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The Securities and Exchange Commission’s proposal to expand what companies may say to investors as they prepare to go public is likely to be circulated to commissioners for a vote by this summer, a key agency staffer said. “We want to get a corporate finance staff recommendation to commissioners by this summer,” Martin Dunn, deputy director of the Corporate Finance Division, told securities lawyers at the Practising Law institute’s annual SEC Speaks conference on March 4. In moving to ease restrictions on companies planning initial public offerings, the SEC would allow executives to provide basic information about their business and management philosophy in media interviews or on their Web sites during the 30-day “quiet period” preceding the IPO. Under current rules, many agree, it’s unclear what issuers may say during the quiet period. The agency proposed new rules, which would update 1930s-era rules on securities offerings, in October. Regulatory onlookers said agency commissioners will likely vote 5-0 to approve the formal proposal by fall. Commissioners are expected to take roughly 30 days to consider the measure before voting on it. The agency’s corporate finance division is now reviewing comments from interested companies and underwriters it received between October and January. Companies that will take advantage of the rule changes must accept liability for any quiet-period statements. That means shareholders or the SEC could sue for fraud if a company makes bad-faith evaluations or if historical data it provides is inaccurate. “Well-known seasoned” companies, meaning those with market capitalizations of at least $700 million and that have been public for more than a year, would be even more flexible than small public concerns in what they can disclose during the quiet period before they issue stock in secondary or follow-up offerings. These large companies could advertise stock offerings on television provided they take legal responsibility for any commercials and file relevant information about an ad with the agency. In his comments, Dunn said the agency is considering corporate concerns about a provision in the proposal that disqualifies companies from the well-known category if they have ever settled an action with the commission. These companies criticized this provision, arguing that they may not have settled with the agency had they known it would disqualify them from the special category. A source close to the commission said the corporate finance division, led by Alan Beller, might consider “grandfathering,” or exempting some or all companies that have settled with the agency. The agency may instead ask such companies to come back and request waivers based on the particular details of their settlement. Companies that settle an action with the agency after the proposal is adopted would remain disqualified. Dunn added that some corporations had questions about an element in the proposal called “pay as you go,” which means that companies would have to pay fees to the SEC only as the shares are issued. Many companies consider this an improvement because it does not require issuers to prepay significant fees. Now, if a company puts out a $10 billion shelf-registration statement today, it pays the fee on the $10 billion immediately, even though the securities are issued over a significant span of time. But some large companies said they worry that they could no longer pay up front if they desired to do so. “If you want to pay in advance you will continue to be able to do that,” Dunn said. Copyright �2005 TDD, LLC. All rights reserved.

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