NASD Discussion on Rule 2710

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					                                   MINUTES
                     MEETING OF THE SUBCOMMITTEE ON
                      NASD CORPORATE FINANCING RULES
                FEDERAL REGULATION OF SECURITIES COMMITTEE
                        ABA SECTION ON BUSINESS LAW
                               September 22, 2004


        The Subcommittee on NASD Corporate Financing Rules ("Subcommittee") met
in New York City at the offices of Skadden, Arps, Slate, Meagher & Flom LLP 12:30
p.m. to 2:00 p.m. on Wednesday, September 22, 2004.

Overallotment Option
        Peter LaVigne, Chair of the Subcommittee, opened the meeting by discussing the
recent position taken by the staff of the NASD's Corporate Financing Department and the
SEC's Division of Market Regulation with respect to the calculation of the 15% limitation
on the overallotment option in multinational offerings. Suzanne Rothwell, Vice-Chair of
the Subcommittee confirmed that the calculation had previously been based on all shares
registered with the SEC that were underwritten on a "firm commitment" basis onshore
and offshore, which is consistent with the language of the overallotment restriction in
Rule 2710. The staffs of the NASD and SEC are now limiting the overallotment in the
U.S. to no more than 15% of the final retention by the U.S. underwriters and also
requiring that the overallotment option for the entire global offering cannot exceed 15%
of the global offering. NASD staff are accepting disclosure that the issuer has granted the
underwriters an option to purchse an amount of shares equal to 15% of the global
offering, with an undertaking that "To the extent the option is exercised by the U.S.
underwriters, such option will not exceed 15% of the total number of ADSs
sold in the United States."

         The Subcommittee members discussed that this interpretation of the
overallotment restriction in NASD Rule 2710 was problematic because it was difficult to
determine whether a sale by a U.S. underwriter is onshore or offshore. The
Subcommittee agreed that there should be further discussions with NASD and SEC staff
that the calculation should be based on 15% of the amount of shares sold by U.S.
broker/dealers, regardless of where sold.

Shelf Offering Proposal
        The Subcommittee discussed the NASD's pending rule filing that would amend
Rule 2710 to clarify its application to offerings of securities from a registration that relies
on SEC Rule 415, the "shelf offering" rule. Peter LaVigne described several issues
associated with the proposal including that the procedures for filing and receipt of a no
objections opinion do not comport with current practice and would interfere with the
ability of broker/dealers to do shelf take-downs, that every member would be required to
have a no objections letter and could not rely on prior filings by the issuer or another
member, and that the market transaction exemption is not available for securities traded
only in the OTCBB and the Pink Sheets. He also raised concerns regarding the proposed



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changes to the definitions of "underwriter and related persons" and "participation in a
public offering," which would have a wide-reaching impact on the review of offerings
beyond the shelf offering clarification.

        The Subcommittee agreed that the NASD's review of shelf offerings should be
based on the terms applicable to the shelf, not on a firm-by-firm basis. Some
Subcommittee members were not in favor of an after-the-fact review, preferring that the
proposal be narrowed to situations requiring pre-take-down review and that such review
be automated to issue a "no objections" opinion. In this connection the Subcommittee
also expressed concern about the current review process for shelf offerings with respect
to requirement for representations by a broker/dealer of the issuer's prior representations.

         Subcommittee members questioned whether the exemption for shelf offerings on
Form S-3 based on the 1992 Form S-3 standards could be expanded and whether NASD
staff were aware of the significant impact of this proposal on capital-raising in general
and on the SEC's efforts to facilitate corporate access to the capital markets and its
initiative to further reform the offering process. Members of the Subcommittee indicated
that it would assist the securities bar to provide comments and understand the proposal if
the NASD would provide information on the abuses it is seeking to address. In this
connection, members discussed that there are numbers of shelf offering situations that are
not abusive, such as sovereign issuer offerings, that should not be subject to the NASD
Rule 2710 filing requirements.

         The Subcommittee affirmed that it will submit a comment letter to the NASD on
the proposal when it is published. Mr. LaVigne asked that Subcommittee members who
wish to participate in drafting the Subcommittee’s comment letter on the NASD's rule
filing to clarify the application of Rule 2710 to shelf offerings send their comments to
Suzanne Rothwell.

                                              ****

       The next meeting of the Subcommittee will be at the November 19-20, 2004
meeting of the Federal Regulation of Securities Committee in Washington, D.C.




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