2260. Forwarding of Proxy and Other Materials
This rule is no longer applicable. NASD Rule 2260 has been superseded by FINRA Rule 2251. Please consult the appropriate FINRA Rule.
(a) A member has an inherent duty to forward promptly certain information regarding a security to the beneficial owner (or the beneficial owner's designated investment adviser) if the member carries the account in which the security is held for the beneficial owner and the security is registered in a name other than the name of the beneficial owner.
(1) Equity Securities
For an equity security, the member must forward:
(A) all proxy material that is properly furnished to the member by the issuer of the securities or a stockholder of such issuer; and
(B) all annual reports, information statements and other material sent to stockholders that are properly furnished to the member by the issuer of the securities.
(2) Debt Securities
For a debt security other than a municipal security, the member must make reasonable efforts to forward any communication, document, or collection of documents pertaining to the issue that: (A) was prepared by or on behalf of, the issuer, or was prepared by or on behalf of, the trustee of the specific issue of the security; and (B) contains material information about such issue including, but not limited to, notices concerning monetary or technical defaults, financial reports, information statements, and material event notices.
(b) No member shall give a proxy to vote stock that is registered in its name, except as required or permitted under the provisions of paragraphs (c) or (d) hereof, unless such member is the beneficial owner of such stock.
(c)(1) Whenever an issuer or stockholder of such issuer soliciting proxies shall timely furnish to a member:
(A) sufficient copies of all soliciting material that such person is sending to registered holders, and
(B) satisfactory assurance that he or she will reimburse such member for all out-of-pocket expenses, including reasonable clerical expenses incurred by such member in connection with such solicitation,
such member shall transmit promptly to each beneficial owner of stock of such issuer (or the beneficial owner's designated investment adviser) that is in its possession or control and registered in a name other than the name of the beneficial owner, all such material furnished. Such material shall include a signed proxy indicating the number of shares held for such beneficial owner and bearing a symbol identifying the proxy with proxy records maintained by the member, and a letter informing the beneficial owner (or the beneficial owner's designated investment adviser) of the time limit and necessity for completing the proxy form and forwarding it to the person soliciting proxies prior to the expiration of the time limit in order for the shares to be represented at the meeting. A member shall furnish a copy of the symbols to the person soliciting the proxies and shall also retain a copy thereof pursuant to the provisions of SEC Rule 17a-4.
(2) Notwithstanding the provisions of subparagraph (1), a member may give a proxy to vote any stock pursuant to the rules of any national securities exchange to which the member is also responsible provided that the records of the member clearly indicate which procedure it is following.
(3) This paragraph shall not apply to beneficial owners residing outside of the United States of America, although members may voluntarily comply with the provisions hereof in respect to such persons if they so desire.
(d)(1) A member may give a proxy to vote any stock registered in its name if such member holds such stock as executor, administrator, guardian, trustee, or in a similar representative or fiduciary capacity with authority to vote.
(2) A member that has in its possession or within its control stock registered in the name of another member and that desires to transmit signed proxies pursuant to the provisions of paragraph (c), shall obtain the requisite number of signed proxies from such holder of record.
(3) Notwithstanding the foregoing,
(A) any member designated by a named ERISA* Plan fiduciary as the investment manager of stock held as assets of the ERISA Plan may vote the proxies in accordance with the ERISA Plan fiduciary responsibilities if the ERISA Plan expressly grants discretion to the investment manager to manage, acquire, or dispose of any plan asset and has not expressly reserved the proxy voting right for the named ERISA Plan fiduciary; and
(B) any designated investment adviser may vote such proxies.
(e)(1) As required in paragraph (a), a member must forward promptly the material set forth in (a)(1), in connection with an equity security, or must make reasonable efforts to forward promptly the material set forth in (a)(2), in connection with a debt security, provided that the member:
(A) is furnished with sufficient copies of the material (e.g., annual reports, information statements or other material sent to security holders) by the issuer, stockholder, or trustee;
(B) is requested by the issuer, stockholder, or trustee to forward the material to security holders; and,
(C) receives satisfactory assurance that it will be reimbursed by such issuer, stockholder, or trustee for all out-of-pocket expenses, including reasonable clerical expenses.
(2) This paragraph shall not apply to beneficial owners residing outside of the United States of America although members may voluntarily comply with the provisions hereof in respect to such persons if they so desire.
(f) For purposes of this Rule, the term "designated investment adviser" is a person registered under the Investment Advisers Act of 1940 or registered as an investment adviser under the laws of a state,1 who exercises investment discretion pursuant to an advisory contract for the beneficial owner and is designated in writing by the beneficial owner to receive proxy and related materials and vote the proxy, and to receive annual reports and other material sent to security holders.
(1) The written designation must be signed by the beneficial owner; be addressed to the member; and include the name of the designated investment adviser.
(2) Members that receive such a written designation from a beneficial owner must ensure that the designated investment adviser is registered with the Commission pursuant to the Investment Advisers Act of 1940 or with a state as an investment adviser under the laws of such state,2 and that the investment adviser is exercising investment discretion over the customer's account pursuant to an advisory contract to vote proxies and/or to receive proxy soliciting material, annual reports and other material. Members must keep records substantiating this information.
(3) Beneficial owners have an unqualified right at any time to rescind designation of the investment adviser to receive materials and to vote proxies. The rescission must be in writing and submitted to the member.
(g) The Board of Governors for the guidance of members is authorized to establish a suggested rate of reimbursement of members for expenses incurred in connection with transmitting the proxy solicitation to the beneficial owners of the securities pursuant to paragraph (c) hereof or in transmitting information statements or other material to the beneficial owners of securities pursuant to paragraph (e) hereof.
* For purposes of this Rule, the term "ERISA" is an acronym for the Employee Retirement Income Security Act of 1974.
1 The term "state" as used herein shall have the meaning given to such term in Section 202(a)(19) of the Investment Advisers Act of 1940, and as such term may be amended from time to time therein.
2 Members may verify registration of an investment adviser through the use of the Investment Adviser Registration Depository ("IARD") system.
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Amended by SR-NASD-2002-124 eff. June 16 2003. Amended by SR-NASD-2002-11 eff. July 9, 2002. Amended by SR-NASD-95-06 eff. May 5, 1995. Amended eff. Mar. 31, 1974; May 1, 1980; Apr. 29, 1986; May 30, 1986; Aug, 7, 1991. Adopted eff. Jan. 2, 1969. Selected Notices: 85-26, 86-35, 86-46, 91-57, 92-17, 95-45, 02-33, 03-26. |