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Securities Exchange Act of 1934
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Re: |
Auction Rate Securities — Global Exemptive Relief |
Dear Mr. Douglas:
We are responding to your letter dated September 22, 2008 to the Divisions of Corporation Finance, Investment Management, and Trading and Markets with regard to your request for no-action and exemptive relief. Our response is attached to the enclosed photocopy of your letter to avoid having to recite or summarize the facts presented in your letter. Unless otherwise noted, capitalized terms in this letter have the same meaning as in your letter.
You request exemptive and no-action relief on behalf of Participating Firms so that they may make Offers to purchase Subject Securities from certain current and former customers in conformance with the Offer Protocol. In order to reduce the burdens and costs to the Participating Firms that otherwise must seek individual exemptions and no-action relief, the U.S. Securities and Exchange Commission grants the following exemptions, and the Divisions grant the following no-action relief, so long as the Offers to purchase Subject Securities meet the criteria in your accompanying letter, including, but not limited to, the terms of the Offer Protocol and the Non-Settling Firms comply with the Non-Settling Firm Conditions.
Based on your representations and the facts in your letter, but without necessarily concurring in your analysis, the Commission hereby grants exemptions from:
Section 14(d)(5) of the Exchange Act and the provisions of Regulation 14D and Rules 13e-4 and 14e-1(d) under the Exchange Act for Offers made by Participating Firms;
the provisions of Rule 13e-3 under the Exchange Act for Offers made by Participating Firms; any out-of-offer purchases made by Participating Firms, so long as the out-of-offer purchases of Subject Securities from Eligible Customers are made at par (plus dividends or accrued but unpaid interest, if any); and any acquisitions by an issuer of Subject Securities from a Participating Firm that, in turn, acquired the Subject Securities pursuant to the Offers or out-of-offer purchases; and
the provisions of Rules 14d-9 and 14e-2 under the Exchange Act for issuers of the Subject Securities with respect to Offers made by Participating Firms.
In addition, the Division of Corporation Finance will not recommend that the Commission take enforcement action if the issuers of the Subject Securities do not comply with Rule 13e-1 under the Exchange Act during the Offers made by Participating Firms.
Further, the Division of Corporation Finance will not recommend enforcement action to the Commission if the Participating Firms and any of their affiliates that acquire Subject Securities pursuant to the Offers and out-of-offer purchases report beneficial ownership of the Subject Securities on Schedule 13G pursuant to Rule 13d-1(b) under the Exchange Act within the timeframe set forth in your accompanying letter, so long as:
the entity is not a person specified in Rule 13d-1(e)(1)(i);
the entity has not incurred an obligation to file reports on Schedules 13D or 13G with respect to a class of Subject Securities before the date hereof;
the Schedule 13G identifies any filing person that is not an entity described in Rule 13d-1(b)(ii)(A) through (I) and includes a statement that the Schedule 13G is filed in reliance on this letter; and
the entity, if it is a Non-Settling Firm, makes an Offer for Subject Securities pursuant to the Offer Protocol to its eligible individual retail clients holding Non-Settling Firm Securities.
The foregoing positions are based on the facts described and the representations made in your letter. In particular, we note your representations that:
each Settling Firm will make one or more Offers, and pursuant to the Non-Settling Firm Conditions, each Non-Settling Firm will make one or more Offers, to all of their Eligible Customers to purchase all Subject Securities held by such Eligible Customers for cash at par (plus dividends or accrued but unpaid interest, if any);
each Offer will be open for a minimum of 20 business days (within the meaning of Exchange Act Rule 14d-1(g)(3)) from the date the relevant Offer Document is first distributed by the Participating Firm to its Eligible Customers, although the Division of Corporation Finance will not object if the Participating Firm pays for tendered securities as early as the day of tender;
Eligible Customers may withdraw tendered Subject Securities at any time before acceptance for payment;
payment for Subject Securities will be made promptly following acceptance for payment or at such earlier time as may be required by the relevant Settlement;
Participating Firms will disseminate an Offer Document that contains the material information as set forth in your accompanying letter;
neither the tender nor the purchase of Subject Securities pursuant to the Offers will result in or constitute a waiver of any claims (except as otherwise may be provided in or permitted by the applicable Settlement) of the holder of the Subject Securities; and
any waivers sought by Participating Firms in connection with any out-of-offer purchases will be in conformity with the federal securities laws, including Section 29(a) of the Exchange Act.
On the basis of your representations and the facts presented, but without necessarily concurring in your analysis, the Commission hereby grants an exemption from Rule 14e-5 under the Exchange Act to permit purchases outside of a tender offer for equity securities by each Settling Firm from the date of the announcement of the first Settlement applicable to it and, with respect to each Non-Settling Firm, from the date of the first announcement of its voluntary Offer, as follows:
purchases of Subject Securities from Eligible Customers that will be made immediately (e.g., subsequent to the announcements of the Settlements or Offers but prior to the commencement of an Offer or ahead of the next applicable purchase date specified in an Offer);
purchases of Subject Securities that are not within the parameters of the Settlements (e.g., ARS that were purchased after the relevant cut-off date under the Settlements) from Eligible Customers;
purchases of Subject Securities from holders who are not Eligible Customers (e.g., purchases from institutional investors prior to any Offer being extended to them) and are therefore ineligible to participate in an earlier Offer;
purchases made pursuant to a Participating Firm's participation in an auction for Subject Securities;
purchases of Subject Securities not subject to Settlements for technical reasons (e.g., a client of a Participating Firm may hold ARS in the client's account at that firm, but the bidding rights for those securities are held by another firm and the Participating Firm's Settlement defines Eligible Customers as those holding ARS in which such Participating Firm held bidding rights);
purchases of Subject Securities by a Participating Firm from another Participating Firm effected to accommodate inclusion in the purchasing Participating Firm's Offer of Subject Securities initially purchased by an Eligible Customer from such purchasing Participating Firm but held in an account at the selling Participating Firm, so long as such acquisition is made at not more than par (plus dividends or accrued but unpaid interest, if any)(any such selling Participating Firm will continue to be subject to the requirement that its purchase of such Subject Securities from Eligible Customers be made at par (plus dividends or accrued but unpaid interest, if any)); and
any other acquisition that results in the payment of not more than par (plus dividends or accrued but unpaid interest, if any).
The aforementioned purchases outside of tender offer for equity securities are subject to the following conditions:
Subject Securities will be purchased at prices not greater than par (plus dividends or accrued but unpaid interest, if any);
Eligible Customers will be paid the same price (par, plus dividends or accrued by unpaid interest, if any) for their Subject Securities, and other holders of ARS, if the Participating Firm elects to purchase ARS from such holders, will receive no greater than par (plus dividends or accrued by unpaid interest, if any);
in connection with a purchase made pursuant to paragraph seven above, Participating Firms will provide to the Division of Trading and Markets1 the following information related to the acquisition: date, time (if applicable), size, purchase price, reason for the acquisition, and identities of the buyer and seller;
Participating Firms will transmit the information as specified in the preceding bullet point to the Division of Trading and Markets at its offices in Washington, D.C. within 30 days after the month in which such acquisition occurs;
each Participating Firm will retain all documents and other information required to be maintained pursuant to this exemption for a period of not less than two years from the termination of this global exemptive relief with respect to such Participating Firm; and
representatives of the Participating Firms are made available (in person at the offices of the Division of Trading and Markets in Washington, D.C. or by telephone) to respond to inquiries of the Division of Trading and Markets relating to its records.
The Division of Corporation Finance and the Division of Investment Management will not recommend enforcement action to the Commission with respect to Section 30(h) of the Investment Company Act of 1940 to the extent that such section would apply the reporting requirements of Section 16(a) of the Exchange Act to the Participating Firms (or their affiliates), if:
a Participating Firm (or its affiliate) determines that it is subject to Section 30(h) solely as a result of acquiring beneficial ownership of more than ten percent of a class of Subject Securities based on its beneficial ownership of that class at the end of a Filing Month, applying the same timing and methodology for determining percentage ownership as for its Schedule 13G filing, as described in your accompanying letter; files a Form 3 to report such beneficial ownership not later than ten calendar days after the end of that Filing Month; and undertakes, in a footnote to the Form 3, to provide upon request by the Commission staff, the issuer, or a security holder of the issuer, complete information regarding the number of Subject Securities purchased and sold at each different price and date for the period between the date on which beneficial ownership exceeded ten percent and the end of that Filing Month; or
a Participating Firm (or its affiliate) that is subject to Section 30(h), whether based on ten percent beneficial ownership of a class of Subject Securities or otherwise, does not report pursuant to Section 16(a) purchases and sales of Subject Securities for cash at par (plus dividends, if any).
The foregoing positions are based on the facts described and the representations made in your letter. In particular, we note your representations that:
the Subject Securities that are subject to Section 30(h) are designed to trade at par;
purchases of the Subject Securities pursuant to the Offer Protocol are required to be made for cash at par (plus dividends, if any);
there does not appear to be any informational advantage, or corresponding potential for abuse, arising from purchases and sales of the Subject Securities subject to Section 30(h) for cash at par (plus dividends, if any); and
each Participating Firm (or its affiliate) that relies upon this transactional reporting relief undertakes to provide upon request by the Commission staff, the issuer, or a security holder of the issuer, complete information regarding the number of shares of Subject Securities purchased and sold for cash at par (plus dividends, if any) at each different date.
The foregoing exemptions and no-action relief are based solely on the circumstances outlined in our letter if Participating Firms conduct Offers for Subject Securities, and any different circumstances might require a different conclusion. Further, such relief will terminate on the later of (i) December 31, 2010 and (ii) with respect to each Settling Firm, the completion of its obligation to purchase Subject Securities pursuant to any Settlement applicable to it.
* * * * *
Your attention is directed to the anti-fraud and anti-manipulation provisions of the Exchange Act, particularly Sections 10(b) and 14(e), and Rule 10b-5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the Participating Firms. The staff expresses no view with respect to any other questions that the Offers may raise, including, but not limited to, the adequacy of disclosure concerning, and the applicability of other federal or state laws to, the Offers and conduct of your Offers as described in your letter. The staff intends to continue to monitor conditions in the market for auction rate securities and, if warranted, may modify or withdraw the position taken herein.
For the Commission,
By the Division of Corporation Finance,
Pursuant to delegated authority,
/s/ Michele M. Anderson
Michele M. Anderson
Chief, Office of Mergers and Acquisitions
Division of Corporation Finance
For the Commission,
By the Division of Trading and Markets,
Pursuant to delegated authority,
/s/ James A. Brigagliano
James A. Brigagliano
Associate Director
Division of Trading and Markets
/s/ Douglas J. Scheidt
Douglas J. Scheidt
Chief Counsel and Associate Director
Division of Investment Management
The Incoming Letter is in Acrobat format.
http://www.sec.gov/divisions/corpfin/cf-noaction/2008/arsger092208.htm
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