan managers.
We did, however, request comment on whether

   

 * companies and intermediaries should be able to household proxy materials to
   these investment advisers and investment managers without having to rely on
   the proposed householding rules since it is unlikely that a single person or
   entity making the proxy voting decision on behalf of others would need more
   than one copy of the proxy materials; and
   
   
   
   

 * companies and intermediaries should be allowed to household proxy material
   without written or implied consent to trustees, executors, administrators,
   guardians or persons who act in similar capacities and who have been vested
   with proxy voting authority.
   
   

Two commenters supported householding by implied consent to investment
advisers82 and three commenters indicated we should permit householding to
investment advisers without requiring compliance with the householding rules.83
The commenters did not indicate what procedures companies and intermediaries
have followed in implementing householding to investment advisers. While we
believe that companies and intermediaries could easily comply with the
householding rules by obtaining either written or implied consent from
investment advisers, we are also persuaded that, in most cases, companies and
intermediaries should be allowed to continue to household to investment advisers
as they have in the past. Thus, we will allow such householding to continue
outside the scope of the rules we adopt today, provided that the investment
adviser is eligible to vote the proxies under the self-regulatory organization
rules and does not object to householding.

In contrast, we are not persuaded that companies and intermediaries should be
able to household proxy materials to trustees, executors, administrators,
guardians or persons who act in similar capacities and who have been vested with
proxy voting authority without first obtaining their written or implied consent.
Given the lack of a supplementary regulatory regime and the uncertainty as to
whether all of these individuals would share the same level of sophistication as
investment advisers covered by the self-regulatory organization rules, we
conclude that these categories of individuals should be covered by the
provisions of the rules we adopt today.


IV. PAPERWORK REDUCTION ACT

Certain provisions of the rule amendments adopted today contain "collection of
information" requirements within the meaning of the Paperwork Reduction Act of
1995.84 We published notice soliciting comments on the collection of information
requirements relating to Schedules 14A and 14C in the proposing release,85 and
submitted these requirements to the Office of Management and Budget ("OMB") for
review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The titles for
those collections of information are: "Regulation 14A (Commission Rules 14a-1
through 14b-2 and Schedule 14A)"; and "Regulation 14C (Commission Rules 14c-1
through 14c-7 and Schedule 14C)." OMB approved the regulations' information
collection requirements and subsequently approved a revision to the regulations'
collection of information requirements in connection with our proposal to revise
the Commission's auditor independence requirements.86 All burden estimates in
this section have been revised from the proposing release to include the
increased paperwork burdens approved in the subsequent revision.87

We did not receive any comments that address specifically the estimated
paperwork burdens associated with the proposed collections of information. The
comments we received primarily addressed the costs and benefits of the proposals
in general terms, rather than issues relating to the collection of information.
Those concerns are addressed more fully in the cost-benefit and other sections
of this release.

The rule amendments permit delivery of a single annual report, prospectus, proxy
statement or information statement to a household to satisfy the delivery
requirements with respect to two or more security holders in the household. A
person relying on one of the rules must obtain either written or implied consent
to householding from each security holder who will no longer receive a separate
copy of the document. The rules require persons who wish to household with
implied consent to send a notice to each security holder stating that the
security holders in the household will receive one annual report, prospectus,
proxy statement or information statement in the future unless the security
holders provide contrary instructions. The purpose of this requirement is to
give reasonable assurance that all security holders have access to the annual
report, prospectus, proxy statement or information statement.

The rule amendments also require companies choosing to household proxy
statements or information statements to provide disclosure in their proxy
statements or information statements informing security holders how they can
revoke their consent to householding, request householding or request extra
copies of any householded document. The purpose of this requirement is to allow
security holders whose circumstances have changed to revise their delivery
arrangements in order to ensure that they continue to have convenient access to
the disclosure documents.

Preparing and sending the initial notice that a company intends to household by
implied consent and preparing the proxy statement and information statement
householding disclosure are collections of information. Companies and
intermediaries are the primary respondents. The information collection
requirements imposed by the rule amendments are required for those companies,
banks or broker-dealers that decide to rely on the rules to obtain the benefit
of sending fewer documents to each household. Those companies, banks, and
broker-dealers that decide not to obtain that benefit are not required to rely
on or comply with the rule amendments. Responses to the collection of
information will not be kept confidential.

We estimate that 9,892 respondents are subject to Regulation 14A and 253
respondents are subject to Regulation 14C. We estimate that 10% of these
respondents will deliver the notice that they intend to household by implied
consent and prepare the Schedule 14A or Schedule 14C householding disclosure.
Taking into account today's amendments, we estimate that the total respondent
reporting burdens for Schedules 14A and 14C, in terms of hours, are 179,966
hours and 4632 hours, respectively, or approximately 18 hours per respondent
under each schedule. These estimates include 5,192 and 131 hours for respondents
subject to Regulations 14A and 14C, respectively, to prepare and deliver the
notice of intent to household and to prepare and include the required proxy
statement and information statement disclosure regarding householding.88 In
addition to the internal hours they will expend, we expect that issuers will
hire outside counsel to help prepare the required disclosures. The internal
hours issuers will require to comply with Regulations 14A and 14C are reflected
as Hours in the table below; the additional costs they will incur to comply with
those regulations are reflected as Cost. The total dollar costs of complying
with Regulations 14A and 14C, revised to include the additional outside counsel
costs expected from today's amendments, are estimated to be $92,461,000 and
$2,395,000, respectively. The increases in the burden hours and total costs
required to comply with the regulations are primarily attributable to increases
in the number of respondents subject to Regulations 14A and 14C.



 

Hours

Cost

Schedule 14A




179,966






$92,461,000



Schedule 14C




4,632






$2,935,000



When the Commission proposed rules in 1997 to permit householding of annual
reports by implied consent,89 it submitted a request for approval of revisions
to Regulations 14A and 14C to OMB. OMB approved the revisions and they were
adopted with some modification.90 In that submission, the Commission estimated
that the time required to prepare and arrange delivery of the notice (required
to be mailed by companies choosing to solicit implied consent to householding of
the annual report from security holders) would be approximately 20 hours per
respondent per year. Because the annual report and proxy statement or
information statement generally are mailed to security holders together in the
same package, it is likely that companies and intermediaries will be able to
mail only one notice to obtain consent to householding of both the annual report
and the proxy statement or information statement. In connection with our 1997
proposals, we increased our estimated paperwork burden associated with
Regulations 14A and 14C to include 20 hours per respondent for the time they
would spend preparing and mailing the notice of implied consent to household
annual reports. Because we anticipate that respondents will mail only one notice
of implied consent to household both annual reports and proxy statements or
information statements, we do not believe the requirement that companies and
intermediaries send out this notice if they intend to rely on implied consent to
household proxy statements and information statements will result in a greater
paperwork burden than previously approved.

We have, however, adjusted our estimate of the paperwork burden associated with
Regulations 14A and 14C to reflect the increased number of respondents required
to file proxy statements and information statements in compliance with those
regulations. In 1997, when we proposed to allow companies to household annual
reports by implied consent, there were only 9321 respondents subject to
Regulation 14A and 150 respondents subject to Regulation 14C. There are now 9892
and 253 respondents subject to regulations 14A and 14C, respectively. We have,
therefore, increased the burden hours companies will require to prepare and
deliver the notices that they intend to household by implied consent under
Regulations 14A and 14C by 285 hours and 50 hours, respectively. We calculated
the increase in burden hours under Regulation 14A by multiplying the difference
in the number of estimated householders by 20, our estimate of the total amount
of time it will take a company and its outside counsel to prepare and deliver
the notices. We then increased our estimate of the company's total burden hours
by 25% of that figure, as we estimate companies will bear approximately 25% of
the increased reporting burden. The remaining 75% is attributed to the total
cost of complying with the regulation, as we assume that outside counsel will be
responsible for approximately 75% of the reporting burden increase. Thus, we
have also increased the total costs associated with Regulations 14A and 14C by
approximately $150,000 and $26,000, respectively.

We believe that it would be inappropriate to increase our previously approved
burden estimate for complying with Rule 154,91 as companies and intermediaries
can inform security holders of their intent to household combination proxy
statement-prospectuses delivered for business combinations, exchange offers, or
reclassifications of securities registered on Forms N-14, S-4 and F-4 using the
same implied consent notice that they would send to notify security holders of
their intent to household proxy statements, information statements and annual
reports.

We estimate that the time to respond to the disclosure requirements of Schedules
14A and 14C will be approximately one hour per respondent per year. We
previously increased our estimate of the burden hours and approximate cost
associated with Regulation 14A by 247 hours and $130,000 to reflect the
increased burden respondents will face as a result of the disclosure
requirements. Our estimates of the burden hours and approximate cost associated
with Regulation 14C were likewise previously increased by 6 hours and $3,000,
respectively.


V. COST-BENEFIT ANALYSIS

The Commission is sensitive to the costs and benefits imposed by its rules on
affected persons and entities. In November 1999, the Commission adopted rules
allowing companies to deliver one copy of an annual report or prospectus (except
those required to be delivered for business combinations, exchange offers or
reclassifications of securities) to consenting security holders at a shared
residential address. We refer to the shared delivery of a disclosure document as
householding. Several commenters on the rules adopted in November 1999 noted
that the ability of companies to household annual reports would be limited by
their inability also to household proxy statements and information statements,
as annual reports are often delivered in the same package as proxy statements or
information statements. Those commenters encouraged the Commission to adopt
similar rules permitting the householding of proxy and information statements.
We are now adopting rules that will permit companies and intermediaries to
household proxy and information statements, as well as prospectuses delivered in
connection with business combinations, exchange offers and reclassifications of
securities. The rules we adopt today will permit companies and intermediaries to
send fewer copies of disclosure documents than they currently must send, and
therefore should result in savings in printing, postage, and other delivery
costs. Security holders will benefit from the decrease in delivery costs paid by
companies and from no longer being burdened with duplicate documents. The rules
require companies and intermediaries who rely on the rules to comply with
certain procedures, including obtaining either written consents from security
holders or delivering notices 60 days in advance of householding. In addition,
companies relying on the rules will need to include certain householding
disclosure in their proxy and information statements. Because householding is
voluntary, the Commission expects that the rules will not have any negative
impact on small businesses and that companies, banks, and broker-dealers
generally will rely on the rules only if the benefits of householding outweigh
the costs.

In the proposing release, the Commission noted that companies would incur costs
in obtaining consents and sending notices to security holders, and estimated
that the cost savings to companies would far exceed the costs of obtaining the
consents and mailing notices. The Commission also noted that the cost of
providing proxy statement or information statement disclosure regarding
householding would be minimal, as the disclosure would be included in proxy
statements or information statements already being prepared by each company. The
Commission requested comment on the costs and benefits of the rules. Commenters
generally supported the goals of the proposal but advocated certain changes that
they believed would decrease the costs and increase the benefits of the rules.




A. BENEFITS



Several respondents commented on the potential benefits of the amended rules.
Every commenter who addressed the issue indicated that allowing companies and
intermediaries to household proxy statements, information statements and
prospectuses used in connection with business combinations would allow companies
to significantly reduce the costs of printing and mailing those documents. Many
of those commenters also indicated that they had received numerous complaints
from security holders expressing disapproval of duplicative wasteful mailings.

One commenter estimated that U.S. security holders would save somewhere between
$200 and $400 million annually if companies and intermediaries were allowed to
household proxy and information statements. He extrapolated that range from his
estimate that almost every company would save at least 10% of their printing and
mailing costs and that companies with "household names" could save as much as
60% of their printing and mailing costs. He assumed that the advance notices
would not be delivered separately and the company or intermediary could address
the package of householded materials to any one security holder in the
household. He did not explain the precise methodology and assumptions he used to
obtain that figure, and one of his assumptions was inconsistent with the rules
we adopt today. As discussed below, the rules we adopt today will allow
companies and intermediaries to include the notice of householding with other
security holder communications. However, the rules will not allow companies to
address the materials to any one security holder without obtaining the written
consent of each security holder in the household. That would impact the above
estimate as some commenters noted that the group addressing requirement would
increase the cost of complying with the required householding procedures.

Charles Schwab estimated that if its proprietary fund family were allowed to
household a hypothetical proxy statement, fund shareholders could save
approximately $862,000, or 16% of total expenses for a shareholder meeting, in
printing, packaging and mailing expenses.

ADP Investor Communication Services, a company that handles the proxy material
distribution function for nearly all large broker and many bank intermediaries,
commented that each percentage point reduction in mailings that results from
householding, using ADP's base of anticipated proxy mailings, equates to a
savings of approximately $11.6 million in the aggregate to companies, assuming a
unit cost of $5 for the printing of an annual report, notice of proxy and proxy
statement, and postage of $1.30. Other commenters stated more generally that
allowing the householding rules to be in place for the last proxy season would
have produced consequent savings of many millions of dollars, and that they
expect the cost savings to companies to far exceed the cost of obtaining the
consents and mailing the advance notices required for householding by implied
consent. While some commenters noted that they might need to continue to
separately deliver each security holder's proxy voting card, they noted that the
savings likely to be generated from the reduction in printing and postage
expenses would fully justify the householding of proxy statements even if the
proxy voting cards continued to be mailed separately.

Relying on the savings estimates provided by Charles Schwab and ADP, the
Commission estimates that the incremental benefit from each eliminated mailing
would be approximately $6, assuming a savings of $5 from printing and $1.30 from
mailing a proxy package, and $.32 cost for mailing the proxy card separately.92




B. COSTS



The Commission requested, but did not receive, any estimates of the total cost
of soliciting and obtaining consent and providing the required householding
disclosure in a company's proxy and information statements. Likewise, the
Commission did not receive any comment estimating the cost of determining which
security holders could be householded by implied consent or implementing
programming or software changes necessary to track consents or print and mail
proxy packages.

Most of the comments the Commission received on the costs of the rules were
qualitative comments identifying provisions which commenters felt needlessly
raised the costs of householding. In particular, most commenters who addressed
the issue argued that the rules should permit householding based on implied
consent for all security holders sharing a household, whether or not the
security holders shared the same last name. These commenters indicated their
belief that security holders would be adequately protected by the implied
consent notice and revocation disclosure procedures. As adopted, the rules will
not permit householding by implied consent to security holders who do not share
the same last name, unless the company or intermediary relying on the rules
reasonably believes the security holders are members of the same family.
However, the rules will allow companies or intermediaries to encourage those
security holders who must give written consent to submit their consents via
electronic mail. This procedure should enable companies and intermediaries to
minimize compliance costs associated with the rules while still ensuring that,
absent their affirmative consent, security holders who wish to receive separate
copies of the disclosure documents will continue to receive them.

Several commenters also indicated their view that requiring companies to address
the householded materials to the group of security holders, rather than any one
of them, would unnecessarily increase the cost of householding without providing
additional security holder protection. These commenters noted that in order to
comply with the group addressing requirement, they may need to print and include
an extra sheet of paper in the householded proxy materials package, and would
thus face higher printing and possibly higher mailing costs than they would if
they could simply show one of the security holder's names through the envelope
window. One commenter indicated that requiring group addressing might result in
fewer companies adopting the benefits of householding. Another indicated that
group addressing may require transfer agents to implement costly programming
changes and changes in the processes used to place proxy materials in envelopes,
with the costs of those changes passed on to companies. That commenter noted
that addressing the householded material to any one of the individual
stockholders would require much more modest and manageable programming and
operational changes.

The Commission is sensitive to these concerns but believes the householded
materials should be addressed in such a manner that security holders will be
aware that the householded package is intended for the group of security holders
included in the household. Therefore, we have decided to allow alternative forms
of addressing but only if each security holder in the household has consented in
writing to the alternative form of address. We believe that the non-quantifiable
benefit from security holders being easily able to understand that documents are
to be shared by the household fully justifies the costs of the addressing
requirements, as adopted.

Many commenters opposed the proposed requirement that the company mail
separately its advance notice of its intention to deliver documents in
householded form. These commenters argued that separate delivery of the notice
would unnecessarily increase costs without providing additional security holder
protection. They recommended that companies and intermediaries be allowed to
include the notice with other security holder communications, as they may do
when they distribute an advance notice of their intention to household
prospectuses under Securities Act Rule 154. In response to those comments, we
have modified the rule; as adopted, the rule will permit companies and
intermediaries to mail the notice of their intent to household with other
security holder communications, so long as the notices are mailed to each
individual in the household and both the notice and the envelope in which it is
mailed contain a prominent legend alerting security holders of the importance of
the contents. The elimination of the separate delivery requirement will reduce
the cost to companies and intermediaries of complying with the rules.

Finally, some commenters thought that requiring intermediaries to obtain the
consent of each company to household its materials would increase the costs of
compliance with the rule. ADP noted that attempting to limit the householding
option on a company-by-company basis is operationally very difficult and
impractical to implement for nominee intermediaries. ADP argued that without
widespread support of intermediaries, which will come with standardized
practices and operations, costs for implementation could offset benefits and
perhaps stall the initiative. ADP also indicated that it anticipated there would
be very limited requests from companies to suppress householding to their
security holders. Another commenter stated that having to limit its ability to
household only where the company consents would add unnecessary complexity and
expense and that placing restrictions on an intermediary's ability to household
would increase the costs and reduce the benefits of householding. The Securities
Industry Association also indicated that it would oppose any provision that
makes householding contingent on approval by each company, because requiring
specific procedures for individual holdings within an account would result in
less efficiency and higher costs. Conversely, one company indicated that in
order for the rules to generate the intended savings, companies must have ways
to require intermediaries to household at a reasonable cost to companies. The
Investment Company Institute commented that the Commission should allow
intermediaries to household only at the direction of the company, as companies
bear the ultimate responsibility to provide the disclosure document and
reimburse the intermediaries' expenses of distributing the proxy materials.
Fidelity Management and Research Co. also believes that fund companies should
have the right to decide whether intermediaries household proxy statements, as
the decision of whether to household could affect fund expenses. We had
originally proposed that intermediaries be able to household to beneficial
owners at their own discretion.

Because of the importance of the required proxy and information statement
disclosure, the necessity of some entity retaining an inventory of extra copies
of the disclosure documents, as well as our agreement that companies must have
ways to control their expenses, we ultimately concluded that companies should be
able to object to intermediary householding. However, as there is not yet enough
empirical data to determine the true cost of householding, from the perspectives
of both companies and intermediaries, we believe it is appropriate for all
entities involved to retain the ability to opt out of householding. We recognize
that many intermediaries will incur large start-up costs to implement
householding. However, we note that companies remain required to reimburse
intermediaries for their reasonable proxy distribution expenses, and that many
intermediaries may be able to recoup some of their expenses through the
imposition of a paper and postage elimination fee.

The Commission estimates that the cost of obtaining a security holder's consent,
using the implied consent procedure allowed by the amendments, would be less
than $.80 per implied consent notice. The actual cost of obtaining an implied
consent may in fact be less, as the above estimate assumes that the notice will
be mailed separately from other communications. Under the rules adopted today,
companies and intermediaries may mail the notice with other security holder
communications as long as a prominent legend is included on both the notice and
the envelope containing the notice. Companies and intermediaries will also incur
costs in determining which security holders may be mailed materials in
householded form, implementing programming or software changes necessary to
track consents, implementing programming changes necessary for the printing and
mailing of householded packages, and providing the proxy and information
statement disclosure required under today's rules. Other nonquantifiable costs
will include the costs to security holders who, for whatever reason, wish to but
do not receive disclosure documents93 and the costs that companies and
intermediaries will incur in responding to security holder consent revocations.
We do not expect those costs to be significant. The Commission anticipates that
the only recurring cost of today's rules would be the cost of including the
required disclosure in the proxy and information statements, and that such cost
will be marginal as the disclosure will be included in documents that would
otherwise be required. The Commission estimated in the proposing release that
the time required to prepare this disclosure would be approximately one hour per
respondent per year. Assuming that the disclosure is prepared by outside
counsel, the Commission estimates that the disclosure requirement would cost
companies who elect to household an additional $175 per year.

We understand companies and intermediaries will incur costs to revise their
proxy printing and mailing systems to comply with the rules we adopt today. We
have not received enough information to estimate those costs with any
reliability. However, as discussed above, the cost savings from householding are
potentially substantial. Assuming a cost savings of $6 for each set of materials
eliminated through householding, that approximately 245 million sets of proxy
materials are mailed annually, that companies and intermediaries will be able to
household 16 percent of the mailings they would otherwise be required to deliver
individually, and that 10% of all companies will choose to household their proxy
statements and information statements, householding could result in aggregate
cost savings of up to $23.5 million annually. The Commission derived its
estimate of the total annual proxy mailings by assuming that ADP's mailings
represent approximately 75% of the total annual proxy mailings. That assumption
is based on the Commission's recognition that ADP controls nearly 100% of the
market94 for delivery of proxy materials to security holders whose securities
are held in street name and that approximately 70-80 % of all outstanding
securities are held in street name.95 ADP Investor Communication Services
commented that, assuming a unit cost of $6.30 for each eliminated mailing,
companies could save approximately $11.6 million in the aggregate for each
percentage point reduction in ADP's base of anticipated proxy mailings. Using
those figures, the Commission estimated ADP's anticipated base of mailings to be
approximately 184 million. The percent of estimated consents was based on the
comment letter of Charles Schwab & Co., which estimated that if Schwab's
proprietary fund family were allowed to household a hypothetical proxy
statement, fund security holders could save approximately 16% of total expenses,
in printing, packaging and mailing expenses for a security holder meeting.96 We
assume that the reduction in expenses would be proportional to the reduction in
eliminated mailings.

Based on information provided in the comment letters and its own analysis, the
Commission believes that the rule amendments adopted today will permit companies
and intermediaries to cost-effectively reduce the number of mailings they are
required to distribute to security holders and that, in the long term, the
benefits of the rules adopted today will justify the costs of implementing
householding and complying with the householding rules.


VI. EFFECTS ON EFFICIENCY, COMPETITION, AND CAPITAL FORMATION

As required by Section 23(a) of the Exchange Act,97 we considered the impact any
new Exchange Act rule would have on competition. We requested comment on any
anti-competitive effects of the proposals. We received one comment letter
responding to that request. That commenter noted its belief that the proposals
would not have an adverse effect on competition. We believe that the amendments
will not have any anti-competitive effect, as the rules are voluntary and are
designed to allow companies and intermediaries to decrease their current
printing and mailing costs.

In addition, Section 2(b) of the Securities Act98 and Section 3(f) of the
Exchange Act99 require us, in adopting a rule that requires a public interest
finding, to consider whether the proposed rule will promote efficiency,
competition and capital formation. We sought comment on how these changes would
affect competition, capital formation and market efficiency. The sole commenter
on these issues indicated its view that the proposals would promote efficiency,
not adversely affect competition, and have no effect on capital formation.
Because the householding of proxy and information statements will eliminate many
unwanted duplicate mailings and allow companies to save printing and mailing
costs, we believe the amendments will have a positive effect on efficiency and
capital formation. We do not believe the amendments will have any effect on
competition.


VII. FINAL REGULATORY FLEXIBILITY ANALYSIS

This Final Regulatory Flexibility Analysis ("FRFA") has been prepared in
accordance with the Regulatory Flexibility Act. It relates to amendments to:
Securities Act Rule 154, Exchange Act Rules 14a-2, 14a-3, 14a-7, 14b-1, 14b-2,
14c-3, and Schedules 14A and 14C.




A. NEED FOR THE RULE AMENDMENTS

The new rule amendments are designed to enable companies and intermediaries to
reduce the number of identical mailings sent to security holders sharing the
same household. The Commission is adopting the rule amendments in order to
permit companies and intermediaries to household proxy and information
statements as well as prospectuses delivered in connection with business
combinations, exchange offers and reclassifications of securities.




B. SIGNIFICANT ISSUES RAISED BY PUBLIC COMMENT



The Initial Regulatory Flexibility Analysis ("IRFA"), which was prepared in
accordance with 5 U.S.C. 603, was published in the proposing release. We
received no comments on the IRFA.




C. SMALL ENTITIES SUBJECT TO THE RULE AMENDMENTS



Rule 0-10 under the Exchange Act defines the term "small business" as a company
whose total assets on the last day of its most recent fiscal year were $5
million or less.100 The only small businesses subject to the proxy rules are
those that have securities registered under Section 12 of the Exchange Act.
There are approximately 771 reporting companies that have assets of $5 million
or less. The actual number of reporting companies affected by the proxy rules
may be less than 771, as not all reporting companies are subject to the proxy
rules. As stated above, the proposed householding rules would be optional. Under
amended Rules 14b-1 and 14b-2, broker-dealers and banks are required to forward
security holder communications to beneficial owners on whose behalf they hold
securities. Under Exchange Act Rule 0-10, a broker or dealer is considered a
small business if it has less than $500,000 total capital, calculated in
accordance with Rule 0-10(c)(1). In addition, a broker or dealer will not be
considered a small business if it is affiliated with any person (other than a
natural person) that is not a small business or small organization as defined in
Rule 0-10. The Exchange Act rules do not contain a definition of small banks.
The Regulatory Flexibility Act defines the term "small entity" by reference to
definitions published by the Small Business Administration.101 The Small
Business Administration has defined a "small entity" for banking purposes as a
national or commercial bank, savings institution or credit union with less than
$100 million in assets.102

The rule amendments would define the circumstances under which broker-dealers
and banks could household materials to security holders on whose behalf they
hold securities. There are approximately 913 broker-dealers registered with the
Commission that would be considered small businesses under Rule 0-10. We
estimate that there are approximately 4946 entities potentially subject to Rule
14b-2 that could be considered small businesses under the Small Business
Administration's size regulations.

An indeterminable number of entities could be affected by the amendment to Rule
154, as companies who have not previously registered with the Commission can use
the forms prescribed for business combinations, exchange offers, or
reclassifications of securities. However, as discussed above, there are
approximately 771 reporting companies that have assets of $5 million or less.




D. PROJECTED REPORTING, RECORDKEEPING, AND OTHER COMPLIANCE REQUIREMENTS



The primary goal of the rule amendments is to remove unnecessary regulatory
requirements. The amended rules, however, will require a company or other party
choosing to solicit implied consent to householding from security holders to
mail a separate written notice of its intention to household proxy and
information statements. The proposed rules also will require companies to
undertake in the proxy statement or information statement to provide, upon
written or oral request, a separate copy of the annual report, proxy statement
or information statement to a security holder residing at an address to which
the company or intermediary delivered a householded copy. Additionally,
companies choosing to household the annual report and proxy statement or
information statement would have to provide instructions in the proxy statement
or information statement as to how: (1) a security holder can revoke consent to
householding; (2) security holders sharing an address can request householding;
and (3) security holders can request extra copies of the annual report, proxy
statement or information statement. It is likely that the company's notice of
its intent to household generally would not exceed one page, and the proxy
statement or information statement disclosure would be only a paragraph or two
in length.




E. AGENCY ACTION TO MINIMIZE EFFECTS ON SMALL ENTITIES

As required by Sections 603 and 604 of the Regulatory Flexibility Act, the
Commission has considered the following alternatives to minimize the economic
impact of the rule amendments on small entities: (1) the establishment of
differing compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the clarification,
consolidation or simplification of compliance and reporting requirements under
the rule amendments for small entities; (3) the use of performance rather than
design standards; and (4) an exemption from the coverage of the rule, or any
part thereof, for small entities.

The adopted rules are intended to remove regulatory requirements for all
companies, including those that are small entities. Because householding is
voluntary, the Commission expects that the rules will not have any negative
impact on small businesses and that companies, banks, and broker-dealers
generally will rely on the rules only if the benefits of householding outweigh
the costs. The Commission considered exempting small entities that are reporting
companies from the notice, undertaking, and disclosure requirements, but
believes that security holders in companies of all sizes should be notified that
a company intends to household any disclosure document and have the opportunity
to object. Because the proposed rules will be optional and should benefit small
entities, it was unnecessary to consider exempting them from coverage of the
adopted rules.


VIII. STATUTORY AUTHORITY

We are amending Rule 154 pursuant to the authority set forth in Section 19(a) of
the Securities Act. We are amending Rules 14a-2, 14a-3, 14a-7, 14a-101, 14b-1,
14b-2, 14c-3, and 14c-101 under the authority set forth in sections 12, 14 and
23(a) of the Exchange Act.




LIST OF SUBJECTS




17 CFR PART 230



Investment companies, Reporting and recordkeeping requirements, Securities.




17 CFR PART 240



Reporting and recordkeeping requirements, Securities.




TEXT OF RULES

For the reasons set out in the preamble, Title 17, Chapter II of the Code of
Federal Regulations is amended as follows:




PART 230 - GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933



1. The authority citation for Part 230 continues to read, in part, as follows:

Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77r, 77s, 77sss, 77z-3, 78c, 78d,
78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30,
and 80a-37, unless otherwise noted.

* * * * *

2. Section 230.154 is amended by removing paragraph (e).




PART 240 - GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934



3. The authority citation for Part 240 continues to read, in part, as follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg, 77nnn, 77sss,
77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q,
78s, 78u-5, 78w, 78x, 78ll(d), 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37,
80b-3, 80b-4 and 80b-11, unless otherwise noted.

* * * * *

4. Section 240.14a-2 is amended by revising paragraph (a)(1)(ii) to read as
follows:




§240.14A-2 SOLICITATIONS TO WHICH §240.14A-3 TO §240.14A-15 APPLY.



* * * * *

(a) * * *

(1) * * *

(ii) Furnishes promptly to the person solicited (or such person's household in
accordance with §240.14a-3(e)(1)) a copy of all soliciting material with respect
to the same subject matter or meeting received from all persons who shall
furnish copies thereof for such purpose and who shall, if requested, defray the
reasonable expenses to be incurred in forwarding such material, and

* * * * *

5. Section 240.14a-3 is amended by revising paragraph (e)(1) to read as follows:




§240.14A-3 INFORMATION TO BE FURNISHED TO SECURITY HOLDERS.



* * * * *

(e)(1)(i) A registrant will be considered to have delivered an annual report or
proxy statement to all security holders of record who share an address if:

(A) The registrant delivers one annual report or proxy statement, as applicable,
to the shared address;

(B) The registrant addresses the annual report or proxy statement, as
applicable, to the security holders as a group (for example, "ABC Fund [or
Corporation] Security Holders," "Jane Doe and Household," "The Smith Family"),
to each of the security holders individually (for example, "John Doe and Richard
Jones") or to the security holders in a form to which each of the security
holders has consented in writing;

Note to paragraph (e)(1)(i)(B):

Unless the company addresses the annual report or proxy statement to the
security holders as a group or to each of the security holders individually, it
must obtain, from each security holder to be included in the householded group,
a separate affirmative written consent to the specific form of address the
company will use.

(C) The security holders consent, in accordance with paragraph (e)(1)(ii) of
this section, to delivery of one annual report or proxy statement, as
applicable;

(D) With respect to delivery of the proxy statement, the registrant delivers,
together with or subsequent to delivery of the proxy statement, a separate proxy
card for each security holder at the shared address; and

(E) The registrant includes an undertaking in the proxy statement to deliver
promptly upon written or oral request a separate copy of the annual report or
proxy statement, as applicable, to a security holder at a shared address to
which a single copy of the document was delivered.

(ii) Consent.

(A) Affirmative written consent. Each security holder must affirmatively
consent, in writing, to delivery of one annual report or proxy statement, as
applicable. A security holder's affirmative written consent will only be
considered valid if the security holder has been informed of:

(1) The duration of the consent;

(2) The specific types of documents to which the consent will apply;

(3) The procedures the security holder must follow to revoke consent; and

(4) The registrant's obligation to begin sending individual copies to a security
holder within thirty days after the security holder revokes consent.

(B) Implied consent. The registrant need not obtain affirmative written consent
from a security holder for purposes of paragraph (e)(1)(ii)(A) of this section
if all of the following conditions are met:

(1) The security holder has the same last name as the other security holders at
the shared address or the registrant reasonably believes that the security
holders are members of the same family;

(2) The registrant has sent the security holder a notice at least 60 days before
the registrant begins to rely on this section concerning delivery of annual
reports and proxy statements to that security holder. The notice must:

(i) Be a separate written document;

(ii) State that only one annual report or proxy statement, as applicable, will
be delivered to the shared address unless the registrant receives contrary
instructions;

(iii) Include a toll-free telephone number, or be accompanied by a reply form
that is pre-addressed with postage provided, that the security holder can use to
notify the registrant that the security holder wishes to receive a separate
annual report or proxy statement;

(iv) State the duration of the consent;

(v) Explain how a security holder can revoke consent;

(vi) State that the registrant will begin sending individual copies to a
security holder within thirty days after the security holder revokes consent;
and

(vii) Contain the following prominent statement, or similar clear and
understandable statement, in bold-face type: "Important Notice Regarding
Delivery of Security Holder Documents." This statement also must appear on the
envelope in which the notice is delivered. Alternatively, if the notice is
delivered separately from other communications to security holders, this
statement may appear either on the notice or on the envelope in which the notice
is delivered.

Note to paragraph (e)(1)(ii)(B)(2):

The notice should be written in plain English. See §230.421(d)(2) of this
chapter for a discussion of plain English principles.

(3) The registrant has not received the reply form or other notification
indicating that the security holder wishes to continue to receive an individual
copy of the annual report or proxy statement, as applicable, within 60 days
after the registrant sent the notice; and

(4) The registrant delivers the document to a post office box or residential
street address.

Note to paragraph (e)(1)(ii)(B)(4):

The registrant can assume that a street address is residential unless the
registrant has information that indicates the street address is a business.

(iii) Revocation of consent. If a security holder, orally or in writing, revokes
consent to delivery of one annual report or proxy statement to a shared address,
the registrant must begin sending individual copies to that security holder
within 30 days after the registrant receives revocation of the security holder's
consent.

(iv) Definition of address. Unless otherwise indicated, for purposes of this
section, address means a street address, a post office box number, an electronic
mail address, a facsimile telephone number or other similar destination to which
paper or electronic documents are delivered, unless otherwise provided in this
section. If the registrant has reason to believe that the address is a street
address of a multi-unit building, the address must include the unit number.

Note to paragraph (e)(1).

A person other than the registrant making a proxy solicitation may deliver a
single proxy statement to security holders of record or beneficial owners who
have separate accounts and share an address if: (a) the registrant or
intermediary has followed the procedures in this section; and (b) the registrant
or intermediary makes available the shared address information to the person in
accordance with §240.14a-7(a)(2)(i) and (ii).

* * * * *

6. Section 240.14a-7 is amended by revising paragraphs (a)(2)(i) and (ii) and
designating the existing note to §240.14a-7 as Note 1, revising the heading to
the notes and adding Note 2, to read as follows:




§240.14A-7 OBLIGATIONS OF REGISTRANTS TO PROVIDE A LIST OF, OR MAIL SOLICITING
MATERIALS TO, SECURITY HOLDERS.



* * * * *

(a) * * *

(2) * * *

(i) Mail copies of any proxy statement, form of proxy or other soliciting
material furnished by the security holder to the record holders, including
banks, brokers, and similar entities, designated by the security holder. A
sufficient number of copies must be mailed to the banks, brokers, and similar
entities for distribution to all beneficial owners designated by the security
holder. If the registrant has received affirmative written or implied consent to
deliver a single proxy statement to security holders at a shared address in
accordance with the procedures in

§240.14a-3(e)(1), a single copy of the proxy statement furnished by the security
holder shall be mailed to that address. The registrant shall mail the security
holder material with reasonable promptness after tender of the material to be
mailed, envelopes or other containers therefor, postage or payment for postage
and other reasonable expenses of effecting such mailing. The registrant shall
not be responsible for the content of the material; or

(ii) Deliver the following information to the requesting security holder within
five business days of receipt of the request: a reasonably current list of the
names, addresses and security positions of the record holders, including banks,
brokers and similar entities holding securities in the same class or classes as
holders which have been or are to be solicited on management's behalf, or any
more limited group of such holders designated by the security holder if
available or retrievable under the registrant's or its transfer agent's security
holder data systems; the most recent list of names, addresses and security
positions of beneficial owners as specified in §240.14a-13(b), in the
possession, or which subsequently comes into the possession, of the registrant;
and the names of security holders at a shared address that have consented to
delivery of a single copy of proxy materials to a shared address, if the
registrant has received written or implied consent in accordance with
§240.14a-3(e)(1). All security holder list information shall be in the form
requested by the security holder to the extent that such form is available to
the registrant without undue burden or expense. The registrant shall furnish the
security holder with updated record holder information on a daily basis or, if
not available on a daily basis, at the shortest reasonable intervals, provided,
however, the registrant need not provide beneficial or record holder information
more current than the record date for the meeting or action.

* * * * *

Notes to §240.14a-7.

1. * * *

2. When providing the information required by §240.14a-7(a)(1)(ii), if the
registrant has received affirmative written or implied consent to delivery of a
single copy of proxy materials to a shared address in accordance with
§240.14a-3(e)(1), it shall exclude from the number of record holders those to
whom it does not have to deliver a separate proxy statement.

7. Section 240.14a-101 is amended by adding Item 23 to read as follows:




§240.14A-101 SCHEDULE 14A INFORMATION REQUIRED IN PROXY STATEMENT.



* * * * *




ITEM 23. DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS.

If one annual report or proxy statement is being delivered to two or more
security holders who share an address in accordance with §240.14a-3(e)(1),
furnish the following information:

(a) State that only one annual report or proxy statement, as applicable, is
being delivered to multiple security holders sharing an address unless the
registrant has received contrary instructions from one or more of the security
holders;

(b) Undertake to deliver promptly upon written or oral request a separate copy
of the annual report or proxy statement, as applicable, to a security holder at
a shared address to which a single copy of the documents was delivered and
provide instructions as to how a security holder can notify the registrant that
the security holder wishes to receive a separate copy of an annual report or
proxy statement, as applicable;

(c) Provide the phone number and mailing address to which a security holder can
direct a notification to the registrant that the security holder wishes to
receive a separate annual report or proxy statement, as applicable, in the
future; and

(d) Provide instructions how security holders sharing an address can request
delivery of a single copy of annual reports or proxy statements if they are
receiving multiple copies of annual reports or proxy statements.

8. Section 240.14b-1 is amended by adding a note following paragraph (b)(2) and
by adding paragraph (c)(3) to read as follows:




§240.14B-1 OBLIGATION OF REGISTERED BROKERS AND DEALERS IN CONNECTION WITH THE
PROMPT FORWARDING OF CERTAIN COMMUNICATIONS TO BENEFICIAL OWNERS.



* * * * *

(b)(2) * * *

Note to paragraph (b)(2):

At the request of a registrant, or on its own initiative so long as the
registrant does not object, a broker or dealer may, but is not required to,
deliver one annual report, proxy statement or information statement to more than
one beneficial owner sharing an address if the requirements set forth in
§240.14a-3(e)(1) (with respect to annual reports and proxy statements) and

§240.14c-3(c) (with respect to annual reports and information statements)
applicable to registrants, with the exception of §240.14a-3(e)(1)(i)(E), are
satisfied instead by the broker or dealer.

* * * * *

(c) * * *

(3) In its response pursuant to paragraph (b)(1) of this section, a broker or
dealer shall not include information about annual reports, proxy statements or
information statements that will not be delivered to security holders sharing an
address because of the broker or dealer's reliance on the procedures referred to
in the Note to paragraph (b)(2) of this section.

9. Section 240.14b-2 is amended by adding a note following paragraph (b)(3) and
by adding paragraph (c)(4) to read as follows:




§240.14B-2 OBLIGATION OF BANKS, ASSOCIATIONS AND OTHER ENTITIES THAT EXERCISE
FIDUCIARY POWERS IN CONNECTION WITH THE PROMPT FORWARDING OF CERTAIN
COMMUNICATIONS TO BENEFICIAL OWNERS.



* * * * *

(b)(3) * * *

Note to paragraph (b)(3):

At the request of a registrant, or on its own initiative so long as the
registrant does not object, a bank may, but is not required to, deliver one
annual report, proxy statement or information statement to more than one
beneficial owner sharing an address if the requirements set forth in
§240.14a-3(e)(1) (with respect to annual reports and proxy statements) and
§240.14c-3(c) (with respect to annual reports and information statements)
applicable to registrants, with the exception of §240.14a-3(e)(1)(i)(E), are
satisfied instead by the bank.

* * * * *

(c) * * *

(4) In its response pursuant to paragraph (b)(1)(ii)(A) of this section, a bank
shall not include information about annual reports, proxy statements or
information statements that will not be delivered to security holders sharing an
address because of the bank's reliance on the procedures referred to in the Note
to paragraph (b)(3) of this section.

10. Section 240.14c-3 is amended by revising paragraph (c) to read as follows:




§240.14C-3 ANNUAL REPORT TO BE FURNISHED SECURITY HOLDERS.



* * * * *

(c) A registrant will be considered to have delivered an annual report or
information statement to security holders of record who share an address if the
requirements set forth in §240.14a-3(e)(1) are satisfied with respect to the
annual report or information statement, as applicable.

11. Section 240.14c-101 is amended by adding Item 5 to read as follows:




§240.14C-101 SCHEDULE 14C. INFORMATION REQUIRED IN INFORMATION STATEMENT.



* * * * *




ITEM 5. DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS.

If one annual report or information statement is being delivered to two or more
security holders who share an address, furnish the following information in
accordance with

§240.14a-3(e)(1):

(a) State that only one annual report or information statement, as applicable,
is being delivered to multiple security holders sharing an address unless the
registrant has received contrary instructions from one or more of the security
holders;

(b) Undertake to deliver promptly upon written or oral request a separate copy
of the annual report or information statement, as applicable, to a security
holder at a shared address to which a single copy of the documents was delivered
and provide instructions as to how a security holder can notify the registrant
that the security holder wishes to receive a separate copy of an annual report
or information statement, as applicable;

(c) Provide the phone number and mailing address to which a security holder can
direct a notification to the registrant that the security holder wishes to
receive a separate annual report or proxy statement, as applicable, in the
future; and

(d) Provide instructions how security holders sharing an address can request
delivery of a single copy of annual reports or information statements if they
are receiving multiple copies of annual reports or information statements.

By the Commission.

Jonathan G. Katz
Secretary

October 27, 2000.

--------------------------------------------------------------------------------


FOOTNOTES

1 17 CFR 230.154. 2 15 U.S.C. 77a et seq. 3 17 CFR 240.14a-2. 4 17 CFR
240.14a-3. 5 17 CFR 240.14a-7. 6 17 CFR 240.14b-1. 7 17 CFR 240.14b-2. 8 17 CFR
240.14c-3. 9 17 CFR 240.14a-101 and 240.14c-101. 10 15 U.S.C. 78a et seq. 11 The
proxy rules apply only to companies with equity securities registered under
Section 12 of the Exchange Act and to investment companies registered under the
Investment Company Act of 1940 [15 U.S.C. 80a et seq.]. 12 Rule 14a-3(b) [17 CFR
240.14a-3(b)]. 13 See Delivery of Disclosure Documents to Households, Securities
Act Release No. 7475 (Nov. 13, 1997) [62 FR 61933 (Nov. 20, 1997)], at nn.1-6
and accompanying text. 14 We proposed these amendments in Delivery of Proxy
Statements and Information Statements to Households, Securities Act Release No.
7767 (Nov. 4, 1999) [64 FR 62548 (Nov. 16, 1999)] ("Proposing Release"). 15 See
Delivery of Disclosure Documents to Households, Securities Act Release No. 7766
(Nov. 4, 1999) [64 FR 62540 (Nov. 16, 1999)]. 16 The commenters included one
individual, one corporate issuer, four financial institutions (investment
advisers, mutual fund complexes and broker-dealers), six trade associations, one
state regulatory commission, one consultant and two providers of security holder
communication services. Some commenters endorsed letters submitted by other
commenters. These comment letters and a summary of comments prepared by our
staff are available for public inspection and copying in our Public Reference
Room, 450 Fifth Street, N.W., Washington, D.C. 20549, in File No. S7-26-99.
Public comments submitted by electronic mail are on our website, www.sec.gov. 17
17 CFR 239.23. 18 17 CFR 239.25. 19 17 CFR 239.34. 20 See Rule 14a-3(a) [17 CFR
240.14a-3(a)]. 21 Under Rules 14b-1 and 14b-2, an intermediary is required to
forward proxy soliciting materials and forms of proxy or requests for voting
instructions to beneficial owners on whose behalf the intermediary holds
securities. In Regulation of Communications Among Shareholders, Exchange Act
Release No. 31326 (Oct. 16, 1992) [57 FR 48276 (Oct. 22, 1992)], we indicated
that companies and their security holders may mail proxy soliciting materials
directly to non-objecting or consenting beneficial owners, provided that they
also disseminate the materials through the record holders and provide adequate
disclosure concerning the need for the record holders to execute the proxies. 22
See Rule 14a-3(b). 23 Some companies have chosen to deliver proxy statements and
annual reports in electronic rather than paper format. Section II.B.2.d. of this
release discusses householding of electronic documents. 24 A company may
household annual reports, proxy statements or information statements to a single
security holder holding the same securities in two or more accounts with the
same address without having to comply with the householding provisions relating
to annual reports, proxy statements or information statements. This also is true
when a security holder is acting as custodian for securities (1) in an account
created under a state Uniform Gifts to Minors Act or Uniform Transfers to Minors
Act and the security holder also holds the same security in his or her own
account, with the same address; or (2) in two or more accounts created under a
state UGMA or UTMA. See Delivery of Disclosure Documents to Households,
Securities Act Release No. 7766 (Nov. 4, 1999) [64 FR 62540 (Nov. 16, 1999)], at
n. 6. 25 Rule 14a-3(e)(1) [17 CFR 240.14a-3(e)(1)]. 26 Rule 14c-3(c) [17 CFR
240.14c-3(c)]. 27 Rule 14a-3(e)(1)(i)(C) [17 CFR 240.14a-3(e)(1)(i)(C)]. 28 Rule
14a-3(e)(1)(ii) [17 CFR 240.14a-3(e)(1)(ii)]. 29 Securities Act Rule 154,
Exchange Act Rule 14a-3(e)(1) and Investment Company Act Rule 30d-1 do not
prevent security holders from consenting or revoking consent electronically. 30
Rule 14a-3(e)(1)(ii)(B) [17 CFR 240.14a-3(e)(1)(ii)(B)]. 31 Rule
14a-3(e)(1)(ii)(B)(1) [17 CFR 240.14a-3(e)(1)(ii)(B)(1)]. Some commenters
expressed concern about the ability to discern whether certain security holders
residing at the same address are members of the same family (e.g., a husband and
wife with different surnames). We believe that companies relying on the rule
may, in many cases, be able to base their reasonable belief on information
already provided by the security holder (e.g., in an account agreement). 32 See
Note to Rule 14a-3(e)(1)(ii)(B)(2) [17 CFR 240.14a-3(e)(1)(ii)(B)(2)]. This Note
refers to Securities Act Rule 421(d)(2) [17 CFR 230.421(d)(2)]. 33 An
intermediary may household proxy statements or information statements to
beneficial owners of the company's securities so long as the company does not
object. In that event, the intermediary, rather than the company, must send the
required written notice of its intention to household. See the Notes to Rules
14b-1(b)(2) [17 CFR 240.14b-1(b)(2)] and 14b-2(b)(3) [17 CFR 240.14b-2(b)(3)]
and Section II.C. of this release. 34 Rule 14a-3(e)(1)(ii)(B)(2)(vii) [17 CFR
240.14a-3(e)(1)(ii)(B)(2)(vii)]. 35 Rule 14a-3(e)(1)(ii)(B)(2)(iii) [17 CFR
240.14a-3(e)(1)(ii)(B)(2)(iii)]. In addition to providing a reply form or
toll-free telephone number, the notice also may provide supplemental methods of
opting out of householding, such as sending the reply form to a facsimile
telephone number or responding by e-mail. Reply forms to be returned by mail
must be pre-addressed and returnable by business reply mail or by another method
in which the person relying on the rule pays the postage. 36 Rule
14a-3(e)(1)(ii)(B)(2)(iv) and (v) [17 CFR 240.14a-3(e)(1)(ii)(B)(2)(iv) and
(v)]. 37 Rule 14a-3(e)(1)(ii)(B)(3) [17 CFR 240.14a-3(e)(1)(ii)(B)(3)]. If the
company receives notice that one or more security holders object to householding
within the 60-day waiting period, but there are two or more security holders at
the shared address who do not object, the company would be able to household to
the non-objecting security holders. 38 Rule 14a-3(e)(1)(ii)(B)(4) [17 CFR
240.14a-3(e)(1)(ii)(B)(4)]. One of the conditions to householding proxy
statements and information statements by implied consent requires delivery of
the householded document to a post office box or residential street address. As
a result, the rules do not permit householding by implied consent to an
electronic address. Section II.B.2.d. of this release discusses householding of
electronic documents. 39 See comment letters of ADP Investor Communication
Services, the American Society of Corporate Secretaries, the Corporate Actions
Division of the Securities Industry Association, Fidelity Management & Research
Company, the Investment Company Institute, Prudential Securities, and the
Association of Publicly Traded Companies. These commenters noted that
individuals often share a household without sharing the same last name or
otherwise belonging to the same family. In addition, these commenters were
concerned that the process of gathering information necessary to form a
reasonable belief that security holders are members of the same family may
offend some individuals' sense of privacy and, in any event, may not yield a
clear indication that two clients sharing the same residence are related. These
commenters generally believed that security holders sharing a residence would be
more than adequately protected by the rules' notice and consent revocation
procedures. 40 See comment letters of the Alabama Securities Commission and the
North American Securities Administrators Association. 41 As explained in the
release adopting Rule 154, we believe companies may use information they have
previously obtained from security holders or other sources to form a reasonable
belief that security holders are members of the same family. However, a company
may not form a reasonable belief that security holders are members of the same
family based solely on the fact that the security holders reside at the same
address. 42 A company should not mail householded materials until the 60-day
waiting period for implied consent has run and the company has processed any
objections received during the 60-day waiting period. Also, companies should
consider how their obligations under Rule 14a-13 [17 CFR 240.14a-13] affect
their schedule. Rule 14a-13 generally requires companies to request the number
of sets of materials needed by intermediaries for delivery to beneficial owners
20 business days before the company's record date. The number of security
holders receiving householded documents will affect the number of sets of
materials needed by intermediaries. 43 Although the notice may be mailed in the
same package with other communications, it must be a separate written document.
44 Rule 14a-3(e)(1)(ii)(B)(2)(vii). 45 See Note to Rule 14a-3(e)(1)(ii)(B)(4).
46 Rule 14a-3(e)(1)(ii)(B)(2)(d). Even if a company solicits "perpetual" consent
to householding from all of its security holders, it will have to solicit
consent from new security holders as they open their accounts or at a later
time. 47 Rule 14a-3(e)(1)(iii) [17 CFR 240.14a-3(e)(1)(iii)]. 48 Rule
14a-3(e)(1)(i)(B) [17 CFR 240.14a-3(e)(1)(i)(B)]. 49 Note, however, that Rule
154, as amended, does not allow companies to use an alternative addressing
format. 50 In response to our proposals regarding householding of prospectuses
and annual reports to security holders, none of the comments stated that
householding electronically delivered documents would save money or that
security holders had been requesting this form of delivery. See Delivery of
Proxy Statements and Information Statements to Households, Securities Act
Release No. 7767 (Nov. 4, 1999) [64 FR 62548 (Nov. 16, 1999)] at n. 43. 51 Those
procedures were set forth in Use of Electronic Media, Securities Act Release No.
7856 (April 28, 2000) [65 FR 25843 (May 4, 2000)]; Use of Electronic Media for
Delivery Purposes, Securities Act Release No. 7233 (Oct. 6, 1995) [60 FR 53548
(Oct. 13, 1995)]; and Use of Electronic Media by Broker-Dealers, Transfer
Agents, and Investment Advisers for Delivery of Information, Securities Act
Release No. 7288 (May 9, 1996) [61 FR 24644 (May 15, 1996)]. 52 Electronic
Signatures in Global and National Commerce Act, Pub. L. No. 106-229 (2000). 53
We would not consider two security holders who have separate electronic
addresses under one internet service provider account to share an electronic
address. For example, a security holder using the electronic address
johndoe@isp.com does not share an electronic address with a security holder
using the electronic address janedoe@isp.com, even though the two addresses may
be provided under the same internet service account. 54 The security holder must
be allowed to request an extra copy orally or in writing. See Rule
14a-3(e)(1)(i)(E) [17 CFR 240.14a-3(e)(1)(i)(E)], Item 23 of Schedule 14A [17
CFR 240.14a-101]; and Item 5 of Schedule 14C [17 CFR 240.14c-101]. 55 See Item
23 of Schedule 14A. 56 See Item 5 of Schedule 14C. 57 See Item 23 of Schedule
14A. 58 See Item 5 of Schedule 14C. 59 Some commenters said that we should be
more flexible as to the location of the required disclosures. The information
will be more useful to security holders if it is included in a document that is
actually delivered to security holders, rather than in a document that is filed
with the Commission but not delivered. We, therefore, think the more appropriate
location for the disclosure is in proxy statements and information statements.
60 See Section II.C. of this release for a further discussion. 61 17 CFR
240.14a-4(f). 62 8 Del. C. Section 222 (1999). 63 See comment letters of Lucent
and the American Society of Corporate Secretaries. 64 See comment letter of
Charles Schwab. 65 This prohibition was in paragraph (e) of Rule 154 [17 CFR
230.154(e)]. That paragraph prohibited reliance on Rule 154 in connection with
the delivery of a prospectus filed as part of a registration statement on Forms
N-14, S-4 or F-4 or delivered in connection with a business combination
transaction, exchange offer or reclassification of securities. As part of
today's amendments, we are rescinding paragraph (e) of Rule 154. 66 Delivery of
Disclosure Documents to Households, Securities Act Release No. 7475 (Nov. 13,
1997) [62 FR 61933 (Nov. 20, 1997)]. 67 See comment letters of the American
Society of Corporate Secretaries, the Corporate Actions Division of the
Securities Industry Association, Charles Schwab, the Investment Company
Institute, and Fidelity Management & Research Company. 68 See comment letters of
ADP Investor Communication Services, the American Society of Corporate
Secretaries, the Corporate Actions Division of the Securities Industry
Association, Fidelity Management & Research Company, the Securities Industry
Association, the Investment Company Institute, Charles Schwab, Prudential
Securities, and Lucent. We received no comments objecting to householding by
intermediaries. 69 Fidelity Management & Research Company and the Investment
Company Institute supported a requirement that intermediaries obtain company
consent before householding, noting concerns that companies be able to control
their expenses and that companies ultimately retain the responsibility to
provide the disclosure documents. The American Society of Corporate Secretaries,
ADP Investor Communication Services, Charles Schwab, Prudential Securities and
the Securities Industry Association thought that intermediaries should not have
to obtain company consent, with some noting that the requirement to obtain each
company's consent might prevent the most cost-effective implementation of
householding. 70 Lucent, the Investment Company Institute, Fidelity Management &
Research Company and the American Society of Corporate Secretaries indicated
that companies should be able to direct intermediaries to household. These
commenters cited maximum realization of savings and control of company or fund
expenses as support for their views. In contrast, ADP Investor Communication
Services and the Corporate Actions Division of the Securities Industry
Association opposed giving companies the ability to direct intermediaries to
household. These commenters noted that intermediaries would potentially face
differing instructions from various companies. They also indicated that
intermediaries would have to make substantial changes to their systems in order
to accommodate householding at the company level. 71 ADP Investor Communication
Services and the American Society of Corporate Secretaries commented that
companies should reimburse intermediaries for the cost of soliciting consents to
householding if the company requests the solicitation. Charles Schwab and
Prudential felt that companies should be required to reimburse intermediaries
for implementing householding irrespective of whether the company consents to
householding. The Corporate Actions Division of the Securities Industry
Association argued that companies should reimburse intermediaries for expenses
incurred in obtaining consents to householding, but did not clearly indicate
whether intermediaries should be required to obtain company consent before
householding. 72 Pursuant to today's amendment to Rule 154, intermediaries also
would be able to household combined proxy statement-prospectuses to beneficial
owners. 73 A signature on a new bank or broker-dealer account agreement will not
satisfy the written consent requirement if the agreement merely refers to or
incorporates by reference another document, such as the proxy statement or
information statement, and does not describe the householding procedures. 74
Intermediaries generally use a form of voting instruction rather than a form of
proxy to facilitate automated processing of the beneficial owners' voting
instructions regarding non-routine matters. The voting instruction form contains
the same information as the proxy card with respect to the items presented for
security holder vote. Once the intermediary tabulates the results from the
voting instruction forms, it executes a proxy card in its own name and returns
it to the company or the company's designated agent. An intermediary would have
to include a separate voting instruction form for each beneficial owner who will
receive a householded proxy statement in order to fulfill the requirement of
Rule 14a-3(e)(1)(i)(D), as required by the Notes to Rules 14b-1(b)(2) and
14b-2(b)(3). 75 Rules 14b-1(c)(3) and 14b-2(c)(4) [17 CFR 240.14b-1(c)(3) and
240.14b-2(c)(4)]. 76 See Rules 14b-1(c)(2) and 14b-2(c)(2) [17 CFR
240.14b-1(c)(2) and 240.14b-2(c)(2)]. 77 See, e.g., 2 NYSE Guide (CCH), Rules of
Board, Rules 451 and 465; NASD Manual (CCH), Conduct Rules, Rules 2260 and
IM-2260. 78 See the Note to Rule 14a-3(e)(1) [17 CFR 240.14a-3(e)(1)]. 79 See
Rules 14a-7(a)(2)(i) and (ii) [17 CFR 240.14a-7(a)(2)(i) and (ii)]. 80 For
example, the soliciting party agrees to reimburse the intermediary for
reasonable expenses incurred by the intermediary to forward the proxy statement
to beneficial owners even though these rules are silent with respect to any such
obligations. 81 See Order Approving Proposed Rule Changes by the NASD, Exchange
Act Release No. 35681 (May 5, 1995) [60 FR 25749 (May 12, 1995)]; Order
Approving Proposed Rule Changes by the New York Stock Exchange, Exchange Act
Release No. 34596 (Aug. 25, 1994) [59 FR 45050 (Aug. 31, 1994)]; and Order
Approving Proposed Rule Changes by the American Stock Exchange, Exchange Act
Release No. 34294 (July 1, 1994) [59 FR 35152 (July 8, 1994)]. The SRO rules
require the beneficial owner to notify the member organization in writing of the
name of the investment adviser and specify that the investment adviser has been
designated to receive the proxy and related materials and vote the proxy. In an
Information Memo to its member organizations, the NYSE stated that the member
organizations may wish to provide consolidated proxies and related materials to
investment advisers designated by beneficial owners to exercise voting
discretion. 82 See comment letters of Prudential Securities and the Corporate
Actions Division of the Securities Industry Association. 83 See comment letters
of the Investment Company Institute, Fidelity Management & Research Company and
Charles Schwab. 84 44 U.S.C. 3501 et seq. 85 Delivery of Proxy and Information
Statements to Households, Securities Act Release No. 7767 (Nov. 4, 1999) [64 FR
62548 (Nov. 16, 1999)]. 86 See Revision of the Commission's Auditor Independence
Requirements, Securities Act Release No. 7870 (June 30, 2000) [65 FR 43148 (July
12, 2000)]. 87 The OMB control numbers for the rules are as follows: Rules
14a-2, 14a-3, 14a-7, 14b-1, 14b-2 and Schedule 14A, contained in Regulation 14A
(3235-0059, expires September 30, 2003); Rules 14c-3 and Schedule 14C, contained
in Regulation 14C (3235-0057, expires September 30, 2003). An agency may not
conduct or sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid OMB control number. 88 We
estimate that registrants will prepare 25% of the required notices and
householding disclosures and that outside counsel will prepare the remaining
75%. Accordingly, 25% of the total burden resulting from our householding rules
is reflected as burden hours and the remaining 75% is reflected in the total
cost of complying with the information collection requirements. We used an
estimated hourly rate of $175 to determine the estimated cost to the respondent
of the disclosure prepared by outside counsel. The Commission arrived at that
hourly rate estimate after consulting with several private law firms. 89
Delivery of Disclosure Documents to Households, Securities Act Release No. 7475
(Nov. 13, 1997) [62 FR 61933 (Nov. 20, 1997)]. 90 See Delivery of Disclosure
Documents to Households, Securities Act Release No. 7766 (Nov. 4, 1999) [64 FR
62540 (Nov. 16, 1999)]. 91 In connection with our adoption of Rule 154, we
submitted the collection of information requirements contained in Rule 154, as
originally adopted, to the Office of Management and Budget. The title for that
collection of information is "Rule 154 under the Securities Act of 1933,
Delivery of prospectuses to investors at the same address." (OMB control number
3235-0495, expires Feb. 28, 2001). 92 New York Stock Exchange members may also
incur a $.50 fee for each eliminated proxy mailing under the NYSE fee schedule
for proxy mailings. Payment of that fee would result in those companies saving
$.50 less on each eliminated mailing. 93 For example, a security holder might
not receive a disclosure document if the security holder changes his or her
mailing address without notifying the company or intermediary, or if the
security holder neglects to read and respond to a notice that the company
intends to household using the implied consent procedures. 94 See
Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change by the New York Stock Exchange, Inc., Extending the Pilot
Fee Structure Governing the Reimbursement of Member Organizations for Costs
Incurred in the Transmission of Proxy and Other Shareholder Communication
Materials, Exchange Act Release No. 42433 (Feb. 16, 2000) [65 FR 10137 (Feb. 25,
2000)]. 95 See Self-Regulatory Organizations; New York Stock Exchange, Inc.,
Exchange Act Release No. 41177 (Mar. 16, 1999) [64 FR 14294 (Mar. 24, 1999)]
(stating that research provided by the NYSE indicates that approximately 70 to
80 percent of all outstanding shares are held in street name). 96 See also
comment letter of Lucent. 97 15 U.S.C. 78w(a). 98 15 U.S.C. 77b(b). 99 15 U.S.C.
78c(f). 100 17 CFR 240.0-10. 101 See 5 U.S.C. 601. 102 See 13 CFR 121.201.

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