DealLawyers.com Blog

January 19, 2005

SEC Staff Seeking Disclosure As

Recently, there have been several instances where Corporation Finance examiners have pushed beyond the line taken in the Staff’s long-standing policy of requesting the deletion of any inappropriate language indicating that shareholders may not rely on a financial advisor’s fairness opinion (e.g., seeking deletion of the “solely to the board” language), or alternatively to provide the basis, including citation to applicable case law, as to why the issuer and its financial advisor believe that shareholders can not rely on the advisor’s opinion.

Traditionally, most issuers and their financial advisors have responded to such comments by simply deleting the language that could be interpreted by the Staff as constituting a disclaimer of sorts on shareholders’ ability to rely on the advisor’s opinion and summary included in the SEC filing. Recently, however, several companies have received comments from the Staff essentially demanding that they state “whether shareholders may rely on the advisor’s fairness opinion”.

This can be viewed as a marked change in the Staff’s position on this issue in that it requires companies to affirmatively state whether shareholders may rely. This differs from the Staff’s longstanding position documented in articles and the Staff’s Current Issues Outline. See Section Task Force Meets with Staff of the SEC, Business Law Today, July/August 1996, at 64; Current Issues and Rulemaking Projects, Division of Corporation Finance, Securities and Exchange Commission, November 14, 2000, at 12.

Savvy legal counsel familiar with this issue, however, would be well-advised to push back on this comment because if they do they will find that the Staff’s position has not actually changed. Instead, the comments are merely the product of a handful of examiners who simply push the envelope with the standard comment by insisting that companies revise their disclosure to state “whether” shareholders may rely on the advisor’s opinions and the summary included in the filing. Special thanks to Erik Greupner of Gibson, Dunn & Crutcher for his assistance in providing this scoop.