SEC Adopts Dodd-Frank Mine Safety Disclosure Requirements

By Final Rule dated December 21, the SEC has adopted new rules outlining how mining companies must disclose the mine safety information required by the Dodd-Frank Act, including the addition of Item 1.04 to Current Report Form 8-K.  Section 1503 Dodd-Frank requires mining companies to include information about mine safety and health in the quarterly and annual reports filed with the SEC. The Dodd-Frank Act disclosure requirements are based on the safety and health requirements that apply to mines under the Federal Mine Safety and Health Act of 1977, which is administered by the Mine Safety and Health Administration (MSHA). 

The SEC adopted amendments to periodic Forms 10-K, 10-Q, 20-F and 40-F to require the disclosure mandated by Section 1503(a) of the Dodd-Frank Act; adopted new Item 104 of Regulation S-K, which sets forth the disclosure requirements for Forms 10-K and 10-Q, and amended Item 601 of Regulation S-K to add a new exhibit to Forms 10-K and 10-Q for provision of this information.  The new Form 8-K Item 1.04 implements the requirements imposed by Section 1503(b) of Dodd-Frank, and the SEC amended Form S-3 to add the new item to the list of Form 8-K items the untimely filing of which will not result in loss of Form S-3 eligibility. 

The SEC estimates that, of the approximately 13,500 Form 10-Ks filed annually, approximately 100 are filed by companies that operate, or have a subsidiary that operates, a mine subject to the Mine Act, and that therefore will be affected by the rule and form amendments.  Of the 942 Form 20-F and 205 Form 40-F annual reports filed by foreign private issuers, approximately 30 are filed by companies that  would be affected by the rule and form amendments.  The final rules, which  require disclosure on a mine-by-mine basis, take effect 30 days after publication in the Federal Register.

SEC Restricts Confidential Filing by Foreign Private Issuers

In order to promote transparency and investor protection, the SEC’s Division of Corporation Finance announced on December 8 a change to its traditional policy with respect to the confidential non-public submission of initial registration statements by foreign private issuers.  The longstanding policy was the reason that non-U.S. issuers generally were able to go public not long after they filed their registration statements. 

Foreign companies were allowed to file their registrations confidentially with the SEC, and to go through several rounds of comments without publicly registering.  By completing the rounds of comments before filing publicly, non-U.S. issuers usually spent very little time in registration before making their debuts.

New Policy: the staff will review initial registration statements of foreign issuers that are submitted on a non-public basis only where the registrant is a foreign government registering its debt securities, a foreign private issuer listed on a non-U.S. exchange, a foreign private issuer that is being privatized by a foreign government, or a foreign private issuer that can demonstrate that the public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction.  In addition, shell companies, blank check companies and issuers with no, or substantially no, business operations will not be permitted to use the non-public submission procedure.

The previous policy was partially based on the fact that, historically, the majority of foreign private issuers registering securities with the SEC were also having their securities traded on a foreign securities exchange, and the foreign market ordinarily did not have a practice of requiring public disclosure of the registration statement before completion of review. More recently, however, the vast majority of foreign private issuers using this non-public review procedure have not contemplated listing securities outside the U.S.

EDGAR System Upgraded, Supports Schedule 14N Filings & 8-K Item 5.08

As reported in this space on August 30, 2010, the SEC adopted new rules to require companies to include shareholder-nominated director candidates in their proxy materials under certain circumstances.  The final rules were published in the Federal Register on September 16, 2010, with the effective date of November 15, 2010.  However, by order on October 4, 2010, the SEC issued a stay on their effectiveness until resolution of a legal challenge to the validity of the proxy access rules in the United States Court of Appeals. 

The SEC's final rule release published in the Federal Register on September 20, 2011, noted that the Court's mandate concluded the litigation, did not affect the amendment to the shareholder proposal rule (Exchange Act 14a-8, which was not challenged in the litigation), and the stay expired by its terms. 

On September 26, 2011, the Schedule 14N submission form types (SC 14N, SC 14N-S, and their amendments) were made available for use on EDGARLink Online.  Form 8-K Item 5.08 (Shareholder Director Nominations) was also made available for use on submission form types 8-K, 8-K12B, 8-K12G3 and 8-K15D5.  By Final Rule dated November dated November 21 and effective November 29, 2011, the SEC adopted revisions to the EDGAR Filer Manual to reflect the updates to the EDGAR system.

Going Private Transactions using Combined Schedules TO and 13E-3

The board of directors of Kiewit Investment Fund LLLP, a non-diversified, closed-end management investment company that operates as an "employees' securities company" under the Investment Company Act of 1940 Act, voted unanimously on June 28 to dissolve and liquidate the Fund.  The Fund was designed as a long-term investment vehicle primarily for participants in the Peter Kiewit Sons', Inc. Employee Ownership Plan.  A wholly-owned subsidiary of Peter Kiewit Sons' offers to purchase all outstanding limited partnership units of the Fund at at the Net Asset Value per Unit less $35 per Unit.

The Kiewit tender offer filing on November 1 is the fourth combined Tender Offer Statement and Rule 13e-3 Transaction Statement to be filed in the past year.  A $560 million cash tender offer by an affiliate of Apollo Global Management to purchase all outstanding common shares of CKx, Inc. was filed May 17.  In connection with the related merger agreement, an Apollo affiliate obtained support agreements from two significant stockholders of CKx, The Promenade Trust, the sole beneficiary of which is Lisa Marie Presley and which is CKx’s partner in Elvis Presley Enterprises, and Robert F.X. Sillerman, CKx’s largest stockholder.

The Kiewit and CKx transactions are deemed to be third-party tender offers subject to Rule 14d-1.  Combination Schedules TO and 13E-3 filed by NovaStar Financial, Inc. on 12/10/10 and by IDT Corp. on 12/3/10 are deemed to be issuer tender offers subject to Rule 13e-4.  The NovaStar filing relates to a plan to recapitalize its publicly-held 8.9% Ser. C cumulative redeemable preferred stock and its privately-held 9% Ser. D1 mandatory convertible preferred stock.  The exchange offer and consent solicitation for holders of the NovaStar Ser. C preferred was concurrently filed on Form S-4 (SEC file no. 333-171115).

IDT initiated an offer to exchange shares of its outstanding common stock for shares of Cl. B common stock on a one-for-one basis.  The company stated that the exchange offer was being made to address the limited liquidity in the market for the common stock and the resulting disparity in the trading prices between the two classes -- despite the fact that the equity rights associated with the shares of each class are nearly identical.  Following the completion of the exchange offer, the common stock was delisted from the New York Stock Exchange.  The Cl. B common stock remains listed on the NYSE under the “IDT” ticker symbol.

Risk Reporting on Form PF Required by Certain Private Fund Advisers in 2012

By Final Rule under the Investment Advisers Act of 1940 dated October 31, 2011, the SEC will require advisers to hedge funds and other private funds to report systemic risk data for use by the Financial Stability Oversight Council (“FSOC”) in monitoring risks to the U.S. financial system.  The rule, which implements Sections 404 and 406 of the Dodd-Frank Act, requires SEC-registered investment advisers with at least $150 million in private fund assets under management to periodically file a new reporting form electronically on a confidential basis (Form PF).

For hedge funds, private equity funds and liquidity funds, the information required on Form PF is tiered so that more detailed information is required from larger private fund advisers.  The rule requires heightened reporting from advisers managing at least $1.5 billion in hedge fund assets.  Although this threshold applies only to about 230 U.S.-based hedge fund advisers, those advisers manage more than 80% of the industry’s assets under management.

There will be a two-stage phase-in period for compliance with Form PF filing requirements.  Most private fund advisers will be required to begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after Dec. 15, 2012.  Those with $5 billion or more in private fund assets must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after June 15, 2012. 

Form PF is a joint effort of the SEC and the Commodity Futures Trading Commission.  Staff consulted with the U.K.’s Financial Services Authority and other members of the International Organization of Securities Commissions.  The resulting Form PF is similar in many respects to the European Securities and Markets Authority’s proposed private fund reporting template and surveys of large hedge fund advisers conducted by foreign financial regulators.

SEC Staff Legal Bulletin addresses Legality and Tax Opinions in Registered Offerings

Staff Legal Bulletin No. 19, published on October 14 by the SEC's Division of Corporation Finance, provides guidance on legality and tax opinions issued in connection with registered offerings of securities under the Securities Act of 1933.  The bulletin covers the requirements for such opinions, the Division's views regarding the required elements for these opinions and the filing of consents to include these opinions in registration statements.

Legality Opinions

Item 601(b)(5)(i) of Regulation S-K requires that all 1933 Act filings include an opinion of counsel regarding the legality of the securities being offered and sold pursuant to the registration statement.  As a general rule, counsel’s signed legality opinion must be filed as an exhibit to the registration statement before it becomes effective, and the opinion may not be subject to any unacceptable qualifications, conditions or assumptions.  In general, legality opinions must state that the securities are legally (or validly) issued, fully paid, non-assessable and, if debt securities, binding obligations of the registrant.

Among other things, the bulletin:

• confirms the Division will not accelerate the effectiveness of a registration statement if counsel does not opine that the securities will be legally issued, but if counsel opines that the securities are not fully paid or are assessable, the effectiveness of the registration statement may be accelerated as long as the disclosures about partial payment or assessability are adequate;
• states that when a foreign corporate registrant registers the offer and sale of shares, foreign counsel or U.S. counsel that is competent to opine on the applicable foreign law must provide a legal opinion in the same manner as for a U.S. registrant, and that counsel must opine on the laws of the registrant’s jurisdiction of incorporation, including whether the shares are legally issued, fully paid and non-assessable as those terms are understood under U.S. law;
• notes Counsel must opine on the legality of registered offers of options, warrants or rights to purchase securities, as well as on the legality of the underlying securities; 
• clarifies that when the registrant registers the offer and sale of units comprised of two or more underlying securities, the opinion must address the legality of each component of the unit, as well as the unit itself; and
• affirms that purchasers of securities in registered offerings are entitled to rely on the opinion, and that the Division does not accept any limitation on reliance. 

 Tax Opinions

Regulation S-K requires opinions on tax matters for filings on Form S-11, filings to which 1933 Act Industry Guide 5 applies, roll-up transactions and other registered offerings where the tax consequences are material to an investor and a representation about the tax consequences is included in the filing.  Legal counsel or an independent public or certified accountant can provide the Item 601(b)(8) tax opinion, which supports the tax matters and the consequences to shareholders.  A revenue ruling from the Internal Revenue Service also will satisfy the requirement.  Among other things, the bulletin:

• indicates that tax opinions only have to address material federal tax consequences, and the registrant may recommend in the prospectus that investors seek the advice of their tax counsel or an adviser with respect to any state tax consequences;  
• advises that a tax opinion should address and express a conclusion for each material federal tax consequence, should identify the applicable IRS provision, regulation or revenue ruling, and if counsel or the accountant is unable to opine on a material tax consequence, the opinion should state that fact, provide the reason and discuss possible alternatives and risks to investors; 
• agrees that a tax opinion may be conditioned or qualified as long as the disclosure is adequate, that counsel or the accountant must disclose the assumptions on which the opinion is based, and that assumptions about future facts or conduct, if limited and reasonable, are acceptable;  
• explains that counsel or an accountant may issue a “should” or “more likely than not” opinion if there is a lack of authority that directly addresses the tax consequence of the transaction, conflicting authority or significant doubt about the tax consequences, and that in these instances the staff expects an explanation, including a description of the degree of uncertainty.

Issuers Discuss Impact of Dodd-Frank Durbin Amendment

On October 1, new Federal Reserve Board guidelines went into effect to implement interchange fee reform provisions of Dodd-Frank Act Section 1075 (the Durbin Amendment).  As a result, banks with holdings of $10 billion or more now have a rate cap on what they can charge merchants for processing debit card transactions (21 cents plus 0.05% of the transaction, compared to the current average of 44 cents per transaction).  Affected companies have been striving to project the impact of the new rules on their business in SEC filings.

USA Technologies, Inc. (NASDAQ: USAT), which has a 19 year history in the small ticket electronic payments industry and the unattended Point of Sale market, has been notified by its U.S. credit and debit card processor that Visa and MasterCard will significantly raise their interchange fees for small ticket category transactions paid for through debit cards issued by regulated banks as defined under the Durbin Amendment.  In its Form 10-K filed 9/27/11, USAT states the interchange rate would increase on October 1 from 1.55% of a transaction plus 4 cents, to 0.5% of a transaction plus 22 cents, which represents an increase of approximately 247% based on a transaction of $1.67, which was the average transaction experienced by USAT during the fiscal year ended June 30, 2011.  Approximately 82% of the transactions handled by the USAT network in FY11 consisted of small ticket debit card transactions.  Of such transactions, USAT estimates that 70% were debit transactions from regulated banks.  USAT and its card processor are currently in discussions with the card associations to analyze the impact of the rate increases and to negotiate a viable rate structure. 

The Toronto-Dominion Bank (NYSE: TD) strived to quantify the impact of the  new Federal Reserve rules in the “How Our Businesses Performed” section of its 3Q11 earnings news release filed with a Form 6-K on September 1.  "As a result of the Durbin Amendment, revenue at U.S. Personal and Commercial Banking is expected to decline by approximately US$50-60 million pre-tax per quarter, excluding mitigation strategies.  One third of that impact is expected in the fourth quarter of fiscal 2011 and the first full quarter impact is expected in the first quarter of fiscal 2012.  We are formulating plans to recover this lost revenue over the next 2 years, but not specifically in the debit product."

In addition to the interchange fee cap, Durbin contains a provision that prevents card networks from contractually requiring that their debit cards be transacted exclusively on one debit network.  This will free merchants up to choose a network from a pool of competitors, potentially resulting in a lower per-transaction cost on their side and a further hit to interchange fee revenue on the bank’s side.  PSB Holdings Inc. (OTCBB: PSBQ) touched on this facet of the legislation in the MD&A section of Form 10-Q filed 8/15/11:  “While the new rules technically do not apply to us as a smaller bank, the impacts are expected to become uniform for the industry over time as merchants use their new authority and options to process customer card activity across a wider number of providers. While the timing is uncertain, these fully implemented changes could lower our annualized debit card interchange revenue by approximately $234, down approximately 36% from current revenue levels.”

Resale of Preferred issued pursuant to the Small Business Lending Fund

First Bancorp/NC Form S-3 on 9/30/2011 (SEC file no. 333-177096)
First PacTrust Bancorp, Inc. Form S-3 on 9/29/11 (file no. 333-177055)
Horizon Bancorp Form S-3 on 9/26/11 (file no. 333-177007)

The Treasury Department is the initial selling securityholder of senior non-cumulative perpetual preferred shares recently registered by issuers that have participated in the Small Business Lending Fund (SBLF).  Enacted into law as part of the Small Business Jobs Act of 2010, the SBLF is a $30 billion fund that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.  By press release dated September 28, the Treasury Department states that the final wave of funding through the SBLF has brought the total funding for the program to more than $4 billion going to 332 banks across the country. 

First Bancorp, a bank holding company headquartered in Troy, North Carolina, received an investment of $63.5 million in the company’s preferred stock on September 1.  The initial dividend rate on the preferred stock was 5% and can fluctuate on a quarterly basis during the first 10 quarters during which the  preferred stock is outstanding, based upon changes in the amount of the issuer's “Qualified Small Business Lending" as compared to a baseline level.  The First Bancorp preferred stock qualifies as Tier 1 capital, is non-voting except in limited circumstances and may be redeemed at any time at the company’s option. 
 
The issuances of the preferred stock were completed in private placements to Treasury exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.  First Bancorp filed the corresponding securities purchase agreement on Form 8-K dated September 6.  First PacTrust Bancorp ($32 million) and Horizon Bancorp ($12.5 million) filed their securities purchase agreements with the Secretary of Treasury on Form 8-Ks dated August 30 and August 26, respectively.

Registrant to Offer IPO Shares by Modified Dutch Auction

WhiteGlove Health, Inc., which on September 16 filed Amendment No 9 to its Form S-1, would be the first issuer to use the “OpenIPO” distribution method since 2007.  “OpenIPO” is WR Hambrecht + Co.’s trademarked name for an auction-based approach to the determination of public offering price and share allocation in which all investors, including company insiders, have an equal opportunity to receive an allocation of shares at the same price.  The investment bank was an underwriter in the eleven auction method IPOs that have closed since 2005.

For issuers using "OpenIPO", the underwriters solicit bids from potential investors that specify both the price and the number of securities the bidder wishes to purchase.  Prospective investors must open a brokerage account with one of the underwriters and deposit money into it.  These funds back the bids made in the auction.  The auction begins as soon as a preliminary prospectus is available and closes after the registration is declared effective. At any point within that window, bids can be canceled or modified and investors can make multiple bids at multiple prices.

At the close of the auction, the underwriters determine a “clearing price,” or the highest price at which all offered shares can be sold.  Once a clearing price is set, the issuer and the underwriters establish the public offering price.  The public offering price may be less than, but cannot exceed, the clearing price.  All of an investor’s bids at or above the clearing price will be considered and cumulated at the close of the auction.  The public offering price determines the allocation of shares to potential investors, with all valid bids submitted at or above the public offering price receiving a pro rata portion of the shares bid for.  Each of an investor’s successful bids will be treated separately for purposes of allocation and rounding of lots to multiples of 100 or 1,000 shares.

Benihana Inc. to Resubmit Reclassification Proposal

Benihana's special meeting proposal to simplify its capital structure by reclassifying each Class A common share into one share of common stock (previously reported in this space on June 10) did not receive the required approval by a majority of the outstanding common shares on September 12.  All other classes of stock voted a majority of shares outstanding in favor of the proposal.  The reclassification proposal required the higher burden of not just a majority of shares voting, but a majority of all outstanding common shares. 

Benihana of Tokyo, Inc. ("BOT"), the company's largest shareholder owning approximately 36.8% of the common shares and 26.8% of the voting power, expressed concerns about the reclassification proposal in a letter to the Benihana Inc. board of directors that is included as an exhibit to the Schedule 13D filed June 22 (SEC file no. 005-48717).  On August 5, BOT filed a Proxy Statement on Form DEFC14A to solicit votes against the proposed reclassification, stating it "would benefit certain of the Company’s insiders...while diluting and disenfranchising the vast majority" of the common stockholders.

In a press release filed by Benihana with a Form 8-K on September 12, the company indicated that it would re-file an S-4 Registration Statement to enable stockholders to vote again on the reclassification proposal as soon as possible.  Regarding such vote, the company said that it has been informed by BFC Financial Corporation that it intends to convert additional shares of its Series B preferred stock into common stock prior to the new record date to help obtain shareholder approval.  The new Form S-4 was filed on September 14, file no. 333-176842.

Mid-Year 2011 IPO Proceeds Exceed $26 Billion, Near 2007 Level

With 93 completed offerings in the first six months of 2011, the IPO market is comfortably ahead of last year’s pace of 70 IPOs through the first half of the year.  Companies have generated more than $26 billion in IPO proceeds through the end of June, compared to $9.8 billion in the same period last year.  Further, 2011’s six-month total exceeds the total for all of 2009 ($24.8 billion) and nearly matches 2008’s yearly total of $28.14 billion.

At its current pace, the 2011 market may approach the aggregate proceeds reached in the 2007 IPO market. In that year, 282 IPOs generated $60.59 billion in proceeds, the highest annual total of any year since 2000. The six-month total in 2007 was $29.28 billion, very close to what this year’s market has achieved so far.

This year the market has already seen five IPOs top $1 billion in proceeds.  Only two offerings surpassed the $1 billion mark in all of 2010, although one was General Motors’ $15.77 billion mega-deal.  The largest IPO in the first half of 2011 was the HCA Holdings’ $3.78 billion offering on March 9th.  Of 2011’s 93 IPOs, 28 were completed by non-U.S. companies, which is close to last year’s pace when 57 issuers incorporated outside the U.S. went public in the U.S. Chinese companies account for more than half (15 of 28) of this year’s deals by foreign issuers. 

The information reported herein was gathered using IPO Vital Signs, a Web-based system that includes all SEC registered IPOs, including REITs and those non-U.S. IPO filers seeking to list in the U.S. markets. IPO Vital Signs does not track closed-end funds, best efforts or non-underwritten deals, or IPO offerings for amounts less than $5 million.

Exchange Offer by Accounting Successor Following Reverse Spin-Off

Universal American Corp. (New UAM) was formed pursuant to a separation agreement dated December 30, 2010, whereby all of the businesses of the predecessor Universal American Corp. (Old UAM) other than its Medicare prescription drug business were transferred to New UAM.  Simultaneously with execution of the the separation agreement, Old UAM entered into an agreement and plan of merger which, among other things, provided for the acquisition of the Medicare prescription drug business by CVS Caremark Corp. for cash consideration of approximately $1.25 billion.  

To accomplish the split-off from Old UAM, New UAM registered common stock valued at $623.7 million and non-voting common stock valued at $31 million on Form S-4 (SEC file no. 333-172691, declared effective on 4/4/11).  The merger agreement and separation agreements are included as Annex A and Annex B, respectively.  Paul, Weiss, Rifkind, Wharton & Garrison served as counsel to Universal American, and Davis Polk & Wardwell advised CVS Caremark.  The Registration Statement presents unaudited combined condensed financial statements that represent a "carve-out" of the historical results of operations, assets, and liabilities attributable to UAM's Medicare prescription drug business.  New UAM is considered as divesting the Medicare Part D Business of Old UAM and is treated as the "accounting successor" to Old UAM for financial reporting purposes in accordance with Accounting Standard Codification (ASC) No. 505-60, Spin-offs and Reverse Spin-offs (ASC 205-2-45). 

When the reverse spin-off was consummated on April 29, Old UAM sold 1.6 million 8.5% Ser. A mandatorily redeemable preferred shares in a private placement for $40 million.  Proceeds from this issuance were used in part to finance the cash consideration to Old UAM shareholders in the sale of the Medicare prescription drug business.  New UAM filed a Form S-4 on July 15 to offer shares in exchange for the Ser. A preferred shares that are substantially identical to the outstanding shares except that they are registered under the 1933 Act and have no transfer restrictions or registration rights (file no. 333-175591).  

SEC Provides More Guidance and Exemptions for Security-Based Swaps

Title VII of the Dodd-Frank Act created a new regulatory framework for over-the-counter derivatives, authorizing the SEC to regulate security-based swaps and the Commodity Futures Trading Commission to regulate other swaps.  Under Dodd-Frank, starting July 16, 2011, security-based swaps are defined as “securities” subject to existing federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934.  

The SEC provided additional guidance on July 1 to clarify which U.S. securities laws will apply to security-based swaps starting July 16.  Interim final rules provide certain conditional exemptions under the Securities Act (Rule 240), the Exchange Act (Rule 12a-11 and Rule 12h-1(i)), the Trust Indenture Act (Rule 4d-12) and other provisions of the federal securities laws to allow certain security-based swaps to continue to trade and be cleared as they have pre-Dodd-Frank.  This interim relief will remain in effect until the compliance date for final rules that the SEC may adopt further defining the terms “security-based swap” and “eligible contract participant.”  

By Exemptive Order effective on July 1, the SEC granted temporary relief clarifying that a substantial number of the requirements of the Exchange Act applicable to securities will not apply to security-based swaps when the revised definition of security goes into effect on July 16.  The prohibitions on fraud and manipulation will continue to apply to security-based swaps after that date.  To enhance legal certainty for market participants, the SEC also provided temporary relief from provisions of U.S. securities laws that allow the voiding of contracts made in violation of those laws.  

The purpose of the exemptions is to allow market participants to continue to enter into those security-based swaps that under current law are defined as security-based swap agreements as they do today, and to minimize disruptions and costs to the security-based swap markets that could otherwise occur on July 16.  The SEC intends to monitor closely the transition of the derivatives markets to regulated markets and to determine to what extent, if any, additional regulatory action may be necessary.  Public comments on the exemptions are due July 15.

SEC Requires Private Fund Advisers to Register by March 30, 2012

By a split 3-2 vote with two Republican commissioners opposing, the SEC adopted a Final Rule on June 22 that that requires advisers to hedge funds and other private funds to register with the SEC, and require reporting by certain investment advisers that are exempt from registration.  Under amended Form ADV, advisers to private funds will have to provide basic organizational and operational information about each fund they manage, general information about the size and ownership of the fund and the adviser's services to the fund.  They also will have to identify five categories of "gatekeepers" - auditors, prime brokers, custodians, administrators and marketers - that perform critical roles for advisers and the funds they manage.

For many years, private fund advisers generally have avoided registering with the SEC based on an exemption for advisers with fewer than 15 clients - an exemption that counted each fund as a client, as opposed to each investor in a fund.  The exemption, which was eliminated by Title IV of the Dodd-Frank Act, enabled advisers handling large sums of money to avoid SEC oversight.

By unanimous vote, the SEC also adopted a Final Rule which becomes effective July 21, 2011, that establishes new exemptions from SEC registration and reporting requirements for certain advisers, and reallocates regulatory responsibility for advisers between the SEC and states.  Advisers will not have to register if they qualify for one of three new exemptions specified in the Dodd-Frank Act: 

• Advisers solely to venture capital funds.
• Advisers solely to private funds with less than $150 million in assets under management in the U.S.
• Certain foreign advisers without a place of business in the U.S.

The rules define "venture capital fund" as a private fund that invests primarily in "qualifying investments" (generally, private, operating companies that do not distribute proceeds from debt financing in exchange for the fund's investment in the company), but may hold certain short-term investments.  It also states that a venture capital fund is one that is not leveraged except for a minimal amount on a short-term basis, does not offer redemption rights to investors and represents itself to investors as pursuing a venture capital strategy.  

Procter & Gamble Uses Reverse Morris Trust Structure to Sell Pringles Line

Similar to a 2008 deal where Procter & Gamble Co. sold its Folgers Coffee business to J. M. Smucker Co. (see SEC Registration Statement file nos. 333-152451 & 333-152453), a P&G wholly-owned subsidiary and Diamond Foods, Inc. have registered common shares in connection with transactions whereby P&G will sell its Pringles snack business in a reverse Morris Trust transaction valued at approximately $2.35 billion, including the assumption of approximately $850 million of Pringles debt.  

A reverse Morris Trust transaction is an M&A strategy for a company to essentially sell assets without incurring any corporate tax, whereas typical deal structures would be taxable to the seller.  As a first step, P&G transferred all assets that comprise the target snack business to a stand-alone subsidiary named The Wimble Co. (see the Separation Agreement filed as Exhibit 2.2 to the Diamond Foods Form 8-K on 4/5/11).  P&G was represented by Jones Day of New York in the separation agreement, and Diamond by the San Francisco office of Fenwick & West LLP.  

On June 20, Wimble Co. registered common shares for the purpose of its split-off from P&G (333-175029).  The combination Form S-4/Form S-1 is comprised of an offer by P&G to exchange all Wimble common shares that are owned by P&G and will be converted into Diamond Foods common shares for P&G common shares that are validly tendered.  Prior to the distribution, and in partial consideration for the assets of the Pringles snack business transferred from P&G, Wimble will be recapitalized and will borrow funds to distribute to P&G or its affiliates.

Immediately following consummation of the exchange offer, Wimble Co. ("the Pringles Co.") will merge with and into a direct wholly owned subsidiary of Diamond Foods.  Each Wimble common share will be automatically converted into the right to receive one fully paid and nonassessable share of Diamond common stock.  Diamond registered common shares for the merger on Form S-4 also filed on June 20 (333-175025).  The shares of Diamond common stock issued in connection with the conversion of shares of Pringles Co. common stock in the merger will represent approximately 57% of the shares of Diamond common stock that will be outstanding immediately after the merger.

Blank Check Issuers Returning to IPO Market

Special purpose acquisition companies (SPACs, also known as blank check companies) were the leading industry group within the underwritten IPO market in the United States prior to the global financial crisis of 2008.  Sixty five SPACs went public in calendar year 2007, representing 23 percent of the deals completed.  In sharp contrast, from August 1, 2008, through the end of 2009 only one blank check launched an underwritten IPO in the U.S. among the 64 new offerings during this period. 

Beginning in late 2010 and continuing this year, SPACs have seen a resurgence in IPO activity.  Through June 16, there have been ten SPAC IPOs in 2011, already surpassing the 2010 and 2009 full-year totals.  Twenty of the year’s 151 new registrations have been filed by blank checks, compared to 12 in all of 2010.  The return of SPACs has been good for the business of EarlyBirdCapital and other smaller or boutique underwriters, but a few of this year’s SPAC IPOs were led by Citi. 

The information reported herein was gathered using IPO Vital Signs, a Web-based system that includes all SEC registered IPOs, including REITs and those non-U.S. IPO filers seeking to list in the U.S. markets. IPO Vital Signs does not track closed-end funds, best efforts or non-underwritten deals, or IPO offerings for amounts less than $5 million.

Benihana Inc. to Eliminate Dual-Class Common Stock Structure

The restaurant operator has registered $109.8 million of common shares on Form S-4 filed June 9 in connection with a special meeting proposal to holders of common, Class A common and Series B convertible preferred stock of the company.  Benihana proposes to amend and restate the company's certificate of incorporation by reclassifying one of the two existing classes of common stock into the other class, which would remain as the only class outstanding.  

In reaching its decision to recommend the reclassification proposal, the board of directors considered the following material factors:

• Improved liquidity and trading efficiencies (greater liquidity of the common stock following the reclassification may allow investors to buy and sell larger positions in that class with less impact on the stock price than would otherwise be the case).
• Alignment of voting rights with economic ownership (the reclassification would eliminate the disparity between voting interests and economic interests by establishing a simplified common stock capital structure whereby each share of common stock is entitled to one vote).
• Increased attractiveness to institutional investors (the company believes that simplifying our capital structure could address complexity and liquidity concerns that institutional investors typically express and will allow common shares to be held by certain institutional investors whose investment policies do not permit them to invest in companies that have disparate voting rights). 
• Elimination of investor confusion and improved transparency. (the company believes that some investors may not understand the differences between our two classes of common stock, including confusion as to the calculation of our total market capitalization, shares outstanding and earnings per share).
• Increased strategic flexibility (the company believes that the simplified common stock capital structure could provide increased flexibility to structure acquisitions and equity financings by using equity as acquisition currency and for possible future offerings of our capital stock to potential investors).
• Dilution to the common stock (the board recognized that, pursuant to the reclassification proposal, the reclassification will be dilutive to holders of common stock with respect to voting power).

Benihana will account for the reclassification by adjusting its capital stock account based on the aggregate par value of the shares outstanding immediately following the reclassification.  The change in capital stock will be offset by a decrease in paid-in capital.  The Company expects that all of the shares following the reclassification will be listed on The Nasdaq Global Select Market under the symbol “BNHN”.  The Benihana board has amended the company’s shareholder rights plan to expire automatically when and if the reclassification of the Class A common Stock becomes effective.  

Conversions to REIT Status by Merger

In connection with a plan to reorganize the business operations of American Tower Corp.(NYSE: AMT) to allow the Delaware corporation to be taxed as a real estate investment trust, American Tower REIT, Inc. registered common shares valued at $21.89 billion on June 3 (Form S-4, SEC file no. 333-174684).  The REIT conversion will be implemented through a series of steps including, among other things, the merger of AMT into American Tower REIT, a recently-formed wholly-owned subsidiary.  For accounting purposes, the merger will be treated as a transfer of assets and exchange of shares between entities under common control. 

A REIT is not permitted to retain earnings and profits accumulated during years when the company or its predecessor was taxed as a C corporation.  To elect REIT status for the taxable year beginning January 1, 2012, AMT must distribute to its stockholders on or before December 31, 2012 previously undistributed earnings and profits attributable to the taxable period ending prior to January 1, 2012.  AMT plans to distribute these pre-REIT accumulated earnings and profits by paying a one-time special cash distribution to stockholders, estimated to be be no more than $200 million.  

Summit Hotel Properties, Inc. (NYSE: INN) converted to REIT status concurrently with its IPO on February 9, 2011 (Form S-11, 333-168686).  The issuer's predecessor, Summit Hotel Properties, LLC, formed Summit Hotel OP, LP to serve as the operating partnership of the REIT ("OP").  In connection with the merger of the LLC into the OP, the OP registered units of limited partnership interest valued at $149.9 million to be issued as merger consideration for the membership interests in the LLC (Form S-4, 333-168685). 

Prior to the merger of the LLC into the OP, the OP was treated as an entity disregarded for federal income tax purposes as separate from the REIT.  Although for state law purposes the OP was the surviving entity in the merger, the OP is treated as a continuation of the LLC for federal income tax purposes.  In the reorganization transactions, the REIT will be treated as contributing the cash proceeds of the IPO to the OP in exchange for OP units, except to the extent the payment of accrued and unpaid priority returns on the LLC membership interests as part of the reorganization transactions is recharacterized by the IRS as a “disguised sale” for federal income tax purposes.  The opinion of Hunton & Williams LLP that the payment of the accrued and unpaid priority returns should not be treated as a disguised sale for federal income tax purposes in included as Exhibit 8.1 to the Form S-4.  

Registrant Engages Qualified Independent Underwriter to Comply with FINRA Rule

Committed Capital Acquisition Corp., a Delaware-incorporated blank check company that had a Form 10 Registration go effective in May 2007, has registered five million units of one common share and one warrant for a firm-commitment underwritten public offering (Form S-1 filed May 27, SEC File No. 333-174599).  Unlike most other blank check companies, the board of directors will have the sole discretion and authority to approve and consummate the initial business transaction without seeking stockholder approval.  

The sole book-running manager and underwriters' representative for the deal is Broadband Capital Management LLC ("BCM"), a boutique investment bank and broker-dealer.  Three Committed Capital insiders, who collectively own approximately 42.5% of the issued and outstanding shares before this offering, all serve as management of BCM.  As a member of the Financial Industry Regulatory Authority, BCM may be deemed to have a “conflict of interest” under Rule 5121(f)(5) of the Conduct Rules of FINRA. 

Compliance with Rule 5121(f)(5) of FINRA’s Conduct Rules requires that a “qualified independent underwriter” as defined by FINRA participate in the preparation of the registration statement and exercise the usual standard of due diligence.  The registrant has engaged Rodman & Renshaw to be the qualified independent underwriter and will pay Rodman a fee of $50,000 from the proceeds of a loan provided by BCM. Rodman & Renshaw will receive no other compensation. 

Offering proceeds of $25 million, or $28.750 million if the underwriters’ over-allotment option is exercised in full, will be deposited into a trust account.  The officers and directors have agreed that the company will have 21 months from the date of the prospectus (or 24 months if a letter of intent or a definitive agreement has been executed) to consummate the initial business transaction.  If the transaction has not been completed within such time, the company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as possible, but not more than five business days thereafter, redeem public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account, less taxes and amounts released for working capital purposes, subject to applicable law, and (iii) as promptly as possible following such redemption, dissolve and liquidate as part of the plan of dissolution and liquidation.   

Contractual Rights Offered to Major Investors in T3 Motion, Inc.

T3 Motion, a manufacturer of personal mobility vehicles powered by electric motors that had been listed on the OTC Bulletin Board, initiated trading on the NYSE Amex with an underwritten offering units consisting of one common share, one Class H warrant and one Class I warrant (Form 424B4 filed May 17, SEC File No. 333-171163).  Each warrant entitles the holder to purchase one common share but cannot be exercised until three months after issuance.  The common shares and warrants will trade only as a part of a unit for 90 days following the closing of the offering.

T3 also offers 25 contractual rights to the purchasers of at least $500,000 of units in this offering as well as certain insiders converting their debt into units in a private placement concurrent with this prospectus (collectively, "$500,000 Investors"), which relate to Class H and Class I warrants.  In connection with such rights, the company plans to enter into agreements with the $500,000 Investors whereby, subject to certain exceptions, T3 may not sell or issue any common stock or equivalents at a per share price lower than the exercise price of the Class H or Class I warrants without prior written consent from such $500,000 Investors that hold at least 67% of all Class H and Class I warrants originally acquired by the $500,000 Investors.  

These negative covenant agreements also restrict T3 from engaging in certain types of change of control transactions in which common stock is exchanged for all cash or non-publicly traded securities without prior written consent from the $500,000 Investors (and permitted assigns).  The $500,000 Investors may assign their rights under these agreements in whole, but not in part, to a purchaser of their Class H or Class I warrants.  An agreement terminates with respect to any $500,000 Investor upon the earlier of the date that Class H and Class I warrants are no longer outstanding or at such time that such investor no longer holds Class H or Class I warrants.  The form of letter agreement was filed as Exhibit 4.6 to the Form S-1 on May 13.

Underwriting or Commissions Expense Listed in Registration Statement Part II

Item 511 of Regulation S-K requires the issuer to furnish a reasonably itemized statement of all expenses in connection with the issuance and distribution of the securities to be registered, other than underwriting discounts and commissions.  The General Instructions of registration statement Form S-1 instructs registrants to furnish the information required by Item 511 in Part II, Item 13 (Other Expenses of Issuance and Distribution).

Although the Item 511 requirement explicitly excludes underwriting expenses from mandatory disclosure, and the blank Form S-1 reserves Part II for disclosure of information not required in the prospectus (which constitutes the Part I disclosure), recent filers have included underwriting or commission expenses in the list of fees found in Item 13.  It might be that SEC comment letters called for this disclosure, but any comment letters for the offers discussed below are not yet publically available. 

NGL Energy Partners LP went public on May 12 and began trading on the NYSE (ticker: NGL).  The initial Form S-1 for the offering was filed February 11 (SEC file no. 333-172186), but it was not until Amendment No. 3 on April 28 that NGL disclosed a structuring fee equal to 0.5% of the gross proceeds payable to Wells Fargo Securities, LLC, one of the joint book-running managers for the deal.  Such disclosure was made as a footnote regarding underwriting discounts and commissions on the red-herring prospectus cover page and reference is made to it in Use of Proceeds discussions in Part I.  That is not unusual, but what is unusual is that this fee is quantified ($350,000) and listed as an expense in Part II, Item 13.

Other recent registrants report offering expenses on the prospectus cover page and in other Part I disclosures, but take the further step of quantifying the dollar amount and listing it in Item 13.  Juhl Wind, Inc. has registered $15M of common stock on a shelf basis and estimates up to $875,000 payable as commissions or discounts for a best efforts offering (file no. 333-173791).  On May 13, Vanguard Energy Corporation registered 7,000,000 units for an IPO (333-174194).  Vanguard has agreed to pay Paulson Investment Company, Inc., the representative of the underwriters, a non-accountable expense allowance equal to 3% of the total public offering price, and includes the $283,500 expense allowance with the other expenses of issuance and distribution listed in Part II.

Application of Push Down Accounting

Alto Palermo S.A. ("APSA") is a Buenos Aires-headquartered operator of ten shopping centers in Argentina with a limited trading market of American Depositary Shares listed on the NASDAQ Global Market.  In connection with the registration of common shares for concurrent Argentine and international offerings, APSA has applied push down accounting for US GAAP purposes in the Form F-1 filed on May 2 (SEC file no. 333-173838).  For Argentine GAAP purposes, push down accounting is not applied.

IRSA Inversiones y Representaciones Sociedad Anónima increased its equity interest in APSA to over 94% of the voting capital on October 15, 2010.  Pursuant to FASB ASC No. 805 and Codification of SEC Staff Accounting Bulletins Topic 5.J “New Basis of Accounting Required in Certain Circumstances”, when a purchase transaction results in an entity becoming substantially wholly-owned, push down accounting is applied in the acquired entity´s separate financial statements.  Push down accounting requires that the fair value adjustments and goodwill or negative goodwill identified by the acquiring entity be pushed down and reflected in the financial statements of the acquired entity.

Accordingly, the selected consolidated US GAAP income data statement data for the six-month period ended 12/31/10 prior to 10/15/10 reflect the historical accounting basis in APSA assets and liabilities and are labeled “Predecessor Company”.  The selected consolidated US GAAP income data statement data for the six-month period ended 12/31/10 subsequent to 10/15/10 are labeled “Successor Company” and reflect the push down basis of accounting for the new fair values in APSA's consolidated financial statements.  Consequently, the amounts shown for the periods prior to and subsequent to 10/15/10 are not comparable. Note 14 to the unaudited six-month consolidated financial statements provide a description of the adjustment related to push down accounting.

Charters Amended to Declassify Board of Directors

At the annual meeting of stockholders held this week for three Delaware-incorporated issuers, amended and restated articles of incorporation were approved to provide for the phased-in declassification of the board of directors.  Avery Dennison Corp. and Life Technologies Corp. also made corresponding amendments to restated bylaws, which are included as exhibits to the respective Form 8-K filings dated 4/29 and 4/28/11 (SEC file nos. 1-07685 and 0-25317).

First Niagara Financial Group, Inc. (0-23975) filed the restated articles with the Form 8-K dated April 27 that reports stockholder approval of the board declassification.  Previously, First Niagara directors were elected for staggered terms of three years.  In the declassification proposal presented in the Schedule 14A proxy statement filed March 21, the board indicates that it considered the corporate governance trend towards annual election of directors, as well as the view of many corporate governance experts and institutional shareholders that a classified board has the effect of insulating directors from a corporation’s stockholders.

Commencing with the First Niagara board class standing for election at the 2012 annual meeting, directors will stand for election for one-year terms, expiring at the next succeeding annual meeting of stockholders.  The class of directors that stood for election at this year’s annual meeting for a term ending in 2014 and the class of directors whose term ends in 2013 will continue to hold office until the end of the terms for which they are elected and will stand for election for one year terms thereafter. Commencing in 2014, all directors will be elected on an annual basis.

Avery Dennison and Life Technologies also had three classes of directors with staggered three year terms.  The proposals to phase out the board classification and gradually move to one year terms are presented in the proxy statements filed on 3/17 and 3/18/11, respectively.

Issuer No Longer Eligible to Use Form S-3, Files S-1 and Post-Effective Amendment

Cytomedix, Inc. securities were delisted from the NYSE Amex on January 25, 2011, and began to be quoted on the OTC Bulletin Board.  By Form 8-K filed January 21, the company reported that it had withdrawn its appeal of the determination that it had not timely regained compliance with the Exchange’s continued listing standards because stockholders’ equity is less than $6M.  Consequently, Cytomedix is no longer eligible to use Form S-3.

The company filed a universal shelf registration on Form S-3 on 12/3/07 that was declared effective on 3/28/08 (SEC File No. 333-147793).  To maintain the registration of these previously registered securities, Cytomedix filed a Form S-1 on 4/12/11 and a registration fee in respect of the common shares was paid concurrently with the filing (333-173463).

A subsequent Form S-3 filed by Cytomedix which registered common shares for resale, from time to time, on behalf of certain selling shareholders was declared effective on 11/3/10 (333-168936).  On 4/12/11, the company filed Post-Effective Amendment No. 1 to Form S-3 on Form S-1 to convert its registration statement on Form S-3 to Form S-1.  All filing fees payable in connection with the registration of these securities were previously paid in connection with the filing of the original registration statement.

Amended Rule 19b-4 Defines Business Day in Event of Government Shutdown

By Final Rule that became effective on April 13, 2011, the SEC has amended 1934 Act Rule 19b-4 so that references to “business day” in Section 19(b) of the Exchange Act and Rule 19b-4 thereunder refer to a day other than a Saturday, Sunday, Federal holiday, a day that the U.S. Office of Personnel Management has announced that Federal agencies in the Washington, DC area are closed to the public, a day on which the SEC is subject to a Federal government shutdown in the event of a lapse in appropriations, or a day on which the Commission’s Washington, DC office is otherwise not open for regular business. 

Section 19(b) provides the time frames within which the SEC must act in connection with the review and processing of self-regulatory organization proposed rule changes.  In particular, Section 19(b)(10)(B) of the Exchange Act provides that the SEC may, within seven business days after receipt of a filing, reject as improperly filed a filing that does not comply with SEC rules relating to the required form of a proposed rule change.  Rule 19b-4 did not previously define what constitutes a business day. 

The SEC explained that, by excluding as business days those days on which it is not open for regular business, during which it lacks personnel to review the proposed rule changes, the amendment facilitates the statutory purposes and requirements for a full and adequate review. Without the rule change, an SRO proposal might go into effect in the absence of a review, publication in the Federal Register or an opportunity for public comment, all of which are contemplated by the 1934 Act.

Because the amendment was technical in nature and pertains to the SEC’s organization, procedure or practice, it was not necessary to publish it for comment. The SEC found good cause for the technical amendment to take effect immediately.

SEC Publishes Small Entity Compliance Guide for Exchange Act Section 14A

As reported in this blog on January 31, 2011, the SEC adopted amendments to its disclosure rules and forms on January 25 for public companies that are subject to federal proxy rules.  Such amendments, inserted as Section 14A to the Securities Exchange Act of 1934 and relating to shareholder approval of executive compensation, took effect on April 4. 

The new rules implement Section 951 of the Dodd-Frank Reform Act, which allows the SEC to exempt smaller issuers from its requirements.  All public companies other than smaller reporting companies, must hold say-on-pay and frequency votes at shareholder meetings starting January 21, 2011.  Smaller reporting companies will be subject to the votes at annual meetings starting on January 21, 2013.  The SEC has published a small entity compliance guide to assist registrants with compliance. 

Companies are required to disclose preliminary vote results within four business days of the completion of the shareholder meeting and final voting results within four business days after those results are known on Form 8-K.  Companies other than smaller reporting companies are required to address in the Compensation Discussion and Analysis (CD&A) whether and, if so, how their compensation policies and decisions have taken into account the results of the most recent say-on-pay vote.  Smaller reporting companies are not required to provide a CD&A.

A smaller reporting company is one that has a common equity public float of less than $75 million as of the last business day of its most recently completed second fiscal quarter or one that is unable to calculate its public float and has annual revenue of $50 million or less upon entering the system.

Oil & Gas Independent Engages M&A Consultant for Russian Project

Arcland Energy Corp., a Utah-incorporated exploration and development company headquartered in Dallas, has entered into a consulting agreement for mergers and acquisition services with Digital Associates Capital Limited, a United Kingdom limited liability company engaged in investment banking services.  The agreement provides for Digital to render financing services for asset acquisitions in the oil and gas production and refinery industry in oil fields located in or related to the Russian Federation, including without limitation, securing and evaluating acquisition opportunities and financing options.  

The agreement has an initial term of 364 days from the effective date with automatic one year renewals provided neither party has provided written notice of termination not later than six months before the automatic renewal.  In connection with and at the Arcland's closing of an oil and natural gas transaction in or related to the Russian Federation, Arcland shall pay a fee to Digital equal to 3% of the total purchase price of the applicable oil and natural gas assets acquired by the company.  The agreement is dated March 30 and is Exhibit 10.1 to the Form 8-K filed on April 1 (SEC file no. 0-10315).

Arcland executed a Letter of Intent on March 7 with Switzerland's Linnem Development Corporation SA to acquire a 75 percent interest in a Russian oilfield.  Subject to a formal definitive agreement to be entered into within 90 days of the execution of the letter of intent, Arcland will acquire a 75% stake plus one share in the existing Kumskaya Neft project upon, among other things, completion of financing of at least $125,000,000 to develop and operate the oilfields.  Upon the prospective closing, the Kumskaya Neft project would become a wholly-owned subsidiary of the company.  

Notice Concerning March 11 Earthquake in Japan

Although it is too early for many issuers to assess the potential impact from the recent magnitude 9.0 earthquake in Japan, some companies have made disclosures in the aftermath. 

Toyota Motor Corp. filed a Form 6-K on 3/15 reporting it suspended production at all plants and all subsidiary vehicle-manufacturing plants on March 14, 15 and 16.  Toyota was able to confirm that the team members of Toyota and their family members were safe.

By Form 8-K filed on 3/15, Utah-headquartered Nu Skin Enterprises Inc. reported that no significant damage was sustained by the company’s offices, warehouses or inventory in Japan and that Nu Skin was working to normalize operations as soon as possible despite ongoing challenges with power outages and transportation shutdowns.  Japan accounts for approximately 30% of the company’s revenue globally and the area of Japan most severely impacted by the catastrophes represents slightly less than 10% of Nu Skin revenue in Japan.
 
Finish issuer Nokia Corp. filed a press release on Form 6-K on 3/21 about the preliminary view of the earthquake impact.  Nokia expects some disruption to the ability of its Devices & Services unit to supply a number of products due to the currently anticipated industry-wide shortage of relevant components and raw materials sourced from Japan.  However, Nokia does not expect any material impact on its 1Q11 results due to this event.

Casino Operator Offers Common Stock as an Award for Patronage

Pinnacle Entertainment Inc. (NYSE: PNK) has registered 20 million common shares valued at $2.49M in connection with the company's Owner’s Club Stock Program (Form S-3 filed 3/16/11, file 333-172884).  Pinnacle created the program within its "mychoice" customer loyalty program to provide customers who are individuals and who meet certain eligibility standards the opportunity to receive common stock as an award for their patronage of its casinos and as an incentive to continue such patronage. The company states that the program presents an opportunity for customers to develop a greater proprietary interest in the casinos.

Participants in the mychoice customer loyalty program earn points based on money spent on specified gambling activities at Pinnacle casinos.  The points accumulate in each participant’s mychoice account.  Customers who have earned or obtained 175,000 points under the mychoice customer loyalty program are eligible to apply for membership in the Owner’s Club Stock Program.  Customers who are accepted as members are granted a one-time award of common shares, either in a fixed amount or based on a fixed value, as selected by the President and CEO in his sole discretion.  At the commencement of the program, it is contemplated that new members will be awarded either 100 shares or a number of shares valued at $1,500.

There are three ways in which members may receive common stock under the Owner’s Club Stock Program once admitted as a member.  If a member already has a brokerage account, the member may instruct the broker to contact Pinnacle's transfer agent to request that the shares to be issued under the program be deposited into the brokerage account.  If a member does not already have a brokerage account, the member may establish a brokerage account with a registered broker-dealer and follow the procedure in the foregoing sentence, or the member may contact the transfer agent and elect to hold the shares in book entry form in an account with the transfer agent.  Members may sell common shares received under the Owner’s Club Stock Program at any time in privately negotiated transactions in compliance with applicable securities laws or into the public market. 

Election Between Dual Classes of Common Offered in Reverse Merger

DSW Inc. filed a Form S-4 on March 7 to register equal numbers of Class A common and Class B common shares to be issued in the proposed reverse merger with its majority owner, Retail Ventures, Inc. (SEC file no. 333-172631).  The common control transaction would be accounted for as an equity transaction whereby accounting acquirer Retail Ventures acquires a noncontrolling interest in acquiree DSW, and will not require purchase accounting.  The proposed maximum aggregate offering price is $905M.

In the merger, each outstanding Retail Ventures common share will be converted into the right to receive 0.435 DSW Class A common shares, unless the holder elects to receive an equal number of DSW Class B common shares instead.  The DSW Class A common have one vote per share while the Class B common have eight votes per share.  It is a condition to the merger that all DSW Class A common shares, including those received in exchange for Retail Ventures common shares at the time of closing, will continue to trade on the NYSE under the symbol “DSW.”  DSW does not plan to list the DSW Class B common shares on the NYSE or any other securities exchange and therefore does not expect there to be a liquid trading market for such shares.  Holders of DSW Class B common shares will have the right to convert such shares into DSW Class A common shares at any time on a one-for-one basis.

Goldman, Sachs & Co. provided the opinion to the DSW special committee as to the fairness from a financial point of view to DSW of the merger exchange ratio, and Houlihan Lokey Capital, Inc. provided the opinion to the Retail Ventures board of directors regarding the fairness to unaffiliated shareholders.  For DSW, the proposed merger would simplify the company's corporate structure and enhance the trading liquidity of DSW Class A common shares.  The Retail Ventures board also has determined that the merger is in the best interests of shareholders and unanimously recommends approval of the merger agreement.

Equity Registered Pursuant to Incentive Plan Evergreen Provisions

Most benefit plans cap the maximum number of units or shares that may be issued or sold under the plan, but an "evergreen" provision allows this number to increase annually.  Such increase typically happens on the first day of each fiscal year, often by an amount specified by formula.  Issuers that recently have registered additional shares pursuant to such evergreen provisions include:

athenahealth, Inc. Form S-8 on March 4 (SEC file no. 333-172619, Counsel: Goodwin Procter LLP, Boston)

LoopNet, Inc. Form S-8 on March 3 (333-172589, Counsel: Orrick, Herington and Sutcliffe, LLP, San Francisco)

Blackstone Group L.P. S-8 on February 25 (333-172451, Counsel: Simpson Thacher & Bartlett LLP, New York)

Closed-End Fund Seeks to Convert to Open-End Form

When Global Real Estate Investments Fund was organized in 2009, the closed-end interval fund structure was chosen as most appropriate for the Fund’s investment objective and intended method of operation.  The Fund's Adviser believed that the closed-end interval fund structure would help minimize the potential negative impact of unexpected net redemptions due to short-term trading resulting from day to day volatility in the market.  Nonetheless, the Fund’s initial prospectus contemplated that the Fund’s Board of Trustees would eventually consider the conversion of the Fund into an open-end investment company on or about December 31, 2016. 

In light of changes in market conditions and investor sentiment, in particular the desire of many investors to have immediate access to their invested capital, the Adviser believes that by converting to an open-end fund structure the Fund could experience significant growth without impairing the Adviser’s ability to effectively manage the Fund’s portfolio with an eye toward long-term appreciation.  The preliminary proxy material for the special meeting of shareholders to be held March 24 was filed on Form PRE 14A dated 2/14/11 (SEC file no. 811-22322). 

Proxy Proposal #4 seeks shareholder approval to a) change the subclassification of the Fund from that of a closed-end investment company to that of an open-end investment company, (b) eliminate the Fund’s fundamental policy regarding quarterly repurchases, and (c) eliminate provisions in the Fund’s Declaration which discuss potential conversion of the Fund to an open-end investment company.  Global Real Estate filed a Form N-1A on 2/23/11 to register Class A shares under the 1933 Act.  The proposed conversion will not be implemented until after the Registration allowing the continuous offering of shares becomes effective.

8-K Filings Reporting Revocation of Auditor Registration by PCAOB

View Systems, Inc. Form 8-K filed 2/16/11 (SEC file no. 0-30178): 
SEC Staff had advised View Systems that the Public Company Accounting Oversight Board (“PCAOB”) registration of the company's former independent accountant, Larry O’Donnell, CPA, P.C., had been revoked effective December 14, 2010.  Because the company has a registration statement on Form S-1 pending with the SEC containing audit reports prepared by Larry O’Donnell, CPA, P.C., it must obtain a re-audit of the financial statements for the year ended December 31, 2009 before the Form S-1 registration statement will be declared effective.  On January 19, View Systems engaged Robert L. White & Associates, Inc. to audit the financial statements for the years ended December 31, 2010 and 2009. 

Imperial Resources, Inc. Form 8-K filed 2/7/11 (SEC file no. 0-53332):
On January 27, Imperial Resources was notified by the SEC that the PCAOB had revoked the registration of J. Crane CPA, P.C. (“J. Crane”) on January 19, 2011.  J. Crane was the company’s former independent registered public accounting firm, and rendered an opinion on the Annual Report for the year ended March 31, 2009.  On June 17, 2009, the company dismissed J. Crane as auditor and engaged Madsen & Associates.  In regards to the financial statements for FY09, Madsen relied entirely upon the audit and report previously issued by J. Crane.  Madsen will re-audit the FY09 financials and will include an audit report for all periods presented in an amended 10K for the FY10 and FY09, of which the company anticipates filing on or before April 15, 2011.

Add-on Exchange, Inc. Form 8-K filed 1/27/11 (SEC file no. 0-52867):
The company received a letter from the SEC on January 6 advising that effective October 22, 2010, the PCAOB revoked the registration of Gately & Associates LLC ("Gately") and that, since Gately was no longer registered with the PCAOB, Add-on Exchange may not include Gately's audit reports in SEC filings.  Accordingly, the financial statements for the fiscal year ended September 30, 2009, must be re-audited by an independent public accounting firm registered with the PCAOB.  Add-on engaged Sherb & Co. on January 14 to conduct this audit.

Issuers Implementing Clawback Policies and Plan Provisions

Section 954 of The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC to create a rule requiring public companies to recover incentive-based executive compensation that was paid out based on inaccurate financial statements.  These "clawback" or recoupment provisions are more stringent than under Section 304 of the Sarbanes-Oxley Act of 2002, which extends only to the CEO and CFO and which requires misconduct on the part of the executives or other employees rather than financial restatement due to erroneous data or material noncompliance.

Some companies or their respective board compensation committees have signaled their intent to implement a clawback policy or to modify existing compensation recoupment provisions following the SEC’s final rulemaking (see DEF14A proxy filings on February 2 by Analog Devices, Inc. and Ciena Corp.)  Others are forging ahead. 

GameStop Corp. filed a Form 8-K on February 8 reporting a new Clawback Policy under Item 8 (Other Events).  The policy provides for reimbursement of annual incentive payments or long-term incentive payments to a current or former executive officer of the Company where the payment was based on inaccurate financials over a three-year look-back period. 

DGT Holdings Corp. filed an amended and restated 2007 Incentive Stock Plan with its DEF14A filed on January 26, seeking to increase the number of shares under the plan.  Certain changes to the plan approved by the board will be effective upon shareholder approval of the plan proposal, including a clawback provision that was added to reflect Dodd-Frank legislation. The new Clawback provision is Section 18 of the amended and restated plan. 

Central Pacific Financial Corp. issued preferred shares and a ten-year warrant to the U.S. Treasury in 2009 under the Troubled Asset Relief Program Capital Purchase Program.  In the Compensation Disclosure & Analysis section of the PRE14A filed on February 3, Central Pacific notes that although it does not have a separate policy regarding clawback of incentive awards in the event of misstated or restated financials results, the company's participation in the Capital Purchase Program requires it to ensure that any executive incentive compensation plan does include such a provision for inaccurate financial statements or incentive criteria. 

Secured Notes Offered to Members of U-Haul Investors Club

AMERCO filed four prospectus supplements on February 3 under a universal shelf registration statement (file no. 333-169832), each relating to a series of asset-backed notes with maturities ranging from three to 25 years.  Prospective investors must become a member of the U-Haul Investors Club and comply with the instructions available at http://www.uhaulinvestorsclub.com/.  Principal and interest on the notes will be credited to each holder’s U-Haul Investors Club account in arrears every three months, beginning three months from the issue date, until the maturity date.

Prospective investors are required to complete a membership application, complete a note subscription offer, set up a U-Haul Investors Club online account through which members pay for the notes, and receive and deliver in electronic format any and all documents, statements and communications related to the offering.  To begin investing, a Club account must have a balance of at least $100.  Members can then add or withdraw funds in any denomination through a checking or savings account that is linked to the Club account and processed through ACH (Automated Clearing House).  

The offerings of fully amortized notes are comprised of:

• $2,000,000 aggregate principal amount of 7% notes secured by a first priority lien and deed to secure debt on real property and improvements thereon located in Clayton County, Georgia consisting of a 650-unit U-Haul operated rental center and self-storage facility, together with approximately 4.43 acres of adjacent bare land.
• $500,000 aggregate principal amount of 5% notes secured by a first priority lien on 1,250 designated U-Haul portable storage containers.
• $500,000 aggregate principal amount of 6% notes secured by a first priority lien on 500 designated U-Haul tow dollies.
• $254,800 aggregate principal amount of 4.5% notes secured by a first priority lien on 2,548 designated U-Haul appliance dollies.

The notes are being issued in uncertificated book-entry form only, through the U-Haul Investors Club website.  The notes are not transferable except between Club members through privately negotiated transactions.  AMERCO, a Nevada corporation traded on the NASDAQ Global Select Market, is the holding company for U-Haul International, Inc.

SEC Adopts Rules on Say-on-Pay and Golden Parachute Compensation

The Final Rule adopted by the SEC on January 25 implements Dodd-Frank Act Section 951 requirements relating to shareholder votes on executive compensation ("say-on-pay") and "golden parachute" compensation granted to officers in connection with mergers, acquisitions, consolidations or other change in control transactions.  The rules increase the required disclosures while creating exceptions for smaller companies. All relevant shareholder votes would be advisory.

The say-on-pay votes are required at least once every three years beginning with the first annual shareholders’ meeting that takes place on or after January 21, 2011.  Companies must disclose whether the vote is non-binding and whether they considered the results of the most recent say-on-pay vote.  Also, at least once every six years shareholders are to be allowed to vote on how often the “say on pay” vote will be taken: every year, every other year, or once every three years.  In order to implement the requirement for such a "frequency" vote, the rules revises the proxy rules to permit these three choices on the proxy card. 

Several recent Form DEF14A proxy filings reflect these new provisions for non-binding advisory votes, including on January 27:

• Alberto-Culver Co.
• Applied Materials, Inc.
• Biodel Inc.
• Innovative Solutions and Support, Inc.
• OMNOVA Solutions Inc.

Form 8-K has been revised to allow shareholders to learn how often a company will provide the say-on-pay vote.  The Form 8-K must be filed no later than 150 calendar days after the date of the annual meeting in which the vote took place, and no later than 60 calendar days before the deadline for submitting a shareholder proposal under Rule 14a-8 for the subsequent annual meeting. 

Rescission Offers

A rescission offer is an attempt from a company to redress an error made in the offering of securities.  Contract law defines a rescission as the unmaking of a contract between parties.  The purpose of the rescission is to bring both parties back to where they were before the contract.

In the two most recent rescission offers filed with the Securities & Exchange Commission, previous offerings were found after the registration to be in violation of one or more laws.  The rescission offer gives purchasers of those securities and option to return them for the price they paid.  Often, if the purchaser refuses the rescission offer, the securities are re-registered with the legal ommissions/errors having been corrected.

Prosper Marketplace Inc., provider of a peer-to-peer online credit platform, had allowed its registration in Florida to offer and sell Borrower Payment Dependent Notes to expire.  The Florida Office of Financial Regulation informed the company that it was required to make a rescission offer to any Florida resident that purchased a Note from Prosper between July 10 and August 5, 2010.  The rescission offer was filed 1/24/11 on Form S-1, file no. 333-171837.  Purchasers that accept the offer will receive the price they paid for the notes plus 6% (per annum) interest.

Common shares of Brenham Oil & Gas Corp. were spun-off as a dividend distribution to shareholders of American International Industries, Inc. on July 21, 2010.  However, the registration statement pertaining to the Brenham shares was not filed until September 21 (Form S-1, file no. 333-169507).  Because the shares were issued prior to the registration being declared effective by the SEC, the distribution was not in compliance with federal and state securities laws.  The registration was converted to a rescission offer on the Amendment filed 1/6/11.

The Brenham rescission offer expires on January 31.  Individuals who accept the rescission offer will receive no consideration because the shares were issued as a dividend without any shareholder consideration.  If the offer is not accepted, the shares can be sold after the effective date of the registration without limitation as to the number or manner of sale, but remain subject to any of Brenham’s insider trading policy requirements.

New Disclosure Rules Intended to Revitalize Securitization Market

To improve transparency in asset-backed securities ("ABS") in the wake of significant losses suffered by investors during the financial crisis, the SEC has adopted new rules that require expanded issuer disclosure of information regarding the underlying assets.  The requirements and new Form ABS-15G that were adopted in the Final Rule implement the requirements of Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and also conform disclosure requirements for prospectuses and ongoing reports for ABS sold in registered transactions. 

The final rules require ABS issuers to file with the SEC, in tabular format, the history of the requests they received and asset repurchases they made relating to their outstanding ABS.  The table will provide comparable disclosures so that investors may identify originators with clear underwriting deficiencies.  Specifically, issuers are required to disclose the last three years of repurchase history in an initial filing on EDGAR due by Feb. 14, 2012, and additional disclosures will be required quarterly thereafter. 

Disclosures also will be required in prospectuses for new ABS.  Each prospectus must include the repurchase history for the last three years for the issuer’s ABS of the same asset class as the offered securities.  This requirement also is effective Feb. 14, 2012.  In its ongoing reports, an issuer will be required to provide updated repurchase history for the particular, related asset pool beginning with distribution reports required to be filed on Form 10-D after Dec. 31, 2011.

In addition, the final rules require Nationally Recognized Statistical Rating Organizations (NRSROs) to provide a description of the representations, warranties and enforcement mechanisms available to investors in an ABS offering, and to disclose how these differ from those of similar ABS.  NRSROs will be required to make the disclosures in any report accompanying a credit rating, including in presale reports that are distributed prior to the sale of the security.  NRSROs will be required to provide this information for any report issued on or after six months after the effective date of the rules (which is 60 days after their publication in the Federal Register.)

SEC Adopts New Rules For Issuer Review of Assets in ABS Offerings

By Final Rule adopted January 20 and to be effective 60 days after publication in the Federal Register, the SEC has approved new requirements in order to implement Section 945 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and new Rule 193 (17 CFR 230.193) under the Securities Act of 1933 to require any issuer registering the offer and sale of an asset-backed security (“ABS”) to perform a review of the assets underlying the ABS.

Rule 193, which implements Securities Act Section 7(d)(1), applies to all registered asset-backed securities, regardless of the assets that comprise the bundle.  However, the type of review may vary depending on such circumstances as the nature of the assets being securitized.  Under the final rules, the review must, at a minimum, be designed and effected to provide reasonable assurance that the prospectus disclosure about the assets is accurate in all material respects. 

The rule permits issuers to perform the review themselves or hire third parties to perform the review.  If an issuer obtains assistance from a third party to perform the review, and attributes, in the prospectus, the findings and conclusions of the review to the third party, the issuer may rely on the third-party's review to satisfy the review requirement provided the third party is named in the registration statement and consents to being named as an "expert" under federal securities laws. 

The SEC also adopted amendments to Item 1111 (17 CFR 229.1111) of Regulation AB (17 CFR 229.1100 through 17 CFR 229.1123) to require an ABS issuer to disclose the nature of its review of the assets and the findings and conclusions of the issuer’s review of the assets.  Issuers will be required to disclose:

• Information about how the loans in the pool differ from the loan underwriting criteria disclosed in the prospectus.
• Information about loans that did not meet the disclosed underwriting criteria but were nonetheless included in the pool.
• Information about the entity that made the determination that such loans should be included in the pool, despite not having met the disclosed underwriting standards.

The final rule provides a phase-in period to allow market participants to adjust their practices to comply with the new requirements.  Any registered offering of ABS commencing with an initial bona fide offer after December 31, 2011, must comply with the new rules.

Updated EDGAR Filer Manual to be Effective January 11, 2011

By Final Rule adopted January 5, the SEC adopted revisions to the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) Filer Manual to reflect updates to the EDGAR system.  The revisions:

• implement the new EDGARLink Online Application to allow filers to submit EDGARLink submission form types online without the use of the offline EDGARLink Tool; 
• support the electronic filing of submission form type ABS 15G and its amendment (See Proposing Release No. 33-9148, Disclosure for Asset-Backed Securities Required by Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, relating to to representations and warranties in ABS offerings); 
• add new Form 8-K Item 6.10 (Alternative Filings of Asset-Backed Issuers), which requires a PDF attachment to be included as Exhibit 99;
• support minor changes in XBRL validations for filings containing Exhibit 101 attachments. 

The filer manual is also being revised to address changes previously made in EDGAR to support the electronic filing of new submission form types SC 14N, SC 14N-S, and the new Form 8-K Item 5.08 (Shareholder Director Nominations).  However, use of SC 14N, SC 14N-S and 8-K Item 5.08 is delayed until further notice. See Order Rel. No. 33-9149 (Order Granting Stay) for more information.