Catch tomorrow’s webcast – “The Former SEC Staff Speaks” – to hear former SEC Senior Staffers Marty Dunn, John Huber and Brian Lane join me in a discussion of the latest rulemakings – and interpretations – from the SEC. This webcast will provide a complete “bring-down” of what’s happening at the SEC – and provide practical guidance about what you should be doing as a result. Among the topics are:
– Shareholder access
– New types of shareholder proposals
– PIPEs enforcement cases
– SEC financial reporting developments
– XBRL and more…
Course Materials Now Available: As part of this webcast, you will want to review these Course Materials that relate to “materiality” determinations.
Potential Proxy Solicitation Relief for Delinquent Filers
In our November-December 2007 issue of The Corporate Counsel, we mentioned that the Staff was considering how to provide relief for reporting issuers that must defer their annual meeting because reporting delinquencies or a pending restatement makes it impossible to comply with Rule 14a-3’s requirement to deliver financial statements when soliciting proxies. Yesterday, the SEC published an adopting release for an amendment to its delegation of authority rules that will now permit Corp Fin to consider one-off exemptive applications in these circumstances.
Prior to this rule change, Corp Fin would listen to the concerns of issuers facing these problems, but indicate that it did not have the authority to do anything to help them out – now, Corp Fin will be able to formally consider an issuer’s specific request for exemptive relief from the requirements of Rule 14a-3(b) or Rule 14c-3(a).
While there is not likely to be a flood of these sorts of applications, it will certainly be something that can be used when an issuer finds itself stalled out in its SEC reporting due to a restatement or internal investigation – particularly when hostile shareholders are at the door demanding an annual meeting.
More Executive Compensation Inquiries
Some of the larger companies that have recently wrapped up their executive compensation comment process with Corp Fin now have a new inquiry to deal with – this time from the House Oversight and Government Reform Committee, chaired by Henry Waxman (D-CA). The Committee announced last week that it had sent letters to the compensation committee chairs of each of the Fortune 250 companies, requesting information about how those companies utilize compensation consultants in setting executive pay. As I noted in the blog back in December, the same Committee’s Majority Staff recently released a report raising concerns about potential compensation consultant conflicts of interest. Apparently that was not the end of the story, because the Committee indicates that its investigation into the role of compensation consultants in setting executive pay is ongoing.
The Committee’s questions focus on areas such as: (i) the retention of consultants; (ii) the parties to whom the consultant reports; (iii) the other services performed by the consultant; (iv) disclosure about the role of the compensation consultant; and (v) whether the company has a written policy about the other services that an executive compensation consultant can perform for the company. The Committee is expecting responses back by February 22, 2008.
The SEC has proposed yet another one-year delay in implementation of an independent auditor’s attestation report on the internal controls for the smallest public companies. As noted in the blog at the end of last year, Chairman Cox had promised this delay in his testimony before the House Committee on Small Business.
Under the proposal, non-accelerated filers would be required to provide auditor’s attestation reports beginning with their annual reports filed for fiscal years ending on or after December 15, 2009. The proposal does not affect the requirement that management complete its own assessment of internal control over financial reporting – which is now required for all filers, regardless of size. The proposing release is out for a 30-day comment period.
The proposed delay in fully implementing Section 404(b) – to over seven years after Sarbanes-Oxley was enacted – coincides with an announcement that the Staff has commenced its previously discussed study of the costs and benefits associated with the auditor attestation requirement for smaller companies. This is supposed to be an analysis of “real world” data in order to measure experience with the recent SEC and PCAOB guidance for management and auditors. The final results of the study are not expected for several months.
Yet Another PIPEs Case Gone Bad
Something else the SEC should consider studying (and fast) is why it keeps getting its critical Securities Act Section 5 claims dismissed in federal District Courts across the land. I recently blogged about the dismissal of the SEC’s Section 5 claims in the case of SEC v Edwin Buchanan Lyon, IV. Only a few weeks after that setback, a judge in the Eastern District of Pennsylvania dismissed similar Section 5 claims in SEC v. Berlacher.
Unfortunately, with these decisions now coming in fast and furious, hedge funds that short in anticipation of PIPEs and then cover with the registered securities are emboldened to continue that strategy in the absence of any swift SEC action to protect the legal position.
I will be discussing these cases in more detail with the great panelists on our webcast – “The ‘Former’ SEC Staff Speaks” – coming up this Wednesday.
Our February Eminders is Posted!
We have posted the February issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
The new auditing standard and the related amendments were adopted in the wake of the FASB’s issuance of FAS 154, Accounting for Changes and Error Corrections, as well as in light of the FASB’s impending issuance of The Hierarchy of Generally Accepted Accounting Principles.
Since FAS 154 established retrospective application as the required method for reporting a change in accounting principle (in the absence of explicit transition guidance in a newly adopted accounting principle), and redefined the term “restatement,” it was necessary for the PCAOB to revisit AU Section 320, Consistency of Application of Generally Accepted Accounting Principles, which reflected the provisions of the now superceded APB 20. Under the new Auditing Standard No. 6, auditors will be required to evaluate the consistency of a company’s financial statements and report on any inconsistencies. The standard will require an auditor’s report “to recognize a company’s correction of any material misstatement, regardless of whether it involves the application of an accounting principle.”
With respect to the GAAP hierarchy, the PCAOB seeks to remove the hierarchy from the auditing standards, based on a belief that the hierarchy is more appropriately located in the accounting standards. The effective date of the FASB’s Statement of Financial Accounting Standards setting forth the GAAP hierarchy is expected to coincide with the PCAOB’s changes.
Last month, the Seventh Circuit Court of Appeals issued its decision in Makor Issues & Rights, Ltd. v. Tellabs, which had been remanded by the Supreme Court in June 2007.
On remand, the Seventh Circuit addressed whether the plaintiffs’ securities fraud allegations created a “strong inference” of scienter – as defined by the Supreme Court in its opinion – so that the complaint could survive a motion to dismiss under the pleading standards established by the Private Securities Litigation Reform Act. In adhering to its prior decision and reversing the lower court’s dismissal of the suit, the Court concluded that it was “exceedingly unlikely” that the material misrepresentations allegedly made by the corporate defendant were “the result of merely careless mistakes at the management level based on false information” provided by lower level employees. The Court found that the defendants asserted “no plausible story” to indicate that Tellabs senior management, who were involved in “authorizing or making public statements,” did not know the statements were false.
You can find additional analysis of this case in the memos posted in the Pleading Requirements section of our “Securities Litigation” Practice Area.
Alan Dye’s Section 16 Webcast: Transcript Posted
We have posted the transcript from Alan Dye’s popular Section16.net and Naspp.com webcast – “Keeping Yourself Out of the Section 16 ‘Hot Water.’” Among the questions Alan answered on the webcast were:
– What is the current practice regarding average price reporting now that the Staff has issued its interpretation saying it isn’t permissible?
– We missed a Form 4 filing deadline by minutes – is there any way to avoid treating the missed deadline as a late filing, so that we don’t have to disclose the delinquency in the proxy statement?
– Do you see any reason to prohibit executives from electing, during a quarterly blackout period, tax withholding of shares upon exercise of an option or vesting of restricted stock?
– What is the best practice to follow when preparing a Form 4 to report a transaction that does not affect the insider’s other holdings? That is, is it best to report all of the insider’s other holdings, even though there was no activity involving those holdings?
There is nothing worse than having your registration statement bounced by EDGAR because of an unpaid filing fee (I think the correct term is being put into “fee suspense” or something like that). Unfortunately, that is what could happen to you if you mail or wire a filing fee to the old Mellon Bank account after this Friday.
Earlier this month, the SEC put out a notice that the lockbox financial agent is changing, and now this week the agency published final rules implementing the changes. Effective Monday, February 4th, U.S. Bank will take over as the lockbox agent, so all checks and wires need to be sent to U.S. Bank beginning on Monday. The SEC states that no payments should be submitted to Mellon Bank after tomorrow.
The SEC’s notice provides the specifics on how to wire fees to U.S. Bank. The most critical data for getting your fee through to the lockbox are the SEC’s account number at U.S. Bank and the SEC-assigned account number, identified as the CIK number. Payments may still be made by a certified or bank cashiers check as well, and the notice provides the new U.S. Bank addresses for mail or courier delivery of checks.
The final rules eliminate the option of making payments in cash or personal check – I wonder how many fees have actually been paid with a briefcase full of cash?
Corp Fin Releases New Smaller Company Compliance Guides
The Staff recently posted two new “small entity compliance guides” to explain the new smaller reporting company disclosure system that replaces Regulation S-B and the expanded eligibility for primary offerings by smaller companies on Form S-3. The Staff prepared these guides under the mandate of Section 212 of the Small Business Regulatory Enforcement Fairness Act, and they admonish that the guides are not to serve as a substitute for reading the actual rules.
The guide entitled “Eligibility of Smaller Companies to Use Form S-3 or F-3 for Primary Securities Offerings” outlines the new S-3 primary eligibility requirements for companies with less than a $75 million public float. This guide is more bare-bones, perhaps because the adopting release already included a number of detailed examples of the calculations involved.
The Staff also posted a small entity compliance guide for Rule 14-8(i)(8) earlier this month. This guide explains 14a-8 very generally and then talks about the amendment to (i)(8) to permit exclusion of access proposals.
All in all, it looks like these guides (particularly the smaller reporting company guide) can be useful resources. Unlike the Section 404 compliance guide, these latest guides weren’t accompanied by a catchy slogan like “it doesn’t have to be a chore.” Personally, I would have gone with something like “Form S-3: Not Just for the Big Dogs Anymore”
– Fairness Opinions after Revised NASD Rule 2290: Models & Analysis
– Navigating a Loan-to-Own Transaction: 11 Steps
– Practical Guidelines for Special Committees
– Perspectives from an Industry Insider: Understanding Activist Hedge Funds
– M&A Implications of New Changes to Rules 144 & 145
As all subscriptions are on a calendar year basis, it is time for you to renew your subscription. If you are missing these critical issues, try a 2008 no-risk trial to get a non-blurred version of this issue for free.
Many of you have registered for the big webconference – “New Rule 144: Everything You Need to Know – And Do NOW” – which will be video webcast today starting at noon eastern (video archive will be available starting tomorrow).
Remember you need to register to attend; members of TheCorporateCounsel.net get a discount – but the Conference is not automatically part of the site’s membership. It’s not too late to register, even if the Conference has started since everything will be archived.
Here are instructions on how to attend the Conference:
1. Ensure you have the proper “Player”: To watch the Conference, you will need either the Windows Media Player or the Flash Player (which works for a Mac); RealPlayer will not work for this Conference. You can download a free player if you need to.
2. Determine whether CLE credit is available in your state: This Conference is accredited for CLE in 15 states – here is the list of CLE states. CLE credit will not be available for states that are not on this list.
3. If you seek CLE credit, you will need to input your contact information in our “Online CLE Tracker”: To comply with certain state bar requirements, we have built a system whereby those in states where this webcast is accredited and want to earn CLE will need to click through a series of periodic prompts (i.e. about every 15-20 minutes) to prove they sat through the webcast. When you go to the webconference, you will see a link in a red box to go to the “Online CLE Tracker.”
5. Attend today starting at noon eastern: If you intend to attend live today, the Conference starts at 12:00 noon eastern time. Here is the Conference Agenda, which has the schedule of panels (remember that all panels will be archived and you can watch them afterwards).
To attend, go to the home page of TheCorporateCounsel.net and – and click on the large link at the top with the Conference title and input your ID and password when prompted. If you have questions, please email our HQ at info@thecorporatecounsel.net.
Part II: “The Latest Developments: Your Upcoming Proxy Disclosures —What You Need to Do Now!
Over 50 Executive Compensation Comment Letters: Our Updated List
In the “SEC Comments” Practice Area on CompensationStandards.com, we continue to update our list of links to the SEC’s executive compensation comment letters and responses.
We have now posted 50 comment letters and responses (some companies have more than one letter and response available). During last week’s CompensationStandards.com webcast, Staffer Mike Reedich noted that about 70% of the 350 companies that received comment letters had received a second comment letter – so my guess is that the number of letters being posted to the SEC’s site will continue to trickle rather than flood.
By the way, these letters and responses were the inspiration for an article in yesterday’s WSJ entitled “SEC Unhappy With Answers on Executive Pay.” It still strikes me as odd whenever the mainstream media writes a piece about the SEC comment process…
House’s Severance Hearing Postponed
Perhaps because Countrywide CEO Anthony Mozilo agreed to forego the $37.5 million in cash severance and other benefits that he stood to receive if the company’s acquisition by Bank of America is completed, the hearing before the House Oversight and Government Reform Committee on severance packages – originally scheduled for next week – has been postponed until Thursday, February 28th.
I heard Professor Bob Howell do his thing a few weeks back and he is quite the entertainer. In this podcast, the Professor explains how to best approach drafting disclosure for proxy materials, including:
– What are desired practices for MD&A?
– How should companies draft their risk factors?
– What is the best way that companies can get their message across in the “letter to shareholders” in the annual report?
– How should companies be disclosing “economic (e.g. cash) performance”?
1. Start with a blank sheet of paper – Uh, yeah, OK. No one ever does this. It’s just something SEC staffers like to say because it sounds good in theory. I guess they have visions of us sitting down with our CEOs, CFOs, GCs and Controllers at off-site locations with nothing on the agenda except for brainstorming about what story we want to tell this year. But in reality, unlike Richard Nelson Bolles, the author of “What Color Is Your Parachute,” none of us has time to completely re-write our disclosures every year. Our senior officers’ calendars are too packed to get everyone to be in the same room for more than 10 minutes (particularly if they know lawyers will be in the room). That’s not what they are getting paid those “Holy Cow” numbers to do. Plus, none of us in the in-house world are paid enough to put ourselves through that exercise every year!
2. Consider filing under XBRL – Again, not something many of us are going to do unless we’re forced to, but I thought I’d throw it in to receive “brownie” points from Chairman Cox in case he reads this!
3. Start early – Ha! Another one that sounds good, but no one ever does it. It’s just like the papers we were assigned to write in high school and college–we started doing all of the research and writing the papers the night before the due date (and after “Late Night with David Letterman”). I guess life would be too boring without last minute fire drills.
8. Analysis, analysis, analysis – As they say in New Jersey, “Puh-leeze!” Ever notice that the words “analysis” and “analyst” start with the letters A-N-A-L.
5. “All” means all – NOT! All means everything you are required to disclosed based on the rules. Anything over and above that is just voluntary stuff that could potentially lead to a post on one of those blogs like Footnoted.org whose only real goal is to embarrass you and your executives, or worse, could get you fired!
265. Don’t use generic risk factors that don’t apply to your company’s business – Are you kidding me? If risk factors constitute your insurance policy, as we are all so fond of saying, and it only costs whatever the printer charges for your document to be a couple of pages longer, throw in the kitchen sink! Too many risk factors can’t possibly get you in trouble. No one ever got sued for having too many risk fators.
7. Check the numbering on your exhibits list – Seriously, misnumbering is a tell-tale sign of sloppy lawyering! (Note the misnumbering of this list!)
Jan-Feb Issue of The Corporate Counsel
We recently mailed the Jan-Feb issue of The Corporate Counsel. For those that haven’t tried a no-risk trial, here is a blurred version of the issue so you can get a sense of it. This issue includes analysis of:
– The Commission’s Useful Integration (Rule 152, etc.) Guidance in August’s Reg D Proposing Release
– Yet Another Statutory Basis for a Reg D Offering: Section 28
– This Year, Preliminary Proxy Filing Can Lead to Real-Time Review of 402/404 Disclosures
– S-K Item 404(a) Follow-Up—More on Which In-Laws are Related Persons
– Audit Committee Involvement in Drafting the CD&A—Why Pile On?
– “Proxy Access”
– Bebchuk Shareholder Proposal Follow-Up
– Google’s TSOs—S-3 Registration Rather Than S-8—Follow-Up
– Stoneridge!@#$%
– Enforcement Staff Busy Advising Backdaters and Others When Investigation Has Closed
– Bulletin Board Companies Left Out of S-3 Expansion
– Cheap Stock—IPO Disclosure Overkill
– Management Blogs—Reg FD Dissemination?
– 8-K Amendment Coming to Clarify that 4.02 Reporting Cannot Be (Buried) in 10-Q/K
– FASB Re-Examining FAS 5 Disclosure Criteria—Eventual Impact on the Audit Letter Process
– Fixed 1934 Act Fees?
– Annual Salary Survey
– New Staff 144 Positions on Gifts and Pledges by Affiliates—and Blockbuster Position On Hedging
Recently, the SEC posted the adopting release for its e-forum rulemaking. Even though most of this rulemaking essentially codified what was arguably already permissible under the proxy rules, I believe this rulemaking will spur the investor community to start leveraging the Web more.
During last week’s proxy season webcast, Pat McGurn talked about this topic as well (audio archive and transcript are available now). Although not an e-forum example per se, I pointed out VotePal.com to illustrate the point of how one shareholder can easily get its views known on a shoestring budget (this particular shareholder’s beef relates to omitting the shareholder’s name from certain communications with other shareholders and not properly reporting election results). This site is quite elementary: the shareholder simply has posted a chronological list of any documents related to his agitation at Alaska Air. Note this statement on the left side of the site’s home page: “We’ve Proven Anyone Can Conduct a Proxy Contest…How About You??”
Practice Tip: Votepal.com provides us with a reminder that anything we write these days could surprise you and wind up online. The site contains several letters written by Alaska Air’s law firm (here is an example). Ignore the Web at your own peril!
Pay-for-Performance Disclosure: Transcript from Proxy Season Webcast
We have posted the transcript from last week’s popular webcast with RiskMetrics’ Pat McGurn: “Forecast for 2008 Proxy Season: Wild and Woolly.”
Here is a notable excerpt from Pat’s remarks regarding disclosure of pay-for-performance targets (which dovetails the extensive conversation about this topic with SEC Staffer Mike Reedich and others during last Wednesday’s webcast on CompensationStandards.com):
“If issuers want to stay out of trouble this year, there are a couple of quick ways to do it. The first one on the CD&A side has to do with what I call the “can’t discern alignment” issue. The fact that many companies in 2007 omitted the targets and the hurdles under their performance-based pay programs. I don’t think there is anything that’s going to get you into trouble with investors faster this year than continuing to use stealth over those targets and hurdles.
I think obviously the SEC has now set a bar for confidential treatment of those numbers and that information going forward. But I think it’s something that shareholders are going to judge on their own as well, and if there is one big flash point issue this year, it is going to be on “pay-for-performance” and whether there is enough information for shareholders to figure out how high the bar has been set in the CD&A this year.”
Alan Dye: Keeping Yourself Out of the Section 16 ‘Hot Water’
For members of Section16.net or the NASPP, tune into tomorrow’s webcast – “Alan Dye: Keeping Yourself Out of the Section 16 ‘Hot Water’” – to hear Alan Dye give us guidance on all the latest developments in the Section 16 area. This always is one of the most popular webcasts around. Try a Section16.net no-risk trial to catch this 90-minute program.
Microfinance in Africa
A friend of mine recently launched a microfinance initiative in Buyobo, Uganda, and arranged for a Ugandan charity called FDNC to provide follow up visits to her borrowers. FDNC provides all sorts of health, education and training outreach to women and children in rural villages. FDNC receives funding from a USA charity called Hope for Uganda Students (HUGS).
Now, Parade magazine is holding a charity-giving challenge and will give $50,000 to the 4 USA charities that generate the most new donors by January 31st – and the top 50 will receive $1,000. So my friend is trying to get at least 50 new donors for HUGS during the next three days. You only have to give $10 – the important thing is how many people give – not how much they give. So please go to this web site and donate $10.
Many of you have registered for the upcoming webconference – “New Rule 144: Everything You Need to Know – And Do NOW” – which will be video webcast on Wednesday, January 30th (video archive will be available starting the following day).
Here are instructions to attend the Conference:
1. Test your access now: To watch the Conference, you will need either the Windows Media Player or the Flash Player (which works for a Mac); RealPlayer will not work for this Conference. To test your access, please go to: “Test Your Ability to Access Webconference.”
2. Determine whether CLE credit is available in your state: We expect this Conference to be accredited for CLE in about 15 states – here is the list of CLE states. CLE credit will not be available for states that are not on this list.
3. If you seek CLE credit, you will need to input your contact information in our “Online CLE Tracker”: To comply with certain state bar requirements, we have built a system whereby those in states where this webcast is accredited and want to earn CLE will need to click through a series of periodic prompts (i.e. about every 15-20 minutes) to prove they sat through the webcast. Soon, we will have this “Online CLE Tracker” up and you can input your information in advance of the Conference if you wish.
4. Print out the Course Materials: You can now access these “Course Materials,” including this printable set of model documents. [We just tweaked a few of the rep letters to add a representation about shell companies – so if you already printed out a set of our model documents, you may want to print them out again.]
5. Attend on Wednesday, January 30th starting at noon eastern: If you intend to attend live on Wednesday, the Conference starts at 12:00 noon eastern time (this is earlier than originally announced as the Conference is now longer). Here is the Conference Agenda, which has the schedule of panels (remember that all panels will be archived and you can watch them afterwards).
To attend, go to the home page of TheCorporateCounsel.net and – and click on the large link at the top with the Conference title and input your ID and password when prompted. If you have questions, please email our HQ at info@thecorporatecounsel.net.
Podcast: Impact of Stoneridge
In this podcast, Lisa Wood of Foley Hoag discusses the recent US Supreme Court decision regarding aiding & abetting in Stoneridge Investment Partners v. Scientific-Atlanta, including:
– What did the Supreme Court decide in Stoneridge?
– What does this mean for aiding & abetting allegations going forward?
– What should companies and other market participants do to protect themselves in the wake of Stoneridge?
The Stoneridge Memo Phenomenon
I don’t know why it struck me, but the force and speed by which law firms sent their memos out last week – in the wake of the US Supreme Court’s Stoneridge decision – was truly amazing. So far, we have posted over 40 of these memos, with the bulk of them being drafted within 48 hours of the decision being rendered. So below is a question I ask you:
Catch today’s webcast – “Smaller Companies: How Your 10-K Changes This Proxy Season” – to hear Dave Lynn, John Jenkins and Harry Pangas discuss how to prepare your Form 10-K this proxy season, with a focus on what changes you need to make this year due to the SEC’s new rules and regulations for smaller companies.
Unlike our other webcasts, this one was taped in advance so you can listen to it at anytime (and there will be no transcript). And you will also want to review these “Course Materials,” which consist of practice pointers that the panelists put together. Some good stuff!
Head’s Up for Smaller Companies: Read the Actual Rule Text
A member recently alerted us to a possible glitch in the SEC’s adopting release for smaller company regulatory relief and simplification. In the release, the SEC stated that Item 407 of Regulation S-K was being amended to provide that “smaller reporting companies are: “… Not required to provide an Audit Committee Report until the first annual report after their initial registration statement is filed with the Commission and becomes effective.”
However, the actual amendments to Item 407 don’t refer to the Audit Committee Report – instead, they refer to disclosure regarding the Audit Committee Financial Expert. I think the actual amendments are correct since the intent of the rules is to provide that the disclosure regarding Financial Experts required by Item 407(d)(5) will not be required for a smaller reporting company in its 1st annual report following the effective date of its first registration statement. Smaller reporting companies will be required to provide Audit Committee Reports.
Practice Tip: For both the SEC’s adopting and proposing releases, don’t forget to read the rule text near the end of the releases rather than rely on the narrative description of them in the forepart. After all, the rule text is what we all have to live by, long after the adopting release is mostly forgotten…
News from San Diego: Recap of Corp Fin Efforts
Yesterday, Corp Fin Director John White delivered this speech at the Northwestern Conference in San Diego. It provides a recap of all the SEC’s ongoing efforts. In two weeks, get some expert perspectives from outside the SEC on what the Staff is up to (and has been doing recently) in our webcast: “The ‘Former’ SEC Staff Speaks.”
I hear that Staffer Shelley Parratt had an interesting panel in which she said there have been a lot of questions about how companies can find out which AD group (ie. industry group in Corp Fin’s “operations”) they are in. There is information on the Corp Fin web page – but it can be confusing so the Staff plans to make it easier to use. Don’t forget our handy “Corp Fin Organization Chart.”
With our blockbuster Conference only a week away – “New Rule 144: Everything You Need to Know – And Do NOW” – we have posted our Course Materials so that you can print them out in advance. If you have registered for the Conference, please use your ID and password to access these “Course Materials,” including this printable set of model documents. (Note you need to register for the Conference to access these Materials; members of TheCorporateCounsel.net receive a discounted rate, but the Conference is separate from membership.)
In addition to a “Comprehensive Rule 144 Outline,” nifty charts and useful analysis, the Course Materials include these model documents:
– Model Memorandum to Directors and Executive Officers
– Seller’s Representation Letter #1 – Sales by Affiliate of Reporting Company
– Seller’s Representation Letter #2 – Sales by Affiliate of Non-Reporting Company
– Seller’s Representation Letter #3 – Sales of Restricted Securities by a Non-Affiliate
– Standard Broker’s Representation Letter for Affiliates: “We Will Comply” Letter
– Legend Removal Representation Letter #4.a – to Broker
– Legend Removal Representation Letter #4.b – to Issuer and Transfer Agent
– Legend Removal Broker’s Cover Letter #5 – to Transfer Agent and Issuer
– Broker Instruction/Representation Form
– Letter: Reminder of SEC Restrictions and Company Policy (can be stapled to stock certificate, etc.)
The Course Materials alone are worth the rate of this Conference. You will need all of these documents starting February 15th, when new Rule 144 becomes effective.
New Rule 12h-6: Deregistration Stats So Far
Last week, Corp Fin Director John White gave this speech at PLI’s Annual European conference, which provides a solid recap of the SEC’s international efforts in the corporate finance area. (Chairman Cox also recently delivered this speech entitled “International Business — An SEC Perspective.”)
In his speech, John notes that 100 companies have filed to withdraw from U.S. registration under the SEC’s new deregistration rules during 2007 (which doesn’t include 25 that had previously deregistered under the older exit rules but filed a Form 15F to gain the benefit of new Rule 12h-6). The 100 FPIs represent just under 9% of all FPIs as of the beginning of 2007 and 53% are from the European Union.
It is notable that during 2007, more than 75 new foreign private issuers registered securities in the US. So perhaps it’s too early to tell what the long-term impact of new Rule 12h-6 will be…
Probable Cause for Car Search: No Broker-Dealer License
I’ve heard of getting into trouble driving with a driver’s license – but driving with a broker-dealer license? Keith Bishop notes: I thought that this recent California case was interesting for several reasons:
1. The Court of Appeal found that the police had probable cause that the defendant was selling securities without a broker-dealer license and could lawfully search the defendant’s vehicle in connection with his arrest.
2. The appellate court upheld a burglary conviction based on the fact that the defendant entered the victim’s home to solicit an investment.
3. The court ruled that violation of California’s broker-dealer registration requirement (Cal. Corp. Code Sec. 25210) is a general intent crime. Thus, guilty knowledge is not an element of the crime. (For example, the defendant does not have to know that he or she is selling securities.) However, the defendant’s good faith believe that he or she is not required to be licensed is an affirmative defense.
4. It should be noted that the defendants’ failure to disclose that they lacked a B-D license also supported criminal convictions for selling securities by false statements or omissions (Cal. Corp. Code Sec. 25401).
