Company: Net Roadshow, Inc.
Public Availability Date: September 08, 1997
WSB File No. 090897012
Fiche Locator No. 2789E10
WSB Subject Category: 032
Reference:
Securities Act of 1933, Section 2(10)
INQUIRY LETTER 1
TROUTMAN SANDERS LLP
NATIONSBANK PLAZA
800 PEACHTREE STREET, N.E. - SUITE 5200
ATLANTA, GEORGIA 30308-2216
TELEPHONE(404) 885-3000
July 23, 1997
Catherine T. Dixon, Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
Mail Stop 3-3
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Request for Confidential Treatment
Dear Ms. Dixon:
This firm serves as legal counsel to Brad Hammond and Net Roadshow, Inc.
("Company"). Accompanying this letter is a request ("No-Action Request") made by
this firm on behalf of the Company seeking confirmation of our opinion as to a
legal interpretation of Section 2(10) of the Securities Act of 1933, as amended
("Act") and requesting that on the basis of the facts stated in the No-Action
Request, the Staff would not recommend that the Commission take enforcement
action based on the proposal of the Company.
On behalf of the Company, we hereby request that the No-Action Request
be afforded confidential treatment for a period of time not to exceed 120 days
from the date the response has been sent or given by the Commission to the
Company. Considerations for our request for confidential treatment of the
No-Action Request are as follows:
(i) The information contained in the No-Action Request constitutes trade
secrets and confidential information of a commercial or financial nature and is
property of the Company;
(ii) The information contained in the No-Action Request is privileged
and confidential and the dissemination of such material into the public domain
would be detrimental to the Company and its business operations:
(iii) The disclosure of this information would affect adversely the
Company's competitive position and, as a result, the Company should not be
required to disclose such information to the public at the present time; and
(iv) The Company has, and will, take measures available to it to protect
the confidential nature of the proposal including, but not limited to, requiring
that potential customers enter into a confidentiality agreement with the Company
prior to viewing a presentation of the proposal.
Sincerely,
Thomas M. Duffy, for
TROUTMAN SANDERS, LLP
TMD:llt
INQUIRY LETTER 2
TROUTMAN SANDERS LLP
NATIONSBANK PLAZA
800 PEACHTREE STREET, N.E. - SUITE 5200
ATLANTA, GEORGIA 30308-2216
TELEPHONE(404) 885-3000
July 23, 1997
Catherine T. Dixon, Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
Mail Stop 3-3
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: No-Action Request/Section 2(10) of the Securities Act of 1933, as amended
("Act")
Dear Ms. Dixon:
This firm serves as legal counsel to Brad Hammond and Net Roadshow, Inc.
("Company"). The Company desires to provide road shows for public offerings to
qualified investors over the Internet. We would appreciate confirmation in the
form of a no-action response of our opinion that our client may provide road
shows for public offerings for qualified investors over the Internet under the
following facts and circumstances, and that such transmissions will not
constitute a "prospectus" pursuant to Section 2(10) of the Act:
FACTUAL BACKGROUND
The format and flow of the requested Internet road show product is as
follows:
1. First, a website for road shows regarding public offerings would be
established. The website would provide an index of the road shows available for
viewing by qualified investors and by the underwriting investment banks. The
road shows would be indexed by the name of the offering company, the name of the
underwriting investment bank, and by industry classification. The road shows
will not be transmitted prior to the filing of a registration statement with the
Securities and Exchange Commission ("Commission") as to each applicable
offering.
2. To view a road show, the qualified investor would be required to
contact an institutional salesman or the syndicate department at one of the
underwriting investment banks. The qualified investors will be typical of the
investors who would customarily be invited to attend a live road show, such as
registered broker/dealers and investment advisers. (Institutional salesmen would
also be permitted to call qualified institutional money managers to inform them
that it is available for viewing.) An access code will be required to view the
road show on the Internet. A log will be maintained of who specifically received
the access code. The access code for each road show will be changed each day and
each qualified investor will be allowed to view a road show one day only.
3. The Internet road show would be the exact same road show that
qualified investors see live, as the live road show will be filmed in its
entirety, including the filing of all questions and answers. The live road shows
will not be edited for content and viewers will generally view the road shows in
their entirety.
1 The Internet version of the road show will present the charts and
oral presentation at a similar speed (like a slide show) as the live road show.
In the event information changes between the time the road show is filmed and
throughout the period the road show is available on the website, the display
will include a periodic crawl providing a synopsis of such changes. The crawl
will also provide that the viewer may contact the appropriate institutional
salesman for further information about such changes.
4. A large and obvious button reading "PRELIMINARY PROSPECTUS" will be
displayed at all times throughout the road show. A viewer would simply "click"
on the "button" featuring the preliminary prospectus which is on file with the
Commission to view it in its entirety.
5. Before viewing any road show, the potential view will be advised of,
and must agree to, the following:
"The copying, downloading or distribution of any road show material is not
permitted.
The Internet road show does not constitute a prospectus, in whole or in part. It
is strongly recommended that each investor read the actual prospectus before
making an investment decision."
The prospectus relating to this offering is available through this site for
viewing before viewing the road show. The prospectus may be obtained by clicking
on the button labeled "PRELIMINARY PROSPECTUS." Viewers should refer to the
prospectus and/or the registration statement for more complete information about
the offering.
A registration statement relating to these securities has been filed with the
Securities and Exchange commission but has not yet become effective. These
securities may not be sold nor offers to buy be accepted prior to the time the
registration statement becomes effective. This transmission shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there by any
sale of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any State."
In the event the viewer does not agree to the above, the viewer will be
denied access to the road show. The screen, throughout each road show, would
also carry a disclaimer at all times stating that "the copying, downloading or
distribution of any road show material is not permitted."
6. The viewer will be able to print the entire preliminary prospectus.
The Company's transmissions include technology designed to prevent the copying,
downloading or printing of any portion of the road show transmission other than
the preliminary prospectus.
7. The viewer will be informed by a periodic crawl across the screen or
by prominent text of the importance of viewing the filed prospectus.
8. The issuers and the underwriters of the road shows transmitted will
be required to take such steps as are necessary in order to provide that the
road show information as transmitted by the Internet is not inconsistent or
contradictory with the information set forth in the filed prospectus or in the
live road show.
9. The compensation to be received by the Company for the presentation
of road shows over the Internet will not be contingent upon the degree of
success of an underlying offering and will not be related to the size of an
offering. The fees charged by the Company will be analogous to a production or
printing cost in that the fees will be charged for the production of the
material to be transmitted over the Internet. The Company's fees may vary
depending upon whether the road show presentation is (i) produced but not
transmitted, or (ii) produced and transmitted for any period of time.
10. We believe that the following benefits would be recognized in the
marketplace if the Commission approves the request:
(i) No longer will some institutions and money managers be placed at an
advantage over others on syndicate transactions. Our client believes that your
approval of this process would "level the playing field" and provide each
qualified investor the opportunity to view the road show.
(ii) Money managers located in geographic areas frequently missed by the
live road show would be placed on more equal footing.
(iii) There would be wider availability of the road show and the
preliminary prospectus to interested money managers.
(iv) The road show and the preliminary prospectus should be distributed
faster giving qualified investors more time to make a fully informed investment
decision.
(v) The participants in the road show would likely be more precise in
the choice of words and graphs knowing the distribution channel and the viewing
audience (including, potentially, the Commission).
In summary, we believe that this approach allows for "rapid
dissemination of information to investors and financial markets in a more
cost-efficient, widespread, and equitable manner," consistent with the recent
position of the Commission as provided in Release No. 33-7233.
LEGAL ANALYSIS
Section 5(b) of the Act makes it unlawful to transmit any "prospectus"
unless the prospectus meets the requirements of Section 2(10) of the Act.
Section 2(10) of the Act defines "prospectus" to include any "prospectus,
notice, circular, advertisement, letter, or communication, written or by radio
or television, which offers any security for sale or confirms the sale of any
security." We believe that the limited transmission by the Company of road
shows, over an access code restricted Internet website, to the type of qualified
investors who would customarily be invited to attend live road shows would not
constitute "prospectuses" requiring compliance with Section 10 of the Act.
Road show presentations that occur after the filing and prior to the
effectiveness of the registration statement ordinarily do not constitute
"prospectuses" due to the fact that they are oral and visual and are not
"written."
2 Thus, transmission of substantially the same communication by means
of the Internet should not be deemed prospectuses unless the Internet
transmissions constitute "radio" or "television" broadcasts within the meaning
of Section 2(10) of the Act. We do not believe that such transmissions by means
of the Internet would constitute "radio" or "television" broadcasts.
The use of the terms "radio" or "television" in Section 2(10) of the Act
is for the purpose of regulating the "broadcasting" of materials relating to the
offer of any security for sale. The intention of Congress as evidenced from the
language of the statute was to prevent the broadcasting of a communication
regarding the offer or sale of a security to an unlimited audience.
3 The references in Section 2(10) to "radio" or "television" are not
intended to prohibit all uses of technology, such as radio or television or
electronic media in the form of the Internet, but only to prohibit the
transmission of materials which constitute a broadcast.
The Act specifically provides in Section 10(f) that where a prospectus
does consist of a radio or television "broadcast," copies of the materials
constituting the prospectus must be filed with the Commission. This provision of
the Act indicates that communications which provide the widespread dissemination
of information to the public regarding the offer of a security for sale are the
types of communications fully within the scope of Section 10(f). The only type
of radio or television transmission that could be deemed a prospectus would
therefore be a broadcast to a mass audience. Accordingly, the only type of
transmission by electronic media, such as the Internet, which could be deemed a
prospectus would be a broadcast over the Internet which provided unlimited and
widespread dissemination of the material being transmitted. The proposal of the
Company will take such steps as are necessary in order to provide that access to
the information will be limited so that such transmission will not constitute a
broadcast.
While the use of media such as radio and television, and vehicles for
electronic communication such as the Internet, have evolved since the adoption
of the Act in 1933 and amended thereafter, it remains the intention of Congress
for Section 2(10) to regulate broadcasts of information in a widely disseminated
manner rather than to a limited audience. In Gustafson v. Alloyd Co., Inc.,
No. 93-404 (U.S. Feb. 28, 1995) the United Supreme Court recognized this fact by
holding, in part, that the term prospectus was intended to be a document which
solicited the public to acquire securities. The term was not intended to refer
to the dissemination of information to a limited viewing audience as
contemplated by the Company.
In summary, references to the words "radio" and "television" in Section
2(10) are intended to prevent unlimited and wide spread dissemination or
communication to the public of information regarding an offer for sale of a
security without the type of disclosure required by Section 2(10) of the Act. By
contrast, the Internet transmissions contemplated by the Company will be
restricted in terms of the type of persons or entities to be provided with the
access code required to view the transmission. The Company is also utilizing
technology designed to prevent the person or entity viewing the presentation
from copying, downloading, or otherwise reproducing the road show transmission.
The only component of the road show transmitted by the Company over the Internet
which may be copied or printed is the preliminary prospectus relating to each
offering. The Company has taken these measures in order to provide that the
transmission by the Company of road shows by means of the Internet will make the
securities markets more efficient, furthering the goals of the Commission as
evidence through the implementation of the EDGAR system and more recently, the
adoption of Release No. 33-7233.
CONCLUSION
We believe that the proposal of our client would conform with the
beliefs of the Commission that the use of electronic media within the securities
industry will make the securities markets more efficient, as evidenced through
the implementation of the EDGAR system and more recently, the adoption of
Release No. 33-7233.
The presentation of a road show by means of the Internet as described in
our client's proposal should be permissible because the information disseminated
through the presentation will not constitute a prospectus or a broadcast. Our
client's proposal specifically limits access to the transmissions through an
access restricted website to the type of qualified investors who would
customarily attend a road show, provides that prospective purchasers will not be
provided with a paper version of the road show presentation made by means of the
Internet, and includes technology designed to prevent the presentation from
being copied, printed, or disseminated.
Based on the foregoing facts and analysis, we believe that providing
road shows for public offerings to qualified investors over the Internet as
described herein will not constitute the use of a "prospectus" under Section
2(10) of the Act. We respectfully request advice that you concur with this view
or that the Division will not recommend that the Commission take enforcement
action against our client if it engages in the transactions described above. If
you wish additional information, or believe that additional representations or
clarifications as to the proposed transaction are required before issuing a
no-action response, we would appreciate your contacting us.
Thank you for your review of this no-action letter request.
Sincerely,
Thomas M. Duffy, for
TROUTMAN SANDERS LLP
TMD:llt
STAFF REPLY LETTER
July 30, 1997
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Net Roadshow, Inc. ("Net Roadshow")
Incoming letter dated July 23, 1997
Based on the facts presented, but without necessarily agreeing with your
analysis, the Division will not recommend enforcement action to the Commission
if Net Roadshow transmits an issuer's road show presentation over the Internet
for the purposes and pursuant to the procedures described in your letter in
reliance on your counsel's opinion that such transmissions are not prospectuses
within the meaning of Section 2(a)(10) of the Securities Act of 1933. The
Division notes that a roadshow transmission will not be conducted before the
registration statement is filed with the Commission in connection with the
particular public offering of securities.
The request for confidential treatment pursuant to Regulation 200.81 has
been granted for the earlier of: (i) 120 days from the date of this response, or
(ii) the date the information in your letter and this response is made publicly
available by Net Roadshow, Inc.
This position is based on the representations and your counsel's opinion
made to the Division in your letter. Any different facts or conditions might
require different conclusions. Further, this response represents the Division's
position on enforcement action only and does not express any legal conclusion on
the question presented. Since regulatory responses to legal issues raised by
technological developments may evolve, you should be aware that this no-action
position may be reevaluated in the future.
Sincerely,
Mary J. Kosterlitz
Special Counsel
1The Company reserves the right to edit our "dead time" arising
through logistical, organizational, or similar problems at live road shows and
to give the issuer and/or underwriter the opportunity to edit our misstatements
or mistakes.
2The communications, while not prospectuses, remain subject to the
anti-fraud provisions of the Act and the Securities Exchange Act of 1934, as
amended.
3Section 10(f) provides that "in any case where a prospectus consists
of a radio or television broadcast, copies thereof shall be filed with the
Commission under such rules and regulations as it shall prescribe."