Excerpt from Current Issues and Rulemaking Projects Outline (November 14, 2000)
Section II.D.1. Mergers & Acquisitions - Current Issues - Investment Banking Firm Disclaimers
Boards of directors of companies soliciting shareholder voting and/or investment decisions in connection with mergers and other extraordinary transactions often retain investment banking firms as financial advisors, in many cases to render an opinion on the financial fairness of the transaction. In connection with its review of proxy statements, Securities Act registration statements and other Commission filings made in this context, the staff increasingly has observed the appearance of disclaimers by or on behalf of the financial advisor regarding shareholders' right to rely on a fairness opinion that the advisor has furnished to the registrant's board, a special committee of the board, and/or the registrant. Examples of such disclaimers include the following:
• "No one other than the Board of Directors [or the Special Committee and/or the Company] has the right to rely on this opinion;"
• "This opinion is provided solely/only to the Board of Directors [or the Special Committee and/or the Company]:"
• "This opinion is solely/only for the benefit of the Board of Directors [or the Special Committee and/or the Company];"
• "No one may rely on this opinion without the prior consent of the Financial Advisor;" and
• "This opinion is addressed [solely/only] to the Board of Directors [Special Committee and/or the Company] and is not intended to be relied upon by any shareholder."
During the review and comment process, the staff has objected to such statements as inconsistent with the balance of the registrant's disclosure addressing the fairness to shareholders of the proposed transaction from a financial perspective. Specifically, the staff has requested that any such direct or indirect disclaimer of responsibility to shareholders, whether made by or on behalf of the financial advisor, be deleted from any portion of the disclosure document in which it appears (including exhibits). Alternatively, the registrant may add an explanation that clarifies:
• the basis for the advisor's belief that shareholders cannot rely on its opinion, including (but not limited to) whether the advisor intends to assert the substance of the disclaimer as a defense to shareholder claims that might be brought against it under applicable state law;
• whether the governing state law has addressed the availability of such a defense to the advisor in connection with any such shareholder claim; if not, a statement must be added that the issue necessarily would have to be resolved by a court of competent jurisdiction; and
• that the availability or non-availability of such a defense will have no effect on the rights and responsibilities of the board of directors under governing state law, or the rights and responsibilities of the board or the advisor under the federal securities laws.