DIVISION OF CORPORATION FINANCE
MANUAL OF PUBLICLY AVAILABLE TELEPHONE INTERPRETATIONS
SEC's "Telephone Manual"
1S. Sections 2(a)(3) and 5; Rule 145(a)(2)
Statutory mergers by means of security holders' vote are defined by
Rule 145(a)(2), for purposes of Section 2(a)(3), as events of sale. The
rule excludes from this definition mergers for the sole purpose of
changing the issuer's state of incorporation. The exclusion itself is
limited to migratory transactions occurring exclusively within the
United States, that is, a migration from one state to another within the
United States. Despite the rule's express domestic limitation, the
Division believes that similar transactions changing a foreign issuer's
domicile from one political subdivision of a country to another (such as
reincorporation from one Canadian province to another) likewise should
not be treated as a sale. However, if a foreign corporation undertakes a
merger to become a United States corporation, the migratory transaction
is an event of sale that must be registered with the Commission or
exempt from registration.
2S. Section 3(a)(9)
In recent years, United States issuers acquiring Canadian companies
have used an offering structure designed to allow Canadian security
holders of the acquired business to defer a tax event in the sale of
those securities. Canadian law will currently tax the disposition of
shares in a Canadian enterprise through a business combination, but
provides an exemption where the consideration is paid in securities of
another Canadian issuer. To allow Canadian shareholders to qualify for
this tax deferral, United States issuers have effected acquisitions with
the shares of a Canadian subsidiary. Holders of common shares in the
Canadian subsidiary indirectly share the same dividend, liquidation, and
voting rights as held by common stockholders of the United States
parent. The Canadian subsidiary's shares also carry the right to convert
into shares of the United States parent.
Section 3(a)(9) of the Securities Act exempts from registration
exchanges of securities by the issuer exclusively with its own security
holders. By its terms, the exemption is not available for issuer
exchanges of its securities with the security holders of another person,
even including security holders of a subsidiary. Historically, the only
exception to this exclusivity requirement had been for certain
guaranteed securities. For example, the Division has agreed that a
parent may rely on the 3(a)(9) exemption to issue its own securities to
holders of a wholly-owned subsidiary's debt securities supported by the
parent's full and unconditional guarantee.
In Microsoft/Softimage (April 8, 1994), the Division granted
no-action relief for the conversion of Microsoft shares for the shares
of its Canadian subsidiary used in the earlier acquisition of Softimage.
The transactions followed the general pattern described in the first
paragraph. The Division has reconsidered Microsoft/Softimage.
Beginning with
Battle Mountain Gold (June 7, 1996), the Division
has not agreed that an issuer may rely on Section 3(a)(9) to exempt such
a conversion. The reconsidered view is based on the perspective that,
notwithstanding other similarities between the parent and subsidiary
shares, ownership of a subsidiary's securities following this design
intrinsically represents an ownership interest in the subsidiary that is
not directly shared by security holders of the parent. As a result,
conversion to the parent's securities cannot satisfy the "same-issuer"
requirement of Section 3(a)(9).
3S. Sections 5 and 4(2); Rule 416; Form S-3;
S-K Items 507 and 508
(a) A company privately placed convertible securities in reliance on
the exemption provided by Section 4(2). The company agreed to file a
registration statement within two months after the private placement
closing to register the resale of the common stock issuable on
conversion of the convertible securities. The securities were
convertible into common stock using a conversion ratio based on the
company's common stock trading price at the time of conversion. Company
counsel asked if it could use Form S-3 to register the resale of the
common stock prior to conversion. The company also asked, through
counsel, if it could use Rule 416 to register for resale an
indeterminate number of shares that it may issue due to the operation of
the conversion formula.
If the company satisfies the Form S-3 registrant eligibility
requirements and the offering satisfies the Form's secondary
offering requirements, the staff believes that the company may use
Form S-3 to register, prior to the conversion, the resale of the
common stock issuable upon conversion of the outstanding convertible
securities. The company may not use Rule 416 to
register for resale an indeterminate number of shares resulting from
operation of the conversion formula. Rule 416 does not apply by
its terms in these circumstances, because the floating conversion
rate is not "similar" to an anti-dilution provision. Instead,
the company must make a good-faith estimate of the maximum number of
shares that it may issue on conversion to determine the number of
shares to register for resale. If the number of registered shares is
less than the actual number issued, the company must file a new
registration statement to register the additional shares, assuming
the selling securityholder desires to sell those additional shares.
It may use Rule 462(b), if available, for this purpose.
The selling securityholder information in the registration
statement, at the time of effectiveness, must include the total
number of shares of common stock that each selling securityholder
intends to sell (based on current market price if there is a
floating conversion rate tied to market price), regardless of any
contractual or other restriction on the number of securities a
particular selling securityholder may own at any point in time. As
the selling securityholders resell shares of common stock following
conversion, the company must file prospectus supplements, as
necessary, to update the disclosure of the number of shares that
each selling securityholder intends to sell, reflecting prior
resales.
In addition, the plan of distribution in the registration
statement must specify, in compliance with Item 508 of Regulation
S-K, how each selling securityholder intends to dispose of the
securities it receives on conversion.
(b) The company asked whether the answer to the above question is
different if it has not yet issued some or all of the convertible
securities prior to filing the registration statement for the resale of
the common stock underlying all of the convertible securities.
Unless the transaction involving the issuance of the convertible
security meets the conditions under which a company may file a
registration statement for resale of privately placed securities
before their actual issuance (commonly known as a "PIPE," or
private-investment, public-equity transaction, as discussed below),
we would not view the registration for resale of the common stock
underlying the unissued convertible security as a valid secondary
offering. We instead would treat the transaction as an indirect
offering by the issuer, and thus a primary offering, with the
investor being identified in the registration statement as an
"underwriter." The staff will object, in such circumstances, to use
of the phrase "may be an underwriter." Instead, the disclosure in
the registration statement must state that the investor "is an
underwriter." As a result, the company may register on Form S-3
the resale of the underlying common stock, or the convertible
security itself, only if the company is eligible to use that Form
for a primary offering. In addition, if the company continues to
sell privately additional convertible securities after it has filed
the registration statement for the securities underlying the
previously sold convertible securities, the continuation of the same
offering may call into question the Section 4(2) exemption generally
claimed for the entire convertible securities offering.
In a PIPE transaction (private-investment, public-equity), the
staff will not object if a company registers the resale of
securities prior to their issuance if the company has completed a
Section 4(2)-exempt sale of the securities (or in the case of
convertible securities, of the convertible security itself) to the
investor, and the investor is at market risk at the time of filing
of the resale registration statement. The investor must be
irrevocably bound to purchase a set number of securities for a set
purchase price that is not based on market price or a fluctuating
ratio, either at the time of effectiveness of the resale
registration statement or at any subsequent date. When a company
attempts to register for resale shares of common stock underlying
unissued, convertible securities, the staff's PIPEs analysis applies
to the convertible security, not to the underlying common stock.
There can be no conditions to closing that are within an investor's
control or that an investor can cause not to be satisfied. For
example, closing conditions in capital formation transactions
relating to the market price of the company's securities or the
investor's satisfactory completion of its due diligence on the
company are unacceptable conditions. The closing of the private
placement of the unissued securities must occur within a short time
after the effectiveness of the resale registration statement.
4S. Sections 5, 4(2) and 2(a)(11); Rule 415;
Form S-3
Note: Interpretation 4S was superceded by the Division of
Corporation Finance's Current Issues Outline March 31, 2001 Quarterly
Update at
Section VIII thereof.
(a) A company entered into an agreement with a limited number of
investors under which the investors committed to provide the company
with private equity capital on a periodic basis. Under the agreement,
the company will exercise its right to draw down on the "equity line"
arrangement and issue securities after the filing and effectiveness of a
registration statement covering the resale of the equity securities that
the company will issue. The timing and amount of each draw-down on the
equity line will be negotiated between the company and the investors
during the duration of the commitment. The securities purchase price is
based on a formula tied to market price at the date of each draw-down.
The company has asked whether it may register the resale of the
securities it will issue under the equity line on Form S-3.
Because the investors are not at market risk and have not made an
irrevocable decision to purchase the securities prior to the filing
of the resale registration statement, notwithstanding the signing of
the equity line agreement before the filing of the registration
statement, the transaction does not satisfy the conditions of the
staff's PIPEs position. Because the "resale" is actually an indirect
primary distribution of the securities by the company effected
through the investors, the investors are viewed as statutory
underwriters within the meaning of Section 2(a)(11). Thus, while the
staff will not object to the registration for resale of securities
issued under such equity line arrangements, the investors must be
named as underwriters in the registration statement (not
identified as possible underwriters), and the company
may register the securities for resale on Form S-3 only if it is
eligible to use the form for a primary offering. Otherwise, the
company may register the resale of the securities only on the form
that it may use for a primary offering (e.g., S-1 or S-2). In
addition, because the parties' execution of the "equity line"
arrangement is not considered sufficient to demonstrate that a
completed private placement has occurred before the time of filing
of the registration statement, the company may have to disclose in
the registration statement the existence of contingent liabilities
for a violation of Section 5 in connection with sales of the
securities made under the equity line. Further, depending on the
facts of a particular case, the offering may have more
characteristics of a primary offering than a secondary offering
(whether due to the ongoing investment decisions by the investor or
the character of the investor) and may need to meet the requirements
of subsections of Rule 415 (such as Rule 415(a)(1)(x) and Rule
415(a)(4)) other than Rule 415 (a)(1)(i) for secondary offerings.
(b) The company asked whether the answer is different if the ability
to draw down on the "equity line" is solely in the company's control and
if the price and amount of securities for each draw-down is set forth in
advance in the executed "equity line" agreement. The company also asked
whether the answer is different if the "equity" is a convertible
instrument rather than common stock.
The answer is the same under any or all of the altered facts. We
would not view the registration for resale of the shares that the
company will issue under the equity line as a valid secondary
offering. Due to the delayed draw-downs and closings under the
equity line, the investors are not at market risk at the time the
parties execute the agreement, and the offering is really a delayed
primary offering. Further, the answer does not change regardless of
the number of times the company can draw down under the equity line
or the degree of control the investors may exercise with respect to
the timing or amount of each draw-down. The type of security that
the company may issue also does not affect the analysis.
(c) The company asked whether the answer is different if the
investors' capital is placed in escrow and released to the company as
the company issues shares under the equity line. The company stated that
control over issuance of shares is outside the control of investors.
The answer is the same. Because the company's securities are not
being issued promptly after the effectiveness of the registration
statement, the staff does not believe that the investors are at
market risk upon entering into the equity line agreement
notwithstanding the escrow arrangement. This structure enables
companies that are not eligible to use Form S-3 for a primary
offering to avoid the restrictions on who can use Rule 415 for a
delayed offering. Even if the company is eligible to use Form S-3
for a primary offering, this structure improperly facilitates
noncompliance with the requirements of Rule 415 (a)(4) for
"at-the-market" offerings.
5S. Section 6(b) and Rule 457
The public offering price for a security always is the basis for
calculation of the filing fee under Section 6(b) of the Securities Act.
As a result, the principal amount for debt securities sold with original
issue discount will not be the amount on which the fee is calculated.
Instead, the substantially smaller amount to be paid by purchasers in
the public offering will determine the fee.
6S. Section 7; Rule 436
Registration statements covering securities offered and sold in
business combinations and reorganizations often describe or include
opinions from investment bankers on the financial fairness of the
transaction to prospective purchasers in the transaction. Section 7 and
Rule 436 require that the banker's consent to being named in the
registration statement be filed as an exhibit to that registration
statement in these circumstances.
1S. Rule 140; Form S-8 Instruction
A.1(a)
A limited liability company ("LLC") sought to issue to its employees
the stock of its financing member, which has the sole purpose of issuing
stock to the public and investing the proceeds thereof in the LLC's
securities. Because of this relationship, Rule 140 requires the LLC to
register as co-issuer on any Securities Act registration statement filed
by the financing member for the sale of the financing member's stock.
Accordingly, the LLC is considered a "registrant" for purposes of S-8
availability. It is therefore not necessary to analyze whether the
financing member is a "subsidiary" of the LLC for purposes of
determining whether the finance member may register its stock on Form
S-8 for sale to employees of its "parent."
2S. Rule 416; Rule 457 (This Clarifies
Existing Interp. 77)
(a) A company asked how to compute the number of underlying common
shares to be registered in a primary offering of immediately convertible
debentures, where the conversion ratio is based on fluctuating market
prices and the investors pay no additional consideration to effect the
conversion.
Although pursuant to Rule 457(i) the company does not have to pay an
additional fee since it is required to register the underlying
common shares at the same time as the convertible securities, the
company should register an amount of shares based on a reasonable
good-faith estimate of the maximum amount of shares it will need to
cover conversions.
(b) A company asked whether it can use a good-faith estimate to
register the resale of the shares of common stock if the convertible
securities are already outstanding and rely on Rule 416 to register any
additional shares needed due to the operation of a conversion formula.
If the company is not registering the issuance of the convertible
securities in a primary offering, it may not rely on Rule 416 to
register for resale an indeterminate number of shares of common
stock that it may issue under a conversion formula based on
fluctuating market prices. The company must register for resale the
maximum number of shares that it thinks it may issue on conversion,
based on a good-faith estimate and, if the estimate turns out to be
insufficient, the company must file a new registration statement to
register the additional shares for resale. If available, Rule 462(b)
may be used in this context.
3S. Rule 421(d)
The requirement for a "plain English" presentation of information in
a prospectus does not apply to forms used for the U.S./Canadian Multijurisdictional
Disclosure System.
4S. Rule 429
Rule 429 may be used by registrants filing on Schedule B on the same
basis that it may be used by other registrants under the Securities Act.
5S. Rule 466
Rule 466 will be narrowly applied and may be used only
for changes in the ratio of ADRs to underlying foreign shares. In all
other respects, the terms of deposit for the new registration statement
on Form F-6 must be identical to a previously filed registration
statement on Form F-6.
6S. Rule 502
Foreign private issuers eligible to use Forms 40-F, F-9 or F-10 may
use their most recent filing on those forms to satisfy the information
standards of Rule 502(b)(2)(D).
7S. Rule 903
The question of which category of the Regulation S safe harbor may be
used for an offering of securities outside the United States must be
determined at the time the offer is made. If, after the offering is
made, changes occur in the issuer's circumstances that would permit it
to qualify for a different category of the safe harbor in the future,
there will be no change in the distribution compliance period for the
outstanding securities issued under the prior category.
1S. Rule 144(a)(2)
An affiliate settlor transfers unrestricted shares to a charitable
remainder trust. The control securities are the only asset of the trust.
The entire income interest in the trust is held by the affiliate and the
affiliate's family members sharing the same residence. Income
distributions are made annually. The trust is the same person as the settlor under Rule 144(a)(2) and as a result is itself an affiliate of
the issuer. This conclusion is not changed by the use of an independent
trustee.
2S. Rule 144(d)(1)
The holding period for restricted securities acquired under an
employee stock option always begins on exercise of the option and full
payment to the issuer of the exercise price. The date of the option's
grant may never be used for this purpose, even if the exercise involves
no payment of cash or other consideration to the issuer. Because the
option is issued to the employee without any payment for the grant, the
optionee holds no investment risk in the issuer before the exercise.
3S. Rule 144(d)(3)(iv)
An affiliate of an issuer secures a loan with restricted securities.
The restricted securities are hypothecated to the lender, rather than
pledged, and an irrevocable stock power is granted. On a default under
the loan, the lender could use the two instruments to cause legal title
to be transferred to itself. For purposes of the lender's holding period
calculation, the hypothecation agreement and the irrevocable stock power
may be construed as the equivalent of a pledge. Subject to the
requirements for good faith and recourse against the borrower, the
lender would be able to use the borrower's holding period under Rule
144(d)(3)(iv).
4S. Rule 144(e)
Stock splits and reverse stock splits, which are not events of sale
under the Securities Act, have no real effect on available volume under
Rule 144(e). In other words, the split or reverse split should not
change the proportion of the issuer's securities that a holder of
restricted or control securities should be permitted to sell in the
rule's three-month measuring period. To calculate available volume after
a split or reverse split, a Rule 144 seller should give effect to the
split or reverse split throughout the whole three-month period, as
though it had occurred on the first day of the period, even though the
record and effective dates were later. This method may be used for the
rule's one percent measurement or the market-based alternative for
securities listed on an exchange or quoted through Nasdaq (NMS or Small
Cap).
5S. Rule 144A
Affiliates of the issuer may make resales of eligible securities
under Rule 144A. The rule is available to any person other than the
issuer. "Issuer," as used here, has only the meaning given by Section
2(a)(4). The "control" clause of Section 2(a)(11) equates the issuer and
its affiliates solely for the purpose of identifying intermediaries to
the public market who are underwriters within the statute's meaning. By
definition, sales effected under Rule 144A are not made to
the public market.
6S. Rule 144A
The amount of securities expected to be purchased by a buyer in a
Rule 144A offering may not be included when calculating the amount of
securities that are owned or invested on a discretionary basis by that
buyer for purposes of determining whether the buyer is a "qualified
institutional buyer" eligible to participate in the offering.
1S. Rule 415(a)(4)
Pursuant to a shelf registration statement, from time to time a
company issues securities through a firm commitment underwriting at a
price fixed based on the prior day's closing price. These firm
commitment takedowns would not be considered "at the market offerings"
because they are at a fixed price. However, sales into an existing
trading market of securities of the same class made by broker-dealer
firms who buy securities in such takedowns may be deemed indirect
primary offerings made "at the market" within the meaning of Rule
415(a)(4), thereby triggering registration and prospectus delivery
requirements.
1S. Forms F-1, F-2, F-3, F-4, F-6, F-7,
F-8, F-80, F-9, and F-10
These registration statements require the signature of the
registrant's authorized U.S. representative. The term "authorized U.S.
representative" is discussed in Securities Act Release No. 6360 (Nov.
20, 1981). The release states that "the Commission generally accepts the
signature of an individual who is an employee of the registrant or an
affiliate, or who is the registrant's counsel or underwriter in the
United States for the offering, because the signature clearly identifies
an individual that is connected with the offering as subject to the
liability provisions of the Securities Act. By similar reasoning, the
Commission generally has refused to accept the appointment of a newly
formed or shell corporation in the United States as the authorized
representative."
In the case of registrants having dual governing boards, the
registration statement should be signed by whichever board has the
authority to bind the company and performs functions most similar to
those of a U.S. company's board of directors. In some cases, this may
require the signatures of members of both governing boards. The
registration statement disclosure requirements relating to the
registrant's board of directors generally would apply to members of both
governing boards.
2S. Form F-1
In the context of a foreign issuer conducting a worldwide offering of
securities in a currency other than U.S. dollars, where there is
appropriate cover page prospectus disclosure, the staff does not object
to the practice of the issuer requiring U.S. persons to pay U.S. dollars
in an amount equal to up to 110% of the U.S. dollar value of the other
currency (based on the most recently available exchange rate as of the
pricing date) and subsequently refunding to U.S. persons any amounts
over, or charging U.S. persons any deficiency, with respect to such U.S.
dollar value based on the exchange rate on the closing date.
3S. Form F-1
The staff does not object to foreign issuers registering only a
portion of a worldwide equity or debt offering so long as the amount
registered with the Commission covers the securities sold in the U.S.
and any possible flow-back of securities into the United States.
4S. Form F-1
The staff does not object to the use of a U.K-style (or other
foreign-style) document as a prospectus in the United States, so long as
the information required under the Commission's rules is included in the
document. The staff may require some modification of the presentation
and placement of information in order to reflect the Commission's "plain
English" requirements and, in particular, the requirements for
presentation of risk factors.
5S. Form F-1
Although the staff generally requires risk factor disclosure for all
initial public offerings, foreign issuers that are making their U.S.
equity IPO and have existing, established trading markets for their
equity securities outside the United States generally are not required
to include risk factors addressing possible illiquidity of the offered
securities in the United States.
6S. Form F-6
The staff does not object to the use of Form F-6 for the registration
of installment receipts even though the form, by its terms, is not
available in cases where the underlying shares are not withdrawable.
7S. Form F-6
The staff does not object to the use of Form F-6 for the registration
of American Depositary Shares even though local government law prohibits
the withdrawal and holding of underlying shares by U.S. and other
foreign persons. For example, certificates of participation (CPO's)
issued by a master trust established with respect to the securities of
Mexican companies should be registered on Form F-6, even though the
form, by its terms, is not available in cases where the underlying
shares are not withdrawable.
8S. Form F-6
A new registration statement on Form F-6 must be filed if the
depositary for an ADR program changes.
9S. Form F-6
When a registration statement on Form F-6 is filed in connection with
the establishment of a company-sponsored ADR program, the depositary and
the company will be required to provide a representation that
arrangements are in place to terminate any existing unsponsored ADR
programs for the company's securities in a prompt and orderly fashion.
The staff may require written confirmation from the depositaries of the
unsponsored programs as to their concurrence with such arrangements.
10S. Forms F-7, F-8, F-9, F-10 and F-80
Item 2 of each of these registration forms (Item 3, in the case of
Form F-10) specifies certain legends that should be included, to the
extent applicable, on the outside front cover page of the prospectus.
The staff does not object if issuers eligible to use these forms
substitute the following plain English versions of the first four
legends required by these items of the forms, in place of the versions
currently set forth in the forms:
"We are permitted to prepare this prospectus in accordance with
Canadian disclosure requirements, which are different from those of the
United States. We prepare our financial statements in accordance with
Canadian generally accepted accounting practices, and they may be
subject to Canadian auditing and auditor independence standards. They
may not be comparable to financial statements of United States
companies."
"Owning the [securities] may subject you to tax consequences both in
the United States and Canada. This prospectus or any applicable
prospectus supplement may not describe these tax consequences fully. You
should read the tax discussion in any applicable prospectus supplement."
"Your ability to enforce civil liabilities under the United States
federal securities laws may be affected adversely because we are
incorporated in [province/Canada], [some/all] of our officers and
directors and [some/all] of the experts named in this prospectus are
Canadian residents, and [many/all] of our assets are located in Canada."
"Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense."
In addition, the staff does not object if the legend required by Item
2 of Form F-9 and Item 3 of Form F-10 for prospectuses used before the
effective date of the registration statement is presented in the
following plain English version:
"The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted."
11S. Form F-7
The U.S./Canadian Multijurisdictional Disclosure System ("MJDS") may
be used for rights offers exempt from Canadian registration
requirements, notwithstanding the general prohibition on the use of the
system for exempt offerings. The offering circular and any other
material used to make the offers constitute the "prospectus" for
purposes of Form F-7. See Item 1 of Part I "Information Required
to Be Sent to Shareholders."
12S. Form F-8
The required legend with respect to the securities not being approved
or disapproved by the Commission may be modified to add a reference to
the fact that state regulators also have not approved or disapproved
such securities.
13S. Form F-8
The reference in Forms F-8 and F-80 to business combinations
requiring the vote of the shareholders of the companies that are the
parties to the combination would not preclude the use of either form in
the case of a statutory share exchange, which only requires the vote of
the shareholders of the company being acquired.
14S. Form F-9
Form F-9 eligible securities which are convertible after one year
into another class of the issuer's securities may be registered on Form
F-9, but the securities into which they are convertible also must be F-9
eligible securities, independent of the convertible securities.
15S. Form F-9; Form F-10
When a registrant which has filed a registration statement on Form
F-9 or Form F-10 in connection with a shelf offering in Canada updates
that shelf registration in Canada, the registrant must file a
post-effective amendment to its registration statement on Form F-9 or
Form F-10.
16S. Form F-10
The staff will interpret the Form F-10 reconciliation requirement in
Item 2 to apply to the issuer's annual financial statements and
year-to-date financial statements (including comparative periods)
without requiring that any other interim financial statements be
reconciled to U.S. GAAP. This interpretation is consistent with the
reconciliation requirements of Form F-1. Reconciliation of these
financial statements is required regardless of whether they are included
directly or incorporated by reference.
17S. Form F-10
Form F-10 may be used by an issuer which satisfies the eligibility
requirements of the form at the time of filing, but which will not
satisfy such requirements upon closing. This is consistent with Rule
401(a) and the staff's policy of not permitting registrants to establish
form eligibility by looking to their status after the offering in
question.
18S. Form F-10
Eligible issuers may use Form F-10 for secondary offerings.
19S. Form F-10
If a Canadian issuer wants to use Form F-10 for a dividend
reinvestment plan ("DRIP") and is willing to voluntarily file a
registration statement in Ontario despite the Canadian registration
exemption which is available for DRIPs, the issuer may file on Form
F-10, but is, in effect, waiving the benefit of this exemption and
should consider itself subject to normal Canadian requirements
applicable to offerings generally (including, if applicable, the
requirement that the prospectus be circulated to Canadian shareholders).
20S. Form F-10
Form F-10 may be used to register a rights offering that is not
eligible for registration on Form F-7, even though the issuer is exempt
from the requirement to file a prospectus with the Canadian authorities.
General Instruction I.J. of Form F-10 was revised in the MJDS
Corrections Release (Sec. Act. Rel.
33-6902A (March 23, 1992)) to
clarify that the registrant is permitted to file a rights offers
circular prepared pursuant to Canadian requirements in lieu of a
prospectus. In such cases, the registrant must include in the Form F-10
a reconciliation to U.S. GAAP for those financial statements that are
required to accompany a rights offers circular filed with the Canadian
authorities.
21S. Form F-10
MJDS-eligible registrants may use Form F-10 to register so-called
"A/B" or "Exxon Capital" exchange offers that would otherwise be
eligible for registration on Form F-1 or Form F-4, if appropriate
procedures are followed.
22S. Form S-4, General Instruction
A.2.(1) replaces existing interp. 51
The requirement that the combined proxy statement/prospectus be sent
to security holders 20 business days in advance of the vote if
incorporation by reference is used applies to both the acquired company
and the acquiring company. In most cases, only the
acquired company's security holders will be voting, but if both
companies are subjecting the transaction to a vote, the proxy
statement/prospectus must be sent to each company's security holders at
least 20 business days in advance of the vote.
23S. Form S-4, Instruction D.4
An issuer intends to use Form S-4 to register common stock to be
issued in a merger transaction. The target company, although not a
public company, satisfies the definition of a "small business issuer"
under Item 10(a)(1) of Regulation S-B. Information regarding the company
to be acquired therefore may be furnished in accordance with either
Instruction D.4.(b) or D.4(c).
24S. Form S-8; Rule 457
A company was registering shares issuable on exercise of stock
options. At the time of filing, the company had not yet issued options
so that there was no option exercise price. The company only had public
debt outstanding and there was no market for its common stock. The
company had a negative book value. The company was advised to calculate
the filing fee, for purposes of Rule 457(h), based on a good faith
estimate of the value of the underlying securities.
25S. Form S-3
Multiple issuers of securities on an unallocated shelf registration
statement must allocate the amount of securities registered among the
issuers and the prospectus must reflect the securities being issued by
each registrant. This position may not always apply in situations
involving subsidiaries.
1S. Item 305 of Regulation S-K
A company filing its Form 10-Q asked whether it was required to
include Item 305 market risk disclosure. We told the company that it did
not have to include Item 305 disclosure in the Form 10-Q unless there
was a material change in the Item 305 information disclosed in its most
recently filed Form 10-K.
2S. Item 403 of Regulation S-K
A caller asked whether phantom stock units held in a nonqualified
deferred compensation plan are reportable in the 403(b) table. If the
units can be settled in stock at the holder's election, so that if the
holder were terminated currently he or she would get the underlying
stock without the need to satisfy any additional vesting requirements,
the units should be reported. This is because the holder would have the
right to acquire the underlying stock within 60 days (see
Exchange Act Rule 13d-3). However, the phantom stock units should be
presented in a manner that distinguishes them from stock owned outright
e.g., pursuant to a clear and succinct footnote explanation.
In contrast, if the phantom stock units can be settled in stock only
at the company's discretion, they should not be reported because the
holder does not have a right to acquire the underlying stock within 60
days. Similarly, if the phantom stock units can be settled solely in
cash, they should not be reported because the holder has no right to
acquire the underlying stock.
3S. Item 404(a) of Regulation S-K (this
would replace existing interp. 39)
The Division staff was asked how to value unexercised, in-the-money
stock options for purposes of determining whether the Item 404(a)
$60,000 materiality threshold had been met. The staff stated that the
value of unexercised in-the-money options should be determined for
404(a) purposes in the same manner as required by Item 402(d)(2) of
Regulation S-K. Use of the Black-Scholes or binomial option pricing
method also would be appropriate, provided such use and the underlying
assumptions are clearly disclosed and the value thus
calculated is greater than zero and otherwise reasonably related to the
unrealized gain value reported in the 402(d) table.
4S. Item 507 of Regulation S-K
We were asked whether identification of an entity as a selling
shareholder in the registration statement must include disclosure of the
persons who have sole or shared voting or investment power over the
entity.
The company must identify in the registration statement the person
or persons who have voting or investment control over the company's
securities that the entity owns. Use Rule 13d-3 by analogy to make
the determination.
Item 402 of Regulation S-K
1S. Item 402 of Regulation S-K
A company has an omnibus long-term incentive plan pursuant to which
it may grant several types of incentive awards to executive officers,
including stock options and appurtenant dividend equivalent rights ("DERs").
A DER entitles the holder of a stock option, after the option vests and
prior to its exercise, to receive a cash payment equal to the value of
any dividends that the executive holding the option would have received
on the underlying shares had that option been exercised immediately upon
vesting. These options vest solely on the basis of an
executive-recipient's continued employment for a 3-year period following
the date of grant, while DERs on such options will be awarded, beginning
on vesting date, only if pre-established individual and/or company
performance criteria measured over the 3-year period between grant and
vesting dates, respectively, are satisfied. Dividend equivalent payments
would commence on the first dividend payment date following acquisition
of the DERs, and would continue until the earlier of the expiration or
exercise of the corresponding options.
Counsel asked whether: (1) the opportunity to acquire DERs on stock
option awards was reportable in the LTIP Table prescribed by Item 402(e)
of Regulation S-K; and (2) cash payments made pursuant to the DERs upon
vesting of the corresponding options (assuming the specified performance
criteria are met as of that date), are reportable as LTIP payouts in the
Summary Compensation Table. In response, the staff indicated that it
would not view DERs thus awarded as LTIP grants, nor would the cash
dividend equivalent payments made under the DERs be deemed LTIP payouts,
based on counsel's representations that: (1) the option awards are
reported in both the Summary Compensation Table (S-K Item 402(b)(iv)(B))
and the Option/SAR Grants Table (S-K Item 402(c)); (2) disclosure of the
right of an option holder to acquire DERs (including a description of
the DERs) is provided in a footnote to the Option/SAR Grants Table in
accordance with Instruction 3 to S-K Item 402(c); (3) the Compensation
Committee Report (S-K Item 402(k)) contains a discussion of the DER
awards and payments thereunder that specifically addresses the
relationship of such awards and payments to company and/or individual
performance criteria; and (4) the dollar value of the cash dividend
equivalent payments made in a given fiscal year after vesting are
reported in the Other Annual Compensation column of the Summary
Compensation Table to the extent dividends are awarded at preferential
rates (as defined by Instruction 4 to Item 402(b)(2)(iii)(C)). See
also Exchange Act Rel. No. 31327 (Oct. 16, 1992) ("market-rate and
non-preferential earnings on deferred compensation, restricted stock,
and options/SARs should not be reported as compensation").
2S. Item 402 of Regulation S-K
Revise Interp No. 1 to read as follows [italics to reflect
additions]:
A registrant need not report earnings on salary and bonus deferred
pursuant to non-tax qualified arrangements as "above-market or
preferential earnings within the meaning of Item 402(b)(iii)(C)(2),"
where the return on such earnings is calculated in the same manner and
at the same rate as earnings on externally managed investments to
employees participating in a tax-qualified plan providing for
broad-based employee participation. See n. 43 to Exchange Act Rel. 31327
(Oct. 16, 1992); American Society of Corporate Secretaries (January 6,
1993). For example, many issuers provide for deferral of salary or bonus
amounts not covered by tax-qualified plans where the return on such
amounts is the same as the return paid on amounts invested in an
externally managed investment fund, such as an equity mutual fund,
available to all employees participating in a non-discriminatory,
tax-qualified plan (e.g., 401(k) plan). Although this position generally
will be available for so-called "excess benefit plans" (as defined for
16(b)-3(b)(2) purposes, it may not be appropriately applied in the case
of a pure "top-hat " plan or SERP (Supplemental Employee Retirement
Plan) that bears no relationship to a tax-qualified plan of the issuer.
When in doubt, consult the staff.
For a deferred compensation plan with a cash-based, interest-only
return, earnings would not be reportable as "above-market" unless the
rate of interest exceeded 120% of the applicable federal long-term rate,
as stated in Instruction 3 to Item 402(b)(2)(iii)(C). If earnings on the
plan are denominated in stock, see Instruction 4 to this Item.
Deferred compensation plan earnings that are "above-market or
preferential" under either of these standards are reportable even if the
deferred compensation plan is unfunded and thus subject to risk of loss
of principal.
Above-market or preferential earnings accrued on deferred
compensation are reportable in the "All Other Compensation" column
(Column I) of the Summary Compensation Table. But if the above-market
rates are paid or payable during the year, they are instead reported in
the "Other Annual Compensation" column (Column E) of the Summary
Compensation Table to show that the executive officer was entitled to
receive them during the year.
3S. Item 402 of Regulation S-K
Whether a spin-off is treated like the IPO of a new "spun-off"
registrant for purposes of Item 402 disclosure depends on the particular
facts and circumstances. When determining whether disclosure of
compensation before the spin-off is necessary, the "spun-off" registrant
should consider whether it was a reporting company or a separate
division before the spin-off, as well as its continuity of management.
For example, if a parent company spun off a subsidiary which conducted
one line of the parent company's business, and before and after the
spin-off the executive officers of the subsidiary: (1) were the same;
(2) provided the same type of services to the subsidiary, and (3)
provided no services to the parent, historical compensation disclosure
likely would be required. In contrast, if a parent company spun-off a
newly formed subsidiary consisting of portions of several different
parts of the parent's business and having new management, it is more
likely that the spin-off could be treated as the IPO of a new "spun-off"
registrant.
[Replaces current Item 402 phone interp number 3: "For purposes of
Item 402 disclosure, a spin-off is treated like the IPO of the new
"spun-off" registrant."]
4S. Item 402 of Regulation S-K
Company A acquired Company B three months before the end of A's
fiscal year. Before the acquisition, Company A and Company B were
controlled by the same shareholders. Company A's financial statements
were restated to present Company A and Company B as one entity. When
determining whether an executive officer of Company B, who became an
executive officer of Company A, should be deemed a named executive
officer of Company A, consider the executive officer's compensation from
the nine months at Company B plus the three months at Company A.
5S. Item 402 of Regulation S-K
A caller asked whether an executive officer, other than the chief
executive officer, could be considered a "named executive officer" if
the executive officer became a non-executive employee during the last
completed fiscal year and did not depart from the registrant. Yes.
If an executive officer becomes a non-executive employee of a registrant
during the preceding fiscal year, consider the compensation the person
received during the entire fiscal year for purposes of determining
whether the person is a named executive officer for that fiscal year. If
the person thus would qualify as a named executive officer, disclose all
of the person's compensation for the full fiscal year, i.e. compensation
for when the person was an executive officer and for when the person was
a non-executive employee.
6S. Item 402 of Regulation S-K
If a company changes its fiscal year, report compensation for the
"stub period," and do not annualize or restate compensation. In
addition, report compensation for the last three full fiscal years, in
accordance with Item 402 of Regulation S-K. For example, in late 1997 a
company changed its fiscal year end from June 30 to December 31. In the
Summary Compensation Table, provide disclosure for each of the following
four periods: July 1, 1997 to December 31, 1997; July 1, 1996 to June
30, 1997; July 1, 1995 to June 30, 1996; and July 1, 1994 to June 30,
1995. Continue providing such disclosure for four periods (three full
fiscal years and the stub period) until there is disclosure for three
full fiscal years after the stub period (December 31, 2000 in the
example). If the company was not a reporting company and was to do an
IPO in February 1998, it would furnish disclosure for both of the
following periods in the Summary Compensation Table: July 1, 1997 to
December 31, 1997; and July 1, 1996 to June 30, 1997.
[Replaces current Item 402 interp number 9: "A company with a May 31
fiscal year end changed its fiscal year end...]
7S. Item 402 of Regulation S-K
The repricing table need not include any repriced options the
executive officers received in periods earlier than the last preceding
fiscal year for services they provided as employees before they became
executive officers. Repricings occurring in the last preceding fiscal
year must be disclosed regardless of whether the repricing occurred
while the named executive officer was an executive officer.
[Add to the end of current Item 402 phone interp 24: "In the
repricing table, the registrant is required to provide ten-year tabular
information with respect to the repricing of options/SARs held by
any executive officer over the lesser of the last ten completed
fiscal years or the period in which the registrant has been subject to
Exchange Act reporting requirements, even if such executive officer
served as an executive officer in prior years and then left the
company."]
1S. Rule 3a12-3(b)
For purposes of determining the availability of the exemptions
provided by Rule 3a12- 3(b), the staff does not object to foreign
issuers checking their status as a "foreign private issuer" at the end
of each fiscal quarter and upon the completion of: (i) any purchase or
sale by the issuer of its equity securities (other than in connection
with an employee benefit plan or compensation arrangement, a conversion
of outstanding convertible securities, or an exercise of outstanding
options, warrants or rights); (ii) any purchase or sale of assets by the
issuer other than in the ordinary course of business; and (iii) any
purchase of equity securities of the issuer in a public tender or
exchange offer by a person unaffiliated with the issuer.
2S. Rule 12b-25, Rule 14a-6, Form 10-K,
Form 10-KSB
General Instructions G.3 to Form 10-K and E.3 to Form 10-KSB permit a
reporting issuer subject to the proxy rules to omit Part III
information, concerning management and its compensation, from the annual
report filed with the Commission 90 days from the end of the fiscal
year, if the information omitted from Part III is disclosed in the
issuer's proxy statement and if the proxy statement is filed with the
Commission no later than 120 days from the end of the fiscal year.
The purpose of these instructions is to prevent duplicative
disclosures. The instructions permit forward incorporation by reference
of the proxy statement into the already filed Form 10-K or 10-KSB. The
effect of the instructions is to deem the Part III information to have
been timely filed, that is, 90 days from fiscal year end. The effect is
not to constitute the 120th day as a second due date for the Part III
information.
As a result, Rule 12b-25 cannot be used to extend the time available
for satisfying Part III's line-items by incorporating the proxy
statement. The Form 10-K or 10-KSB must be amended by the 120th day to
disclose the Part III information if the definitive proxy statement has
not been filed, as stated in the general instructions. The proxy
statement still must be filed independently to comply with Rule 14a-6.
If a filer does not file its proxy statement or amend its Form 10-K
or 10-KSB within 120 days, it would be considered an untimely filer.
Thus, the company would be eligible to use Form S-3 only after it
subsequently filed its Exchange Act reports on a timely basis for the 12
calendar months after the original Form 10-K due date (i.e., 90
days after the company's fiscal year end).
3S. Rule 12g-3
Following emergence from bankruptcy, the same issuer issues a new
class of common stock that has substantially the same terms as its old
common stock, except for a different par value. Under the bankruptcy
plan, all shares of the old common stock are canceled simultaneously
with the issuance of the new common stock to new holders. Although Rule
12g-3 technically does not apply because only one issuer is involved,
the Division is of the view that the new common stock would succeed to
the registered status of the old common stock, so that continuous
Exchange Act reporting would be required.
4S. Rule 12g-3
(this replaces nos. 19
and 21)
Rule 12g-3 under the Exchange Act provides for the registration of
the securities of successor issuers under the Exchange Act. The
securities of a successor issuer described in Rule 12g-3 are deemed to
be registered under Section 12 by operation of law, and no Exchange Act
registration statement on Form 8-A or any other form therefore need be
filed. The successor must file a Form 8-K with respect to the succession
transaction using the predecessor's file number. After the Form 8-K is
filed, a new file number will be generated for the successor company.
When two reporting companies consolidate, each of the predecessor
companies should file a Form 15 in connection with the succession.
5S. Rule 12g-3(a)
Rule 12g-3(a) would be available to effect Section 12 registration of
securities of a successor issuer formed as part of the predecessor's
emergence from bankruptcy, even though the class of securities so
registered will be issued to persons other than the holders of the
corresponding class of the predecessor.
6S. Rule 12g3-2(a)
The method of counting record holders of an issuer's equity
securities for purposing of determining whether it qualifies for the
exemption from registration in Rule 12g3-2(a) is different than the
method of counting record holders for purposes of determining whether it
is a "foreign private issuer" under Rule 3b-4. The count of record
holders for purposes of Rule 3b-4 is based on Rule 12g5-1, while the
count of record holders for purposes of Rule 12g3-2(a) references Rule
12g5-1, but also requires that the issuer look to the separate accounts
held of record by brokers, dealers, banks or nominees for any of them.
7S. Rule 12g3-2(b)
The staff publishes an annual list of companies claiming the Rule
12g3-2(b) exemption that appear to have furnished the information
required by the rule. Copies of this list are available on the
Commission's internet website, at
www.sec.gov. If a
company previously claiming the exemption fails to provide the
information required by the rule, causing the exemption to lapse, it may
request reinstatement of the exemption. The procedure for reinstating an
exemption is the same as that for an original exemption claim, provided
that: (1) the information submitted pursuant to Rule 12g3-2(b)(1)(i)
should include all information (to the extent not previously provided)
for the issuer's last two full fiscal years and any
interim period; and (2) if there has been no change in the issuer's
disclosure obligations in its home country since the original list of
disclosure obligations was submitted pursuant to Rule 12g3-2(b)(1)(ii),
the issuer may state that there has been no change since the original
list was submitted rather than resubmitting the list.
8S. Rule 12g3-2(b)(1)
Subsection (ii) of Rule 12g3-2(b)(1) requires that the Commission be
furnished a list which identifies, in a general manner, the type of
information which the issuer (A) has made or is required to make public
pursuant to the law of the country of its domicile or in which it is
incorporated or organized; (B) has filed or is required to file with a
stock exchange on which its securities are traded and which was made
public by such exchange; or (C) has distributed or is required to
distribute to its securityholders. The list should include an indication
of which agency, exchange or other entity requires such information to
be made public, filed with an exchange or distributed to shareholders
and an indication of the timing for publication, filing or distribution
of the information (such as, for example, within a certain number of
days after the end of a fiscal period or before a shareholders'
meeting). The list required by subsection (i) of Rule 12g3-2(b)(1) is an
inventory of the actual disclosures that were made during the time
period indicated pursuant to the general disclosure obligations
identified in subsection (ii), and which, generally speaking, will be
included in the materials furnished to the Commission in connection with
the initial claim of exemption. It is the list of general disclosure
obligations to which the company is subject, as required by Rule
12g3-2(b)(1)(ii), which must be updated after the end of any fiscal year
in which there is a change in the company's disclosure obligations.
9S. Rule 12g3-2(b)(1)
Information that an issuer posts on an internet website is considered
to be information that the issuer has made public, for purposes of
subsections (i) and (ii) of Rule 12g3-2(b)(1).
10S. Rule 12g3-2(b)(4)
The staff interprets the translation requirements of this section of
the rule to require that all press releases and other information which
is published through a news service or which is sent directly to
shareholders be translated into English. An English language summary of
all other information submitted pursuant to the rule may be provided
instead of a complete translation, so long as it conveys to U.S.
shareholders the substance of the information contained in the original
document. With respect to the company's annual reports, the staff takes
the position that, although the text of the report may be summarized in
this fashion, the financial statements do not lend themselves to
anything other than a line-by-line translation into English.
1S. Rule 14a-3(b)(1)
The "most recent fiscal years" referenced in Rule 14a-3(b)(1) are the
most recent completed fiscal years as of the date of a company's annual
meeting, not as of the date a company mails proxy materials for its
annual meeting. For example, a company with a December 31 fiscal year
end, holding an annual meeting in early February 1999, must include
audited balance sheets as of the end of each of 1998 and 1997 in the
annual report that accompanied or preceded the annual meeting proxy
statement.
2S. Rule 14a-4(c)(1)
If the last day, determined using the 45-day provision in Rule
14a-4(c)(1), for a registrant to receive timely notice from a
shareholder of a matter to be presented to a vote outside of Rule 14a-8
is a non-business day (e.g., a weekend day or a holiday), the
registrant may use the first preceding day that is a business day as the
last day upon which it can be deemed to have received timely notice.
3S. Rule 14a-4(c)(1)
A registrant that has an advance notice by-law or charter provision
governing when notice of a matter is deemed timely may exercise
discretionary voting authority in accordance with Rule 14a-4(c)(1), even
though the advance notice provision does not specifically reference the
use of discretionary voting authority.
4S. Rule 14a-4
A company must rely on the deadline for submission of non-Rule 14a-8
proposals prescribed in its advance notice provision, instead of the
45-day deadline fixed by Rule 14a-4(c)(1), in determining whether notice
of such a matter was received in a timely manner for purposes of this
rule. Thus, if a company's advance notice by-law provision requires
receipt of notice of a matter 60 days before the date on which the
company mailed its proxy materials for the prior year's annual meeting
of shareholders, the company should use this deadline to determine
compliance with the "timely notice" standard defined in Rule
14a-4(c)(1), rather than the 45-day period otherwise prescribed by this
subsection.
5S. Rule 14a-4(c)(1)
Notice of a non-14a-8 matter to be presented to a vote that the
company receives after the 14a-4(c)(1) "timeliness" deadline (i.e.,
as measured under the company's advance notice provision or, absent such
a provision, the 45-day standard of Rule 14a-4(c)(1)) is considered
untimely. This means that a company can exclude the matter from its
proxy statement, while preserving discretionary authority to vote
management proxies on such matter, as long as the company includes a
specific statement in its proxy statement regarding how it intends to
exercise its discretionary authority to vote on the matter if presented
at the meeting. Additional disclosure may be necessary to satisfy the
company's obligations under Rule 14a-9. State law would be determinative
of whether the matter may then be properly introduced and voted upon at
the meeting.
6S. Rule 14a-4(c)(1)
If a company has changed its annual meeting date to be more than 30
days from the date it was held last year, or if the company did not hold
an annual meeting last year, notice of a matter to be submitted by a
shareholder at the current year's annual meeting must be received a
"reasonable time" before the company mails its proxy materials for the
current year in order to be deemed timely. The term "reasonable time" is
not defined and should be determined based upon the particular facts and
circumstances. Notice of the date change must be included either
pursuant to Item 5 of the company's earliest possible quarterly report
on Form 10-Q or 10-QSB, or, if impracticable, this notice must be
disseminated by any other means reasonably calculated to inform
shareholders. The notice also should include the date by which matters
must be proposed by shareholders under Rule 14a-4 (c)(1).
7S. Rule 14a-4(c)(1), (c)(2)
(a) If a company receives timely and complete notice of a matter
submitted by a shareholder in accordance with Rule 14a-4(c)(2)(i), the
company does not have discretionary voting authority on the matter.
Thus, if the company wants to vote its proxies on the matter at the
annual meeting, it must include the matter on its proxy card and provide
in its proxy statement the necessary disclosure, including, inter
alia, information on how and why the company intends to vote on the
matter. In this circumstance, the company may not rely on
the discussion in Section IV(D) of Release No. 34-40018 (May 21, 1998)
on filing proxy statements in preliminary form. The benefits of that
interpretive position are available only when a company properly may
exercise discretionary voting authority on a non Rule 14a-8 matter..
Here, because the company has received timely and complete notice,
thereby precluding it from exercising discretionary authority, the
company cannot file a plain-vanilla proxy statement under Rule 14a-6.
(b) If the notice is timely but deficient (i.e., does not
comply with the requirements listed in 14a-4(c)(2)(i) by, for example,
failing to indicate that the proponent intends to deliver a proxy
statement and form of proxy to holders of at least that percentage of
the company's voting shares necessary to approve the matter), the
company would not be required to put the matter on its proxy card.
However, the company's ability to exercise discretionary authority is
conditioned on including in its proxy statement advice on the nature of
the matter and how the company intends to exercise its discretion to
vote on that matter. The company's ability to file a plain-vanilla proxy
statement pursuant to Rule 14a-6 will depend upon, among other factors,
the extent of its comments on, or discussion in, its proxy material of
any solicitation in opposition in connection with the meeting.
8S. Rule 14a-8
Rule 14a-8(b) requires the proponent of a shareholder proposal to
have continuously held at least (the lesser of) $2,000 in market value,
or 1%, of a company's securities for at least one year by the date of
submitting the proposal. Registrants should determine the market value
by multiplying the number of securities the proponent held for that
one-year period by the highest selling price during the 60 calendar days
before the proposal was submitted. See Release
34-20091 (Aug. 16, 1983)
at II.A.1. and
Glenfed, Inc. (July 12, 1991).
9S. Schedule 14A, Note A
Note A to Schedule 14A requires that information called for by Items
11, 13 and 14 be provided when security holders are asked to authorize
the issuance of additional securities to be used to acquire another
specified company when there will be no separate opportunity to vote on
the acquisition. This would be the case even when the securities will be
sold in a public offering for cash to finance the transaction.
10S. Schedule 14A, Item 13
(Instruction 1)
A company filed a proxy statement seeking shareholder approval of the
issuance of preferred stock on conversion of debentures to be issued for
cash. The staff took the position that the issuance of preferred stock
on conversion of the debentures is not equivalent to the issuance of
preferred stock for cash under Instruction 1 to Item 13. Therefore, the
company must provide Item 13 financial information in the proxy
statement.
1S. Section 16, Rule 16a-2(a)
A company reincorporated from Canada to Delaware, thus losing its
"foreign private issuer" status (see Exchange Act Rule 3b-4).
Before the reincorporation, an officer of the company purchased shares
of company common stock, which he sold after the reincorporation but
within six months of his purchase. The staff is of the view, generally,
that transactions effected by officers and directors of a foreign
company before the loss of "foreign private issuer" status are not
subject to Section 16. See
Thelen, Marrin, Johnson & Bridges
(December 23, 1994). This position has not been applicable, however, if
the event that culminated in the loss of "foreign private issuer" status
also involved the company's initial registration of equity securities
under Exchange Act Section 12. In such event, Rule 16a-2(a) would be
applicable, which subjects to Section 16 transactions effected by a
director or officer in the six months before the initial Section 12
registration. In the staff's view, for purposes of Section 16 a
reincorporation by a foreign company that causes it to lose its "foreign
private issuer" status is analogous to a company's initial registration
of equity securities under Section 12 because, in each event, the change
in the company's "foreign private issuer" status was within the control
of the company and insiders should have been well aware of the change
sufficiently in advance to take potential Section 16 responsibilities
into account when buying and selling the company's common stock. As a
result, the officer's purchase would be subject to Section 16. He or she
would be required to file a Form 3 within 10 days of the reincorporation
and a Form 4 reporting both the purchase and sale of the common shares
following the sale of those shares.
2S. Rule 16b-3(b)(3)(i)(A)
This rule disqualifies for service as a Non-Employee Director any
director who currently is an officer of or otherwise currently employed
by the issuer, its parent or subsidiary. For this purpose, "parent"
would be defined to include an entity that meets the definition of
"parent" in Exchange Act Rule 12b-2, plus other entities controlled by
the Rule 12b-2 parent entity.
3S. Rule 16b-3(d)(3)
A caller asked whether the six-month holding period of Rule
16b-3(d)(3) could be used to exempt an officer's or director's purchase
of the issuer's stock in an underwritten public offering. We advised the
caller that Rule 16b-3 would not exempt this transaction, stating that
the rule was not intended to cover a situation where someone other than
the issuer controls to whom the sales are made and on what terms.
4S. Rule 16b-3(f)
A deferred compensation plan allows deferrals to either a phantom
stock account or a cash account. Transfers between the phantom stock
account and cash account are permitted. At the time a participant elects
to defer compensation, the participant determines that the balance of
both accounts will be paid in cash at a fixed date more than six months
following the election.
Because of the transfer feature, pursuant to ABA (12/20/96) Q.the
plan is treated as a multi-fund deferral plan, rather than a single-fund
deferral plan. A cash-out from the phantom stock account pursuant to the
election described above would be a discretionary transaction, eligible
for exemption under Rule 16b-3(f). Because the transfer feature permits
assets to be transferred between the accounts, the balance of assets
that will be in the phantom stock account at the fixed date payout
cannot be determined until the fixed date occurs. Therefore, for
purposes of Rule 16b-3(f) the fixed date payout election will be deemed
to occur on the fixed date. The fixed date payout is not eligible for
exemption under Rule 16b-3(e).
5S. Forms 3, 4 and 5
At the filer's option, Forms 3, 4 and 5 may be, but are not required
to be, filed electronically on EDGAR. Each filer choosing to file on
EDGAR must have an individually-assigned EDGAR filing number it is not
possible to use the company's filing number.
6S. Forms 3, 4 and 5
The forms may not be faxed directly to the Commission's filing desk.
They may be faxed to a business office or law firm in the Washington,
D.C. area with whom the filer has contacts or faxed to a service bureau
in the Washington, D.C. area. The local recipient of the faxed copy must
then personally file the faxed copy at the filing desk. You should take
care to assure that the faxed copy is legible to avoid any need to
refile it.
7S. Forms 3, 4 and 5
If the form is signed on behalf of the filer by an authorized person,
a confirmation of the person's authority to sign must be attached to the
form. After such confirmation is attached to the Form 3, for example, it
does not have to be re-filed as an attachment to subsequently filed
Forms 4 and 5 while it remains in effect. If, however, a confirmation is
initially filed as an attachment to a non-Section 16 form, such as a
Schedule 13D, a separate copy of the confirmation should be attached to
the initial Section 16 form signed by the authorized person.
1S. Form 20-F (Item 8)
Instructions 6(a) and 6(b) to Item 8 of Form 20-F require the
disclosure of current and historical exchange rates, and Instruction 8
to Item 8 indicates that the rate of exchange used in providing this
information should be the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York. The information needed to calculate
the historical exchange rate may be obtained from the internet website
of the Board of Governors of the Federal Reserve, at
http://www.federalreserve.gov/releases/h10/Hist/ . Daily current
exchange rates are available on the Federal Reserve Bank of New York's
website, at
www.ny.frb.org.
2S. Form 20-F
When the securities being registered on Form 20-F are in the form of
ADRs, a description of the ADRs would be included in the response to
Item 14, but the depositary is not required to sign the registration
statement.
3S. Form 40-F
Item 9A of Form 20-F, which calls for disclosure of quantitative and
qualitative information about market risk, does not apply to Form 40-F
or other MJDS forms.
4S. Schedule 14D-1F
The filing fee for Schedule 14D-1F is calculated on the basis of the
securities to be acquired in the United States, not the entire
consideration offered for all securities in the tender offer. If the
bidder underestimates the amount of securities to be acquired in the
United States, the additional fee should be paid at closing.
1S. Form T-1
Form T-1, the statement of an indenture trustee's eligibility and
qualification under the Trust Indenture Act of 1939, should be filed
electronically as an exhibit to the related registration statement as
required by Item 101(a)(1)(ii) of Regulation S-T, unless the issuer
obtains a hardship exemption. Item 601(b)(25)(ii) of Regulation S-K
provides that the requirement to bind separately the Form T-1 from other
exhibits (39 Act Rule 5a-3(d)) does not apply to electronic filings.
Securities Act Forms #42
Other Exchange Act Forms #2
Securities Act Rules #77 is clarified by
#2S
Securities Act Forms #51 is replaced by
#22S
Regulation S-K #39 is replaced by
#3S
Item 402 of Regulation S-K
#1 is replaced by
#2S
#3 is replaced by
#3S
#9 is replaced by
#6S
#24 is supplemented by
#7S
#46 should refer to 402(l) rather than 401(l)
Exchange Act Rules
#19 and
#21 are replaced by
#4S
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