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SEC Reverses 15-Year-Old No-Action Letter Regarding Broker-Dealer Registration

The SEC has reconsidered a nearly 15-year-old no-action position with regard to certain financial services offered without registration as a broker-dealer (Dominion Resources, Inc., SEC No-Action Letters Ind. & Summaries (WSB) #0313200016 (March 7, 2000)). The Division of Market Regulation granted the no-action position to Dominion in 1985 without discussion in connection with Dominion's proposal to assist a limited number of corporate and government issuers in structuring and issuing taxable and tax-exempt securities transactions.

Dominion planned to analyze the financial needs of an issuer and to recommend or design financing methods and securities to fit the issuer's needs, according to its 1985 no-action letter. Dominion also planned to recommend a bond lawyer, underwriters or broker-dealers for the distribution or marketing of the issuer's securities in the secondary market and to participate in negotiations.

Dominion explained that it would introduce issuers to commercial banks who would act as initial purchasers of securities and as standby purchasers if the securities could not be readily marketable by a broker-dealer. It would also recommend financial institutions to provide letters of credit or other credit support for the securities. Dominion advised at the time that its only contact with potential purchasers would be the possible introduction of an issuer to a commercial bank as a standby purchaser.

Under its proposal, Dominion would receive a negotiated fee payable only once the financing closed. The fee would not be based on the successful issuance of securities.

In its reconsideration, the staff noted that it has frequently considered the question of when a person is a broker that must register under the 1934 Act and when a person is merely a "finder" that is not subject to registration. Since its 1985 no-action letter, the staff cited technological advances such as the Internet, and other developments in the securities markets that have brought more parties within the realm of securities-related services.

The staff referred to a number of no-action letter requests that have been denied in situations similar to that described by Dominion in the 1985 letter. The staff has ceased to believe that an entity conducting the activities described in Dominion's letter would not have to register as a broker-dealer. When the staff contacted Dominion to notify the company that it no longer could rely on the 1985 no-action letter, Dominion advised that it was no longer engaged in the activities described in the 1985 letter.

Noteworthy Letters Just Released...

  • Franklin Templeton Group of Funds
         
    Diversified Investment Companies

    This group of funds requests confirmation that the staff will not recommend Commission action under section 34(b) of the Investment Advisers Act if its registered investment companies that hold themselves out as diversified in their registration statements treat an investment in shares of a private investment company, which is excluded from the definition of "investment company" pursuant to section 3(c)(7), as an investment in securities of other investment companies for the purpose of determining compliance with the diversification requirement contained in section 5(b)(1).

  • Vedder, Price, Kaufman & Kammholz
         
    Automated Phone System

    On behalf of a number of investment company funds, this firm requests confirmation that the staff will not recommend Commission action under 1933 Act section 5(b)(1) if the funds use an automated phone system to provide callers with estimated or actual distributions and other information for tax planning and other purposes. The funds currently use automated phone systems to respond to callers' requests for yield or other information.

    Reconsiderations/Modifications Reconsiderations/Modifications

  • Citigroup Inc.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    0313200012 (March 2, 2000)

    The staff reconsiders its position taken in Citigroup Inc. (SEC No-Action Letters Ind. & Summaries (WSB) #0228200056 (February 17, 2000)) that a shareholder proposal, which requests that this company adopt a "matching gift program" for shareholders to enable shareholders to donate their dividends to qualifying organizations and the company to match any such contributions to an extent determined by the board of directors, may not be omitted from the company's proxy material under rules 14a-8(i)(2) or (i)(7). Upon reconsideration, the staff states that a portion of the supporting statement may be omitted under rule 14a-8(i)(3) as false and misleading under rule 14a-9 if the proponent does not provide the company, within seven days after receipt of the staff's letter, with a supporting statement revised in the manner indicated.

  • Dominion Resources, Inc.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    0313200016 (March 7, 2000)

    The staff reverses its position taken in Dominion Resources, Inc. (SEC No-Action Letters Ind. & Summaries (WSB) #090985008 (August 22, 1985)), in which it granted the company relief from broker-dealer registration under 1934 Act section 15(a) in connection with the company's proposal to assist a limited number of corporate and government issuers in the structuring and issuance of both taxable and tax-exempt securities transactions. In light of technological advances and other developments in the securities markets, the staff states that it no longer believes that an entity conducting the activities described in the 1985 letter would not have to register as a broker-dealer under section 15(a).

  • SK Int'l. Securities Corp.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    0313200013 (February 2, 2000)

    The staff states that the interpretive advice provided in Buys-MacGregor, MacNaughton-Greenawalt & Co. (SEC No-Action Letters Ind. & Summaries (WSB) #021980016 (February 1, 1980)) is still a viable guidepost for dealers to use in determining the general parameters of what types of transactions the staff may consider to be "offsetting contemporaneous" transactions for purposes of 1934 Act rule 10b-10. The staff states that a transaction will not generally be considered a riskless principal transaction where the transaction that restored the firm's original position is effected on the next trading day.

    Letters Deemed Significant by the Division of Investment Management

  • Franklin Management, Inc.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    121498005 (December 10, 1998)

    The staff permitted this company to distribute to existing and prospective advisory clients a quarterly report which identifies and discusses some, but not all, of the specific securities bought, sold or held by the adviser for investment advisory accounts. The staff did not consider the report to be an advertisement that gives its recipients a misleading impression of the adviser's performance, which is prohibited by section 206(4) of the Investment Advisers Act.

  • Defined Asset Funds
    SEC No-Action Letters Ind. & Summaries (WSB) #
    122898002 (December 23, 1998)

    The staff agreed that this family of unit investment trusts could pay the costs of filing and preparing their registration statements without penalty under section 26 of the Investment Company Act. The staff stated that such payments would not constitute direct remuneration or "hidden charges," both of which are prohibited under section 26.

  • Goldman Sachs Mortgage Co.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    030199035 (February 24, 1999)

    The staff was of the view that if this company exercises the defeasanse provisions contained in its commercial mortgage loans ("CMBSs"), the CMBSs will still qualify as "mortgage-related securities" under 1934 Act section 3(a)(41). The staff limited its view to certain CMBSs.

  • Franklin Templeton Group of Funds
    SEC No-Action Letters Ind. & Summaries (WSB) #
    0313200001 (May 21, 1999)

    The staff stated that it would not recommend Commission action under section 34(b) of the Investment Company Act if these funds, which hold themselves out as diversified in their registration statements, treat an investment in the shares of the series of a trust that is excepted from the definition of "investment company" pursuant to section 3(c)(7) as an investment in the securities of an investment company solely for purposes of section 5(b)(1). The staff noted that each series will operate in all material respects as an open-end management investment company, and will comply with the diversification requirements.

  • ING Bank N.V.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    052499011 (May 24, 1999)

    The staff permitted, under 1934 Act section 17(f) and rule 17f-5, this bank's funds to place their investments in the custody of a special purpose corporation ("SPC") established by the bank. The staff stated that the funds' foreign custody arrangements that involve the SPC must comply with rule 17f-5 in all respects except that the SPC may not be a qualified foreign bank or eligible foreign custodian.

  • Investment Co. Institute
    SEC No-Action Letters Ind. & Summaries (WSB) #
    061499025 (June 15, 1999)

    The staff allowed a fund to enter into a repurchase agreement ("repo") with broker-dealer and bank counterparties that are engaged in a securities-related business under section 12(d)(3) of the Investment Company Act. The staff stated that the fund's board or investment adviser must evaluate the creditworthiness of the repo counterparties, and must take steps that are reasonably designed to ensure that the fund's repos are fully collateralized.

  • Salomon Brothers Asset Management Inc.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    072699007 (July 23, 1999)

    The staff advised this company that it could use certain materials as the basis for performance information, provided that the net asset values were accumulated contemporaneously with the management of the account. The company intends to publish materials listing the net asset values of a managed account, together with worksheets that demonstrate the calculation of performance information based on those net asset values, to demonstrate performance information under section 204 and rule 204-2(a)(16) of the Investment Advisers Act.

  • First Australia Fund, Inc.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    080299011 (July 29, 1999)

    The staff advised this company that its proposed concentration policy is consistent with section 8(b)(1) of the Investment Advisers Act. The fund proposed to implement a new concentration policy to permit it to invest up to 35% of its total assets in the equity securities of issuers in a particular industry or group of industries if, at the time of investment, that industry represents 20% or more of the index.

  • PriceWaterhouse Coopers Investment Advisors, LLC
    SEC No-Action Letters Ind. & Summaries (WSB) #
    080999016 (August 10, 1999)

    The staff advised this investment adviser that an adviser would not violate section 206(4) or rule 206(4)-2(a)(5) of the Investment Advisers Act if the adviser achieves the annual verification of client funds and securities through a series of unannounced examinations performed throughout the year.

  • BISYS Fund Services, Inc.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    090799004 (September 2, 1999)

    The staff permitted, under section 206 of the Investment Advisers Act, sponsors of this COMPANY's mutual fund wrap fee program to defer, and eventually excuse, the payment of certain expenses by clients as long as the clients continue their participation in the program for a specified period of time. The wrap fee program is intended to help the company's sponsors to market successfully to investors.

  • Merrill Lynch, Pierce, Fenner & Smith Inc.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    090799022 (September 3, 1999)

    The staff permitted, under section 7 of the Investment Company Act, this company, a newly-formed trust and a trustee to implement a depositary receipts program without registering the trust as an investment company. According to the company, the program is intended function as a means to provide investors with a less costly way of purchasing, holding and transferring equity securities within a particular industry, sector or group, and not as an investment company.

  • Metropolitan Life Insurance Co.
    SEC No-Action Letters Ind. & Summaries (WSB) #
    112299009 (November 23, 1999)

    The staff allowed this company, without registering under 1933 Act section 3(a)(1), to issue common shares to MetLife Policyholder Trust so that the trust could exchange the shares for holding company common shares and allocate interests to trust eligible policyholders. These transactions are being made in connection with the company's proposed conversion to a stock life company that will be a subsidiary of the holding company.

  • Vedder, Price, Kaufman & Kammholz
    SEC No-Action Letters Ind. & Summaries (WSB) #
    0313200002 (December 6, 1999)

    The staff agreed that a fund's use of an automated phone system that includes estimated and actual distribution information could comply with 1933 Act rule 482 notwithstanding that the distribution information does not meet certain requirements of the rule that apply to the presentation of performance.

  • Investment Co. Institute
    SEC No-Action Letters Ind. & Summaries (WSB) #
    1213199915 (December 8, 1999)

    The staff reviewed mutual funds' pricing obligations and provided additional guidance to funds on their obligations to price and redeem their securities during emergency, unusual and other situations.

    Weekly Alphabetical Listing
    Letters Released between Friday, March 10, 2000 and Thursday, March 16, 2000.

    The header "Cat. No." in the Weekly Alphabetical Listing, as well as the Header "Index Location/Category No." in the Abstracts portion of the newsletter refer to the location of abstracts in CCH Washington Service Bureau's monthly looseleaf publication SEC No-Action Letters Index and Summaries. The "Categories" represent a compilation system, devised by CCH Washington Service Bureau, grouping the abstracts according to issues raised under the specific provisions of the federal securities statutes.

    To view the abstract of a given letter, please click on the name of the Subject Company. To view the full-text of the letter, please click on the letter's WSB File No.

    Subject Statutory Provision: Cat. No. WSB
    File No.
    Public Avail.
    Date
    Act Section Rule
    Assocs. First Capital Corp. (3165F1) 0313200020 03/13/00
    1934 14(a) 14a-8 74
          77
     
    Boeing Co. (3164B3) 0313200008 03/03/00
    1934 14(a) 14a-8 74
          77
     
    Chicago Board Options Exchange (3165A4) 0313200015 02/25/99
    1934 15(c)(3) 15c3-1 86
     
    Citigroup Inc. (Recon.) (3164F9) 0313200012 03/02/00
    1934 14(a) 14a-8 77
     
    Dominion Resources, Inc. (Recon.) (3165A8) 0313200016 03/07/00
    1934 15(a)(1) --- 81
     
    Dow Chemical Co. (3163E5) 0313200005 02/24/00
    1934 14(a) 14a-8 74
     
    E.I. du Pont de Nemours and Co. (3165G3) 0313200021 03/02/00
    1934 14(a) 14a-8 77
     
    E.I. du Pont de Nemours and Co. (IBEW) (3163D5) 0313200004 03/03/00
    1934 14(a) 14a-8 74
     
    E.I. du Pont de Nemours and Co. (Sheet Metal Workers) (3163C7) 0313200003 03/03/00
    1934 14(a) 14a-8 74
     
    Equus II Inc. (3164D1) 0313200010 02/24/00
    1934 14(a) 14a-8 76
     
    Franklin Templeton Group of Funds (3163B1) 0313200001 05/21/99
    1940C 5(b)(1) --- 134
    1940C 34(b) ---  
     
    Kappa Beheer B.V. (3163G7) 0313200006 03/07/00
    1934 13(a) --- 72
    1934 15(d) --- 92
     
    Occidental Petroleum Corp. (3164C7) 0313200009 03/03/00
    1934 14(a) 14a-8 77
     
    SK Int'l. Securities Corp. (Recon.) (3164F13) 0313200013 02/02/99
    1934 10(b) 10b-10 69
     
    State Street Corp. (3165A10) 0313200017 03/02/00
    1934 14(a) 14a-8 77
     
    Tokheim Corp. (3164A7) 0313200007 02/29/00
    1934 13(a) --- 72
    1934 15(d) --- 92
     
    United Parcel Service, Inc. (3165D13) 0313200018 02/04/00
    1934 13(e) 13e-4 71
     
    Vedder, Price, Kaufman & Kammholz (3163B14) 0313200002 12/06/99
    1933 5(b)(1) --- 21
    1933 6(a) 482 50
     
    Warner-Lambert Co. (3164E4) 0313200011 02/24/00
    1934 14(a) 14a-8 76
     
    Westpac Banking Corp. (3164G3) 0313200014 08/29/99
    1934 11(d) --- 102
    1934 36(a) ---  
     
    William N. Bernstein & Assocs., PLLC (3165E11) 0313200019 03/13/00
    1940C 2(a)(41) --- 121
    1940C 22(c) 22c-1 133

    Abstracts

    This listing includes all letters released by the Securities and Exchange Commission between Friday, March 10, 2000 and Thursday, March 16, 2000. To view the full-text of any letter, please click on the letter's WSB File No.

    Subject Statutory Provision: Cat. No. WSB
    File No.
    Public Avail.
    Date
    Act Section Rule
    Assocs. First Capital Corp. (3165F1) 0313200020 03/13/00
    1934 14(a) 14a-8 74
          77
    ...A shareholder proposal, which requests that this company establish a committee of outside directors to develop and enforce policies to ensure "that accounting methods and financial statements adequately reflect the risks of subprime lending and…employees do not engage in predatory lending practices" and report to shareholders, may not be omitted from the company's proxy material under rule 14a-8(i)(7) or (i)(10).
     
    Boeing Co. (3164B3) 0313200008 03/03/00
         Prepared By: Perkins Coie
    1934 14(a) 14a-8 74
          77
    ...A shareholder proposal, which requests that this company's board of directors institute a special executive compensation review and report to find ways to link executive compensation with social corporate performance as well as financial performance including efforts to promote human rights and a comparison of the compensation packages for company officers with the lowest paid company employees, may not be omitted from the company's proxy material under rule 14a-8(i)(3) or (i)(12). The staff states that portions of the proposal and supporting statement may be omitted as false and misleading under rule 14a-9 if the proponents do not provide the company with a proposal revised in the manner indicated within seven calendar days after receipt of the staff's response.
     
    Chicago Board Options Exchange (3165A4) 0313200015 02/25/99
    1934 15(c)(3) 15c3-1 86
    ...The staff will not recommend Commission action if a clearing broker-dealer does not take a short option value charge ("SOVC") for short futures options positions carried for the accounts of market makers or specialists if the clearing broker-dealer calculates its capital charges on listed options and related positions in accordance with rule 15c3-1 paragraph (c)(2)(x) and Appendix A. It is represented that a broker-dealer is permitted, pursuant to rule 15c3-1, to use an approved theoretical options pricing model to calculate capital charges for listed options and related futures and futures options positions. In addition to the capital charges calculated by the model, a broker-dealer is required to deduct from its net worth 4% of the market value of commodity options sold by option customers, including market-makers and specialists, on or subject to the rules of a contract market in accordance with rule 15c-3-1(b)(a)(3)(x). The 4% deduction is known as the SOVC. The exchange believes that the SOVC is unnecessary because the market maker's or specialist's short futures option positions are hedge-positions and because the capital charges calculated pursuant to rule 15c3-1 Appendix A adequately address the risks associated with the short futures option positions. The exchange represents that the SOVC creates the risk that a significant increase in the market value of a market maker's or specialist's short futures options positions could force a clearing broker-dealer to liquidate positions in order to avoid a net capital violation without an accompanying actual risk to the clearing broker-dealer.
     
    Citigroup Inc. (Recon.) (3164F9) 0313200012 03/02/00
    1934 14(a) 14a-8 77
    ...The staff reconsiders its position taken in Citigroup Inc., SEC No-Action Letters & Summaries (WSB) #0228200056 (February 17, 2000), in which it held that a shareholder proposal, which requests that this company adopt a "matching gift program" for shareholders to enable shareholders to donate their dividends to qualifying organizations and the company to match any such contributions to an extent determined by the board of directors. The staff now states that this company may omit a portion of the supporting statement from the company's proxy material under rule 14a-8(i)(3) unless the proponent provides the company with a proposal revised as indicated within seven calendar days after receipt of the staff's letter.
     
    Letters/Releases cited in SEC response:
    Citigroup Inc., SEC No-Action Letters Ind. & Summaries (WSB) #0228200056 (February 17, 2000)
     
    Dominion Resources, Inc. (Recon.) (3165A8) 0313200016 03/07/00
    1934 15(a)(1) --- 81
    ...The staff, in consideration of recent developments, reconsiders its position taken in Dominion Resources, Inc., SEC No-Action Letters & Summaries (WSB) #090985008 (August 22, 1985). The staff no longer believes that an entity conducting the activities described in that letter would not have to register as a broker-dealer under 1934 Act section 15. The staff will no longer be able to assure this company that it would not recommend enforcement action under 1934 Act section 15(a) if the company conducted the activities described in the August 22, 1985 letter without the company registering as a broker-dealer in accordance with 1934 Act section 15(b). In the August 22, 1985 letter, the staff referred to the company's plans to assist a limited number of corporate and government issuers in the structuring and issuance of both taxable and tax-exempt securities transactions including: 1) analyzing the financial needs of an issuer; 2) recommending or designing financing methods and securities to fit the issuer's needs; 3) recommending bond lawyers, underwriters, or broker-dealers for the distribution or marketing of the securities in the secondary market; 4) participating in negotiations; 5) introducing an issuer to a commercial bank to act as the initial purchaser of securities and as a stand-by purchaser if the securities could not be readily marketed by a broker-dealer, and 6) recommending a commercial bank or other financial institution to provide a letter of credit or other credit support for the securities. The company represented that the only contact it would have with any potential purchaser was the possible introduction of an issuer to a commercial bank standby purchaser. In exchange for its services, the company planned to receive a negotiated fee that would generally not be payable unless the financing closed successfully. The fees would not be based on the successful issuance of securities to the public. The staff states that in the intervening years since the issuance of the August 22, 1985 letter, the staff has denied no-action requests in situations somewhat similar to the arrangements described in the letter. The staff notes that technological advances, including the advent of the Internet, as well as other developments in the securities markets, have allowed more and different types of persons to become involved in the provision of securities-related services. The staff issues its reconsideration in light of these circumstances.
     
    Letters/Releases cited in SEC response:
    Dominion Resources, Inc., SEC No-Action Letters Ind. & Summaries (WSB) #090985008 (August 22, 1985)
     
    Dow Chemical Co. (3163E5) 0313200005 02/24/00
         Prepared By: Gibson Dunn
    1934 14(a) 14a-8 74
    ...The staff will not comment on a shareholder proposal, which requests that this company's board of directors adopt a policy of not marketing or distributing genetically engineered agricultural products until long-term safety testing has shown that they are not harmful to humans, animals and the environment, where the proponents' withdrawal of the proposal has rendered the matter moot.
     
    E.I. du Pont de Nemours and Co. (3165G3) 0313200021 03/02/00
    1934 14(a) 14a-8 77
    ...A shareholder proposal, which requests that this company's board of directors adopt a policy of not marketing or distributing genetically-engineered agricultural products until long-term testing has shown that they are not harmful to humans, animals and the environment, may not be omitted from the company's proxy material under rule 14a-8(i)(3) or (i)(7).
     
    E.I. du Pont de Nemours and Co. (IBEW) (3163D5) 0313200004 03/03/00
    1934 14(a) 14a-8 74
    ...The staff will not comment on a shareholder proposal, which urges this company's board of directors and senior management to prepare a strategic planning report for shareholders, where the proponent's withdrawal of the proposal has rendered the matter moot.
     
    E.I. du Pont de Nemours and Co. (Sheet Metal Workers) (3163C7) 0313200003 03/03/00
    1934 14(a) 14a-8 74
    ...The staff will not comment on a shareholder proposal, which urges the board of directors of this company to establish a shareholder right of access to the company's proxy materials for the purpose of presenting a non-management candidate for election to the board of directors, where the proponent's withdrawal of the proposal has rendered the matter moot.
     
    Equus II Inc. (3164D1) 0313200010 02/24/00
         Prepared By: Snell Smith
    1934 14(a) 14a-8 76
    ...A shareholder proposal, which mandates that this company hire a proxy advisory firm chosen by shareholder vote to make shareholder voting recommendations, may be omitted from the company's proxy material under rule 14a-8(i)(8) as relating to an election for membership on its board of directors.
     
    Franklin Templeton Group of Funds (3163B1) 0313200001 05/21/99
         Prepared By: Stradley Ronon
    1940C 5(b)(1) --- 134
    1940C 34(b) ---  
    ...The staff will not recommend Commission action under Investment Company Act section 34(b) if these funds hold themselves out as diversified companies in their registration statements and treat their investment in the shares of a trust that is excepted from the definition of "investment company" pursuant to section 3(c)(7) the series of the trust as an investment in the securities of an investment company solely for purposes of section 5(b)(1). The staff's position is based on counsel's representation that each series of the trust will: 1) operate in all material respects as an open-end management investment company, except for the series' reliance on section 3(c)(7), and 2) comply with the diversification requirements of section 5(b)(1). The funds intend to invest their uninvested cash in shares of the trust. The trust will offer the shares in separate series, each representing a separate portfolio. Shares will be purchased and redeemed at the respective series' net asset value per share next determined after receipt of a purchase or redemption order. The funds believe they can achieve greater diversification, enjoy greater returns, create more liquidity and reduce their transaction costs by investing in the trust rather than in money market instruments directly.
     
    Kappa Beheer B.V. (3163G7) 0313200006 03/07/00
         Prepared By: Lovell White Durrant
    1934 13(a) --- 72
    1934 15(d) --- 92
    ...The staff will raise no objection if this company and its wholly-owned subsidiary guarantor do not file periodic reports under 1934 Act sections 13(a) and 15(d) with respect to the $370 million of 10-5/8% senior subordinated notes due 2009, the $100 million of 10-5/8% senior subordinated notes due 2009 and the $145 million of 12-1/2% senior subordinated discount notes due 2009 (collectively, the "notes"). On September 14, 1999, the company and the subsidiary guarantor filed a Form F-4 relating to the notes. In reaching this position, the staff notes that: 1) Kappa Holding B.V. (the "parent guarantor") is a reporting company under the 1934 Act; 2) the parent guarantor and the subsidiary guarantor have fully and unconditionally guaranteed the notes on a joint and several basis, and 3) the company and the subsidiary guarantor are wholly-owned subsidiaries of the parent guarantor. As a condition to its position, the staff states that the parent guarantor must include certain narrative disclosure and financial information in a footnote to the financial statements in its 1934 Act reports. First, the parent guarantor must state in the footnote that: 1) each of the company and the subsidiary guarantor is a wholly-owned subsidiary of the company; 2) the parent guarantor and the subsidiary guarantor have fully and unconditionally guaranteed the notes on a joint and several basis, and 3) the parent guarantor has not presented separate financial statements and other disclosures concerning the company and the subsidiary guarantor because management has determined that such information is not material to investors. Second, for as long as the notes remain outstanding and are guaranteed, the parent guarantor must include condensed consolidating financial statements in the footnote. Specifically, the parent guarantor must: 1) present these statements for the same periods for which it presents the parent guarantor's financial statements; 2) follow the general guidance of rule 10-01 of Regulation S-X related to the form and content of condensed financial statements, and 3) have the statements audited for each period that it is required to have the parent guarantor's financial statements audited. The parent guarantor must present the condensed consolidating financial statements in a columnar format, with separate columns that contain: 1) the financial information for the parent guarantor on a stand-alone basis, carrying any investments in subsidiaries under the equity method; 2) the financial information for the company and the subsidiary guarantor, carrying any investments in non-guarantor subsidiaries under the equity method; 3) the financial information for non-guarantor subsidiaries, with a separate column for each subsidiary incorporated or organized under the laws of any jurisdiction other than the Netherlands; 4) the eliminations necessary to arrive at the information for the parent guarantor on a consolidated basis, and 5) the financial information for the parent guarantor on a consolidated basis. Finally, the parent guarantor's 1934 Act reports must include: 1) the disclosure contemplated by rule 4-08(e)(3)(i) and (ii) of Regulation S-X regarding restrictions on distributions from the company and the subsidiary guarantor to the parent guarantor, and 2) in the Management's Discussion and Analysis section, appropriate disclosure regarding restrictions on distributions from the company and the subsidiary guarantor to the parent guarantor.
     
    Occidental Petroleum Corp. (3164C7) 0313200009 03/03/00
    1934 14(a) 14a-8 77
    ...A shareholder proposal, which recommends that the board of directors of this company adopt a policy whereby the company would establish a minimum budget for each director to retain a resident information analyst, may be omitted from the company's proxy material under rule 14a-8(i)(7).
     
    SK Int'l. Securities Corp. (Recon.) (3164F13) 0313200013 02/02/99
    1934 10(b) 10b-10 69
    ...The staff advises this firm regarding the staff's position on when a broker-dealer must disclose to its customers any mark-ups or mark-downs on riskless principal transactions under rule 10b-10(a)(2)(ii)(A). The firm requested that the staff reconsider its interpretive advice that, for the purposes of determining whether a particular transaction is an "ordinary contemporaneous" transaction within rule 10b-10(a)(2)(ii)(A), ordinarily any covering transaction effected on the next trading day will not be considered a transaction. The staff further stated that a transaction will not generally be considered a riskless principal transaction for purposes of rule 10b-10 where the transaction that restored the firm's original position, the covering position, is affected on the next trading day. This position was set out in a February 1, 1980 letter issued to Buys-MacGregor, SEC No Action Letters & Summaries (WSB) #021980016 (February 1, 1980). The staff notes that with respect to transactions in equity securities effected on a riskless principal basis, rule 10b-10 requires dealers to disclose to their customers, among other things, any difference between the price charged to the customer and the broker-dealer's contemporaneous purchase or sale price. The staff states that with respect to transactions in equity securities effected at risk, dealers must disclose to their customers the price to the customer, the reported trade price, and the difference, if any, between the price to the customer and the reported trade price to the customer and the reported trade price. The firm represents that it discloses to its customers all of the above information, regardless of whether a transaction is effected on a principal or riskless principal basis. The staff, relying on the firm's representation, notes that the firm's customers receive the same transaction information regardless of whether a transaction is effected on a principal or riskless principal basis. The firm represents that given the nature of the Nasdaq market a transaction cannot be riskless when a dealer is long or short a security it has purchased from or sold to its customer, even for a minute, since the dealer is exposed to some market risk. The staff notes that this opinion has been previously expressed by other commenters. The staff, however, believes that the interpretive advice provided in the Buys-MacGregor letter is still a viable guidepost for dealers to use in determining the general parameters of what types of transactions the staff may consider to be offsetting contemporaneous transactions for purposes of rule 10b-10(a)(2)(ii)(A).
     
    Letters/Releases cited in SEC response:
    Buys-MacGregor,, SEC No-Action Letters Ind. & Summaries (WSB) #021980016 (February 1, 1980)
     
    State Street Corp. (3165A10) 0313200017 03/02/00
    1934 14(a) 14a-8 77
    ...A shareholder proposal, which requests that this company's board of directors adopt a policy that the Revised Model Business Corporations Act govern the company's conduct where it does not directly conflict with its by-laws or applicable state statutes, may not be omitted from the company's proxy material under rule 14a-8(i)(3), (i)(4) or (i)(6). The staff states that portions of the proposal and supporting statement may be omitted as false and misleading under rule 14a-9 if the proponent does not provide the company with a supporting statement revised in the manner indicated within seven calendar days after receipt of the staff's response.
     
    Tokheim Corp. (3164A7) 0313200007 02/29/00
         Prepared By: Skadden Arps
    1934 13(a) --- 72
    1934 15(d) --- 92
    ...The staff will raise no objection if this company's subsidiary guarantors do not comply, as separate registrants, with the reporting requirements of 1934 Act sections 13(a) and 15(d) with respect to the $123 million of the company's 11-3/8% senior subordinated dollar exchange notes due 2008 and the Euro $75 million of 11-3/8% senior subordinated Euro exchange notes due 2008 (collectively, the "exchange notes"). In reaching this position, the staff notes that: 1) the company is subject to the reporting requirements of 1934 Act sections 13(a) and 15(d), and 2) each of the subsidiary guarantors is a wholly-owned subsidiary of the company and has fully and unconditionally guaranteed the exchange notes on a joint and several basis. As a condition to this position, the staff states that the company must include certain narrative disclosure and financial statement information in a footnote to its financial statements in its 1934 Act reports. In this footnote, the company must state that: 1) the company has not presented separate financial statements and other disclosures concerning the subsidiary guarantors because management has determined that such information is not material to holders of the exchange notes, and 2) the subsidiary guarantors are wholly-owned subsidiaries of the company and have fully and unconditionally guaranteed the exchange notes on a joint and several basis. For as long as the exchange notes and the accompanying guarantees remain outstanding, the company must include condensed consolidating financial statements in the footnote. In this regard, the company must: 1) present these statements for the same periods for which it presents its own financial statements; 2) follow the general guidance of rule 10-01 of Regulation S-X related to the form and content of the condensed financial statements, and 3) have the statements audited for each period that it is required to have its own financial statements audited. The company must present the condensed consolidating financial statements in a columnar format, with separate columns that contain: 1) the financial information for the company on a stand-alone basis, carrying any investments in subsidiaries under the equity method; 2) the financial information for the subsidiary guarantors, carrying any investments in the non-guarantor subsidiaries under the equity method; 3) the financial information for the non-guarantor subsidiaries; 4) the eliminations necessary to arrive at the information for the company on a consolidated basis, and 5) the financial information for the company on a consolidated basis. Finally, the company's 1934 Act reports must include: 1) the disclosure contemplated by rule 4-08(e)(3)(i) and (ii) of Regulation S-X regarding restrictions on the subsidiary guarantors' ability to make distributions to the company, and 2) in the Management's Discussion and Analysis section, appropriate disclosure regarding restrictions on distributions to the company from any of the subsidiary guarantors.
     
    United Parcel Service, Inc. (3165D13) 0313200018 02/04/00
         Prepared By: Gibson Dunn
    1934 13(e) 13e-4 71
    ...The staff, without necessarily concurring in counsel's analysis, will not recommend Commission action under 1934 Act rule 13e-4(f)(3) if this company conducts an issuer tender offer. The staff notes: 1) the characteristics of the shareholder base holding the class of securities that is the subject of the offer; 2) the lack of a public market for the subject class of securities; 3) the same specified percentage of shares owned will be sought from each shareholder; 4) the offer, by its terms, cannot be oversubscribed, and 5) the offer is structured to treat all shareholders of the subject class in an equal manner.
     
    Vedder, Price, Kaufman & Kammholz (3163B14) 0313200002 12/06/99
    1933 5(b)(1) --- 21
    1933 6(a) 482 50
    ...The staff is of the view that a fund's use of an automated phone system that includes estimated and actual distribution information could comply with 1933 Act rule 482 notwithstanding that the distribution information does not meet certain requirements of the rule that apply to the presentation of performance data. The staff notes that the proposed distribution information does not constitute performance data within the meaning of rule 482. The staff's position is particularly based on counsel's representations that: 1) the estimated distribution information will be provided on the funds' automated phone systems no earlier that the fund can calculate a reasonably accurate estimate, and in no event earlier than 90 days before the ex-distribution date; 2) the actual distribution information will be provided on the funds' automated phone systems for a period of no more than 30 days after the payment date, and 3) the distribution information will not be presented in a manner that may mislead callers about the nature and significance of the information.
     
    Warner-Lambert Co. (3164E4) 0313200011 02/24/00
    1934 14(a) 14a-8 76
    ...A shareholder proposal, which mandates that this company hire a proxy advisory firm chosen by shareholder vote to make shareholder voting recommendations, may be omitted from the company's proxy material under rule 14a-8(i)(8) as relating to an election for membership on its board of directors.
     
    Westpac Banking Corp. (3164G3) 0313200014 08/29/99
         Prepared By: Debevoise Plimpton
    1934 11(d) --- 102
    1934 36(a) ---  
    ...The staff, without necessarily concurring in counsel's analysis, grants an exemption to the global coordinators and the U.S. broker-dealers of this Australian company's international offering, pursuant to 1934 Act section 36, from the prohibitions on arranging for the extension of credit contained in 1934 Act section 11(d)(1). The exemption permits the global coordinators and U.S. broker-dealers to arrange for an extension of credit relating to the offer and sale of WestpacTrust Investments Ltd. shares by selling shares on an installment basis to U.S. qualified institutional buyers ("QIBs") within the meaning of 1933 Act rule 144A. The staff particularly notes that: 1) U.S. sales are limited to QIBs, who will purchase 20% or less of the proposed global offering which will be made in reliance on the safe harbor for registration under 1933 Act Regulation S; 2) there will be only two installment payments, the first totaling 50% or more of the share price and the second paid within 15 months of the closing of the proposed global offering; 3) the largest market for the securities will be abroad, in New Zealand, and the New Zealand market will dictate the terms and, to a large extent, the structure of the offering, and 4) the use of the periodic payment offer structure is relatively common in public offerings in New Zealand.
     
    William N. Bernstein & Assocs., PLLC (3165E11) 0313200019 03/13/00
    1940C 2(a)(41) --- 121
    1940C 22(c) 22c-1 133
    ...The staff gives general guidance in response to this lawyer's concerns regarding the fair value pricing techniques used by Fidelity Investments. The staff states that as a matter of policy it will not comment publicly on the practices and procedures followed by particular fund groups, however, the staff will provide general guidance on fair value pricing. A mutual fund generally must value its portfolio securities at least once a day, at their current market value. Commission rules specify that in valuing securities for this purpose, a fund is generally required to use market quotations for the securities. If the market quotations are not "readily available," the fund must value the securities by using "fair value as determined in good faith" by its board of directors. Commission rules also require all mutual funds to adopt "forward pricing" procedures through which a fund must fill an order to buy or redeem its shares based on the price, or "net asset value," of the shares next calculated after the receipt of the order. Mutual funds in the U.S. typically calculate net asset value at the close of the U.S. markets, usually 4:00 p.m. Eastern time. The goal of the net asset value calculation is to determine the current value of a fund's assets and liabilities at 4:00 p.m. Eastern time. Funds holding foreign securities can value those securities by using closing prices on the principal exchanges on which the securities are traded, even though those closing prices may have been determined many hours before the net asset value calculation is made. If intervening events resulting in market volatility have significantly affected the value of the securities after the close of the foreign exchanges, but before calculation of net asset value, a fund is permitted, but not required, to use fair value pricing to value more accurately the securities it owns. Fair pricing in this context is designed to protect long-term investors in funds from the actions of other investors who might buy or redeem fund shares in an attempt to profit on short-term market movements. The Commission's pricing rules are designed to protect the common interest of investors in mutual funds by reducing the possibility that some investors can trade fund shares at the expense of others, intentionally or unintentionally. As a result, the rules may preclude investors from the arbitrage opportunities that they might have when trading directly in the securities markets. The rules are intended to protect the long-term value of fund shares, which benefits all investors in the fund.

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