Re: Rule Change Proposals
(File No. S7-30-98)
Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
Mail Stop 0609
450 Fifth Street, N.W.
Washington, DC 20549-0609
Dear Mr. Katz:
The National Association of Manufacturers (NAM) welcomes this opportunity to comment on the SECís Release 33-7606A (November 13, 1998) (the "Release") Ė the so-called "Aircraft Carrier." The NAM Ė "18 million people who make things in America" Ė is the nationís largest and oldest multi-industry trade association. The NAM represents 14,000 members (including 10,000 small and mid-sized companies) and 350 member associations serving manufacturers and employees in every industrial sector and all 50 states. Headquartered in Washington, D.C., the NAM has 11 additional offices across the country.
Since 1982, when the SEC introduced its Rule 415, a large number of NAM members have availed themselves of the "shelf registration" process to publicly offer their debt securities. The process has become highly refined and efficient, and allows issuers and underwriters to access the market at any time deemed propitious, with proper disclosure to investors provided through delivery of a final prospectus. None of our members is aware of any abuses arising from the system, nor has there been any complaint from investors, particularly those who are regular institutional purchasers of debt securities.
Our shelf issuer members are distressed that the new system outlined in the Release will remove the efficient and speedy access to debt markets currently available. First, the Release will require registration statements to be filed after the terms of the transaction are set. What was previously done with a quick phone call will, under the proposed changes, become a procedural ordeal: the registration must contain whatever "free writing" has been produced by the issuer or the underwriters, the filing fee must be wired to the SECís account, and the underwriters must confirm that all prospective investors have received the newly proposed "securities term sheet," all before the registration statement can be filed.
Lastly, the proposal changes the signature requirement for registration statements: officers and directors must certify that they have actually read the registration statement and, to their knowledge, it contains no material misstatements or omissions. As a practical matter, the SEC must understand that very few directors will be willing to sign a power of attorney permitting an issuer officer to execute this kind of certification. As a consequence, the registration statement draft will have to be circulated to directors for personal signature. Needless to say, this process will delay transactions for hours, if not days.
We applaud the efforts of the SEC to modernize and streamline the registration process, but we do not see why that effort should do away with one of the most efficient and abuse-free practices that governs access to U.S. capital markets, particularly where the benefit to end investors seems tentative at best.
Howard Lewis III