ChaseMellon Shareholder Services

Overpeck Centre

85 Challenger Road

Ridgefield Park

NJ 07660

March 23, 1999

Mr. Jonathan G. Katz, Secretary

Securities and Exchange Commission

450 Fifth Street, N.W., Stop 6-9

Washington, D.C. 20549

Re: Notice of Proposed Rulemaking: The Regulation of Securities Offerings

Dear Mr. Katz:

ChaseMellon Shareholder Services, L.L.C. ("ChaseMellon") is pleased to submit its comments on the proposed rulemaking by the Securities and Exchange Commission (the "Commission") that is referred to as the Aircraft Carrier proposal (the "Proposal"). ChaseMellon, a transfer agent serving more than 2,000 public companies, is one of the largest providers of shareholder services in the United States. For these companies, we currently provide administrative services to approximately 275 dividend reinvestment plans ("DRIPs") and direct stock purchase plans ("DSPPs") administered by The Chase Manhattan Bank and Mellon Bank, N.A. This letter focuses on the portions of the Proposal that relate to such stock plans.

Our experience as service provider to these companies and their shareholders has given us extensive knowledge of the objectives sought by different companies in instituting DRIPs and DSPPs, as well as the high level of shareholder satisfaction with these plans and low potential for abuses. These plans allow issuers to encourage shareholder loyalty and build relationships with customers, employees and other affinity groups. Some DRIPs and DSPPs plans allow the investor to buy shares that were obtained by the issuer for the plan on the open market. Other plans offer newly issued shares and are a flexible and low-cost means for issuers to raise capital. Because of the low transaction costs for shareholders, DRIPs and DSPPs have long been the most economic way for small investors to own individual stocks. Approximately 1,100 issuers in the country have adopted DRIPs and DSPPs, and ChaseMellon experiences substantial investor demand for more issuers to adopt such plans.

Under current law, companies can generally use Form S-3 for their dividend reinvestment and direct stock purchase plans even if they do not have the public float to be eligible to use Form S-3 for their other offerings. The Proposal extends Form B for this purpose; however, it would impose new ownership, issuance and purchase restrictions. We believe that these restrictions would have unfortunate effects on investors, issuers, and transfer agents without a demonstrated need or public benefit.

Under the Proposal, Form B would only be available for DRIPs and DSPPs that are offered to existing shareholders who have held the stock for at least two months. The Proposal indicates that this restriction is intended to limit investors to people who "have a chance to learn about the issuer before deciding whether to participate." We believe that this restriction is unnecessary. New investors in brokerage accounts are subject to no such limitation, and the dangers of abuse (since brokers are permitted to recommend specific investments and solicit transactions) are smaller in the case of stock plans, not greater. Moreover, DRIP and DSPP participants are no less likely than brokerage customers to obtain information about issuers, which is increasingly readily available to them, whether through EDGAR, the issuer or various websites. We therefore do not see what investor protection goals this new restriction would serve.

Importantly, the two-month holding requirement would deny the use of Form B for many plans that currently may be filed on Form S-3. The Proposal only covers offerings to existing shareholders, apparently ignoring that many DRIPs and DSPPs today are "open availability" plans, allowing new shareholders to buy the stock directly from the issuer, through the plan. These plans allow someone seeking to participate in such plans to avoid having first to make his or her initial purchase through a broker, paying the broker a commission and an additional fee to obtain a certificate for the shares, and then having to mail the certificate to the issuer's plan administrator. These costs are especially burdensome for the small investor, who is the typical DRIP or DSPP participant.

Such open availability plans are permitted under various no-action letters and releases, such as Bank-Sponsored Investment Services Programs (September 14, 1995), and releases, such as Exemption from Rule 10b-6 for Certain Dividend Reinvestment and Stock Purchase Plans (Release Nos. 33-7114; 34-35041, December 1, 1994). In the United States, approximately 230 companies have instituted such open availability plans. Under the Proposal, new shareholders could no longer participate in such plans, unless the issuer used Form A. The Proposal therefore seems to undermine recent Commission initiatives relating to such plans and to the establishment of a direct registration system.

Additionally, it would be costly, if not impossible, to track a holding period. Tracking would seem to require creation of new information systems, not just for issuers and transfer agents but for brokers, as well, since the length of time the investor held the shares with the broker would have to be tracked.

By increasing the cost to issuers of implementing such DRIPs and DSPPs, the Proposal could have the effect of reducing the number of companies that offer them. The result would be to deprive small investors of their current ability to buy stock directly from the issuer at significant savings, without any demonstration that investors are harmed in any way by the current system. Accordingly, we recommend that the proposed two-month holding period be eliminated.

Under the Proposal, a company may use Form B to register shares amounting to no more than 15% of its public float when aggregated with the dollar amount of shares previously registered for sale to existing shareholders on Form B within twelve months of the current offering.

This departure from current law would weaken the ability of issuers to use these plans as a method for raising capital. Issuers should continue to be able to use the more streamlined form under the Securities Act of 1933 Act for such plans, especially if the Proposal's increased disclosure requirements under the Securities Exchange Act of 1934 are implemented.

These issuance limitations would also add to issuers' costs. Issuers or plan administrators would have new tracking obligations that would be very costly to implement, since they would have to determine the market value of positions over various periods of time. Accordingly, in the absence of known abuse, the Commission should not restrict issuance amounts under DRIPs and DSPPs.

ChaseMellon also believes that the Proposal's limitations on the amount of purchases that a shareholder may make are unnecessary and undesirable. Shareholders would be limited to the smaller of 100% of the value of the issuer's securities they own already own or 5% of the total offering amount, except that the shareholder may purchase $10,000 worth of stock in the plan, in any twelve-month period. Currently, there are no such restrictions for purchases in DRIPs and DSPPs, and companies would be forced to amend their plans to continue using the simplified registration form.

The Proposal would limit investor choice and the flexibility of issuers in raising capital. Large institutional investors would no longer be able to acquire shares pursuant to a plan, as they sometimes do today. These institutional investors are clearly able to fend for themselves without needing the additional disclosure of Form A. Additionally, as discussed above, any such investment limitations would be burdensome if not impossible for issuers or plan administrators to track. The tracking problem would be exacerbated by the proposed requirement that purchases by an existing shareholder and its affiliates be aggregated. If the Commission is concerned that a shareholder may purchase securities to effect a public distribution, we believe that existing securities law doctrines and the Commission's enforcement authority are adequate protections.

As a general matter, ChaseMellon believes that the proposed eligibility requirements for use of Form B are unnecessarily restrictive. These restrictions represent a retreat from the efficiencies that were implemented when the integrated disclosure system was established in 1982. In addition to the fact that an estimated 1,175 current S-3 issuers would be ineligible to use Form B due to the increased float and trading volume requirements, we believe that the proposed Form B disqualifications are unnecessarily draconian. Based on our understanding of the marketplace and the other enforcement remedies available to the Commission, we believe that the Form S-3 eligibility standards that are in place today should be expanded, rather than contracted.

Combined with the fact that the eligibility requirements for Form B are stricter than for Form S-3 today, the Proposal could be a blow to issuers that seek to use stock plans for important corporate objectives, as well as to the financial institutions that they retain to administer them. Huge volumes of securities are issued today under DRIPs and DSPPs with minimal evidence of abuse. Compared with transactions effected through brokers, who are permitted to solicit transactions, transactions in stock plans present a much lower risk of abusive sales practices or other need for regulatory intervention. Additionally, as indicated above, if the heightened periodic disclosures included in the Proposal become law, stock plans, which have not been a problem to date, would be even less in need of additional regulatory limitation.

While ChaseMellon supports the Commission's objectives of clarifying and modernizing the securities offering process, we believe that the portions of the Proposal that relate to DRIPS and DSPPs are inconsistent with these objectives and will adversely affect investors, issuers, and plan administrators without a compensating increase in investor protection.

Please feel free to contact me if I may be of additional assistance regarding this matter.

Very truly yours,

Stephen J. Dolmatch

Group Vice President, General Counsel

& Secretary