July 12, 2004

Novel Regulation S No-Action Letter

On April 28th, Corp Fin issued a novel no-action response to limited on some Regulation S issues. This company intends to make available onine prospectuses and related documents for international securities offerings to subscribers.

According to the letter, the company will run a web-based database service that will post prospectuses before distribution is complete for Reg S/144A offerings by non-US issuers. One of the issues addressed is whether the posting will be deemed a “directed selling effort” under Reg S by the issuer of the security.

The database site is password-protected, has legends and you need to be a member to use it but here’s the rub – unlike prior letters like, to get a password you don’t need to be a QIB or an IAI. Rather, you only need to be a customer (apparently, there is a high membership fee but still no need to be a QIB or IAI, etc.).

My good friend Walter van Dorn of Thatcher Proffitt explains to me that the over-all utility of this response is likely to be limited since the overwhelming majority of international offerings are combined Reg S and Rule 144A offerings – and because the site here does not need to be password-protected to nonQIBs/IAIs (even though no-action was granted based on the interpretation of some pretty arcane Reg S provisions).

Most issuers still will have problems with the necessary ’33 Act exemption for the 144A/4(2) component of their offering. So for the vast majority of deals that are combined Reg S/144A offerings, this letter may not be of much practical value.

23 Lessons Learned from Disney

I love “lessons learned” articles because they tend to be so practical – that’s why one of my favorite practice pointers on is “23 Lessons Learned from Disney: Director Liability for Excessive Executive Compensation” by Mike Melbinger.