Survey Demonstrates Significant Savings Opportunity on Proxy Processing Costs for Public Companies

Average Savings of More Than 42 Percent When Compared to NYSE Regulatory Fees

Oct 03, 2011, 09:00 ET from The Securities Transfer Association

NEW YORK, Oct. 3, 2011 /PRNewswire/ -- The Securities Transfer Association ("STA"), the industry organization representing the transfer agents for over 12,000 U.S. public companies, today released a survey that demonstrates significant cost savings related to annual meeting materials.

The survey of the STA's largest members showed an average cost savings, for public companies, of 42 percent for distributing annual meeting materials under a proxy processing system that uses competitive pricing instead of a fixed fee schedule established by regulators.

This STA survey evaluated 20 invoices sent to public companies by Broadridge Financial Solutions, Inc., the dominant service provider for distributing annual meeting materials to shareholders who purchase shares through brokers and banks.  The fees charged by Broadridge for these services are currently established by a regulatory fee structure approved by the U.S. stock exchanges and the Securities and Exchange Commission ("SEC").

The STA sent these 20 Broadridge invoices to its largest transfer agent members and asked them to provide individual price quotes for providing the same services in a marketplace where fees are established through a competitive process.  

Transfer agents generally distribute proxy materials to shareholders who are registered directly with a public company.  These agents compete with one another to provide these services to more than 12,000 public companies in the United States.

The STA survey included companies ranging from 110 shareholders to more than 2 million shareholders.  Cost savings could be achieved for all but one of these companies, with savings ranging from 13 percent to 80 percent, when compared to fees charged by a fixed fee schedule.  The only invoice in which savings could not be achieved involved a company with the smallest number of shareholders—110—where the average transfer agent price quote exceeded the Broadridge invoice by $133.

These results show that a proxy processing system subject to competitive market pricing is significantly less expensive for public companies than a system in which prices are established by regulatory rules.  

Additionally, the STA survey found:

  • For companies with 5,000 or more owners, no individual transfer agent quote—including the cost of obtaining a list of owners from brokers and banks—exceeded the Broadridge invoice for the same number of owners;
  • The cost savings were more significant as the number of owners increased, with an average of 50 percent in potential cost savings for companies with 5,000 or more owners; and
  • As a group, these 20 companies could save more than $1.6 million in proxy processing fees, or an average of $80,081 per company, under a competitive market system.

The STA survey also documented more than $700,000 in unnecessary charges for processing proxy materials for individuals who typically do not receive annual meeting materials in broker-dealer managed accounts.  

A substantial majority of these investors have delegated investment and proxy voting authority to an investment adviser.  The STA's stated position is that public companies should not be charged for any investor who elects not to receive annual meeting materials, pursuant to an account agreement with his or her financial intermediary.

The SEC is currently reviewing the U.S. proxy processing system and is considering a regulatory change to permit competitive pricing for proxy services provided to investors who purchase shares through brokers and banks. This STA survey was conducted to better understand the impacts of a transition to this type of market-based system.

"This STA study is further confirmation that market-based pricing for proxy services is less expensive for public companies than fees set by regulatory rules," said Charles Rossi, STA President.  "Not only are there cost savings for both small and large companies, but the potential savings are even more significant than even our STA members realized."

"This study highlights the many different pricing inefficiencies that are imposed on public companies in a regulated fee environment," said Thomas Montrone, Chairman of the STA Proxy Communications Committee.  "We need to introduce free market principles into the proxy processing industry, in order to generate cost savings for companies and encourage direct communications between our issuer clients and retail shareholders."

The STA survey, 2011 Transfer Agent Survey to Estimate the Costs of a Market-Based Proxy Distribution System, is available on the STA's website through the following link:

About The STA

The Securities Transfer Association ("STA") is an industry trade association, established in 1911, comprised of transfer agents that provide services to over 12,000 large and small public companies in the United States.  The STA and its members work closely with issuers of securities on a variety of public policy matters and have been active for many years in advocating for a fair and efficient system for proxy distribution and communications.  Because of its influence on corporate governance matters, the proxy processing system is extremely important to the operation of the capital markets in the United States.  

Media Contact:

Cynthia Jones
Executive Director
Securities Transfer Association, Inc.
Tel +1 904 683-5158

SOURCE The Securities Transfer Association