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The Practical Corporate & Securities Law Blog

By Broc Romanek

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Friday, April 30, 2004
 
Google IPO Prospectus

Here is the S-1 filed by Google for its auction IPO!

Proposed Asset-Backed Registration & Reporting Framework

At Wednesday's open Commission meeting, the SEC proposed new rules - Regulation AB - governing registration, reporting and disclosure requirements for asset-backed securities. The SEC intends this new regulatory regime to codify existing staff positions taken in no-action letters and other interpretive guidance. There is a 60-day comment period. Here is the SEC's press release. We have started posting client alerts in A.11 of our Sarbanes-Oxley Law Firm Memos.

The following are meeting notes from Jenner & Block that indicate that the proposal would:

- provide for asset-backed securities to be registered on Forms S-1 or S-3. Form S-3 would be available for shelf registration of asset-backed securities under certain conditions, including the requirement that the securities be investment grade.

- enhance foreign access to the U.S. asset-backed securities markets by alleviating impediments to shelf registration by foreign asset-backed security issuers. At the same time, increased disclosure would be required regarding the material effect of foreign laws and regulations on the securities.

- emphasize differences between asset-backed and other securities require tailored disclosure requirements that target information that is important to investors in asset-backed securities.

- codify the many exemptive orders and over 200 no-action letters that have been issued to modify Exchange Act reporting requirements for asset-backed security issuers.

- continue to allow asset-backed security issuers to file, in place of quarterly reports on Form 10-Q, distribution reports that detail the performance of pool assets and payments on the securities.

- specify which of the recently adopted Form 8-K events would be applicable to issuers of asset-backed securities and includes events that are specific to asset-backed securities, such as the failure to make a distribution.

- codify the form of certification under Section 302 of the Sarbanes-Oxley Act and would retain current requirements for an annual service or compliance statement and an assessment and report attested to by an accountant as to compliance with particular servicing criteria.

- introduce a new subpart of Regulation S-K consisting of principles-based disclosure items that would form the basis of Securities Act and Exchange Act disclosure for asset-backed securities. The proposed disclosure items are based largely on current industry practice. They further enhance requirements regarding the sponsor, servicer and trustee of the securities and require disclosure of certain statistical information on a static pool basis if material to an offering.

- codify no-action letters issued in the mid-1990s permitting the use of certain written materials about asset-backed securities. These materials may contain information about the structure and asset pool and data regarding potential payouts of the assets under various pre-payment and other assumptions.

- clarify certain interpretive issues addressed by the staff over the past decade, such as the ability to include loan level information. The new rules would also require the filing of these materials.

- place foreign asset-backed offerings on a more comparable footing with domestic issuers. In the past, foreign issuers were required to use Form S-1 until the staff was comfortable with the issuer's disclosure of its home country's regulatory environment, particularly regarding bankruptcy, tax and the perfection of a security interest. The staff determined that it could be just as vigilant on these disclosure issues in the shelf context as in the non-shelf context, and that Form S-3 should therefore be more available to foreign issuers.

Who Do Ya Like in the Derby?

If you follow the ponies, you are duty-bound as a card-carrying legal practitioner to bet on "Read The Footnotes," who a 12-1 entry in the Kentucky Derby on Saturday.


Thursday, April 29, 2004
 
Snafus in Form ID E-Filing

I have heard members complain about a number of snafus related to the new mandatory e-filing of Form IDs that commenced Monday. In hindsight, the SEC might have been better off with a phase-in period to work out the kinks.

The most trouble appears to occur in the area of "notarized authenticating documents." For example, when you fax in your signed authentication, do not use the print version of the Form ID - you need to use the online version of the form or the SEC's system will reject it.

Thanks to Ruth Kaufman of RR Donnelley, below is an excerpt of what Donnelley sent to clients regarding notarized authenticating documents:

"The SEC has added one additional step to the Form ID process. The SEC now requires applicants to fax to the SEC (202.504.2474 or 703.914.4240) a notarized authenticating document within two days before/after the
electronic filing of Form ID. The fax must include the accession number of the electronically filed Form ID if the electronic filing preceded the fax.

Examples of how to comply with the authenticating document requirement:

"I [name of applicant] hereby confirm the authenticity of the Form ID [filed on] / [to be filed on] [specify date] containing the information contained in this document."

One way to satisfy the authenticating document requirement after electronic filing, would be to use a print-out of the Form ID application acknowledgment generated by the EDGAR Filer Management website. To use the printout to satisfy the requirement, the applicant must notarize the printout and add an authenticity confirming statement. Before faxing the printout, the applicant also should make illegible the passphrase that appears on it (as it should be kept highly confidential).

The adopted amendment, unlike the proposed, also includes a requirement to place in the notarized authenticating document the accession number of the related electronic Form ID filing when electronic filing occurs first."

Transcripts are Up!

For NASPP members, we have posted the transcript regarding "The FASB’s Expensing Exposure Draft—What it Says and How to Implement It. "

For TheCorporateCounsel.net members, we have posted the transcript regarding "The Many Faces of Director Independence."

Controlled Companies Exceptions

Yesterday, the WSJ ran an article that contained criticism of the fact that some controlled companies have taken advantage of the exceptions in the new SRO governance standards regarding director independence. I'm not convinced the criticism is warranted in all cases - rather, true independence is what counts regardless of relationships, etc.

Anyways, we have updated our "Controlled Companies" Practice Area to include links to the proxy statements of 30 controlled companies.

Wednesday, April 28, 2004
 
Blackout and Window Period Survey

Come on and fill out our latest Quick Survey - a blackout and window period survey.

OECD Finalizes Updated Corporate Governance Principles

Last week, the OECD Council approved these updated corporate governance principles after much deliberation and changes. The original OECD priniciples were established in 1999. It is expected that these principles will be ratified by the OECD Ministers at a meeting on May 12.

Some of the final principles are bound to be controversial in the US, such as:

- shareholders should have more say in nominating directors and deciding their pay
- shareholders should be able to express their views about compensation policy for board members and executives
- all equity components of an executive pay package, such as options or share incentives, should be subject to shareholders' approval
- boards should make a clear link between pay and performance when disclosing remuneration policy
- rating agencies, banks, brokers and information providers should disclose and manage conflict of conflicts of interests that may arise in the course of close contacts with a company

Tuesday, April 27, 2004
 
Business Roundtable and Direct Access

The BRT has been one of the more outspoken opponents of the SEC's shareholder access proposal - and the BRT recently filed a petition for rulemaking asking the SEC to allow companies to have direct access to beneficial owners. In addition to saving money, this would provide companies with greater opportunities to communicate with their "true" owners in the mini-contested elections that would be part of a shareholder access world.

In its petition, the BRT requests that the SEC "take steps to make the system of shareholder communications more efficient." Specifically, the petition seeks:

- companies be able to obtain a list of all beneficial owners so that they can communicate directly with beneficial owners rather than through brokers, banks and ADP

- brokers and banks be required to execute proxies in favor of their customers so that beneficial owners can vote directly rather than through "voting instructions"

- companies be permitted to transmit proxy materials directly to beneficial owners, and not have to go through brokers and banks

The petition asks the SEC to begin the process with a concept release to solicit public comment.

FOIA Flap over Shareholder Access Rulemaking

Speaking of the BRT, Gibson Dunn (which has represented the BRT for some time) recently filed a letter as part of the shareholder access rulemaking record regarding a recent denial of a FOIA request. For what I can gather from this letter, the original FOIA request sought data that ADP provided to the SEC staff - this data was prominently noted when the 35% withheld vote trigger was proposed (egs. see footnotes 78 and 84 - and related text - of the proposing release).

It appears that the SEC staff has denied this FOIA request so far. From my dwindling memory of rulemaking, under the Administrative Procedures Act, a federal agency is required to publicly state what it relied upon when proposing a rule because it can't base its rulemaking on secret evidence.

Monday, April 26, 2004
 
A New Approach to the Regulation of Underwriting Agreements

Suzanne Rothwell of Skadden Arps has put together a "bible" on new NASD Rule 2710. This 60-page memo - entitled "A New Approach to the Regulation of Underwriting Agreements" - follows up on her February interview with me, plus much more. It is available as a link from that interview as well as a link on the home page (until I create an "Underwriting Arrangements" Practice Area next week).

Updating Governance Practices

Learn how Nextel - a Nasdaq company - has coped with new governance obligations by forming a new department and more from my interview with their Corporate Secretary/Head of Governance & Corporate Responsibility Office, Christie Hill.

Today, You Need a New Passphrase to Make an EDGAR Filing

Starting today, you will not be able to make an EDGAR filing without a new passphrase. I blogged about this last week (and before that). If you have any questions about how to do this, look at the two Q&A Forums on Section16.net as Alan Dye has been answering hordes of questions there. Me, I ain't no EDGAR expert...