October 27, 2004

Proposed ’33 Act Reform

Yesterday, the SEC proposed its long-awaited ’33 Act reform at an open Commission meeting. “Well-Known Seasoned Issuer” (“WKSI,” pronounced “WICK-SEE”?) is a new term of art to define a category of issuers to which the most significant proposed revisions apply. A WKSI is an S-3 eligible issuer that has $700M in float, or in limited circumstances, has issued $1B of registered debt in the last three years.

The reform proposal can loosely be grouped into the following 5 categories (which are all summaries based on meeting notes and subject to certain conditions):

1. Easier Communications Around Registered Offerings
• WKSIs would be permitted to communicate orally or in writing at any time
• All issuers/offering participants would be permitted to use a free writing prospectus after filing the registration statement
• Communications more than 30 days prior to filing a registration statement would not be an offer (so long as they don’t mention an offering)
• Definition of “prospectus” would be narrowed
• Exemptions for research reports would be expanded

2. Liability Issues
• Would interpret 12(a)(2) and 17(a)(2) disclosure liability to be assessed against the information conveyed to an investor at the time of its investment decision
• Would provide that the application of Section 11 liability in shelf offerings would be similar to non-shelf offerings

3. Registration Procedures
• WKSIs would be permitted to use “automatic shelf registration,” which would involve automatic effectiveness, pay-as-you-go fees and maximum flexibility in the offering process
• The shelf system would be modernized to: include a single rule detailing the information permitted to be omitted from a base prospectus; require a new registration statement every three years; permit immediate takedowns; permit at-the-market offerings and permit material changes to plan of distribution in a prospectus supplement
• S-3 eligible companies would be permitted to identify selling security holders in the prospectus supplement where the securities are outstanding at the time the registration statement is filed
• Form S-1/F-1 would permit incorporation by reference, and therefore, S-2/F-2 would be eliminated

4. Prospectus Delivery Reform
• Would move to an “access equals delivery” model for final prospectuses, but would require notification to investors that they purchased securities in a registered offering

5. Changes to Exchange Act Reports
• Risk factors would be required in 10-Ks
• Voluntary filers would be required to disclose their filing status as such
• Accelerated Filers would be required to disclose material, unresolved Staff comments

Deferred Compensation Legislation Become Law

Last Friday, President Bush signed the tax overhaul legislation that includes the deferred compensation provisions – so the Treasury Department now has 60 days to adopt regulations under the law to flush out how the deferred compensation provisions work. (Unlike other tax bills, there was no ceremony for this legislation-signing – Bush signed it on Air Force One on his way to a campaign stop.)

However, we understand that the Treasury Department will act well before then to allow for better year-end planning – and such planning is essential. That’s why the NASPP is hosting a webcast on November 17th regarding “Deferred Compensation Legislation: Ten Things You Need to Do By Year-End!” Join the NASPP now and get the rest of ’04 for free.

Carl’s Corner

The October installment for Carl’s Corner is on “Purchase Prices in Shareholders’ Agreements.”