STA and SSA Call for the SEC to Prohibit Unnecessary Proxy Service Fees for Separately Managed Accounts

NEW YORK, March 13, 2012 /PRNewswire/ -- The Securities Transfer Association (STA) and the Shareholder Services Association (SSA) filed today a joint petition calling on the U.S. Securities and Exchange Commission (SEC) to prohibit broker-dealers and their agents from charging issuers with unnecessary proxy service fees related to separately managed accounts.

Despite current rules, broker-dealers are passing charges back for proxy servicing fees to issuers for beneficial owner positions in separately managed accounts.  Separately managed accounts are broker-dealer programs in which investors delegate investment decisionmaking and proxy voting authority to an investment adviser for a fee that is usually a percentage of the assets held in an individual account.

Fees being charged to issuers for these accounts can total as much as $1.06 to $1.21 for each beneficial owner position. With this proxy fee practice, an issuer with 50,000 beneficial owners in separately managed accounts may be paying more than $50,000 in unnecessary charges for beneficial owner positions that are, by account agreement, not receiving proxy materials or voting proxies at the beneficial owner level. 

"Proxy service fees for separately managed accounts is a $50-$60 million a year problem for issuers," said Charles Rossi, President of the STA.  "We do not believe it is reasonable for issuers to pay for fees where, in many cases, no services are being provided."  

Details of the petition can be found in the filing on STA's website (www.stai.org) and on the SSA's website (www.shareholderservices.org).  The STA and SSA are calling for the SEC to issue an interpretive release with guidance, clarifying that broker-dealers and their agents are prohibited from charging issuers for proxy processing, suppression, voting, and other fees for wrap fee accounts and separately managed accounts, at the beneficial owner level.  This fee prohibition should apply to any circumstance in which a beneficial owner has instructed in writing that an investment adviser is to receive issuer proxy materials and vote his or her proxies in lieu of the beneficial owner.   

"We are taking this action now due to the fact that many issuers are in the process of mailing annual meeting materials, and, absent the requested fee relief, they would be subject to these fees for this year's proxy season," said Karen Danielson, President of the SSA.

In the alternative, the STA and the SSA are petitioning the SEC for an emergency or interim order to direct issuers to place the full amount of any disputed proxy fees into an escrow account until these issues are resolved through rulemaking by the SEC.

The Securities Transfer Association (STA), established in 1911, is the professional association of transfer agents.  The STA membership includes more than 150 registered transfer agents maintaining records of more than 100 million registered shareholders on behalf of more than 15,000 issuers.  Additional information about the STA can be obtained at http://www.stai.org.

The Shareholder Services Association (SSA), established in 1946, is a professional association whose purpose is to support corporate issuers in effectively meeting their responsibilities for shareholder recordkeeping and service.  Additional information about the SSA can be obtained at http://www.shareholderservices.org

Contact:
Cynthia Jones
Executive Director
Securities Transfer Association, Inc.
tel. (904) 683-5158
[email protected]

SOURCE The Securities Transfer Association