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For all the talk about investors surfing the Web, empowered by the Internet’s vast reach, securities officials still aren’t buying it. The Securities and Exchange Commission has recently issued guidelines on using the Web to deliver information about initial public offerings and other money raising events to the public. But the feds fell far short in addressing some of the stickier issues lawyers wrestle with when their dot-com clients go public. Currently making the rounds among securities lawyers is an SEC missive that explains how companies may — or may not — use the Web during an IPO. The document also solicits lawyers’ opinions about the Internet and securities offerings. The questions offer some insight into what the SEC wants before enabling investors to tap the Web for IPO information. The guidelines were issued April 25. Lawyers have until mid-June to report back to the SEC with their questions or comments. The SEC is under intense pressure from investors and companies to declare the Internet a primary mode for delivering information. Still, the feds do not move quickly and want feedback from corporate lawyers before addressing some of the thornier issues, like Webcasting. “We’re all now kind of scratching our heads and saying, ‘We knew the SEC was going to do this,’ but I’m not sure that because of this promulgation any of us are doing anything differently,” said Ralph “Buddy” Arnheim III, a partner in the Menlo Park, Calif., office of Seattle’s Perkins Coie. During the IPO process, companies cannot distribute in print any information that isn’t contained in an SEC filing. So companies have had to purge their Web sites and strictly monitor any new postings during the so-called quiet period before and after an IPO. And companies that do post a prospectus on their Web site feel they are taking a big risk. Companies are expressly forbidden from tooting their own horns in any way. Lawyers have interpreted those restrictions to cover all the information posted on the company’s Web site, even old information. As a result, companies are barred from posting on their Web site some press releases, and particularly news articles that were published prior to the first IPO filing. The thinking was that by association, the company was spreading positive information about itself — even if it had become public long before the IPO. The new guidelines for the most part maintain the status quo. Nevertheless, investors have been clamoring for access, by telephone and by Webcast, to pre-IPO investor meetings during which executives may say things about the company’s prospects that they aren’t allowed to print. The issue came to a head last summer when an online journalist listened in on an investor-only conference call with Webvan Group Inc. executives, during which the online supermarket gave out information not included in its prospectus. The journalist’s subsequent story tripped securities laws because company information not already on file with the SEC appeared in print. The SEC forced Foster City, Calif.-based Webvan into a cooling off period for several weeks, which delayed the company’s ultimately successful IPO. The story also touched off a firestorm among investors, who long have been suspicious that they weren’t getting the same data as institutional investors. In the wake of the Webvan controversy, the SEC finally seems ready to make significant changes to rules governing how companies can transmit IPO information. The agency is probing the issue further with a series of questions posed directly to securities lawyers about Web usage. For example, officials want to know just how fast a Web connection, and how powerful a computer, investors must have to be considered fully plugged in. Among the other questions the SEC is asking: � Is there data supporting the conclusion that most investors have access to the Internet? � Would we be creating a two-tiered system with access to some offerings available only to investors with Internet access? � How can technology help minimize investor confusion while providing access to potentially useful information? The queries were based on questions lawyers have posed to securities officials. “[We] recognize that at this point in time, it’s not the best regulatory course to speak on issues without hearing from the constituents,” said Michael McAlevey, the Washington, D.C.-based deputy director of the SEC’s Division of Corporate Finance. Linda DeMelis, an associate at Menlo Park’s Venture Law Group, said she applauds the SEC for not speaking on some issues without the facts. “Some of us hoped there would be more specific information, and it’s clear they are still thinking through some issues,” said DeMelis, who is charged with keeping tabs on SEC missives. For example, DeMelis is still waiting for the SEC to determine whether companies may place a banner ad online announcing an offering. Currently, companies may place a tombstone in The Wall Street Journal for such an event, but cannot use the Web, she said. Until the release came out last week, lawyers, such as Perkins Coie’s Arnheim, told clients, as a conservative measure, to strip down their Web sites before IPO documents are filed. Now armed with the release, Arnheim says, lawyers can give the same advice because it’s the law. Few lawyers, if any, were expecting a major departure from what SEC officials have demanded in recent years when it came to using the Web during an IPO, said former SEC official Brian Lane, who’s now a partner in the Washington, D.C., office of Los Angeles’ Gibson, Dunn & Crutcher. “People should anticipate a measured response as opposed to radical response,” Lane said.

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