Disclosure Concerning Legal Proceedings Involving Management, Promoters, Control Persons and Others
Federal RegisterNov 7, 1994
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 228, 229, 230, 239, 240, and 274
[Release Nos. 33-7106; 34-34923; IC-20670; File No. S7-31-94]
RIN 3235-AE14
Disclosure Concerning Legal Proceedings Involving Management,
Promoters, Control Persons and Others
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rulemaking.
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SUMMARY: The Commission is publishing for comment amendments that would
expand the types of legal proceedings required to be disclosed in
Commission filings, add such disclosure to certain investment company
filings, and increase to 10 years the reporting period for such legal
proceedings disclosure.
DATES: Comments must be submitted on or before January 6, 1995.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009. Comment letters should refer to File
No. S7-31-94. All comments received will be available for public
inspection and copying in the Commission's Public Reference Room, 450
Fifth Street, N.W., Washington, D.C. 20549-6009.
FOR FURTHER INFORMATION CONTACT: James R. Budge, Office of Disclosure
Policy, (202) 942-2910, Division of Corporation Finance (Mail Stop 3-
12); with regard to investment company issues, Kathleen K. Clarke,
Office of Disclosure and Investment Adviser Regulation, (202) 942-0721,
Division of Investment Management (Mail Stop 10-6), Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-
6009.
SUPPLEMENTARY INFORMATION: The Commission today is publishing for
comment proposed amendments to paragraphs (f) and (g) of Item 4011
of Regulation S-K2 and paragraph (d) of Item 4013 of
Regulation S-B4 under the Securities Act of 1933 (``Securities
Act'')5 and the Securities Exchange Act of 1934 (``Exchange
Act'').6 The Commission also proposes to conform legal proceedings
disclosure items in Form 1-A7 under the Securities Act, and
Schedules 13D,813E-3,9 14A10 and 14D-111 under the
Exchange Act. The Commission also is proposing to add legal proceedings
disclosure requirements to various forms used by registered investment
companies under the Securities Act or the Investment Company Act of
1940 (``Investment Company Act''),12 including Forms N-1A,13
N-2,14 N-3,15 N-4,16 N-5,17 N-8B-2,18 N-8B-
319 and N-8B-4.20
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\1\17 CFR 229.401(f) and (g).
\2\17 CFR Part 229.
\3\17 CFR 228.401(d).
\4\17 CFR Part 228.
\5\15 U.S.C. 77a et seq.
\6\15 U.S.C. 78a et seq.
\7\17 CFR 239.90.
\8\17 CFR 240.13d-101.
\9\17 CFR 240.13e-100.
\1\017 CFR 240.14a-101.
\1\117 CFR 240.14d-100.
\1\215 U.S.C. 80a-1 et seq. As discussed in Section IV, below,
investment companies currently are specifically required to disclose
legal proceedings only in proxy statements related to the election
of directors and not in registration statements or other disclosure
documents.
\1\317 CFR 274.11A.
\1\417 CFR 274.11a-1.
\1\517 CFR 274.11b.
\1\617 CFR 274.11c.
\1\717 CFR 274.5.
\1\817 CFR 274.12.
\1\917 CFR 274.13.
\2\017 CFR 274.14.
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I. Executive Summary
The Commission's current regulations require disclosure of legal
proceedings21 involving executive officers, directors, persons
nominated to become directors, promoters, significant shareholders,
participants in proxy contests, and other specified persons
(``designated persons'').22 The principal provisions are found in
Items 401 (f) and (g) of Regulation S-K and Item 401(d) of Regulation
S-B,23 but a number of forms and schedules require similar
disclosure, as discussed below.24 A review of current requirements
has raised questions about the adequacy of the five-year period for
reporting such proceedings. In light of these questions, as well as the
enactment of the Securities Enforcement Remedies and Penny Stock Reform
Act of 1990 (``Remedies Act''),25 the Commission proposes to
expand the disclosure provisions and the time frame of the current
requirements and to eliminate the differences in requirements among
various forms.
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\2\1The term ``legal proceeding,'' as used in this release and
in current Item 401, includes criminal convictions, as well as
findings, orders or sanctions in civil and administrative actions,
that have not been reversed, suspended or vacated. It also includes
criminal actions pending at the time a disclosure document is filed,
and the initiation of bankruptcy or similar proceedings. With
respect to proposed Item 401, the term also encompasses sanctions
issued by securities and commodities self-regulatory organizations
that have not been reversed or otherwise rendered of no effect.
\2\2As used in this release, ``designated person'' includes the
persons identified in the following disclosure provisions, forms and
schedules: S-K Item 401 (f) and (g) and S-B Item 401(d)--executive
officers, directors, persons nominated to become directors, as well
as promoters and control persons of newly public companies;
Schedules 13D, 13E-3, and 14D-1--the person filing the schedule. In
addition, if the filer is a general or limited partnership,
syndicate or other group--the individual general partners of general
or limited partnerships, each member of such syndicate or group and
each person controlling such partner or member; if such general
partner, member or person controlling such partner or member is a
corporation, or if the filer is a corporation--the corporation's
directors and executive officers, persons controlling such
corporation, and directors and executive officers of any corporation
ultimately in control of such corporation; Proxy statements relating
to election contests--any participant in an election contest, as
defined by Instruction 3 to Item 4 of Schedule 14A (in addition to
the Item 401 disclosure generally required in a proxy statement
involving an election of directors, contested or otherwise);
Regulation A Offering Circular (Model B)--executive officers,
directors and persons nominated to become directors; Prospectuses
Relating to Oil and Gas Programs (Securities Act Industry Guide 4)--
management and operating companies (in addition to the disclosure
required by the appropriate registration form); Registration
Statements Relating to Interests in Real Estate Limited Partnerships
(Securities Act Industry Guide 5)--the persons making investment
decisions (in addition to the disclosure required by the appropriate
registration form).
\2\3In order to simplify references to the legal proceedings
disclosure requirements, references to Item 401(f) or 401(g)
hereafter should be read to include the comparable provisions in
Regulation S-B Item 401(d).
\2\4In addition to provisions requiring disclosure of legal
proceedings involving designated persons, Regulation S-K Item 103
[17 CFR 229.103] requires disclosure of material pending legal
proceedings involving the registrant.
\2\5Pub. L. 101-429, 104 Stat. 931 (1990). The Remedies Act
amended the federal securities laws to provide for: civil money
penalties in civil actions for violations of the federal securities
laws; Commission authority to issue cease-and-desist orders; court
enforcement of cease-and-desist orders and imposition of civil money
penalties for failure to comply; affirmation of power of federal
courts to order officer and director bars and suspensions; and civil
money penalties, disgorgement, and orders of accounting in
Commission administrative proceedings. Congress granted these new
judicial and administrative remedies to increase both the
Commission's ability to deter those who violate the securities laws
and its flexibility to adapt remedies to the varying circumstances
of particular conduct and violators.
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The amendments proposed today would consolidate and clarify
existing legal proceedings disclosure provisions, as well as add
requirements to disclose the following:
Federal and state agency receivership appointments
involving a designated person, any partnership in which such person was
a general partner, and any corporation in which such person served as
an executive officer;26
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\2\6Current requirements limit disclosure to court-appointed
receiverships.
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All judicial and administrative findings, orders and
sanctions based on alleged violations of federal or state securities,
commodities, banking and insurance laws and regulations;27
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\2\7Existing provisions require disclosure of court orders
restricting certain business activities subject to federal or state
securities, commodities, banking and insurance laws, administrative
restrictions on such activities that exceed 60 days, and court
limitations on any business practice. Disclosure also is required of
judicial and administrative findings of violations of federal or
state securities or commodities laws.
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Civil and administrative proceedings resulting from a
designated person's involvement in mail fraud, wire fraud, and fraud in
connection with activities related to a business entity;28
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\2\8Disclosure of fraud-related legal proceedings currently is
limited to criminal fraud actions and to the types of proceedings
listed in n.27, above, that involve fraud.
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Civil and administrative actions relating to a designated
person's breach of a fiduciary duty owed to a corporation, partnership,
business trust or similar entity;29
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\2\9Disclosure currently is required if the breach of fiduciary
duty resulted in one of the restrictions identified in n.27, above.
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Administrative orders restricting a designated person's
business practices;30
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\3\0Administrative restrictions on business practices currently
must fall within one of the categories identified in n.27, above,
before disclosure is required.
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Disciplinary sanctions imposed against a designated person
by securities and commodities self-regulatory organizations (``SROs'');
and
Comparable foreign legal proceedings.31
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\3\1Current provisions do not distinguish between criminal and
civil proceedings brought within the United States and those pursued
in foreign jurisdictions. The proposals would make it clear that
disclosure is required of any foreign criminal or civil proceeding
if its domestic counterpart would be required to be disclosed and
would add provisions requiring disclosure of foreign administrative
and bankruptcy actions.
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Disclosure would be required for 10 years following the specified
event, expanding the current five-year provision.
The proposals would rescind the general provisions that currently
permit disclosure to be omitted if the registrant believed that the
information would be neither material to investors in evaluating the
ability and integrity of management, nor to a voting or investment
decision; provisions relating to bankruptcy or insolvency proceedings,
however, would retain the materiality language. In addition, the
provision limiting disclosure to administrative orders that restrict
activities for periods of more than 60 days would be deleted.32
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\3\2The provisions of paragraphs (f) and (g) of Regulation S-K
Item 401 would be consolidated into a single paragraph (f).
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The proposals also conform the requirements in various forms and
schedules under the Securities Act and the Exchange Act. Finally, the
Commission is proposing to add legal proceedings disclosure to
investment company registration statement forms.
II. Background of Legal Proceedings Requirements
Disclosure of information regarding legal proceedings involving
directors, executive officers, control persons, promoters and others
has been required in various filings under the federal securities laws
for many years. In 1956, the Commission adopted the current provisions
requiring participants in proxy contests involving the election or
removal of directors to disclose criminal convictions (other than
traffic violations or similar misdemeanors) that occurred within the
past 10 years.33 Since their adoption in 1968, large shareholder
beneficial ownership reports34 also have required disclosure of
criminal convictions with respect to the person or persons filing the
report.35
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\3\3Release No. 34-5276 (January 17, 1956) [21 FR 577]. This
originally was adopted as a provision of Schedule 14B, and a summary
of this information was required to be furnished in election contest
proxy statements. In October 1992, the Commission eliminated the
Schedule 14B filing requirement and moved the legal proceedings
disclosure provision from that Schedule into Item 5(b)(1)(iii) of
Schedule 14A. See Release No. 34-31326 (October 16, 1992) [57 FR
48276]. That provision currently requires disclosure of any criminal
conviction of a ``participant'' in the election contest that has
occurred in the last 10 years.
\3\4Schedule 13D. Release No. 34-8370 (July 30, 1968) [33 FR
11015].
\3\5The ten year disclosure requirement originally found in the
Schedule 13D was revised to a five-year requirement in 1977. Release
No. 33-5808 (February 24, 1977) [42 FR 12342].
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More than 20 years ago, the Commission began requiring disclosure
of legal proceedings involving directors in registration statements and
annual reports filed under the Exchange Act.36 In 1970, Exchange
Act registration statements\37\ and annual reports\38\ were amended to
require disclosure of the initiation of bankruptcy or other insolvency
proceedings, court appointments of receivers, criminal convictions and
pending criminal actions if these actions involved a director of the
registrant and were material to an evaluation of the director's ability
and integrity. Disclosure also was required if a court restricted
activities involving the purchase or sale of securities or certain
activities in the securities, commodities, banking and insurance
industries.\39\ In the administrative context, disclosure of similar
restrictions was required if a suspension or bar exceeded 60 days.
Disclosure was required if the action was taken within the past 10
years.
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\36\In March 1969, the Commission's Disclosure Policy Study
recommended increased disclosure of legal proceedings involving
management in Securities Act registration statements and Exchange
Act registration statements, proxy statements and annual reports.
Disclosure to Investors: A Reappraisal of Administrative Policies
under the '33 Act and '34 Act, Report and recommendations to the
Securities and Exchange Commission from the Disclosure Policy Study,
March 1969, pp. 93-95.
\37\Form 10, 17 CFR 249.210, Release No. 34-8996 (October 14,
1970) [35 FR 16537].
\38\Form 10-K, 17 CFR 249.310, Release No. 34-9000 (October 21,
1970) [35 FR 16919].
\39\Specifically, disclosure was required if the director had
been restricted from acting as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person, director
or employee of any investment company, bank, savings and loan
association or insurance company. Disclosure also was required if
the court imposed any other restriction on activities associated
with the position.
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In 1973, the legal proceedings disclosure provisions were expanded
to include executive officers.40 Comparable requirements were
added at that time to the general form for registration under the
Securities Act41 and the registration form used for certain
development stage companies.42
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\4\0Release No. 33-5395 (June 1, 1973) [38 FR 17202].
\4\1Form S-1 [17 CFR 239.11]. At the same time, prospectuses
relating to interests in oil and gas programs also were required to
include disclosure of legal proceedings involving management and
operating companies, because the Industry Guide applicable to such
programs contained a provision requiring disclosure of the
background information called for by Form S-1 with respect to those
persons. See Release No. 33-5036 (January 19, 1970) [35 FR 1233],
adopting Guide 55, subsequently redesignated Guide 4 [17 CFR
229.801(d)]. In 1976, through the operation of a newly adopted
Securities Act Industry Guide for registration statements relating
to interests in real estate limited partnerships, comparable
disclosure was required in such registration statements respecting
individuals responsible for a partnership's investment decisions.
See Release No. 33-5692 (March 17, 1976) [41 FR 17403], adopting
Guide 60, subsequently redesignated Guide 5 [17 CFR 229.801(e)].
\4\2In 1973, the then Form S-2 was used for development stage
companies (other than insurance, investment or mining companies)
that had not had any substantial gross returns from the sale of
products or services, or any substantial net income from any source,
for any fiscal year ended during the past five years, had not
succeeded to any business that had such returns or net income, and
did not have any subsidiaries (other than inactive subsidiaries with
no more than nominal assets).
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In July 1978, the legal proceedings disclosure requirements for
Securities Act registration statements, as well as those in the
Exchange Act registration statement and annual report, were
consolidated into Regulation S-K, and the individual provisions were
replaced with references to the Regulation S-K Item.43 The
disclosure requirements also were extended to real estate company
registration statements and proxy and information statements.44
The disclosure requirements were expanded at that time to include
information relating to persons nominated to become directors and to
require disclosure of court orders imposing restrictions on any
business practice, as well as injunctions prohibiting future violations
of federal or state securities laws.45 Disclosure of findings of
securities law violations by a court or by the Commission also was
added. Finally, the time period for the disclosure was reduced from 10
to five years from the time the action was taken.46
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\4\3Regulation S-K Item 401 [17 CFR 229.401]; Release No. 33-
5949 (July 28, 1978) [43 FR 34402]. The disclosure requirements
originally were included in Regulation S-K Item 3 (Directors and
executive officers), subsequently redesignated Item 401. Release No.
33-6383 (March 3, 1982) [47 FR 11380].
\4\4Provisions requiring the disclosure called for by Regulation
S-K Item 401 were added to Form S-11 (for registration of securities
of real estate companies) [17 CFR 239.18] and the proxy statement
requirements in Schedule 14A. This new provision did not replace the
requirement to disclose criminal proceedings involving participants
in an election contest, discussed above in n.33, but rather, was
included as an additional requirement.
The amended proxy statement requirements also applied to
information statements prepared in accordance with Schedule 14C [17
CFR 240.14c-101] of the Exchange Act, which incorporates many of the
proxy statement requirements, and to proxy statements under Rule
20a-1 of the Investment Company Act [17 CFR 270.20a-1], which makes
the Schedule 14A disclosure requirements applicable to investment
companies.
\4\5Section 3(a)(47) of the Exchange Act [15 U.S.C. 78c(a)(47)]
defines ``federal securities laws'' to mean the Securities Act, the
Exchange Act, the Public Utility Holding Company Act of 1935 [15
U.S.C. 79a et seq.], the Trust Indenture Act of 1939 [15 U.S.C.
77aaa et seq.], the Investment Company Act, the Investment Advisers
Act of 1940 (``Investment Advisers Act'') [15 U.S.C. 80b-1 et seq.],
and the Securities Investor Protection Act of 1970 [15 U.S.C. 78aaa
et seq.].
\4\6Subsequent to these changes, the Commission incorporated the
Item 401(f) requirements into other disclosure documents. In April
1980, the Commission amended Form S-8 (17 CFR 239.16b), for
securities issued pursuant to employee benefit plans, to require the
incorporation by reference of the issuer's latest Exchange Act
annual report, including its legal proceedings disclosure, into the
registration statement. Release No. 33-6202 (April 2, 1980) [45 FR
23653].
In March 1982, Securities Act Industry Guides 4 and 5 were
amended to require the information specified in Regulation S-K Item
401, replacing the reference to the requirements of Form S-1.
Release No. 33-6384 (March 3, 1982) [47 FR 11476]. See n.41, above,
and current Item 11 of Guide 4 and Item 9.A. of Guide 5.
At that time, the Commission also adopted current Form S-2 [17
CFR 239.12], for registration under the Securities Act of securities
of certain issuers, and Form S-3 [17 CFR 239.13], for registration
under the Securities Act of securities of certain issuers offered
pursuant to certain types of transactions. Release No. 33-6383
(March 3, 1982) [47 FR 11380]. These forms incorporate by reference
information required in the Form 10-K, including the legal
proceedings disclosure.
In the same year, the Commission adopted Form S-18 [17 CFR
239.28] (optional registration form for small issuers) Release No.
33-6406 (June 4, 1982) [47 FR 25126] and Form S-20 [17 CFR 239.20]
(optional registration form for standardized options), Release No.
33-6426 (September 16, 1982) [47 FR 41950]. Both forms required
disclosure of the legal proceedings specified in Regulation S-K Item
401. Form S-18 was rescinded in connection with the small business
initiatives in 1992. Release No. 33-6949 (July 30, 1992) [57 FR
36442]. For information relating to the adoption of Form S-4 [17 CFR
239.25], see n.49, below.
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Substantive revisions to the legal proceedings disclosure
requirements were made most recently in 1984.47 The amendments
required disclosure of legal proceedings involving federal commodities
laws48 and applied the disclosure requirements to promoters and
control persons of newly public companies.49
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\4\7Release No. 33-6545 (August 9, 1984) [49 FR 32762].
\4\8Specifically, Regulation S-K Item 401(f) was amended to
require disclosure of judicial and administrative restrictions on
activities regulated by the Commodity Futures Trading Commission
(``CFTC''), as well as court restrictions on engaging in activities
involving the purchase or sale of a commodity or the violation of
federal commodities laws. A provision requiring disclosure of
findings of federal commodities law violations by courts or the CFTC
also was added.
\4\9The amendments added Item 401(g) [17 CFR 229.401(g)], which
provided that registrants that have not been subject to the
reporting requirements of Exchange Act Sections 13(a) [15 U.S.C.
78m(a)] or 15(d) [15 U.S.C. 78o(d)] for the 12 months immediately
prior to the filing of the registration statement, report or other
document to which Item 401 is applicable, are required to disclose
the Item 401(f) information with regard to control persons if the
event occurred within the past five years and was material to a
voting or investment decision. In cases where such registrants were
organized within the past five years, the Item 401(f) disclosure is
to be included with respect to promoters as well.
In April 1985, the Commission adopted Form S-4 (for registration
of securities issued in business combination transactions), which
requires disclosure of the Item 401 information. Release No. 33-6578
(April 23, 1985) [50 FR 18990].
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In 1992, the Commission adopted Regulation S-B as part of its small
business initiatives, which included an Item 401(d), governing legal
proceedings disclosure, patterned on the requirements of Item 401 (f)
and (g) of Regulation S-K.50 This disclosure is required in
connection with Securities Act registration statements on Form SB-
2,51 Exchange Act registration statements on Form 10-SB,52
and Exchange Act annual reports filed by small businesses.53
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\5\0Release No. 33-6949 (July 30, 1992) [57 FR 36442].
\5\117 CFR 239.10.
\5\217 CFR 249.210b.
\5\3Form 10-KSB [17 CFR 249.310b].
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Other disclosure documents include legal proceedings disclosure
requirements separate from those found in Regulation S-K or Regulation
S-B. Schedule 14D-1,54 the tender offer schedule adopted in
1977,55 requires disclosure if during the last five years the
person filing the schedule was convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), or was the
subject of a judicial or administrative order that enjoined future
violations of, or prohibited activities subject to, federal or state
securities laws, or that included findings of violations of those laws.
In 1978, Schedule 13D was amended to include legal proceedings
disclosure provisions comparable to those included in Schedule 14D-
1,56 and when Schedule 13E-3, for going private
transactions,57 was adopted in 1979, the same disclosure was
required.58 Unlike the Regulation S-K Item 401(f) requirements,
disclosure is required of the enumerated proceedings without regard to
the filer's determination as to their materiality, and disclosure of
administrative proceedings is not limited to suspensions or bars
exceeding 60 days.
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\5\417 CFR 240.14d-100.
\5\5Release No. 33-5844 (July 21, 1977) [42 FR 38341].
\5\6Release No. 33-5925 (April 21, 1978) [43 FR 18484].
\5\717 CFR 240.13e-100.
\5\8Release No. 33-6100 (August 2, 1979) [44 FR 46736].
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The offering circular furnished to investors at or prior to the
offer or sale of securities made in reliance upon an exemption under
Regulation A was amended in 1981 to require legal proceedings
disclosure.59 Issuers are required to disclose in the circular
criminal convictions, the initiation of bankruptcy or other insolvency
proceedings, and appointments of receivers if those actions involved
any director, person nominated to become a director or executive
officer, if the information is material to an evaluation of the
person's ability or integrity, and if the action was taken within the
past five years.60
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\5\9Release No. 33-6340 (August 7, 1981) [46 FR 41766]. This
requirement currently is found in Offering Circular Model B, Part II
of Form 1-A, the Regulation A Offering Statement [17 CFR 239.90].
On April 28, 1993, the Commission adopted Form SB-1 [17 CFR
239.9], an optional registration form for use by certain small
businesses. See Release No. 33-6996 (April 28, 1993) [58 FR 26509].
Form SB-1 affords filers the option of providing the disclosure
required by the Model B offering circular found in Form 1-A,
including its legal proceedings disclosure requirements.
\6\0Issuers not subject to Exchange Act reporting obligations
that sell securities pursuant to an exemption in accordance with
Section 230.505 or Section 230.506 of Regulation D (governing the
limited offer and sale of securities without registration under the
Securities Act [17 CFR 230.501-230.508]) to a purchaser that is not
an accredited investor must provide the disclosure, including legal
proceedings information, required by Regulation A (if the issuer is
eligible to rely on that exemption) or by the prospectus
requirements of the registration statement the issuer is eligible to
use.
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III. Proposed Amendments
The amendments proposed today would retain and clarify current
legal proceedings disclosure requirements, expand the scope of existing
provisions, and lengthen the time period for which disclosure is
required. With one exception,61 the proposals also would delete
the provisions permitting a registrant to omit disclosure where it
concludes that the information would not be material to investors in
evaluating the ability and integrity of management,62 or would not
be material to a voting or investment decision.63 Consequently,
under the proposals, like other line item disclosure requirements,
information concerning legal proceedings would be required if specified
by the item.64
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\6\1See discussion of bankruptcy and insolvency disclosure in
Section III.A.1, below.
\6\2Current Item 401; current Item 8(d) of Part II, Offering
Circular (Model B), Form 1-A.
\6\3Current Item 401(g) (1) and (2). The provisions of Item
401(g) requiring disclosure of legal proceedings involving promoters
and control persons of newly public companies would be incorporated
into proposed Item 401(f). See proposed Item 401(f)(2).
\6\4Current Instruction 2 to Item 401(f), which states that
registrants may voluntarily advise the staff that the disclosure was
not required based on a determination that it is not material to an
investment or voting decision, would be inapplicable to most
disclosure requirements. The substance of the instruction would be
moved to a note to the bankruptcy provisions found in proposed Item
401(f)(1)(i).
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The proposed amendments would require disclosure of any identified
legal proceeding unless it was subsequently reversed, suspended,
vacated, annulled or otherwise rendered of no effect,65 and would
codify the current staff interpretation that disclosure is not required
if a conviction is reversed. The proposals also would make it clear
that disclosure is required while a legal proceeding is pending
appeal.66
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\6\5See proposed Item 401(f)(1), representing a consolidation of
similar provisions found in paragraphs (3), (4), (5) and (6) of
current Item 401(f).
Under current and proposed rules, an order or sanction need not
be disclosed if it has been reversed or otherwise set aside on the
basis of the underlying law or facts. However, a registrant must
disclose a permanent injunction involving a designated person during
the entire disclosure period even if equitable relief from the
injunction has been granted before the close of such period.
\6\6Instruction 1 to Item 401(f) would be amended to indicate
that disclosure of final convictions, orders, judgments, decrees or
sanctions is required from the date of entry. If appealed,
disclosure would continue to be required. If ultimately reversed,
suspended, vacated, annulled or otherwise rendered of no effect,
disclosure no longer would be required. Disclosure of preliminary
orders, judgments, decrees and sanctions would be required from the
date that any right to appeal the preliminary action expired.
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Currently, it is the practice to disclose legal proceedings
background information for each general partner of a partnership and
each trustee of a real estate investment trust. A new instruction would
be added to codify this practice and to expand the requirement to
provide such disclosure with respect to trustees of any registrant that
is a trust, as well as any other persons providing comparable services
to such entities. Disclosure also would be required relating to any
person who performs, either directly or indirectly, director or
executive officer functions pursuant to a management contract, service
contract, such as those used by asset-backed pools, or
otherwise.67
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\6\7See proposed Instruction 5 to Item 401(f).
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While specific requests for comment are made throughout with
respect to the proposals discussed in detail below, commenters are
requested to comment generally on the need for revision of the legal
proceedings disclosure requirements. Is the approach proposed adequate
to address investor concerns about the background of those who direct
the affairs of public companies, or would some other method be more
effective?
A. Disclosure of Judicial and Administrative Proceedings
1. Bankruptcy and Insolvency Proceedings
The current provision requiring disclosure of the court appointment
of a receiver, fiscal agent or similar officer with respect to a
business in which a designated person served as an executive officer
would be expanded to include a similar appointment made by a federal or
state agency.68 For example, disclosure would be required where a
state insurance commissioner appointed a conservator to take control of
the business and assets of an insurance company for which a designated
person had served as an executive officer within two years prior to
such appointment.69 Disclosure also would be required of the
appointment by a bank regulatory authority of a receiver or conservator
to operate, sell or liquidate a financial institution.70
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\6\8Proposed Item 401(f)(1)(i).
\6\9See, e.g., Ariz. Rev. Stat. Ann. Sec. 20-169 (authorizing
the director of insurance to take possession of, or to appoint a
conservator for, an insolvent insurance company); Texas Insurance
Code Ann. Sec. 21.28A (authorizing the commissioner of insurance to
undertake supervision of or to appoint a conservator for, an
insolvent insurance company).
\7\0See, e.g., Section 203 of the Bank Conservation Act [12
U.S.C. 203] (authorizing the Comptroller of the Currency of the
United States to appoint a conservator for a national bank), and
Cal. Financial Code Sec. 8250 (authorizing the California Savings
and Loan Commissioner to appoint a receiver for a savings and loan
association).
As used in this release, ``financial institution'' means any
bank, bank holding company, savings association, or savings and loan
holding company, as defined in Section 3 of the Federal Deposit
Insurance Act [12 U.S.C. 1813], any federal or state credit union,
as defined in Section 101 of the Federal Credit Union Act [12 U.S.C.
1752], or any system institution of the Farm Credit System, as
defined in Section 5.35 of the Farm Credit Act of 1971 [12 U.S.C.
2271], or any substantially equivalent foreign institution. See
proposed Instruction 3 of Item 401(f).
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While in most instances the provisions allowing registrants to omit
disclosure of legal actions based on their materiality would be
eliminated under the proposals, as discussed elsewhere in this
release,71 the Commission proposes to retain a provision
permitting filers to weigh the materiality of bankruptcy and insolvency
proceedings involving designated persons prior to disclosure.72
Unlike the other legal proceedings to be disclosed under Item 401,
bankruptcy proceedings include proceedings as to which the designated
person's responsibility could vary considerably. Comment is solicited
as to whether this materiality provision should be retained with
respect to bankruptcy and insolvency proceedings, as proposed, or
whether such actions should be disclosed without exception.
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\7\1See Section III.A, above, and Section III.E, below.
\7\2Proposed Item 401(f)(1)(i).
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The Commission also solicits commenters' views on whether the
current provisions should be expanded to require disclosure where the
designated person served as a director of a company within two years
before the initiation of bankruptcy or insolvency proceedings or the
appointment of a receiver or conservator with respect to that company.
Currently, disclosure is required only if the person was an executive
officer of the entity. Commenters should identify the reasons for or
against such an expansion.
Further, comment is sought as to whether the current provision
requiring disclosure where the designated person served as an executive
officer within two years of the identified bankruptcy or insolvency
actions should be retained, as proposed, or whether the two-year time
period should be shortened or lengthened, for example, to one year, or
three or five years. Commenters also should address whether disclosure
should be required where a designated person was an executive officer
of a financial institution whose operation or sale is supervised by an
administrative authority in the absence of the formal appointment of a
receiver or conservator.73
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\7\3See, e.g., Tex. Rev. Civ. Stat. Ann. art. 342-801a
(authorizing the Texas Banking Commissioner to supervise the
activities of a bank) and N.Y. Banking Law Sec. 606 (authorizing the
New York Superintendent of Banks to take possession of, operate or
liquidate a banking organization).
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2. Criminal Proceedings
Like the current Item, the proposals would require disclosure where
a designated person was convicted in a criminal proceeding or was the
named subject of a pending criminal action (excluding traffic
violations and other minor offenses).74 However, the proposal
clarifies that the Item requires disclosure of a criminal conviction
resulting from a designated person's entry of a plea of nolo
contendere.
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\7\4Current Item 401(f)(2) and proposed Item 401(f)(1)(ii).
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3. Civil and Administrative Proceedings
a. Money penalty consent decrees and other orders or sanctions.
Disclosure concerning civil and administrative proceedings involving
designated persons now is limited to judicial orders restricting
specified business activities,75 administrative orders restricting
such activities for more than 60 days,76 and judicial or
administrative findings of securities or commodities law
violations.77 As proposed, any judicial or administrative finding,
order or sanction relating to violations of federal and state
securities and commodities laws and regulations, or laws and
regulations respecting financial institutions or insurance companies,
would trigger disclosure.78 The exemption from disclosure of
administrative proceedings that impose restrictions for periods of less
than 60 days would be eliminated. Comment is solicited as to whether
this exemption should be retained, but with a shorter time period, such
as 20, 10 or five days.
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\7\5Current Item 401(f)(3).
\7\6Current Item 401(f)(4).
\7\7Current Item 401(f) (5) and (6).
\7\8Proposed Item 401(f)(1)(iii)(A) (1) and (2).
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As a result of the proposed amendments, disclosure would be
required of any order or sanction resulting from proceedings brought
under the federal securities laws, including court-imposed civil money
penalties and judicial orders temporarily barring an individual from
serving as an officer or director of a public company, as authorized by
the Remedies Act.\79\ Disclosure of such orders or sanctions would be
required, whether or not the court makes a finding that securities laws
were violated.\80\
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\7\9See, e.g., Section 20(d) and 20(e) of the Securities Act [15
U.S.C. 77t(d) and (e)].
\8\0While courts may issue orders upon a proper showing without
finding securities law violations, all administrative orders issued
by the Commission contain findings of a violation or violations of
securities laws and regulations, even when the order is the result
of a settlement agreement. Consequently, disclosure of all orders or
sanctions issued by the Commission, such as cease-and-desist orders,
pursuant to the enforcement provisions added by the Remedies Act
would be required under both current and proposed provisions.
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Similarly, disclosure explicitly would be required of any judicial
or administrative finding, order or sanction issued or imposed against
the designated person under the enforcement provisions of the federal
laws and regulations governing financial institutions, as amended by
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
(``FIRREA''),\81\ as well as under similar state statutes and
regulations.\82\ For example, the proposed disclosure requirements
would reach a civil money penalty imposed pursuant to a settlement
agreement between a designated person and a bank regulator, where the
final order neither included findings of violations of the law nor
imposed any limitation on that person's acting in any capacity related
to banks or savings and loan associations.
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\8\1Pub. L. No. 101-73, 103 Stat. 183 (1989). FIRREA amended the
enforcement provisions of the Federal Deposit Insurance Act
(``FDIA'') [12 U.S.C. 1811 et seq.], the Federal Reserve Act [12
U.S.C. 221 et seq.], the Home Owner's Loan Act of 1933 [12 U.S.C.
1461 et seq.], the Bank Holding Company Act of 1956 [12 U.S.C. 1841
et seq.], the Bank Holding Company Act Amendments of 1970 [12 U.S.C.
1971 et seq.], the Bank Protection Act of 1968 [12 U.S.C. 1881 et
seq.], and the Federal Credit Union Act [12 U.S.C.A. 1751 et seq.].
The enforcement provisions relating to the Farm Credit
Administration are found in the Farm Credit Act of 1971 [12 U.S.C.
2001 et seq.].
\8\2E.g., Cal. Financial Code Secs. 5000-12000 (California laws
governing savings and loan associations); N.Y. Banking Law Secs. 10-
46 (New York laws establishing the New York Banking Department, the
Superintendent of Banks, and their supervisory and regulatory
powers).
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b. Fraud in connection with a financial institution, insurance
company, or other business entity. The proposals would expand current
provisions by requiring disclosure of legal proceedings involving
alleged violations by a designated person of any law or regulation
prohibiting fraud in connection with a financial institution, insurance
company or other business entity. Disclosure of legal proceedings
involving fraud currently is limited to criminal fraud proceedings,
civil and administrative actions involving fraud in connection with
violations of securities or commodities laws, and orders restricting
the designated person from acting as a director, employee or affiliated
person of a bank, savings and loan association or insurance company or
from engaging in related activities based on that person's fraudulent
conduct. Consequently, in addition to the actions for which disclosure
is currently required, the proposals would require disclosure of a
court order enjoining the designated person from knowingly defrauding a
financial institution, whether or not the court imposed restrictions on
the person's future business relationship with the institution.\83\
Another example of required disclosure would be a court judgment
against a designated person for violating consumer fraud statutes in
connection with that person's business.\84\
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\8\3See 18 U.S.C 1345 (allowing civil actions by the United
States to enjoin the execution of a scheme or artifice to knowingly
defraud a financial institution, as prohibited by 18 U.S.C. 1344
[Bank fraud]).
\8\4See, e.g., Del. Code. Ann. tit. 6, Secs. 2513 et seq.
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c. Civil mail and wire fraud. The proposals also would require
disclosure of civil and administrative proceedings relating to mail and
wire fraud.\85\ Thus, for example, court orders enjoining violations of
mail or wire fraud statutes,86 as well as U.S. Postal Service
orders requiring a designated person to cease and desist from
conducting a scheme or device for obtaining money or property through
the mail by false representations,87 would be disclosed.
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\8\5Proposed Item 401(f)(iii)(A)(3).
\8\6Generally, legal actions involving mail or wire fraud would
be criminal proceedings [see 18 U.S.C. 1341, providing criminal
penalties for fraud and swindles accomplished through the mails and
18 U.S.C. 1343, providing criminal penalties for schemes and
artifices to defraud by means of wire, radio or television];
however, the Attorney General of the United States may commence a
civil action in any federal court to enjoin ongoing or prospective
violations of federal mail or wire fraud statutes. 18 U.S.C. 1345.
\8\7See 39 U.S.C. 3005.
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d. Fiduciary duties. The proposed amendments would extend
disclosure to legal actions involving laws and regulations governing
fiduciary obligations owed to corporations, partnerships, business
trusts and similar business entities.88 If, for example, a
designated person was subject to a court order resulting from a breach
of a fiduciary duty imposed by the Employee Retirement Income Security
Act of 1974 (``ERISA''),89 or had been found to have breached a
fiduciary duty as a director of a corporation, in violation of state
corporation or common law, disclosure would be required.
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\8\8Proposed Item 401(f)(1)(iii)(A)(2). One type of a ``similar
business entity'' under the proposed rule is a limited liability
company, which strictly speaking is neither a corporation nor a
partnership, but has characteristics of both. See Del. Code Ann.
tit. 6, Sec. 18-101 et seq., for an example of a state statute
(Delaware) providing for the organization of limited liability
companies.
\8\9See Section 409 of ERISA [29 U.S.C. 1109] (providing for
equitable remedies against fiduciaries who breach fiduciary duties
imposed by ERISA).
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e. Restrictions on any business practice. The current provision
requiring disclosure where a court enjoins or otherwise limits the
designated person from engaging in any business practice90 would
be expanded to require disclosure of similar orders issued by
administrative authorities.91 Under the proposals, for example,
Federal Communications Commission orders requiring a designated person
to cease and desist from engaging in activities that violate
regulations governing telecommunications,92 International Trade
Commission orders restricting such person from engaging in unfair
practices in the importation of articles into the United States,93
Federal Trade Commission orders requiring the person to cease and
desist from engaging in unfair methods of competition,94 and other
similar federal or state administrative actions would be required to be
disclosed.
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\9\0Current Item 401(f)(3)(ii).
\9\1Proposed Item 401(f)(1)(iii)(B).
\9\2See 47 U.S.C. 312.
\9\3See 19 U.S.C. 1337.
\9\4See 15 U.S.C. 45.
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f. Request for comment concerning civil and administrative
proceedings. The proposed provisions discussed above relating to civil
and administrative proceedings require disclosure if a finding, order
or sanction relates to an alleged violation by a designated person of
securities, commodities, banking and insurance laws and regulations and
other designated laws and regulations, as well as orders restricting a
designated person from engaging in any business practice. Comment is
requested as to whether the requirement to disclose restrictions on any
business practice is sufficient to apprise investors of the backgrounds
of those who direct the affairs of public companies.
Comment also is sought as to whether disclosure relating to
violations of laws governing corporations, partnerships or other
entities should be restricted to violations of a fiduciary duty
provision, as proposed, or restricted further to violations of a
fiduciary duty involving fraud. Commenters also are requested to
address whether those proposals should be expanded to require
disclosure of findings, orders and sanctions entered in proceedings
involving alleged violations of any laws respecting such business
entities. Finally, comment is requested as to whether there is any
category of civil or administrative proceeding that should be excluded
from the disclosure requirements and the reason for the recommended
exclusion.
B. Disclosure of Disciplinary Actions by Self-Regulatory Organizations
Under the proposals, a requirement would be added to describe
disciplinary sanctions imposed by any securities or commodities
industry self-regulatory organization (``SRO'') that oversees the
business conduct and sales practices of its members.95 The
Commission requests comment as to whether there are any classes of SRO
disciplinary proceedings that should be excluded, such as summary
proceedings by an SRO wherein the designated person is fined not more
than $2500 for minor or technical violations of the SRO's rules and
procedures.96
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\9\5Proposed Item 401(f)(1)(iv). Section 3(a)(26) of the
Exchange Act [15 U.S.C. 78c(a)(26)] defines self-regulatory
organization as any national securities exchange registered under
Section 6 of the Exchange Act [15 U.S.C. 78f] (e.g., the New York
Stock Exchange), any securities association registered under Section
15A of the Exchange Act [15 U.S.C. 78o-3] (e.g., the National
Association of Securities Dealers (``NASD'')), and any clearing
agency registered under Section 17A of the Exchange Act [15 U.S.C.
78q-1] (e.g., the National Securities Clearing Corporation). The
Municipal Securities Rulemaking Board (``MSRB'') also falls within
the statutory definition of a self-regulatory organization, but the
MSRB refers all disciplinary actions to the NASD.
Regulations under the Commodity Exchange Act [7 U.S.C. 1 et
seq.] define self-regulatory organization as contract markets
registered under Section 5 of the Commodity Exchange Act [7 U.S.C.
7] (e.g., the Chicago Board of Trade) and futures associations
registered under Section 17 [7 U.S.C. 21] of that Act (e.g., the
National Futures Association). 17 CFR 1.3(ee). Clearing
organizations, as defined in 17 CFR 1.3(d) (e.g., the Commodity
Clearing Corporation), also are included in the definition of self-
regulatory organization found in 17 CFR 1.59(a)(1).
\9\6Such proceedings would include action taken pursuant to an
SRO minor rule violation plan or similar plan. See Rule 19d-1(c)(2)
[17 CFR 240.19d-1(c)(2)].
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C. Disclosure of Comparable Foreign Legal Proceedings
While current provisions relating to disclosure of a designated
person's involvement in criminal and civil actions do not distinguish
between foreign legal actions and those taken within the United States,
the proposed amendments explicitly would require disclosure of foreign
criminal convictions and civil proceedings before foreign courts.
Moreover, provisions would be added requiring disclosure of actions by
foreign administrative authorities. Thus, disclosure would be required
of any foreign legal proceeding that is comparable to a domestic legal
proceeding requiring disclosure.
These proposals reflect the ever-increasing international character
of financial transactions and the important role played by foreign
authorities in assuring safe and efficient financial markets world-
wide.97 Comment is requested as to whether there are any other
types of legal proceedings before foreign authorities that should be
specifically required, as well as whether any foreign legal proceedings
should be excluded from the disclosure requirements.
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\9\7The International Securities Enforcement Cooperation Act of
1990 (``ISECA'') [Sections 201-207 of the Securities Acts Amendments
of 1990, Pub. L. No. 101-550, 104 Stat. 2713 (1990)] granted the
Commission the authority to sanction regulated entities and
associated persons if they have been convicted of certain crimes by
a foreign court of competent jurisdiction within 10 years of filing
an application with the Commission, or have been found by a foreign
financial regulatory authority to have violated laws and regulations
that are substantially equivalent to federal securities and
commodities laws. See Sections 203 and 205 of ISECA, amending
Section 15(b) (4) and (6) of the Exchange Act [15 U.S.C. 78o(b) (4)
and (6)], Section 9(b)(4) of the Investment Company Act [15 U.S.C.
80a-9(b)(4)], and Section 203(e)(7) of the Investment Advisers Act
[15 U.S.C. 80b-3(e)(7)].
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D. Other Legal Proceedings
1. Arbitration Proceedings
While not specifically included in the amendments proposed today,
the Commission requests comment on whether disclosure should be
required concerning the results of arbitration proceedings arising out
of allegations of violations of securities or commodities laws and
regulations, or breaches of the laws and regulations relating to other
commercial transactions. Given the widespread use of arbitration
clauses, as well as statutes and court rules that require or permit
claims to be submitted to arbitration rather than to courts, investors
may consider information regarding a designated person's involvement in
arbitration proceedings material to their investment decisions.
The Commission invites comment on whether disclosure should be
required concerning arbitration awards where the action would have been
disclosed had the claim been pursued before a court, administrative
body or SRO. In addition, commenters should address whether there are
other types of alternative dispute resolution that should trigger
disclosure. Comment also is requested as to whether there are any
arbitration proceedings that should be exempt from disclosure in light
of the nature of the issues involved or the insignificant dollar amount
of the award. Finally, comment is solicited as to whether there should
be dollar amount thresholds that govern disclosure and whether such
thresholds should be cumulative figures based on multiple arbitration
awards.
2. Rule 2(e) Proceedings
The Commission also solicits comment as to whether filers should be
required to disclose all administrative actions brought by the
Commission against a designated person pursuant to Rule 2(e) of the
Commission's Rules of Practice.\98\ Rule 2(e) provides for the
suspension or disbarment of certain professionals, usually attorneys
and accountants, from practicing before the Commission.\99\ Where Rule
2(e) orders relate to violations of the federal securities laws,\100\
disclosure would be required under both the current and proposed rules.
Should the requirements be expanded to encompass Rule 2(e) orders based
on lack of professional qualifications,\101\ lack of character or
integrity, or unethical or improper professional misconduct,\102\ the
conviction of a felony or of a misdemeanor involving moral turpitude,
or the disbarment or revocation of a license to practice as an
attorney, accountant, engineer or other expert?\103\ If not, commenters
should provide specific reasons for any recommended exclusions. If it
is determined that all Rule 2(e) orders should be disclosed, should
disclosure of disciplinary sanctions imposed by other federal and state
authorities or non-government professional associations, such as bar
associations, for violations of standards of professional conduct also
be required?
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\98\17 CFR 201.2(e).
\99\``Practicing before the Commission'' is defined in Rule 2(g)
[17 CFR 201.2(g)] to include ``transacting any business with the
Commission'' as well as ``the preparation of any statement, opinion
or other paper by any attorney, accountant, engineer or other
expert, filed with the Commission in any registration statement,
notification, application, report or other document with the consent
of such attorney, accountant, engineer or other expert.''
\100\See Rule 2(e)(1)(iii) [17 CFR 201.2(e)(1)(iii)], allowing
the Commission to suspend or disbar a professional that has been
found by the Commission in a Rule 2(e) proceeding to have violated
federal securities laws, and Rule 2(e)(3) [17 CFR 201.2(e)(3)],
which provides for a summary disbarment or suspension by the
Commission where a court has enjoined the professional from future
violations of the federal securities laws, or where the person has
been found by a court or by the Commission in a separate proceeding
to have violated those laws.
\101\Rule 2(e)(1)(i) [17 CFR 201.2(e)(1)(i)].
\102\Rule 2(e)(1)(ii) [17 CFR 201.2(e)(1)(ii)].
\103\Rule 2(e)(2) [17 CFR 201.2(e)(2)].
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E. Disclosure Period Expansion to 10 Years
The Commission proposes to expand the time during which disclosure
is required from five to 10 years,\104\ and to delete in most instances
the provisions allowing registrants to omit information they determine
is neither material to an evaluation of the ability or integrity of the
designated person\105\ nor to a voting or investment decision.\106\
Based on its experience since 1978, when the original disclosure period
was reduced from 10 to the current five years,\107\ the Commission
believes that many legal proceedings remain material beyond five
years.\108\ Of course, the inclusion of the information would continue
to be required beyond 10 years where necessary to render statements
otherwise made in the registration statement, report or document not
misleading.\109\
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\104\Proposed Item 401(f)(1).
\105\Current Item 401 and Item 8(d) of the Regulation A offering
circular (Model B).
\106\Current Item 401(g) (1) and (2). As discussed in Section
III.A.1, above, the materiality provision would be retained with
respect to bankruptcy and insolvency proceedings.
\107\See Section II, above, for background relating to this
requirement.
\108\This comports with the President's Commission on Organized
Crime's 1986 recommendation that disclosure of all legal proceedings
required by Item 401 of Regulation S-K be extended to at least 10
years to provide adequate notice to investors and government
agencies as to the background of corporate officials. See
President's Commission on Organized Crime, THE EDGE: Organized
Crime, Business, and Labor Unions; Report to the President and the
Attorney General p. 345 (March 1986).
\109\Rule 408 [17 CFR 230.408] under the Securities Act, Rule
12b-20 [17 CFR 240.12b-20] under the Exchange Act, and Rule 8b-20
under the Investment Company Act [17 CFR 270.8b-20] require
registrants to disclose, in addition to the information expressly
required to be included in a registration statement or report, any
further material information as may be necessary to make the
required statements, in light of the circumstances under which they
are made, not misleading. Cf. Releases No. 33-5758 (November 2,
1976) [41 FR 49493] and No. 33-5949 (July 28, 1978) [43 FR 34402]
stating that information regarding events occurring outside the
five-year period may be material and should be disclosed. For
examples of civil actions finding legal proceedings over five years
old to be material, see SEC v. Scott, 565 F.Supp. 1513 (S.D.N.Y.
1983) (prospectus deemed materially false and misleading, in part
because 1961 Canadian fraud conviction not disclosed in 1980
prospectus); Bertoglio v. Texas Int'l Co., 488 F.Supp. 630 (D. Del.
1980) (1964 Commission bar should have been disclosed in 1979 proxy
materials notwithstanding five-year disclosure requirement). See
also Calderon v. Tower Associates Int'l, Civil No. 88-1240-FR (D.
Ore. March 28, 1989) (order compelling answers to interrogatories)
(criminal securities law violations occurring in 1977 and 1979
deemed material and discoverable notwithstanding Item 401(f) five-
year provisions).
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Since some types of legal proceedings may have a greater impact on
voting and investment decisions than others, the Commission requests
comment as to whether there are specific actions that should be
disclosed for periods less than 10 years. For example, should
misdemeanors be described for a lesser period than felony convictions?
Commenters favoring that approach should specify the types of
proceedings to which the current five-year provision should continue to
apply. On the other hand, disclosure may be appropriate for periods
longer than 10 years with respect to certain types of legal
proceedings--for example: criminal fraud convictions; civil,
administrative and SRO actions based on fraud involving securities,
commodities, financial institutions, insurance companies or other
businesses; actions involving mail and wire fraud; and, proceedings
resulting in the removal or bar from acting in a decision-making
capacity in connection with a financial institution or other business.
Should these types of legal proceedings be disclosed for longer
periods, such as 15 or 20 years, or indefinitely? Should disclosure be
required so long as the designated person is subject to the order?
Commenters should provide an analysis in support of any specific time
period recommended.
Many legal proceedings based on violations of federal, state or
other laws or rules or SRO rules result in orders or sanctions that
remain in place for indefinite periods. For example, many injunctions,
cease-and-desist orders and industry bars are imposed permanently and
remain in force until further judicial or administrative action is
taken to vacate the order.\110\ Should the current five-year disclosure
period be maintained, with the exception that any injunction, cease-
and-desist order, industry bar or other continuing order or bar would
be required to be disclosed for as long as the designated person is
subject to the order or sanction, even when the order or sanction was
imposed more than five years ago? Would that have the effect of
providing sufficient disclosure of the conduct most relevant to
investors' voting decisions? If such a provision were adopted, would it
be appropriate to provide some outer limit (such as 10 or 15 years)
after which disclosure could be discontinued?
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\110\For a discussion of disclosure where a court grants relief
from a permanent injunction based on conduct occurring after
imposition of the order, see n. 65, above.
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F. Form and Schedule Amendments
As outlined above,\111\ legal proceedings disclosure requirements
vary among certain forms and schedules. The Commission proposes to
amend the requirements found in Schedules 13D, 13E-3, 14A\112\ and 14D-
1 and the Regulation A offering circular (Model B) to conform with
those of Regulation S-K Item 401.\113\ The Commission solicits comment
as to whether any schedule or form identified above should not be
conformed with proposed legal proceedings requirements, and requests
that commenters provide the specific rationale for any exclusion
recommended.
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\111\Section II, above.
\112\This proposed change would only affect disclosure relating
to participants in election contests, which currently requires
disclosure only of criminal convictions within the past 10 years.
See current Item 5(b)(1)(iii) of Schedule 14A. Of course, all proxy
statements involving the election of directors would be affected by
the rule proposals generally because Item 7(b) requires that the
information specified in Item 401 be included with respect to
directors, officers and director nominees.
\113\The changes to these forms and schedules are found in
proposed Item 2(d) of Schedule 13D; proposed Item 2(e) of Schedule
13E-3; proposed Item 5(b)(1)(iii) of Schedule 14A; proposed Item
2(e) of Schedule 14D-1; and proposed Part II, Offering Circular
Model B, Item 8(d) of Form 1-A.
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As discussed above, the Item, forms and schedules identify persons
for whom the legal proceedings disclosure is required;\114\ the
proposed amendments would specify that disclosure is required where the
function performed by a designated person is performed by others,
directly or indirectly, pursuant to a management or service contract,
or otherwise.\115\ Comment is requested as to whether there is any
class of persons not currently subject to legal proceedings disclosure
that should be. For example, should disclosure relating to promoters or
control persons be required beyond the current 12 month period
following an initial public offering, thus requiring disclosure in
Exchange Act annual reports? Is there any class of persons currently
identified as designated persons that should not be? Should the
Regulation S-K Item 401 provisions be expanded to require disclosure
relating to persons participating in the offering of a penny stock if
the disclosure document is furnished in connection with such an
offering?\116\
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\114\See n. 22, above.
\115\For a discussion of disclosure obligations relating to
registrants that are partnerships or trusts, or whose management
services are provided by outside parties pursuant to management
contracts, service agreements or otherwise, see introduction to
Section III, above.
\116\Section 504 of the Penny Stock Reform Act [Title V of the
Securities Enforcement Remedies and Penny Stock Reform Act, Pub. L.
No. 101-429] amended Section 15(b)(6) of the Exchange Act [15 U.S.C.
78o(b)(6)] to authorize the Commission to bar or take other
administrative action against a ``person participating in the
offering of penny stock.'' As amended, Section 15(b)(6) defines a
person participating in the offering of a penny stock to include
``any person acting as any promoter, finder, consultant, agent or
other person who engages in activities with a broker, dealer, or
issuer for purposes of the issuance or trading in any penny stock,
or inducing or attempting to induce the purchase or sale of any
penny stock.''
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Finally, the Commission solicits comment as to whether legal
proceedings disclosure provisions should be added to any forms,
schedules or other documents where not required currently. For example,
should legal proceedings involving persons issuing securities pursuant
to an exemption under Regulation B,\117\ relating to fractional
undivided interests in oil and gas rights, be required to be disclosed
in the offering sheet delivered to investors?
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\117\17 CFR 230.300-230.346.
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IV. Investment Company Act Disclosure
The Commission is proposing to add legal proceedings disclosure, as
proposed to be amended, to investment company registration statement
forms and to expand the scope of legal proceedings disclosure in proxy
statements. Currently, legal proceedings disclosure is specifically
required only in investment company proxy statements related to the
election of directors.118 Investment Company Act disclosure
documents are intended, among other things, to inform investors and
investment company shareholders about matters that concern the
background and qualifications of those persons who oversee (such as
directors) or manage (such as investment advisers) an investment
company and its assets. The Commission believes that disclosure of
information concerning legal proceedings may be material to investors
and shareholders and is, therefore, proposing to require this
disclosure in investment company disclosure documents.
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\1\18Item 22(b)(4) of Schedule 14A. Prior to the recent
amendments to the proxy rules applicable to investment companies,
which consolidated the disclosure requirements in Item 22 of
Schedule 14A (Release No. IC-20614 (October 13, 1994) [59 FR
52689]), Rule 20a-1 under the Investment Company Act required legal
proceedings disclosure by reference to Item 7 of Schedule 14A.
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The proposed amendments would require Item 401(f) disclosure in
investment company prospectuses.119 Because most investment
companies are externally managed by investment advisers, the Commission
also is proposing to require disclosure concerning not only directors
and officers of the investment company, but also ``managerial persons''
of the investment adviser.120 For the purposes of the legal
proceedings disclosure, ``managerial persons'' would mean ``affiliated
persons'' of the investment adviser as that term is defined in section
2(a)(3) of the Investment Company Act121 who are engaged in the
management, direction, supervision, or performance of any activities
related to the investment company.122 This definition would
include, for example, officers or employees of the investment adviser
whose duties are related to the management of an investment
company.123 On the other hand, the definition is not intended to
require disclosure with respect to persons affiliated with the
investment adviser who have no managerial or similar responsibilities
with respect to the investment company.124 The Commission requests
comment on whether the proposed definition of ``managerial persons''
will result in appropriate disclosure that will provide material
information to investment company investors and shareholders.125
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\1\19Proposed amendments to: Item 5 of Form N-1A (open-end
investment companies); Item 9 of Form N-2 (closed-end investment
companies) Item 6 of Form N-3 (separate accounts that offer variable
annuity contracts that are registered under the Investment Company
Act); Form N-4 (separate accounts that offer variable annuity
contracts which are registered under the Investment Company Act as
unit investment trusts); Items 11, 12, and 16 of Form N-5 (small
business investment companies); Item 28 of Form N-8B-2 (unit
investment trusts); Items 26, 27, and 28 of Form N-8B-3 (investment
companies issuing periodic payment plan certificates); Items 29 and
34 of Form N-8B-4 (face amount certificate companies).
The Commission also is proposing amendments to Schedules A and B
of Regulation E [17 CFR 230.610a] under the Securities Act which
would require offering circulars used by small business investment
companies and business development companies relying on the
Regulation E exemption to include the information specified in
proposed Item 401(f) as to each director, executive officer and
advisory board member of the issuer and as to managerial persons of
the investment adviser of the issuer.
\1\20In the case of an investment company registered as a
separate account on Forms N-3, N-4 or N-8B-2, disclosure would be
required of legal proceedings involving the directors, officers and
employees of the sponsoring insurance company, or its affiliates,
who participate directly in the management or administration of the
separate account.
\1\2115 U.S.C. 80a-2(a)(3). An affiliated person is: (i) a
person who directly or indirectly owns or controls more than 5% of
the voting securities of a person; (ii) a person of which more than
5% of the voting securities is owned or controlled by a person;
(iii) a person that is controlled, controlled by, or under common
control with, a person; (iv) any officer, director, partner, or
employees of a person; (v) if such person is an investment company,
the investment adviser or any member of the advisory board thereof;
and (vi) if the person is an unincorporated investment company
without a board of directors, the depositor thereof.
\1\22The term ``managerial persons'' is similar to, but not the
same as, the term ``management person'' used in Rule 206(4)-4 under
the Investment Advisers Act [17 CFR 275.206(4)-4]. Rule 206(4)-4
requires investment advisers to disclose to their clients certain
financial and disciplinary information about the investment adviser
or a management person of the adviser. For purposes of Rule 206(4)-
4, a management person is defined as a person who controls the
adviser or determines the general investment advice given to
clients.
\1\23This disclosure would include a fund's portfolio manager as
well as any member of a portfolio management committee.
\1\24For a large company with investment advisory services and
other types of businesses, monitoring and reporting legal
proceedings about all persons affiliated with the company could be
costly and result in lengthy disclosure.
\1\25The proposed legal proceeding disclosure would require
information concerning persons, otherwise barred under section 9(a)
of the Investment Company Act [15 U.S.C. 80a-9(a)], who have been
permitted by the Commission under section 9(c) of the Investment
Company Act [15 U.S.C. 80a-9(c)] to be associated with an investment
company.
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The Commission also is proposing to conform the legal proceedings
disclosure in proxy statements to the registration statement forms, as
proposed to be amended. The proposed disclosure in proxy statements for
officers and directors of the investment company and managerial persons
of the investment adviser would be required both in connection with the
election of directors, as currently required, and in proxy statements
seeking approval of an investment advisory contract.126 Legal
proceedings disclosure may be as relevant to a shareholder's assessment
of an investment advisory contract as it is to the election of
directors.
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\1\26Proposed item 22(a)(3)(vii).
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V. General Request for Comment
Any interested persons wishing to submit written comments on the
proposed rule and form amendments or suggest additional changes or
comment on other matters that might have an impact on the amendments
set out in this release are invited to do so by submitting them in
triplicate to Jonathan G. Katz, Secretary, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-6009.
Comment is requested on the impact of the proposals from the point of
view of the public, the entities or persons making filings affected by
the proposals, and the persons with respect to whom disclosure would be
made. The Commission further requests comment on any competitive
burdens that might result from adoption of the proposals. Comments on
this inquiry will be considered by the Commission in complying with its
responsibilities under Section 19(a) of the Securities Act,127
Section 23(a) of the Exchange Act,128 and Section 38(a) of the
Investment Company Act.129 Comment letters should refer to File
No. S7-31-94. All comments received will be available for public
inspection and copying in the Commission's Public Reference Room, 450
Fifth Street, N.W., Washington, D.C. 20549-6009.
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\1\2715 U.S.C. 77s(a).
\1\2815 U.S.C. 78w(a).
\1\2915 U.S.C. 80a-37(a).
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VI. Cost-Benefit Analysis
To assist the Commission in its evaluation of the costs and
benefits that may result from the proposed changes to disclosure
requirements contained in this release, commenters are requested to
provide views and data relating to any costs and benefits associated
with these proposals. It is expected that the enhanced legal proceeding
disclosure provisions will modestly increase most registrants' costs
and compliance burdens. A requirement to provide additional information
for longer periods of time than currently required in documents filed
under the Securities Act, Exchange Act and Investment Company Act
should not significantly increase the burden on company resources,
since many registrants and others already are required to gather
information regarding the backgrounds of directors, officers and
others. It appears, however, that any additional expense may be
justified in view of the material information that would be made
available to investors.
VII. Summary of Initial Regulatory Flexibility Analysis
An initial regulatory flexibility analysis has been prepared in
accordance with 5 U.S.C. 603 concerning the proposed amendments to Item
401 of Regulations S-K and S-B, the Regulation A offering circular
(Model B), Schedules 13D, 13E-3, 14A and 14D-1, Forms N-1A, N-2, N-3,
N-4, N-5, N-8B-2, N-8B-3 and N-8B-4, and Regulation E. The analysis
notes that the proposed amendments are intended to provide investors
with more information regarding the background of those who exercise
control over the affairs of public companies.
As discussed more fully in the analysis, the proposed changes would
affect persons that are small entities, as defined by the Commission's
rules. It is expected that increased reporting, recordkeeping and
compliance burdens would result from the changes. The analysis also
indicates that there are no current federal rules that duplicate,
overlap or conflict with the revised legal proceedings disclosure
provisions.
As stated in the analysis, several possible significant
alternatives to the proposals were considered, including, among others,
establishing different compliance or reporting requirements for small
entities or exempting them from all or part of the proposed
requirements. As more fully discussed in the analysis, the alternatives
were either addressed in the proposals, inconsistent with the purposes
of the federal securities laws, or otherwise without justification.
Written comments are encouraged with respect to any aspect of the
analysis. Such comments will be considered in the preparation of the
Final Regulatory Flexibility Analysis if the proposed revisions are
adopted. A copy of the analysis may be obtained by contacting James R.
Budge, Office of Disclosure Policy, Division of Corporation Finance, at
(202) 942-2910, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009.
VIII. Statutory Basis for Rules and Forms
The Commission is proposing amendments to Item 401 of Regulations
S-K and S-B, Regulation A and Regulation E pursuant to Sections 3(b),
6, 7, 8, 10, and 19 of the Securities Act. Other amendments to Item 401
and amendments to Schedules 13D, 13E-3, 14A and 14D-1 are proposed
pursuant to Sections 12, 13, 14, 15(d) and 23 of the Exchange Act. The
Commission also is proposing amendments to the proxy rules applicable
to investment companies and to investment company registration
statement forms pursuant to Sections 8(b), 20(a) and 38(a) of the
Investment Company Act.
List of Subjects in 17 CFR Part 228, 229, 230, 239, 240, and 274
Investment companies, Registration requirements, Reporting and
recordkeeping requirements, Securities.
Text of the Proposed Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is proposed to be amended as follows:
PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS
1. The authority citation for Part 228 continues to read as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss,
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.
2. Section 228.401 (Item 401) is amended by revising paragraph (d)
to read as follows:
Sec. 228.401 (Item 401) Directors, executive officers, promoters and
control persons.
* * * * *
(d) Involvement in certain legal proceedings.
(1) Describe any of the actions listed below, not subsequently
reversed, suspended, vacated, annulled or otherwise rendered of no
effect, taken during the past 10 years that involved any executive
officer, director or person nominated to become a director of the small
business issuer:
(i) Bankruptcy or other insolvency proceedings. The initiation of
any federal, state or foreign bankruptcy or insolvency proceeding by or
against, or the appointment of a receiver, conservator, fiscal agent or
similar officer for the business or assets of any such person, any
partnership in which such person was a general partner at or within two
years before the time of such initiation or appointment, or any
corporation or business association of which such person was an
executive officer at or within two years before the time of such
initiation or appointment. The foregoing shall be described if material
to an investment or voting decision.
(ii) Criminal proceedings. The conviction of such person in a
federal, state or foreign criminal proceeding (including convictions
entered on a plea of nolo contendere), or the naming of any such person
as the subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses).
(iii) Civil and administrative proceedings. The issuance in a
federal, state or foreign civil or administrative proceeding of:
(A) A finding, order, judgment, decree or sanction to which such
person was subject, relating to an alleged violation of:
(1) Any securities or commodities law or regulation, or
(2) Any law or regulation respecting financial institutions,
insurance companies, or fiduciary duties owed to a partnership,
corporation, business trust or similar business entity, including, but
not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order; or
(3) Any law or regulation prohibiting mail or wire fraud or fraud
in connection with any business entity;
(B) An order enjoining or otherwise limiting such person from
engaging in any type of business practice.
(iv) Self-regulatory organization proceedings. The imposition of a
sanction against such person by:
(A) A self-regulatory organization, as defined in Section 3(a)(26)
of the Exchange Act [15 U.S.C. 78c(a)(26)];
(B) A contract market designated pursuant to section 5 of the
Commodity Exchange Act [7 U.S.C. 7];
(C) A futures association registered under section 17 of such Act
[7 U.S.C. 21]; or
(D) Any substantially equivalent foreign authority or organization.
(2) Control persons and promoters. Any small business issuer that
has not been subject to the reporting requirements of Sections 13(a) or
15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)) for the 12
months immediately prior to the filing of the registration statement,
report, or statement to which this Item is applicable also shall
describe any action enumerated in this paragraph (d), for the time
period specified herein, that involved a control person of the small
business issuer. If any such issuer was organized within the past five
years, comparable disclosure is required with regard to any promoter of
the small business issuer.
Instructions to Paragraph (d) of Item 401
1. For purposes of computing the 10 year period referred to in
this paragraph, the disclosure period applicable to a final
conviction, order, judgment, decree or sanction shall begin with its
date of entry. The disclosure period applicable to a preliminary
order shall commence when the rights of appeal from such order have
lapsed. Any conviction, order, judgment, decree or sanction that is
appealed shall continue to be disclosed until ultimately reversed,
suspended, vacated, annulled or otherwise rendered of no effect, at
which time disclosure shall no longer be required. With respect to
bankruptcy and insolvency proceedings, the computation date shall be
the date of filing for uncontested petitions or the date upon which
approval of a contested petition became final. In the case of
receiverships and conservatorships, the computation date shall be
the date the receiver or conservator was appointed.
2. The small business issuer is permitted to explain any
mitigating circumstances associated with actions reported pursuant
to this paragraph.
3. For purposes of this paragraph, the term financial
institution includes any bank, bank holding company, savings
association, or savings and loan holding company, as defined in
Section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813], any
federal or state credit union, as defined in Section 101 of the
Federal Credit Union Act [12 U.S.C. 1752], or any system institution
of the Farm Credit System, as defined in Section 5.35 of the Farm
Credit Act of 1971 [12 U.S.C. 2271], or any substantially equivalent
foreign institution.
4. If the information called for by this paragraph is being
presented in a proxy or information statement, no information need
be given respecting any director whose term of office as a director
will not continue after the meeting to which the statement relates.
5. If the small business issuer is a partnership or a trust, the
information required by this paragraph shall be provided with
respect to each general partner of the partnership, each trustee of
the trust, and any other person providing services to such entities
that are comparable to those provided by the persons identified in
this paragraph. Where management services are provided the small
business issuer by outside parties pursuant to a management or
service contract or otherwise, the information called for by this
paragraph shall be disclosed with respect to the persons identified
in this paragraph, as well as any other person providing comparable
services on behalf of the small business issuer.
6. Paragraph (d)(2) shall not apply to any subsidiary of a small
business issuer that has been reporting pursuant to Section 13(a) or
15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)) for the 12
months immediately prior to the filing of the registration
statement, report or statement.
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
3. The general authority citation for Part 229 continues to read in
part as follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn,
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79e, 79n,
79t, 80a-8, 80a-29, 80a-30, 80a-37 and 80b-11, unless otherwise
noted.
* * * * *
4. The authority citation following Sec. 229.401 is removed.
5. Section 229.401 (Item 401) is amended by revising paragraph (f)
and by removing paragraph (g) to read as follows:
Sec. 229.401 (Item 401) Directors, executive officers, promoters and
control persons.
* * * * *
(f) Involvement in certain legal proceedings.
(1) Describe any of the actions listed below, not subsequently
reversed, suspended, vacated, annulled or otherwise rendered of no
effect, taken during the past 10 years that involved any executive
officer, director or person nominated to become a director of the
registrant:
(i) Bankruptcy or other insolvency proceedings. The initiation of
any federal, state or foreign bankruptcy or insolvency proceeding by or
against, or the appointment of a receiver, conservator, fiscal agent or
similar officer for the business or assets of any such person, any
partnership in which such person was a general partner at or within two
years before the time of such initiation or appointment, or any
corporation or business association of which such person was an
executive officer at or within two years before the time of such
initiation or appointment. The foregoing shall be described if material
to an investment or voting decision.
(ii) Criminal proceedings. The conviction of such person in a
federal, state or foreign criminal proceeding (including convictions
entered on a plea of nolo contendere), or the naming of any such person
as the subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses).
(iii) Civil and administrative proceedings. The issuance in a
federal, state or foreign civil or administrative proceeding of:
(A) A finding, order, judgment, decree or sanction to which such
person was subject, relating to an alleged violation of:
(1) Any securities or commodities law or regulation, or
(2) Any law or regulation respecting financial institutions,
insurance companies, or fiduciary duties owed to a partnership,
corporation, business trust or similar business entity, including, but
not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order; or
(3) Any law or regulation prohibiting mail or wire fraud or fraud
in connection with any business entity;
(B) An order enjoining or otherwise limiting such person from
engaging in any type of business practice.
(iv) Self-Regulatory Organization proceedings. The imposition of a
sanction against such person by:
(A) A self-regulatory organization, as defined in Section 3(a)(26)
of the Exchange Act [15 U.S.C. 78c(a)(26)];
(B) A contract market designated pursuant to section 5 of the
Commodity Exchange Act [7 U.S.C. 7];
(C) A futures association registered under section 17 of such Act
[7 U.S.C. 21]; or
(D) Any substantially equivalent foreign authority or organization.
(2) Control persons and promoters. Any registrant that has not been
subject to the reporting requirements of Sections 13(a) or 15(d) of the
Exchange Act (15 U.S.C. 78m(a) or 78o(d)) for the 12 months immediately
prior to the filing of the registration statement, report, or statement
to which this Item is applicable also shall describe any action
enumerated in this paragraph (f), for the time period specified herein,
that involved a control person of the registrant. If any such
registrant was organized within the past five years, comparable
disclosure is required with regard to any promoter of the registrant.
Instructions to Paragraph (f) of Item 401
1. For purposes of computing the 10 year period referred to in
this paragraph, the disclosure period applicable to a final
conviction, order, judgment, decree or sanction shall begin with its
date of entry. The disclosure period applicable to a preliminary
order shall commence when the rights of appeal from such order have
lapsed. Any conviction, order, judgment, decree or sanction that is
appealed shall continue to be disclosed until ultimately reversed,
suspended, vacated, annulled or otherwise rendered of no effect, at
which time disclosure shall no longer be required. With respect to
bankruptcy and insolvency proceedings, the computation date shall be
the date of filing for uncontested petitions or the date upon which
approval of a contested petition became final. In the case of
receiverships and conservatorships, the computation date shall be
the date the receiver or conservator was appointed.
2. The registrant is permitted to explain any mitigating
circumstances associated with actions reported pursuant to this
paragraph.
3. For purposes of this paragraph, the term financial
institution includes any bank, bank holding company, savings
association, or savings and loan holding company, as defined in
Section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813], any
federal or state credit union, as defined in Section 101 of the
Federal Credit Union Act [12 U.S.C. 1752], or any system institution
of the Farm Credit System, as defined in Section 5.35 of the Farm
Credit Act of 1971 [12 U.S.C. 2271], or any substantially equivalent
foreign institution.
4. If the information called for by this paragraph is being
presented in a proxy or information statement, no information need
be given respecting any director whose term of office as a director
will not continue after the meeting to which the statement relates.
5. If the registrant is a partnership or a trust, the
information required by this paragraph shall be provided with
respect to each general partner of the partnership, each trustee of
the trust, and any other person providing services to such entities
that are comparable to those provided by the persons identified in
this paragraph. Where management services are provided the
registrant by outside parties pursuant to a management or service
contract or otherwise, the information called for by this paragraph
shall be disclosed with respect to the persons identified in this
paragraph, as well as any other person providing comparable services
on behalf of the registrant.
6. Paragraph (f)(2) shall not apply to any subsidiary of a
registrant that has been reporting pursuant to Section 13(a) or
15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)) for the 12
months immediately prior to the filing of the registration
statement, report or statement.
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
6. The general authority citation for Part 230 continues to read in
part as follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c,
78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30 and
80a-37, unless otherwise noted.
* * * * *
7. By amending Sec. 230.610a by adding paragraph (g) to Item 4 of
Schedule A of Regulation E, to read as follows:
Sec. 230.610a Schedule A: Contents of offering circular for small
business investment companies; Schedule B: Contents of offering
circular for business development companies.
Schedule A--Contents of Offering Circular for Small Business Investment
Companies
* * * * *
Item 4. Management and Certain Security Holders of the Issuer
* * * * *
(g) Provide the information required by Item 401(f)(1) of
Regulation S-K [17 CFR 229.401(f)(1)] as to each director, officer,
and advisory board member of the issuer, and each managerial person
of the investment adviser of the issuer.
Instruction. For the purposes of this Item 4(g), managerial
person means any affiliated person (as defined in Section 2(a)(3) of
the Investment Company Act of 1940 [15 U.S.C. 80a-2(a)(3)]) of the
investment adviser who is engaged in the management, direction,
supervision, or performance of any activities related to the issuer.
* * * * *
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
8. The general authority citation for Part 239 continues to read in
part as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l,
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m,
79n, 79q, 79t, 80a-8, 80a-29, 80a-30, and 80a-37 unless otherwise
noted.
* * * * *
9. By revising Part II, Model B, Item 8, paragraph (d) of Form 1-A
(referenced in Sec. 239.90) to read as follows:
Note.--The text of Form 1-A does not and the amendment will not
appear in the Code of Federal Regulations.
Form 1-A.--Regulation A Offering Statement Under the Securities Act of
1933
* * * * *
PART II--OFFERING CIRCULAR
* * * * *
OFFERING CIRCULAR MODEL B
* * * * *
Item 8. Directors, Executive Officers and Significant Employees
* * * * *
(d) Involvement in certain legal proceedings.
(1) Describe any of the actions listed below, not subsequently
reversed, suspended, vacated, annulled or otherwise rendered of no
effect, taken during the past 10 years that involved any executive
officer, director or person nominated to become a director of the
issuer:
(i) Bankruptcy or other insolvency proceedings. The initiation of
any federal, state or foreign bankruptcy or insolvency proceeding by or
against, or the appointment of a receiver, conservator, fiscal agent or
similar officer for the business or assets of any such person, any
partnership in which such person was a general partner at or within two
years before the time of such initiation or appointment, or any
corporation or business association of which such person was an
executive officer at or within two years before the time of such
initiation or appointment. The foregoing shall be described if material
to an investment or voting decision.
(ii) Criminal proceedings. The conviction of such person in a
federal, state or foreign criminal proceeding (including convictions
entered on a plea of nolo contendere), or the naming of any such person
as the subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses).
(iii) Civil and administrative proceedings. The issuance in a
federal, state or foreign civil or administrative proceeding of:
(A) A finding, order, judgment, decree or sanction to which such
person was subject, relating to an alleged violation of:
(1) Any securities or commodities law or regulation, or
(2) Any law or regulation respecting financial institutions,
insurance companies, or fiduciary duties owed to a partnership,
corporation, business trust or similar business entity, including, but
not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order; or
(3) Any law or regulation prohibiting mail or wire fraud or fraud
in connection with any business entity;
(B) An order enjoining or otherwise limiting such person from
engaging in any type of business practice.
(iv) Self-Regulatory Organization proceedings. The imposition of a
sanction against such person by:
(A) A self-regulatory organization, as defined in Section 3(a)(26)
of the Exchange Act [15 U.S.C. 78c(a)(26)];
(B) A contract market designated pursuant to section 5 of the
Commodity Exchange Act [7 U.S.C. 7];
(C) A futures association registered under section 17 of such Act
[7 U.S.C. 21]; or
(D) Any substantially equivalent foreign authority or organization.
Instructions to Paragraph (d)
1. For purposes of computing the 10 year period referred to in
this paragraph, the disclosure period applicable to a final
conviction, order, judgment, decree or sanction shall begin with its
date of entry. The disclosure period applicable to a preliminary
order shall commence when the rights of appeal from such order have
lapsed. Any conviction, order, judgment, decree or sanction that is
appealed shall continue to be disclosed until ultimately reversed,
suspended, vacated, annulled or otherwise rendered of no effect, at
which time disclosure shall no longer be required. With respect to
bankruptcy and insolvency proceedings, the computation date shall be
the date of filing for uncontested petitions or the date upon which
approval of a contested petition became final. In the case of
receiverships and conservatorships, the computation date shall be
the date the receiver or conservator was appointed.
2. The issuer is permitted to explain any mitigating
circumstances associated with events reported pursuant to this
paragraph.
3. For purposes of this paragraph, the term financial
institution includes any bank, bank holding company, savings
association, or savings and loan holding company, as defined in
Section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813], any
federal or state credit union, as defined in Section 101 of the
Federal Credit Union Act [12 U.S.C. 1752], or any system institution
of the Farm Credit System, as defined in Section 5.35 of the Farm
Credit Act of 1971 [12 U.S.C. 2271], or any substantially equivalent
foreign institution.
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
10. The general authority citation for Part 240 continues to read
in part as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,
78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37,
80b-3, 80b-4, and 80b-11, unless otherwise noted.
* * * * *
11. Sec. 240.13d-101 (Schedule 13D) is amended by: revising row 5
of the cover page and instruction 5 for the cover page; revising the
introductory text of Item 2; revising paragraph (d) of Item 2; removing
paragraph (e) of Item 2; and redesignating paragraph (f) of Item 2 as
paragraph (e), to read as follows:
Sec. 240.13d-101 Schedule 13D--Information to be included in
statements filed pursuant to Sec. 240.13d-1(a) and amendments thereto
filed pursuant to Sec. 240.13d-2(a).
Schedule 13D
* * * * *
(5) Check if disclosure of legal proceedings is required pursuant
to Item 2(d).
* * * * *
Instructions for Cover Page
* * * * *
(5) If disclosure of legal proceedings is required pursuant to
Item 2(d), row 5 should be checked.
* * * * *
Item 2. Identity and Background.
If the person filing this statement or any person enumerated in
Instruction C of this statement is a corporation, general
partnership, limited partnership, syndicate or other group of
persons, state its name, the state or other place of its
organization, its principal business, the address of its principal
business, the address of its principal office and the information
required by (d) of this Item. If the person filing this statement or
any person enumerated in Instruction C is a natural person, provide
the information specified in (a) through (e) of this Item with
respect to such person(s).
* * * * *
(d) Involvement in certain legal proceedings.
(1) Describe any of the actions listed below, not subsequently
reversed, suspended, vacated, annulled or otherwise rendered of no
effect, taken during the past 10 years that involved any such
person(s):
(i) Bankruptcy or other insolvency proceedings. The initiation
of any federal, state or foreign bankruptcy or insolvency proceeding
by or against, or the appointment of a receiver, conservator, fiscal
agent or similar officer for the business or assets of any such
person, any partnership in which such person was a general partner
at or within two years before the time of such initiation or
appointment, or any corporation or business association of which
such person was an executive officer at or within two years before
the time of such initiation or appointment. The foregoing shall be
described if material to an investment or voting decision.
(ii) Criminal proceedings. The conviction of such person in a
federal, state or foreign criminal proceeding (including convictions
entered on a plea of nolo contendere), or the naming of any such
person as the subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses).
(iii) Civil and administrative proceedings. The issuance in a
federal, state or foreign civil or administrative proceeding of:
(A) A finding, order, judgment, decree or sanction to which such
person was subject, relating to an alleged violation of:
(1) Any securities or commodities law or regulation, or
(2) Any law or regulation respecting financial institutions,
insurance companies, or fiduciary duties owed to a partnership,
corporation, business trust or similar business entity, including,
but not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order;
or
(3) Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity;
(B) An order enjoining or otherwise limiting such person from
engaging in any type of business practice.
(iv) Self-Regulatory Organization proceedings. The imposition of
a sanction against such person by:
(A) A self-regulatory organization, as defined in Section
3(a)(26) of the Exchange Act [15 U.S.C. 78c(a)(26)];
(B) A contract market designated pursuant to section 5 of the
Commodity Exchange Act [7 U.S.C. 7];
(C) A futures association registered under section 17 of such
Act [7 U.S.C. 21]; or
(D) Any substantially equivalent foreign authority or
organization.
Instructions to Paragraph (d).
1. For purposes of computing the 10 year period referred to in
this paragraph, the disclosure period applicable to a final
conviction, order, judgment, decree or sanction shall begin with its
date of entry. The disclosure period applicable to a preliminary
order shall commence when the rights of appeal from such order have
lapsed. Any conviction, order, judgment, decree or sanction that is
appealed shall continue to be disclosed until ultimately reversed,
suspended, vacated, annulled or otherwise rendered of no effect, at
which time disclosure shall no longer be required. With respect to
bankruptcy and insolvency proceedings, the computation date shall be
the date of filing for uncontested petitions or the date upon which
approval of a contested petition became final. In the case of
receiverships and conservatorships, the computation date shall be
the date the receiver or conservator was appointed.
2. The person filing this schedule is permitted to explain any
mitigating circumstances associated with events reported pursuant to
this paragraph.
3. For purposes of this paragraph, the term financial
institution includes any bank, bank holding company, savings
association, or savings and loan holding company, as defined in
Section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813], any
Federal or State credit union, as defined in Section 101 of the
Federal Credit Union Act [12 U.S.C. 1752], or any system institution
of the Farm Credit System, as defined in Section 5.35 of the Farm
Credit Act of 1971 [12 U.S.C. 2271], or any substantially equivalent
foreign institution.
* * * * *
12. Sec. 240.13e-100 (Schedule 13E-3) is amended by: revising the
section heading; revising the introductory paragraph of Item 2;
revising paragraph (e) of Item 2; removing paragraph (f) of Item 2; and
redesignating paragraph (g) of Item 2 as paragraph (f), to read as
follows:
Sec. 240.13e-100 Schedule 13E-3, Rule 13e-3 transaction statement
pursuant to section 13(e) of the Securities Exchange Act of 1934 and
rule 13e-3 [Sec. 240.13e-3] thereunder.
Rule 13e-3 Transaction statement
* * * * *
Item 2. Identity and Background. If the person filing this
statement is the issuer of the class of equity securities which is
the subject of the Rule 13e-3 transaction, make a statement to that
effect. If this statement is being filed by an affiliate of the
issuer which is other than a natural person or if any person
enumerated in Instruction C to this statement is a corporation,
general partnership, limited partnership, syndicate or other group
of persons, state its name, the state or other place of its
organization, its principal business, the address of its principal
executive offices and provide the information required by paragraph
(e) of this Item. If this statement is being filed by an affiliate
of the issuer who is a natural person or if any person enumerated in
Instruction C of this statement is a natural person, provide the
information required by paragraphs (a) through (f) of this Item with
respect to such person(s).
* * * * *
(e) Involvement in certain legal proceedings.
(1) Describe any of the actions listed below, not subsequently
reversed, suspended, vacated, annulled or otherwise rendered of no
effect, taken during the past 10 years that involved any such
person(s):
(i) Bankruptcy or other insolvency proceedings. The initiation
of any federal, state or foreign bankruptcy or insolvency proceeding
by or against, or the appointment of a receiver, conservator, fiscal
agent or similar officer for the business or assets of any such
person, any partnership in which such person was a general partner
at or within two years before the time of such initiation or
appointment, or any corporation or business association of which
such person was an executive officer at or within two years before
the time of such initiation or appointment. The foregoing shall be
described if material to an investment or voting decision.
(ii) Criminal proceedings. The conviction of such person in a
federal, state or foreign criminal proceeding (including convictions
entered on a plea of nolo contendere), or the naming of any such
person as the subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses).
(iii) Civil and administrative proceedings. The issuance in a
federal, state or foreign civil or administrative proceeding of:
(A) A finding, order, judgment, decree or sanction to which such
person was subject, relating to an alleged violation of:
(1) Any securities or commodities law or regulation, or
(2) Any law or regulation respecting financial institutions,
insurance companies, or fiduciary duties owed to a partnership,
corporation, business trust or similar business entity, including,
but not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order;
or
(3) Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity;
(B) An order enjoining or otherwise limiting such person from
engaging in any type of business practice.
(iv) Self-regulatory organization proceedings. The imposition of
a sanction against such person by:
(A) A self-regulatory organization, as defined in Section
3(a)(26) of the Exchange Act [15 U.S.C. 78c(a)(26)];
(B) A contract market designated pursuant to section 5 of the
Commodity Exchange Act [7 U.S.C. 7];
(C) A futures association registered under section 17 of such
Act [7 U.S.C. 21]; or
(D) Any substantially equivalent foreign authority or
organization.
Instructions to Paragraph (e)
1. For purposes of computing the 10 year period referred to in
this paragraph, the disclosure period applicable to a final
conviction, order, judgment, decree or sanction shall begin with its
date of entry. The disclosure period applicable to a preliminary
order shall commence when the rights of appeal from such order have
lapsed. Any conviction, order, judgment, decree or sanction that is
appealed shall continue to be disclosed until ultimately reversed,
suspended, vacated, annulled or otherwise rendered of no effect, at
which time disclosure shall no longer be required. With respect to
bankruptcy and insolvency proceedings, the computation date shall be
the date of filing for uncontested petitions or the date upon which
approval of a contested petition became final. In the case of
receiverships and conservatorships, the computation date shall be
the date the receiver or conservator was appointed.
2. The person filing this schedule is permitted to explain any
mitigating circumstances associated with events reported pursuant to
this paragraph.
3. For purposes of this paragraph, the term financial
institution includes any bank, bank holding company, savings
association, or savings and loan holding company, as defined in
Section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813], any
federal or state credit union, as defined in Section 101 of the
Federal Credit Union Act [12 U.S.C. 1752], or any system institution
of the Farm Credit System, as defined in Section 5.35 of the Farm
Credit Act of 1971 [12 U.S.C. 2271], or any substantially equivalent
foreign institution.
4. While negative answers to Item 2(e) are required in this
schedule, they need not be furnished to security holders.
* * * * *
13. Sec. 240.14a-101 (Schedule 14A) is amended by revising
paragraph (b)(1)(iii) of Item 5 and by amending Item 22 by adding a new
paragraph (a)(3)(vi) and revising paragraph (b)(4) to read as follows:
Sec. 240.14a-101 Schedule 14A. Information required in proxy
statement.
* * * * *
Item 5. Interest of certain Persons in Matters to be Acted Upon
* * * * *
(b) Solicitation subject to Rule 14a-11 (Sec. 240.14a-11 of this
chapter). * * *
(1) * * *
(iii) State the information required by Item 401(f) of
Regulation S-K (Sec. 229.401(f) of this chapter).
* * * * *
Item 22. Information required in investment company proxy
statement.
* * * * *
(a) * * *
(3) * * *
(vi) If action is to be taken with respect to the election of
directors or the approval of an advisory contract, provide the
information required by Item 401(f)(1) of Regulation S-K
(Sec. 229.401(f)(1)) as to each director, officer, and advisory
board member of the Fund, and each managerial person of the
investment adviser of the Fund.
Instruction. For the purposes of this Item 22(a)(3)(vi),
``managerial person'' means any affiliated person (as defined in
Section 2(a)(3) of the Investment Company Act of 1940) of the
investment adviser who is engaged in the management, direction,
supervision, or performance of any activities related to the issuer.
* * * * *
(b) * * *
(4) Provide in tabular form, to the extent practicable, the
information required by Items 401 (except the information required
by paragraph (f) of Item 401, which is required pursuant to
paragraph (a)(3)(vi) of this Item 22), 404 (a) and (c), and 405 of
Regulation S-K (Secs. 229.401, 229.404, and 229.405 of this chapter.
* * * * *
14. Sec. 240.14d-100 (Schedule 14D-1) is amended by: revising
row 5 of the cover page and instruction 5 for the cover page;
revising the introductory paragraph of Item 2, revising paragraph
(e) of Item 2, removing paragraph (f) of Item 2; and redesignating
paragraph (g) of Item 2 as paragraph (f), to read as follows:
Sec. 240.14d-100 Schedule 14D-1. Tender offer statement pursuant to
section 14(d)(1) of the Securities Exchange Act of 1934.
Schedule 14D-1
* * * * *
(5) Check if disclosure of legal proceedings is required
pursuant to Item 2(e).
* * * * *
Instructions for Cover Page
* * * * *
(5) If disclosure of legal proceedings is required pursuant to
Item 2(e) of Schedule 14D-1, row 5 should be checked.
* * * * *
Item 2. Identity and Background. If the person filing this
statement or any person enumerated in Instruction C of this
statement is a corporation, general partnership, limited
partnership, syndicate or other group of persons, state its name,
the state or other place of its organization, its principal
business, the address of its principal business, the address of its
principal office and the information required by paragraph (e) of
this Item. If the person filing this statement or any person
enumerated in Instruction C is a natural person, provide the
information specified in paragraphs (a) through (f) of this Item
with respect to such person(s).
* * * * *
(e) Involvement in certain legal proceedings.
(1) Describe any of the actions listed below, not subsequently
reversed, suspended, vacated, annulled or otherwise rendered of no
effect, taken during the past 10 years that involved any such
person(s):
(i) Bankruptcy or other insolvency proceedings. The initiation
of any federal, state or foreign bankruptcy or insolvency proceeding
by or against, or the appointment of a receiver, conservator, fiscal
agent or similar officer for the business or assets of any such
person, any partnership in which such person was a general partner
at or within two years before the time of such initiation or
appointment, or any corporation or business association of which
such person was an executive officer at or within two years before
the time of such initiation or appointment. The foregoing shall be
described if material to an investment or voting decision.
(ii) Criminal proceedings. The conviction of such person in a
federal, state or foreign criminal proceeding (including convictions
entered on a plea of nolo contendere), or the naming of any such
person as the subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses).
(iii) Civil and administrative proceedings. The issuance in a
federal, state or foreign civil or administrative proceeding of:
(A) A finding, order, judgment, decree or sanction to which such
person was subject, relating to an alleged violation of:
(1) Any securities or commodities law or regulation, or
(2) Any law or regulation respecting financial institutions,
insurance companies, or fiduciary duties owed to a partnership,
corporation, business trust or similar business entity, including,
but not limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order;
or
(3) Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity;
(B) An order enjoining or otherwise limiting such person from
engaging in any type of business practice.
(iv) Self-Regulatory Organization proceedings. The imposition of
a sanction against such person by:
(A) A self-regulatory organization, as defined in Section
3(a)(26) of the Exchange Act [15 U.S.C. 78c(a)(26)];
(B) A contract market designated pursuant to section 5 of the
Commodity Exchange Act [7 U.S.C. 7];
(C) A futures association registered under section 17 of such
Act [7 U.S.C. 21]; or
(D) Any substantially equivalent foreign authority or
organization.
Instructions to Paragraph (e).
1. For purposes of computing the 10 year period referred to in
this paragraph, the disclosure period applicable to a final
conviction, order, judgment, decree or sanction shall begin with its
date of entry. The disclosure period applicable to a preliminary
order shall commence when the rights of appeal from such order have
lapsed. Any conviction, order, judgment, decree or sanction that is
appealed shall continue to be disclosed until ultimately reversed,
suspended, vacated, annulled or otherwise rendered of no effect, at
which time disclosure shall no longer be required. With respect to
bankruptcy and insolvency proceedings, the computation date shall be
the date of filing for uncontested petitions or the date upon which
approval of a contested petition became final. In the case of
receiverships and conservatorships, the computation date shall be
the date the receiver or conservator was appointed.
2. The person filing this schedule is permitted to explain any
mitigating circumstances associated with events reported pursuant to
this paragraph.
3. For purposes of this paragraph, the term financial
institution includes any bank, bank holding company, savings
association, or savings and loan holding company, as defined in
Section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813], any
federal or state credit union, as defined in Section 101 of the
Federal Credit Union Act [12 U.S.C. 1752], or any system institution
of the Farm Credit System, as defined in Section 5.35 of the Farm
Credit Act of 1971 [12 U.S.C. 2271], or any substantially equivalent
foreign institution.
4. While negative answers to Item 2(e) are required in this
schedule, they need not be furnished to security holders.
* * * * *
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940
15. The authority citation for Part 274 continues to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, and 80a-29, unless otherwise noted.
16. By amending Item 5 of Form N-1A (referenced in Secs. 239.15A
and 274.11A) to revise the introductory text, to redesignate paragraphs
(d), (e), (f), and (g) as (e), (f), (g), and (h) and to add paragraph
(d) to read as follows:
Note: The text of Form N-1A does not and the amendments will not
appear in the Code of Federal Regulations.
Form N-1A
* * * * *
Item 5. Management of the Fund
Describe concisely the management and business of the
Registrant, including:
(a) * * *
(b) * * *
(c) * * *
d. Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each director, executive
officer and advisory board member of the Registrant, and each
managerial person of the investment adviser.
Instruction. For the purposes of this Item 5(d), ``managerial
person'' means any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940) of the investment adviser who
is engaged in the management, direction, supervision, or performance
of any activities related to the Registrant.
* * * * *
17. By amending Item 9 of Form N-2 (referenced in Secs. 239.14 and
274.11a-1) to revise the introductory text of paragraph 1, to
redesignate paragraphs 1.d, 1.e, 1.f, and 1.g as paragraphs 1.e, 1.f,
1.g, and 1.h, to add a paragraph 1.d, and to add ``9.3'' after the word
``item'' in the first clause of the Instruction to paragraph 3 to read
as follows:
Note: The text of Form N-2 does not and the amendments will not
appear in the Code of Federal Regulations.
Form N-2
* * * * *
Item 9. Management
1. General: Describe concisely the management and business of
the Registrant, including:
(a) * * *
(b) * * *
(c) * * *
d. Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each director, executive
officer and advisory board member of the Registrant, and each
managerial person of the investment adviser.
Instruction. For the purposes of this Item 1.d, ``managerial
person'' means any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940) of the investment adviser who
is engaged in the management, direction, supervision, or performance
of any activities related to the Registrant.
18. By amending Item 6 of Form N-3 (referenced in Secs. 239.17a and
Sec. 274.11b) to revise the introductory text, to redesignate
paragraphs (c) and (d) as (d) and (e), and to add paragraph (c) to read
as follows:
Note: The text of Form N-3 does not and the amendments will not
appear in the Code of Federal Regulations.
Form N-3
* * * * *
Item 6. Management
Describe concisely the management and business of the
Registrant, including:
(a) * * *
(b) * * *
(c) Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each director, executive
officer and advisory board member of the Registrant, and each
managerial person of the investment adviser.
Instruction. For the purposes of this Item 6(c), ``managerial
person'' means any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940) of the investment adviser who
is engaged in the management, direction, supervision, or performance
of any activities related to the Registrant.
* * * * *
19. By amending Item 5 of Form N-4 (referenced in Secs. 239.17b and
274.11c) to redesignate paragraph (f) as (g) and to add paragraph (f)
to read as follows:
Note: The text of Form N-4 does not and the amendments will not
appear in the Code of Federal Regulations.
Form N-4
* * * * *
Item 5. General Description of Registrant, Depositor, and Portfolio
Companies
* * * * *
(f) Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each director, officer and
employee of the depositor, or its affiliates, who participates
directly in the management or administration of the separate
account.
* * * * *
20. By amending Form N-5 (referenced in Secs. 239.24 and 274.5) to
designate the text of Item 11 as paragraph (a) and to add paragraph
(b), to designate the text of Item 12 as paragraph (a) and to add
paragraph (b), and to add paragraph (d) to Item 16 to read as follows:
Note: The text of Form N-5 does not and the amendments will not
appear in the Code of Federal Regulations.
Form N-5
* * * * *
Item 11. Directors and Executive Officers
(a) * * *
(b) Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each director and
executive officer of the Registrant.
Item 12. Members of Advisory Board of Registrant
(a) * * *
(b) Provide the information required by Item 401(f)(1) of
Regulation S-K [229.401(f)(1)] as to each member of the registrant's
advisory board.
* * * * *
Item 16. Investment Advisers.
* * * * *
(d) Provide the information required by Item 401(f)(1) of
Regulation S-K [229.401(f)(1)] as to each managerial person of each
investment adviser.
Instruction: For the purposes of this Item 16(d), ``managerial
person'' means any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940) of the investment adviser who
is engaged in the management, direction, supervision, or performance
of any activities related to the registrant.
PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940
21. By amending Item 28 of Form N-8B-2 (referenced in Sec. 274.12)
to add paragraph (c) to read as follows:
Note: The text of Form N-8B-2 does not and the amendments will
not appear in the Code of Federal Regulations.
Form N-8B-2
* * * * *
Officials and Affiliated Persons of Depositor
28. (a) * * *
(c) Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each managerial person of the
depositor.
Instruction: For the purposes of this Item 28(c), ``managerial
person'' means any affiliated person (as defined in Section 2(a)(3) of
the Investment Company Act of 1940) of the investment adviser who is
engaged in the management, direction, supervision, or performance of
any activities related to the registrant.
* * * * *
22. By amending Item 27 of Form N-8B-3 (referenced in Sec. 274.13)
to add paragraph (c) to read as follows:
Note: The text of Form N-8B-3 does not and the amendments will
not appear in the Code of Federal Regulations.
Form N-8B-3
* * * * *
Officials and Affiliated Persons of Depositor
26. (a) * * *
(c) Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each managerial person of the
depositor.
Instruction: For the purposes of this Item 26(c), ``managerial
person'' means any affiliated person (as defined in Section 2(a)(3) of
the Investment Company Act of 1940) of the investment adviser who is
engaged in the management, direction, supervision, or performance of
any activities related to the registrant.
* * * * *
23. By amending Form N-8B-4 (referenced in Sec. 274.14) to add
paragraph (d) to Item 29 and to add paragraph (c) to Item 34 to read as
follows:
Note: The text Form N-8B-4 does not and the amendments will not
appear in the Code of Federal Regulations.
Form N-8B-4
* * * * *
Item 29. Investment Advisers and Agreements Therewith
* * * * *
(d) Provide the information required by Item 401(f)(f) of
Regulation S-K [Sec. 229.401(f)(1)] as to each managerial person of
each investment adviser of the registrant.
Instruction: For the purposes of this Item 29(d), ``managerial
person'' means any affiliated person (as defined in Section 2(a)(3) of
the Investment Company Act of 1940) of the investment adviser who is
engaged in the management, direction, supervision, or performance of
any activities related to the registrant.
* * * * *
Item 34. Directors, Officers and Advisory Board Members
* * * * *
(c) Provide the information required by Item 401(f)(1) of
Regulation S-K [Sec. 229.401(f)(1)] as to each person named pursuant to
paragraph (a).
* * * * *
By the Commission.
Dated: November 1, 1994.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-27486 Filed 11-4-94; 8:45 am]
BILLING CODE 8010-01-P
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.