DealLawyers.com Blog

Here is a guest blog from Broc Romanek: On Friday morning at the ABA Spring Meeting, SEC Corp Fin Director Alan Beller spent about 10 minutes discussing the Titan Report and – as Brian Brehney stated during our webcast a few weeks back – reiterated that he believed that the Report was “unremarkable” and only was a clear statement of existing law.

Alan stated that the principal issue to be drawn from Report was whether a reasonable investor could conclude, based on the total mix of information, that the representations in the merger agreement between two companies should be construed as a statement of fact. Alan emphasized that the Report does not say that the SEC believes that an investor is entitled to such a conclusion or that such representations and warranties are for the benefit of investors (although Alan pointed out that there were a few unreported court decisions which made that finding). But Alan noted that the Report categorically rejected the notion that investors can’t even consider the reps & warranties (thus rebuffing the theory that the merger agreement is simply relevant to the contracting parties).

Alan also pointed out that – as part of the SEC settlement – Titan was not found to have violated the FCPA or any other law. So clearly this is an atypical Section 21(a) report on that basis alone, as these types of reports normally require violations to serve as the premise of the report.

Alan warned the audience that it would be problematic if lawyers were to start advising clients to not include their merger agreements in their SEC filings in reaction to the Report.

As for the ability to include disclaimers to warn investors that the reps and warranties in such an agreement should not be taken as a statement of fact, Alan indicated that he did not object if a company believes that it is right to provide such advice to investors in a particular situation. But as noted later in the Negotiated Acquisitions Committee meeting, this approach ultimately might not sit well with the SEC Staff – as a disclaimer could trigger a request by the Staff to submit disclosure schedules as supplemental materials and ultimately include some of that information in the proxy statement. We continue to post law firm analysis of the Titan Report in our “Disclosure” Practice Area.