Company Name: Perfect Information
Public Availability Date: December 22, 2000
Document Sections:LETTER OF INQUIRY
STAFF REPLY LETTER
[LETTER OF INQUIRY]
December 22, 2000 Mr. Paul M. Dudek,
Chief, Office of International Corporation Finance,
Securities and Exchange Commission.
450 Fifth Street, N.W.,
Washington, D.C. 20549 Re: Regulation S and Interpretation of "Directed Selling Efforts" under Rule
902(c) of Regulation S Dear Mr. Dudek, I. Question Presented We are counsel to Perfect Information ("PI"), an online database provider of
information obtained from international markets. We are writing on behalf of PI
to seek concurrence from the staff of the Securities and Exchange Commission
(the "Commission") with our opinion that PI may, on a continual basis, make
available final prospectuses and related documents for international securities
offerings to subscribers, without causing either the issuers, the distributors
participating in the related offerings, their affiliates or any person acting on
their behalf to be deemed to have engaged in "directed selling efforts" in the
United States within the meaning of Regulation S under the U.S. Securities Act
of 1933.1 Compensation will be paid to PI by its subscribers in consideration of
PI's making available its prospectuses to them. It is understood that such
concurrence would in no way relieve either PI or entities depositing materials
with it from their obligations to comply with Regulation S. II. Statement Of Facts PI is a company which provides on-line images of original publicly listed
company reports and accounts, with coverage of Europe, Asia and the Pacific Rim
and the U.S. Securities and Exchange Commission's EDGAR on-line service. In
addition to the reports and accounts, PI's database also includes shareholder
circulars, comprising documents which have to be sent to shareholders following
national stock exchange regulations. PI's electronic document collection is used by the global corporate advisory
sector to replace costly hard-copy libraries and information centers and is
primarily a research tool. All the documents stored on PI's systems are original
as released. PI's customer base comprises over 300 major institutions, with over
15,000 contracted desktops. PI's service can be accessed via dedicated direct
high-bandwidth links to Intranets or via the worldwide web. Access to the service is via a user name and password only. All access is
logged, and unauthorized access is not possible without direct permission from
PI. PI proposes to provide its subscribers, including subscribers in the United
States, with access on a continuous basis to final prospectuses, currently
numbering over 25,000 and covering the past 13 years, and relating primarily to
securities publicly offered in the international markets, i.e., "Eurobonds",
together with a certain number of equity and convertible debt securities, very
few, if any, of which relate to securities that have been registered under the
Securities Act. A substantial number of the final prospectuses contain
provisions designed to permit one or more underwriters to offer and sell the
related securities to institutional investors in the United States pursuant to
Rule 144A, which provisions are likely to be included in future prospectuses
delivered to PI. All such final prospectuses and related documents would be provided to PI by
lead managers, issuers or other market participants, or by self-regulatory
organizations of which they are a member, such as the International Securities
Market Association. PI would make the full text of each of these prospectuses and related documents,
all of which will be in final form (although distribution of the underlying
securities may not yet have been completed), available to subscribers as soon as
they have been received by PI and placed on its database. The speed with which any particular newly issued prospectus will appear in PI's
database and thereafter become available to subscribers will depend entirely
upon how quickly a market participant or self-regulatory organization delivers
it to PI. However, we expect that many future prospectuses may be available to
the subscribers during the respective periods in which various categories of
securities are restricted from being offered publicly in the United States.2 Subscribers to PI will likely be able to locate and focus upon any particular
prospectus by identifying features such as the name of the issuer, type of
issue, currency, lead manager and the like, or search for a group of bonds
containing the same features through a menu driven index (the "Index"). Users
can search, view, print and manipulate on their local drives exact copies of all
documents available on the database through use of the Index. Users cannot,
however, upload information onto PI's database for consultation by other
subscribers. The cost of a subscription to PI's service will be substantial in
the United States. The base of subscribers is likely to consist primarily of
investment banks, investment managers and other financial institutions, as well
as certain professional groups which provide services to the financial markets.
Such groups would be likely to include law firms and accounting firms. Each time a subscriber attempts to access PI's database, it will confront
initially a legend with substantially the following text: (a) the information made available to the User does not constitute the giving of
investment advice or an offer to sell or the solicitation of an offer to buy any
security of any enterprise in any jurisdiction; (b) certain documents contained
in the information relate to securities which have not been and will not be
registered under the United States Securities Act of 1933, as amended, and
according to the rules, regulations and laws of the United States, may not be
offered, sold or delivered within the United States (or any State thereof) or
to, or for the account or benefit of, United States persons; (c) certain
documents contained in the information may contain legends or other restrictions
limiting the persons who, or the circumstances under which certain persons may,
participate in an offering; and (d) the availability of the information through
the database does not alter or change in any way the nature of or affect any
such restriction. You hereby represent and warrant that, to the extent that the information
relates to such securities offerings, you will not use any of the information or
the Service for the purpose of offering or selling, or soliciting any offer to
purchase, any security (or for the purpose of assisting, directly or indirectly,
or participating, directly or indirectly, in any such undertaking) to or from
any person or in any circumstance that would violate such restrictions or the
securities or other laws of any jurisdiction. You are reminded that in your User
Agreement you have agreed not to disseminate by any means any material obtained
from the database to any person or entity outside your own organization. You
further acknowledge that violation of any of these representations, warranties
or covenants may result in the immediate suspension or cancellation of your
service at PI's will without right of recourse. Users accessing prospectuses relating to international securities will also
invariably see whatever disclaimers or other cautionary provisions appear on the
front cover of the prospectus, because each search result will initially display
the front cover of the prospectus on the user's screen, after which the user
will be able to view the full text of the prospectus. Under its user agreement,
PI will reserve the right to withdraw a user's rights to the PI database with
written notice upon violation by the user of the terms of the agreement. III. Discussion Regulation S embodies one aspect of the Commission's recognition that
technological advances and the need for prompt access to capital are resulting
in an increasing globalization of the securities markets. The Commission adopted
Regulation S to permit international securities offerings to proceed on a
reasonable basis, without undue concern that U.S. securities laws or regulations
would be violated. Regulation S was expected to have "a profound and beneficial
effect" upon, and enhance United States "competitiveness and efficiency" in, the
market.3 The Structure of Regulation S Regulation S contains a general statement4 and two safe harbors from the
registration requirements of Section 5 of the Securities Act.5 Rule 901 states
that registration under the Securities Act is required when an issuer is engaged
in any "offer," "offer to sell," "sale" or "offer to buy" within the United
States. However, under Rule 901, a transaction will qualify for exemption from
registration if the offer or sale is conducted outside the U.S. To provide
foreign issuers and resellers of foreign securities with certainty that their
transactions will be deemed to occur outside the U.S., the two safe harbors of
Regulation S provide conditions which, if met, will grant issuers exemption from
registration under the Securities Act. Though there are two safe harbors, one for issuers (Rule 903) and one for
resales of securities (Rule 904), the following discussion is limited to Rule
903, the issuer safe harbor provision, because the issue addressed in this
letter is whether the action of PI and any depositing entity in making available
the PI database would be attributed to an issuer or distribution participants in
connection with an offer or sale of securities. Rule 903 establishes two primary
requirements, or general conditions, which must be met in order for an issuer to
claim exemption from registration under Regulation S:6 (A) the offer or sale must be made in an "offshore transaction"; and (B) there must be no "directed selling efforts" in the United States "by the
issuer, a distributor, any of their respective affiliates, or any person acting
on behalf of any of the foregoing."7 Rule 902(c) defines "directed selling efforts" as including any activity
undertaken for the purpose of "conditioning" the U.S. market for securities
being offered in reliance on Regulation S, or which can "reasonably be expected
to have" such effect.8 The Regulation's concern is with activities that arouse
"public interest in"9 or "stimulate an appetite" for the securities.10 The
definition includes mailing printed materials to U.S. investors, conducting
promotional seminars in the U.S., or placing advertisements "in a publication
with a general circulation in the United States" (a "General Publication"). A
publication is deemed to have a "general circulation" in the U.S. if (i) "it is
printed primarily for distribution in the U.S.; or (ii) has had, during the
preceding twelve months, an average circulation in the United States of 15,000
or more copies per issue in the U.S."11 "Tombstone" advertisements are permitted
in publications distributed in the U.S. if the U.S. represents less than 20% of
such publication's overall market. Rule 902(c), however, leaves open the
question as to whether the dissemination of broker-dealer quotations will be
considered violations of the "directed selling efforts" prohibition, granting
the Commission the right to decide such issues on a case-by-case basis. In addition, Rule 902(d) defines "distributor" to mean "any underwriter, dealer,
or other person who participates, pursuant to a contractual arrangement, in the
distribution of the securities offered or sold in reliance on this Regulation
S."12 The thrust of the proscription against "directed selling efforts" is to prohibit
any distributor acting through a contractual relationship with the issuer or any
affiliate thereof from purposefully (as judged by a reasonableness standard)
conditioning the U.S. markets for unregistered securities through any
advertising efforts that might achieve that goal during the period in which such
securities are prohibited from being publicly offered or sold in the United
States. IV. Analysis A. PI Is Not A Distributor PI is not permitted to engage, nor does it engage, in any activity that can
plausibly be construed as a sale, offer to sell or distribution of securities of
any issuer, nor does it so function pursuant to any contractual arrangement
between itself and any underwriter, issuer or self-regulatory organization. By
reason of these facts, PI is not in our opinion a "distributor" of any issuer's
securities. B. PI Is Not An Affiliate Of, Nor Is It Acting On Behalf Of, Entities Depositing
Prospectuses PI itself has no contractual relationship with any issuer, underwriter or
self-regulatory organization, in its capacity as such.13 If the activities of PI
can fairly be attributed to entities depositing prospectuses individually, then
by providing PI with prospectuses that they know will promptly be accessible to
U.S. subscribers through it's database, such entities might be deemed to have
engaged in "direct selling efforts" through the instrumentality of PI. In order
to support this theory, PI would have to be deemed an "affiliate" or the agent
of, or acting on behalf of, depositing entities for purposes of the "directed
selling efforts" restriction. Regulation S does not define the term "affiliate". Rule 405 defines an affiliate
of an issuer as "a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,"
such issuer.14 Applying the same test, but substituting "distributor" in place
of "issuer", PI certainly does not "control" any entity depositing prospectuses
nor is it under common control with any of them. It is also clear that PI is not
"controlled by" any single depositing entity or identifiable subset of such
entity. In our opinion, PI is not an "affiliate" of any depositing entity for
purposes of the "directed selling efforts" restriction. We find support for our conclusion in the Regulation S Release, which states
that an offer or sale by an issuer, a distributor, an affiliate of either, or any
person acting on behalf of any of the foregoing, that meets the applicable
conditions of Rule 903 is outside the United States ... The term "distributor"
includes ... persons who are participating in a distribution of securities
pursuant to contractual arrangements, such as sub-underwriters, it does not
include persons participating pursuant to contract only in ancillary positions,
such as fiscal agents or persons hired to perform clearing services.15 The quoted text makes it clear that no ancillary entity is intended to be
characterized as either a "distributor" or an "affiliate" of a distributor, even
though it does play a peripheral role in a distribution of securities. This
statement strongly suggests that the underlying intent of the Regulation is to
limit the concept of "distributor" to those market participants that can, on a
practical, common-sense basis, reasonably be viewed as actually engaged in the
distribution process. PI has no role in the securities distribution process. PI does not engage in
offers or sales of securities, nor does it obtain commissions or fees for
promoting any such offers or sales PI will not derive any monetary gain from
these transactions otherwise than pursuant to the fees that will be charged to
subscribers that use its database. It does not, nor is it expected to, promote
the issuance or sale of any particular securities. In our opinion, PI is not an
agent or affiliate of its depositing entities, nor acting on their behalf, with
respect to such matters. The mechanism by which PI operates will be consistent with that conclusion. Sale
orders cannot be executed via PI's systems. Rule 902(c)(3)(v), for example,
permits distribution of a foreign broker-dealer's quotations, provided that it
is distributed by a third-party system primarily in foreign countries and (1)
securities transactions cannot be executed through the system and (2)
participants in the system do not initiate contacts with U.S. persons (other
than those permitted by Rule 15a-616 of the Securities Exchange Act).17 The
staff has acknowledged that information that is posted by issuers on the Stock
Exchange Automated Quotations of the London Stock Exchange ("SEAQ") and made
available to U.S. investors through their computer terminals will not constitute
"directed selling efforts," even if foreign broker-dealers that are not
participants in the specific offering, but that are participants in SEAQ,
initiate contacts with U.S. investors.18 The SEAQ Letter noted that where the
quotations are not posted for the purpose of conditioning the U.S. market and
the issuer, distributors, their respective affiliates and persons acting on
behalf of the foregoing "covenant not to, and do not, initiate contacts with
U.S. persons or persons in the United States" except for those contacts exempted
by-the Securities Act, there is no violation of Regulation S.19 Similarly, in these circumstances transactions cannot be executed through PI's
system. The information on PI's database is made generally available to
subscribers to PI, without any solicitation or offer to sell or buy
securities.20 Information on any issuer's securities is thus not targeted or
highlighted but, in fact, is part of a large and general database that includes
primarily historical information, along with a certain number of prospectuses
relating to securities that may still be in the distribution process. PI will
not initiate any contacts with U.S. persons for investment in securities,
because they are not participants in the distribution process. The depositing
entities, on the other hand, will already have agreed not to "initiate contacts
with U.S. persons" otherwise than in exempt transactions by virtue of their
signature of documents that evidence a safe harbor from registration under
Regulation S. Furthermore, depositing entities should not be implicated as participants in
"directed selling efforts"., because the financial benefit of the transaction
will be entirely for the account of PI in its independent capacity, not that of
any such entity. In making its prospectus database available, PI is only
supplying a volume of information, much of which would be accessible to
subscribers through other, more cumbersome and less efficient means, such as
collection of prospectuses from the offices of market participants. C. The PI Database Will Not Constitute Activities Or Publication That Condition
The Market Even if it were assumed that PI's actions could be imputed to depositing
entities, provision of prospectuses would still not bring about any violation of
the "directed selling efforts" restriction, because activities undertaken do not
meet the criteria for publication or advertising which "condition" the market.
The depositing entities are significant participants in the securities market
and are aware of the restrictions of the United States securities laws. In
compliance with Regulation S, they are obliged contractually not to offer to
sell to, nor solicit offers from, persons in the U.S. for any issuances
conducted outside the U.S. otherwise than pursuant to an appropriate exemption.
In addition, as noted above, they will have been notified, and will have been
deemed to have undertaken, that they will not use PI to offer, sell, or solicit
offers for securities described in any prospectus they deposit. We believe it
implausible to expect that simply placing many prospectuses and related
documents on PI's database, thereby making them available to PI's subscribers,
will cause or encourage any of the depositing entities to alter its conduct in
any way. By making its database available, PI does no more than provide
passively a vast library of information to a limited group of subscribers.
Because the user will be reminded each time it accesses PI's database that PI is
not in the business of selling securities, the availability of such information
will not be misconstrued as an offer to sell. The general legend that every
subscriber will see upon accessing PI's database will also alert users that
restrictions on sales apply to all unregistered securities offerings issued
pursuant to Regulation S.21 This line of reasoning is essentially consistent with, though not explicitly
addressed by, SEC pronouncements since 1996 on internet use. No-action letters
since then have commented only on facilities specifically meant to be used in
conjunction with securities offerings.22 The no-action letters have thus assumed
arguendo that the activities upon which comment is being rendered would
constitute an offer under Section 5 of the Securities Act. The interpretive
release of March 23, 1998 (the "March Release"), explicitly presumes that the
activities involve, variously, an "offer", "directed selling efforts" or
"general solicitation."23 The March Release and these no-action letters
generally focus on limiting the locus or recipients of that offer (to non-U.S.
persons. QIBs or accredited investors, as appropriate), in order to determine if
Regulation S. Rule 144A or Section 4(2) provides a safe harbor. Although the no-action letters in this area and the March Release do not apply
directly to PI's proposal, the guidelines they set forth to obviate the need for
registration are consistent with PI's plan. The March Release, for instance,
provides a flexible approach to remaining within the safe harbor of Regulation
S. In the case of non-U.S. issuers, registration is not required if 1) a
prominent disclaimer is included on the facility making clear that it is not an
offer to U.S. persons and 2) measures are taken reasonably designed to guard
against sales to U.S. persons. A parallel approach is suggested in the JPONET
Letter (substituting QIBs for non-U.S. persons) where the safe harbor of Rule
144A is sought. As noted above, PI would include exactly such a disclaimer.
Since the purpose of the database would be only informational, any salesto U.S.
persons, QIBs or the public at largewould be, by definition, guarded against.
D. PI Access Will Not Result In A General Publication By providing prospectuses to its subscribers, PI should not be deemed to violate
the "directed selling efforts" restriction against placing advertisements in a
"publication with a general circulation" in the U.S. because, even if providing
the information on the database can be considered "publication," the factual
circumstances of this transaction should preclude the classification of such
publication as "general." The Commission has expressed its willingness to
recognize the importance of constructing rules that recognize the increasing
prevalence and use of the electronic media as a means for dissemination of
"information to more people at a faster and more cost-effective rate than
traditional methods, which have been largely paper-based."24 The October Release provides examples that are intended as guides for future
conduct. One such example, Example 20 ("Example 20") notes that placing offering
materials for a purportedly private offering on a Web page in order to assist in
raising capital would "not be consistent with the prohibition against general
solicitation or advertising in Rule 502(c) of Regulation D."25 The stipulated facts in Example 20 are significantly different from the present
situation, however. First, the context of Example 20 clearly indicates that the
information is provided by a company that wishes to raise capital on the
Internet, and at its own Web site. Any computer-equipped investor, whether or
not such investor meets the requirements for exemption under Regulation D, would
merely have to go on-line to find the offer. Insofar as such prospectus
information is available to any member of the general public who has an interest
in the issuer and visits its Web site, for reading or copying, the on-line
posting could reasonably be considered a "general solicitation" inconsistent
with Regulation D.26 In the present case, however, depositing entities will be
providing information to PI for availability only to subscribers. Information
will not be accessible by the general public of Internet users. In addition, as
noted above, depositing entities will have been notified, and will have been
deemed to have undertaken, that they will not use the website to offer, sell, or
solicit offers for securities described in any prospectus they deposit with PI.
The context of the present case also removes it from either of the definitions
required for what we have called a General Publication under Rule 902(c)(2). The
first definition requires that the publication be "printed primarily for
distribution" in the U.S. In contrast, PI will provide information to
international markets other than the United States. The U.S. market is thus only
one of the markets to which PI aspires to provide information. Consequently, the
publication under consideration is not "primarily for distribution" in the U.S.
market. Alternatively, the General Publication requirement would be met if the
publication has an average circulation of 15,000 copies per issue in the U.S.27
PI will have only a few hundred subscribers in the United States during the
first two years of service.28 Thus, even if the posting of information is deemed
a publication, PI's proposed database would still fall beyond the volume
parameters established by Regulation S.29 V. Conclusion To the best of our knowledge, the staff has not previously been presented with
the issues raised by the proposed action by PI. We therefore request that the
staff confirm that it will not recommend to the Commission that it take
enforcement action against PI, any issuer or any other provider of prospectuses
if a final prospectus for an international offering is made available to PI's
subscribers accessing the database on the basis that the availability of such
database to subscribers in the United States constitutes "directed selling
efforts" in the United States within the meaning of Regulation S, on condition
that PI acts in the manner contemplated and described herein, including (i) use
of the initial cautionary screen as described above, (ii) execution of
agreements with all PI subscribers restricting such users from distributing any
prospectus obtained to parties outside their own respective organizations, (iii)
refraining from any other actions which could be deemed inconsistent with
Regulation S. Very truly yours, CLEARY, GOTTLIEB, STEEN & HAMILTON Edward F. Greene, a Partner -----FOOTNOTES----- 1 17 C.F.R. § 230.901-905 (2000) ("Regulation S"). See Offshore Offers and
Sales, Securities Act Release No. 33-6863 [1989-1990 Transfer Binder] Fed. Sec.
L. Rep. (CCH) 84,524, at 80,661 (April 24, 1990) (the "Regulation S Release")
under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq. (the
"Securities Act"). 2 This would include the distribution compliance period that begins on the
closing date or when the first purchase offer is made to persons other than
distributors under Regulation S. Restrictions would also apply to Category I
offerings, where dealers are bound by a de facto 40-day waiting period in order
to be eligible for the Section 4(3) exemption. 3 Julie L. Kaplan, "Pushing the Envelope" of the Regulation S Safe Harbors, 44
Am. U.L. Rev. 2495, 2499 (August 1995), citing Andrea F. Bradley, Regulation S:
Tempest in a Safe Harbor, 25 Rev. Sec. & Commodities Reg. (S&P) No. 17, at 185
(Oct. 7, 1992) (quoting opening remarks of Richard C. Breeden, Chairman of SEC,
April 19, 1990). 4 17 C.F.R. § 230.901 (2000) ("Rule 901"). 5 17 C.F.R. § 230.903-904 (2000) ("Rule 903" and "Rule 904", respectively). 6 Regulation S also establishes three categories of securities, each with
separate conditions and restrictions. Inasmuch as the principal issue presented
here has to do with one of the general conditions, the distinctions among
categories are unimportant for this analysis. 7 Rule 903. 8 17 C.F.R. § 230.902(c)(2000). 9 Securities Act Release No. 33-3844, 1957 WL 3605, at *3 (S.E.C. Oct. 8, 1957). 10 In re Carl M. Loeb Rhoades & Co., 38 S.E.C. 843, 850 (1959). 11 17 C.F.R. § 230.902(c)(2)(i)(2000). 12 17 C.F.R. § 230.902(d)(2000) (emphasis added). 13 Certain entities which happen to be issuers, underwriters or self-regulatory
organizations are themselves subscribers to PI's database, and, in the course of
that subscription, they enter into contracts subscribing for those services.
These arrangements are entirely separate from such entities' roles as suppliers
of prospectuses to PI, which they do on a voluntary basis and for which they
neither pay nor receive a fee. 14 17 C.F.R. § 230.405 (2000). 15 Regulation S Release at 80.666 (emphasis added). 16 17 C.F.R. § 240.15a-6 (2000). 17 17 C.F.R. § 230.902(c)(3)(v) (2000). 18
Skadden,
Arps, Slate, Meagher & Flom, SEC No-Action Letter, 1993 WL 173767,
at *3 (S.E.C. May 18, 1993) (the "SEAQ Letter"). 19 Id. 20 Indeed, the present case is less problematic than the
SEAQ Letter because the
information on PI's database can be accessed only by individual subscribers and
not the general public. As such, it poses less of a threat to conditioning the
market. See infra Section IV. D, for a discussion on how this fact affects the
analysis of whether the Agreement will result in a "General Publication". 21 In a release, the Commission equated paper delivery to delivery through
electronic media. Use of Electronic Media For Delivery Purposes, Securities
Release No. 33-7233, 34-36345, IC-21399, 1995 WL 588462, at *3 (S.E.C. Oct. 6,
1995) (the "October Release"). The October Release noted that: If a paper document is required to present information in a certain order, then
the electronic document should convey the information in substantially the same
order. For example, in an audio or video prospectus, the information required to
be on the cover page of a paper prospectus pursuant to Item 501(c) of regulation
S-K... (e.g., red herring language) must be among the first information
presented through the audio or video media. Id. at *3 n.20 Where a prospectus is delivered over a system such as PI's with no editorial
comments or changes to the information, and where the information is presented
in the same format as if it had been delivered in paper format, it should have
the same effect as if it had been physically delivered. The initial legend seen
on PI system's screen should therefore be accorded the same weight and value as
legends appearing on prospectuses of unregistered securities that are
distributed in paper format. 22
Real
Goods Trading Corporation, SEC No-Action Letter, 1996 WL 422670 (S.E.C.
June 24, 1996); IPONET, S.E.C. No-Action Letter, 1996 WL 431821 (S.E.C. Jul. 26,
1996) (the "IPONET Letter"). 23 Securities Release No. 33-7516, 34-39779, IA-1710, IC-23071, International
Series Release No. 1125, 1998 WL 128123 (S.E.C. March 23, 1998). 24 October Release at *1. The October Release defined "electronic" as "media
such as audiotapes, videotapes, facsimiles, CD-ROM, electronic mail, bulletin
boards [and] Internet Web sites...." Id. at *2 n.9. 25 Id. at *11. 26 In light of the October Release's equation of electronic media with
paper-based delivery, it would appear that placing an item on a Web site would
be analogous to placing an advertisement in a general newspaper. 27 17 C.F.R. § 230.902(c)(2)(i) (2000). 28 Achieving 15,000 subscribers appears highly unlikely to occur for many years,
if ever. 29 The Commission has determined that, at least with regard to a reporting
issuer, important considerations for determining whether a "publication" has or
has not occurred include whether such information is "given no materially
greater space or prominence" than information about other companies mentioned in
such publication, and that any opinions or recommendations (of which there are
none here) are not more favorable to the issuer wishing to rely on Regulation S.
Regulation S Release at 80,669. Although these considerations are not
dispositive in the context of a non-reporting issuer, we believe that, viewed
together with the other relevant circumstances, they buttress the argument that
the establishment of PI's databases do not constitute "directed selling
efforts". [STAFF REPLY LETTER]
December 22, 2000 RESPONSE OF THE OFFICE OF INTERNATIONAL CORPORATE FINANCE
DIVISION OF CORPORATION FINANCE Re: Perfect Information Incoming Letter Dated December 22, 2000 Based on the facts presented, and noting that (1) PI will use the initial
cautionary screen described in your letter, (2) PI will execute agreements with
all PI subscribers restricting these users from distributing any prospectus
obtained from the PI database to parties outside their own respective
organizations, and (3) PI will refrain from any other actions that could be
deemed inconsistent with Regulation S, the Division will not recommend
enforcement action to the Commission if a final prospectus for an international
offering is made available to PI's subscribers through the PI database. In
reaching this determination, the Division is relying on your opinion as counsel
that the availability of the PI database to subscribers in the United States
does not constitute "directed selling efforts" in the United States within the
meaning of Regulation S. We also note that depositing entities are obliged
contractually not to offer to sell to, nor solicit offers from, persons in the
United States for any issuances conducted outside the United States otherwise
than pursuant to an appropriate exemption from registration. We express no view as to whether PI is a distributor, whether it is an affiliate
or acting on behalf of entities depositing prospectuses in the PI database,
whether the provision of prospectuses to the PI database and the availability of
the PI database to subscribers would constitute conditioning the market, or
whether providing prospectuses to subscribers through the PI database
constitutes advertising in a publication with a general circulation in the
United States. Because these positions are based on the representations made to the Division in
your letter, any different facts or conditions might require the Division to
reach different conclusions. Sincerely, Paul M. Dudek
Chief
Office of International Corporate Finance
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