REMARKS OF RICHARD Bo SMITH, COMMISSIONERUNITED STATES SECURITIES AND EXCHANGE COMMISSIONBEFORE THE FINANCIAL ANALYSTS FEl>ERATION CONFERENCEDALLAS, TEXAS, APRIL 29, 1970

"Gun-Jumping" and the Broker-Dea1er's Dilemma

One of the more troublesome problems facing the corpora-tion about to go to the public for capital is how to handlepublicity about the public offering on one hand and generalcorporate disclosures on the other. The pervasiveness of theproblem is illustrated by the impact it has on those whosebusiness it is to analyze significant corporate developmentsand make investment recommendations or decisions--broker-dealers, investment advisors and financial analysts.

Perhaps part of the problem may be traced to the very useof the ominous-sounding term "gun-jumping." The term has beenloosely defined to refer to both the premature offer of securi-ties before a registration statement has been filed with theSEC (a violation of Section 5(c) of the Securities Act) andthe premature sale of securities before a registration state-ment has taken effect (a violation of Section 5(a) of the ~ct).

I would like to focus on the gun-jumping problem primarilyfrom the standpoint of the financial analyst and broker-dealer,for two reasons. First, some of the more interesting and subtleaspects lie in that area. And second, there are four pendingSEC rule proposals which, if adopted, might provide substantialguidance to the investment community about investment informa-tion and advice during the registration period.

Let me make it clear at the outset that since the Commis-sion still has under consideration the proposed new gun-jumpingrules, I have formed no final judgment on whether or in whatform any such rules should be adopted. It should be equallyclear that my remarks today do not necessarily reflect the viewsof my colleagues on the Commission or on the Commission's staff.

-2-Two functions

For the broker:dealer the gun-jumping problem derivesfrom the dual funct10ns he performs. On the one hand the,broker-dealer serves as a financial analyst, making objectiveappraisals of the merits of various securities and issuers inorder to make investment recommendations to his customers.This is an investment advisory function (despite the absencein most cases of any special fee) 0 Some of the broker's custo-mers might have initially purchased such securities on his recom-mendation. It has sometimes been saidll that the broker-dealerhas a continuing obligation to his customers to furnish currentinformation and advice.

Of course, shareholders of companies receive annual reports,proxy statements and other communications from management whichmay provide investment guidance. But the invaluable "extra"the broker-dealer adds is professional analysis and advice.His customers expect him to render this and, hopefully, hisexperience and ability enable him to render it well.

In addition to analyzing materials which are sent directlyto shareholders by management, the broker-dealer is able tocall upon other sources of information. Thus, periodic reportswhich are filed by companies pursuant to the Exchange Act maycontain useful information for securities analysis. I mightadd that, if pending proposals to broaden the content of thesereports are adopted, their usefulness as a source of investmentinformation will be greatly enhanced. The broker-dealer canserve as a prime instrument in the dissemination of the infor-mation contained in such reports, thereby expanding their valueas media of current corporate disclosures 0

Broker-dealers may have access to other sources of infor-mation as well, such as interviews with management and personalexamination of a company's facilities. The broker-dealer maythus be able to generate an up-to-date analysis of a companyand to draw investment conclusions from that analysis which theordinary investor would, at the very least, find difficult to do.

11See, .!:.:.&., Wheat Repor't , p. 145 •

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But the broker-dealer has a second function, apart fromproviding investment advice. He is a purveyor of the securi-ties whose issuers he analyzes. He may buy and sell securitiesfor his own account and as agent for his customers. In theusual ca~e, this aspect of his business is where he makesmoney; as I indicated, such investment advice is generallyrendered without separate charge. If the customer agrees withhis broker's recommendations, he will ask the broker to act onthe recommendation by buying or selling securities. Where ordi-nary trading transactions are involved, the potential conflictbetween rendering investment advice and executing transactionsbased on that advice is at a tolerable level. Rules concerningchurning, unsuitable recommendations, and failure to know yourcustomer, are aimed at keeping that potential conflict withintolerable limits, just as is the general development towardprofessionalization of members of the securities industry.

But where a registered public offering is involved, theconflict is sharpened between the broker's investment advisoryfunction and his specially compensated sales or distributionfunction 0

If the broker-dealer is a member of the underwriting syndi-cate or dealer group, he will receive compensation for sellingthe publicly offered securities to his customers substantiallygreater than customary commissions in normal trading trans-actions 0 MJreover, if he fails to sell his allotment, he standsto lose a ~ood deal. This also is different from the normalobrokerage posture. Thus, the incentive is greater to make state-ments about the securities and issuer that go beyond the type ofconservative, purely factual disclosure required in a registra-tion statement and prospectus. Hence, the specific requirementsof the Sacurities Act, which provide that a public offering ofsecurities may be made only in a certain prescribed way. Theprescription is intended to ensure that the investor will, ingeneral have available full, fair and objective disclosuresabout the securities being offered on which to base his invest-ment decisiono

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The three periods

Thus, the Act provides that, prior to the filing of theregistration statement, no offers or sales by the issuer orany prospective participant in the distribution of the securi-ties to be registered may be made, either oral or written ifthrough the mails or instrumentalities of interstate comm;rce.

After the registration statement has been filed, oraloffers (including recommendations) may be made as long as theyare factually correct and complete. The only written offerswhich may be made during this so-called waiting period betweenfiling and effectiveness are those that take the form of thestatutory prospectus, filed as part of the registration state-ment. The waiting period, between filing and effectiveness ofthe registration statment, is a time during which investors andtheir advisors should have the opportunity, in the words of a1964 Commission re1ease,l/ litobecome acquainted with the infor-mation contained in the registration statement and to arrive atan unhurried decision concerning the merits of the securities."And, of course, before effectiveness, no sales may be made.

After the registration statement has become effective,sales may be made, as long as a final prospectus is furnishedto the purchaser before or with confirmation. To the extentthat additional offers are made after effectiveness, writtenoffers are permitted as are oral offers. However, any writtenoffers must be preceded or accompanied by a copy of the finalprospectus. In addition, any dealer must deliver copies of theprospectus to purchasers for 40 days after the effective dateof the registration statement. This period is lengthened to90 days in the case of first-time registrants.

The familiar provisions which I have just described raisetwo interpretive inquiries: what constitutes an offer? W110is a participant? If it is an offer by a participant, the Actapplies and that is that. This audience, however, knows it isnot that simple. So let me discuss the matter further, takingup the second question first.

l/R~lease Noo 33-4697.

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A "participant"?

The initial question any broker-dealer must ask to deter-mine whether he is subject to the gun-jumping rules is whether

tt t"" t". b Hhe 1S a par 1C1pan 1n a pu 1C offering. The requirementsa?ply with equal force to those who participate in distribu-tions or public offerings of securities, as well as to corpo-rate issuers. This is because under the Securities Act an,underwriter, as that term is defined in the Act, is subjectto the registration requirements. An underwriter is not merelysomeone who is a member of an underwriting syndicate; the termbroadly encompasses any person who participates in a distribu-tion of securities.

A broker-dealer is clearly a participant in a publicoffering or distribution if he is a member of the underwritingsyndicate, dealer group or otherwise receives considerationfrom the issuer or any underwriter with respect to the publicoffering. Although ordinarily it will not prove difficult todetermine whether a broker-dealer is a participant, the ques-tion is not without its subtleties. For example, if there isan informal understanding that Broker-Dealer A will recommendsecurities underwritten by Broker-Dealer B even though A isnot a ~ember of the sYndicate, in return for which Broker-Dealer B will recommend securities underwritten by A under likecircumstances, a reciprocal arrangement involving an element ofconsideration exists. This would present opportunities forabuse of the Securities Act prohibitions on unrestricted sell-ing efforts. Under such circumstances, I would think brokersso involved would be deemed participants in both distributions.

Another problem area involves publicity generated by theissuer, but facilitated by an otherwise non-participatingbroker-dealer. If, for example, management of an issuer inthe process of going public conveys projective data to abroker-dealer in the expectation that the broker will publishthis data and disseminate it to customers with a "buy" recom-mendation then the broker may be aiding and abetting a gun-jumping violation by the issuer, even though the broker is notformally a member of the selling group.

"

-6-A recent example will serve to illustrate difficulties

brok~rs may en~Q1mt~r ~n this area. I preface the example bystat1ng that S1nce 1t 1nvolves a position taken by the staffof the Commission--and not a position of the Commissionitself--I do not necessarily regard it as a firm precedent.A broker-dealer firm ran ads in newspapers with respect to aproposed rights offering. The ad stated that the offeringwas "your chance to make money" and invited the public to aseries of meetings to be held to discuss the proposed offer-ing. The broker-dealer was also mailing soliciting lettersof the same type to potential customers. Although the offer-ing was not to be underwritten and although it was establishedthat the issuer knew nothing about the ads and had done nothingto encourage them, the Commission's staff informally requestedthat the broker-dealer discontinue the ads and letters andpostpone the public meetings. The staff's view was that thepromotional effort directed specifically at the securitiesunder registration promoted their proposed distribution forwhich the broker-dealer firm would earn commissions fromsoliciting exercise or sale of the rights.

Obviously, if carried to an extreme, it could be arguedthat almost any favorable recommendation of a stock might beconstrued as facilitating the distribution of new securitiesto be publicly offered and as providing an economic benefitto the broker-dealer. That a recommendation to buy by itselfmakes a participation goes too faro Such a construction wouldbe not only harsh, it seems to me, but inconsistent with thepurpose of the federal securities laws.

So let us now take a broker-dealer who is not a memberof the underwriting SYndicate or the selling group and doesnot have any arrangement direct or indirect with the distri-bution apparatus. Are there nevertheless inhibitions on whatthis broker-dealer can say or recommend to his customers aboutsecurities that are the subject of a public offering? Thatrequires some analysis. S~ppose the offering is of securitieswhere there are securities of the same class already outstand-ing. Let us further assume that it is a reporting company, sothere is plenty of information around on which to base recom-mendations. In that situation the true nonparticipant is free

-7-to advise his clients, orally or in writing, as he chooseso Iam assuming, of course, that the recommendation is made in goodfaith and on a reasonable basis. If there is some manipulativescheme being carried out, Rule lOb-5 reaches thato

Certainly, if his recommendation is adverse, to sell,there is no conceivable purpose served by seeking to precludesuch divergence in viewpoint from the opinion of the sponsoringunderwriter. (If anything, it is to be encouraged!) And, ofcourse, a sell recommendation to an existing holder is hardlyan "offer" of additional securities being underwritten.

Even if the recommendation is favorable, to buy, I cansee no basis to apply "gun-jumping" to the true nonparticipant.Nor do I think it necessary that the analytical basis for therecommendation must necessarily come from the prospectus itselfoThe analysis might rely on general industry trend data andtechnical market data, neither of which are necessarily re-flected in the prospectus itself. Even if the recommendationwere based on predictive material, I don't see the objection,although this could be more troublesome because the usualsource of predictive material is the management of the issuerand this raises the aiding and abetting problem I mentionedearlier.

lrnat I have just said must be qualified with respect tothe post-effective period. If a broker-dealer makes a recom-mendation and thereby solicits a buy order after effectiveness,he cannot be sure that the particular security he is sellingwill not be from the distributed offering, which for purposesof prospectus delivery requirements continues for 40 days afterthe commencement of the offering. If the broker sells securi-ties which were part of the public offering, he becomes a parti-cipant in the distribution at the time of such sales. There-fore, while his earlier conduct may present no problems, he cantotally protect himself after effectiveness only by accompanyinga written recommendation with a prospectus. The proposed ruleswhich I shall discuss later would largely dispose of this post-effective problemo

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Now let us assume the issuer is not already a publiclyheld company. In such circumstances, as the court cases andthe Commission's promulgations have consistently indicated,almost any favorable announcement or prediction outside thef~~r corners of the registration statement may have theinevitable effect, in the words of a 1957 Commission release ,of "conditioning the public mind or arousing public interestin the issuer or in the securities of an issuer in a mannerwhich raises a serious question whether the publicity is notin fact part of the selling effort."3/ There are no securi-ties other than those being offered to which the recommenda-tions can apply. Therefore, where there is a new issuerinvolved, even though the broker may not be a member of theselling group, he should refrain from any favorable recommen-dations except in conjunction with the prospectus, if there isany possibility that he may be active in the after-market.Here, unlike the case of the broker engaged in post-effectiveparticipation in the distribution of a seasoned issuer's securi-ties, there is a requirement that prospectuses be delivered for90 days after effectiveness. There is no proposal to changethat requirement. Thus, the broker engaging in post-effectivetransactions in newly issued securities of a first-time issuermay become a participant. At that point, again unlike thecase involving a seasoned issuer, the broker's pre-effectiverecommendations could become gun-jumping violations. This isbecause, as I have noted, the earlier recommendations couldonly have applied to the publicly offered securities and thebroker's post-effective participation in the distributionwould tend to confirm that he was an indirect participant inthe pre-effective period as well, but simply expected to sellonly in the after-market.

The question of participation is a central one, since itis the fulcrum on which turns the question of whether thebroker-dealer or analyst is subject to the gun-jumping rules.

l/Release 33-3844.

-9-An 1J0ffer"?

Assuming that the broker-dealer is a participant in thedistribution, the next question is what type of conduct mightbe deemed an "offer" of the securities to be distributedpublicly, thereby invoking the gun-jumping prohibitions. Inother words, to t~at does the offer apply?

To begin, a recommendation to sell a security, or againstbuying it, could hardly be construed as an "offer" except inunusual circumstances--such as where there is an exchange offer.If a broker wishes to make an adverse "don't buy" or "sell"recommendation, as I indicated earlier (assuming he has a basisfor it), I see no impediment to his doing so at any time eitherorally or in writing.

Wnere the recommendation is to buy, it is possible to dis-tinguish on a theoretical basis between recommendations respect-ing an issuer's already outstanding publicly held securitiesand offers to sell the new issue to be distributed. Practi-cally, this distinction is often difficult to administer. Inmany cases, particularly for participants in the offering, itis simply not possible to draw the line. In those cases, thepolicies of securities regulation are best served by prohibitingthe participating broker-dealer from disseminating any informa-tion or recommendations about the issuer except in compliancewith gun-jumping rules that are carefully drawn to prevent pre-conditioning abuses. Where the broker-dealer is truly non-participating in the offering, the distinction is easier to~ake and greater breadth is possible.

The proposed rules~~ile the staff of the Commission has always made itself

available £Qr informal consultation on possible gun-jumpingquestions,_1 it has become inc~easingly clear that there is a

i/Release No. 33-5009.

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need for more definitive guidelines in the area. Currently,the only Commission rules on gun-jumping have been Rule 134,which permits certain very limited written notices outsidethe statutory prospectus to be circulated after the registra-tion statement has been filed (including tombstone ads), andRule 135, which permits limited notices to be distributed evenbefore filing, but only in the case of rights, exchange andemployee offerings.

Last fall, the Commission promulgated for public commenta series of proposed rules ,il growing out of the Wheat Report,which were designed to reduce some of the existing uncertaintyin application of the gun-jumping doctrine, particularly as itmay affect the investment industry.

In brief summary, proposed new Rule 135 would permit anissuer to give pre-filing notice of not only rights, exchangeand employee offerings, but also merger-related offerings andindeed any public offering. The content of the pre-filingnotice is also proposed to be somewhat expanded. The noticeuarst; state that the offering will be made by means of a pro-spectus and contain only the name of the issuer, the titleand amount of the securities to be offered, the time of theoffering, and certain basic information of a limited natureas to any rights offering, exchange offer, business consolida-tion or employee offering.

Many of the public comments which the Commission hasreceived on this proposed revision of Rule 135 suggest thatsome additional information be permitted, including whetherthe public offering will be primary or secondary; whether itwill be underwritten; if so, whether on a competitive bid,finn commitment or best efforts basis; the name of the managingunderwriter; and a brief description of the issuer's type ofbusiness and of the securities to be offered. These commentsare still under consideration, and it is not possible for meto indicate whether the rule or any of the suggested changeswill be adopted,

i/Release No. 33-5010.

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Of course, proposed Rule 135 is not intended to precludethe sort of customary corporate disclosure which the Commis-sion has always countenanced. Thus, ordinary advertising forthe company's products or services, the dissemination ofperiodic shareholder reports and routine press releases asto material corporate events may and should continue evenduring registration. At the same time, it might be well forcompany officials to advise the Commission's staff in advanceof any proposed major publicity campaign or highly unusualcorporate development as to which public disclosure is con-templated during registration. A special problem exists inthe area of advertisements for mutual funds or companies sell-ing investment company shares which are in continuous distri-bution and hence, continuous registration. Here, advertise-ments which do not comply with the specific tombstone require-ments may constitute offers to sell fund shares and thus runafmll of the Securities Act.

Proposed Rule 137 deals solely with a broker-dealer orinvestment advisor which is not and does not propose to be amember of the underwriting syndicate or selling dealer group,and does not receive any consideration from or enter into anyarrangement with the issuer or participating dealers. S~ch abroker-dealer or investment advisor would be permitted to?ublish and distribute information, opinions and recommenda-tions in the regular COllrse of its business respecting thesecurities of the issuer during the registration period, butonly if the issuer is a reporting company filing periodicreports with the Commission under the Exchange Act.

In my view, this proposed rule merely represents theembodiment of existing law and practice, except that it israther cautiously limited to reporting company securities.At least two public commentators on the proposed rule havesuggested that it should apply equally to non-reporting com-panies. The difficulty to me with this suggestion is that ittends to discount the disproportionately greater significancewhich might be attributed to any such information or recom-mendations in the absence of other public information aboutthe issuer in the Commission's files. It raises problemscomparable to favorable recommendations on a first-time offer-ing. It does seem to me that financial analysts and othermembers of the investment community should be somewhat hesitantto form factual conclusions about any company which has notbeen subjected to the requirements of public reporting, at leastfor purposes of public customer recommendations.

-12-The proposed rule recognizes that in the case of report-

ing companies, there is an independent source of information,prepared in a~cordance with Commission rules and forms, toWhich the financial community is able to refer and check whenit is formulating investment recommendations. On the otherhand, the only publicly filed information about a non-reportingcompany is the registration statement itself. The underlyingthesis of the proposed rule is that this should constitute thebest evidence of what the company has done and the basis forany investment decisionmaking.

I might also point out here, because it is relevant tothe present problem a broker-dealer has in making recommenda-tions in the post-effective period, that proposed R~le 174would totally eliminate the 40 day prospectus delivery require-ment for reporting companies. However, the 90 day deliveryrequirement for new issuers would continue.

Proposed Rule 138 recognizes a special situation--thefairly large seasoned issuer filing a registration statementon Form 8-7 or 8-9 which has outstanding securities of adistinctly different class. If common or convertible pre-ferred stock of such an issuer is outstanding, and the issuerwishes to offer a non-convertible debt security or a non-convertible, non-participating preferred stock, there seemslittle reason to prohibit a dealer, even a participatingdealer, in the regular course of its business from givinginformation, opinions or recommendations relating solely tothe outstanding common or convertible preferred. TIleproposedrule would permit that. Similarly, the rule permits a dealerin the regular course of business to publish information abouta non-convertible debt or preferred security where the offeringis of common or convertible preferred. One could imagine abuseshere, and the regular course of business qualification was in-tended to prevent them.

Finally, proposed Rule 139 would permit any dealer, evena dealer participating in the distribution, to render infor-mation, opinions or recommendations in the regular course ofits business about the securities registered if (1) the issueris a reporting company; (2) the information or "recommendationis contained in a publication regularly distributed for at leasttwo years. (3) the publication contains a comprehensive list ofsecuritie~ currently recommended; (4) the recommendation is

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given no special prominence and does not include projectivedata beyond the current year; and (5) a recommendation atleagt as favorable was included in the last previous publi-cation.

As you can see, the permissive language of the rule ishedged by quite a few conditions. Since my summary of theseproposed rules is necessarily brief, I a~ sure that each ofyOllwill want to examine the proposed rules carefully andcompletely.

Some of the public comments we have received concerningproposed Rule 139 suggest that the two-yea~ publication pro-vision could be shortened if the publication appeared weeklyor monthly and that a dealer shrnlld be permitted at least todelete an adverse or usell" recommendation in all cases, eventhough this might be construed as a more favorable recommenda-tion.

In substance, the proposed rules) if adopted, would meanthat issuers could with reagonable insulation from securitieslaw liability issue concise, factual notices respecting pro-posed public offerings of their securitieso Members of theinvestment community, including broker-dealers, investmentadvisors and financial analysts, would be able to rely uponlargely objective standards to determine when and how theymight comment on the securities of a company in registration.

~~ere the company is a new issuer or an issuer otherwisenot filing periodic reports with the Commission under theExchange Act, the proposed rules would provide g£ basis inand of themselves for a~y claim of exemption from the gun-jumping doctrine.

If the company is a seasoned issuer filing periodic re-ports with the Commission, a broker-dealer or investmentadviser not participating in the distribution could, in theregular course of business, supply its customers with infor-mation and advice as it would normally do if there were no?ublic offering contemplatedo In addition, even participatingdealers could, in the regular course of business, furnish in-formation and advice about; a company's outstanding junior

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security where the public offering was to be a non-convertiblesenior security, or about an outstanding non-convertible seniorsecurity where the public offering was to be a junior security.They could also continue to furnish information and adviceabout securities in a publication which they had been regularlydistributing for at least two years, provided such data wasgiven no special prominence and the recommendations were notmore bullish than previously given.

The proposed rules would answer many of the questions whichcurrently confront the investment industry. But they would notprovide a complete answer to every gun-jumping problem. For onething, the rules are limited to cases involving reporting com-panies. Where a new issuer is involved or a company otherwisenot subject to the reporting requirements, the basic concepts of"participation" and "offer" which I have discussed will stillrequire consideration in every caseo

The proposed rules do not provide guidance in so~e of themore unusual distributive situations, such as shelf registra-tions. The Wneat Report suggested some common sense guidelinesin this area, but did not propose specific Commission rules. Itseems to me that where securities are registered for the shelfby the issuer for use in possible future acquisitions, no gun-jumping problem will ordinarily arise until the securities areactually sold. Until that point, broker-dealers could not nor-mally be participants since there is no underwriting involved.Of course, if a particular broker-dealer assists the issuer inan acquisition for which shelf-registered shares are issued, hewould have to be careful to avoid gun-ju~ping questions. Afterthe shelf securities are issued, the 40 day prospectus deliveryrequirement might apply, but it would not preclude continuingreco~endations by broker-dealers as long as the delivery re-6/quirements were observed (for example, pursuant to Rule 153).-

Where the shelf registration is for the purpose of per-mitting a secondary diatribution, I believe that a broker-dealer should not be deemed a participant in the distributionuntil he actually receives an order to sell some of the

~7The Commission's staff has construed the prospectus deliveryrequirement as extending for only one 40 day period aftereffectiveness regardless of any post-effective amendments.As I have indicated, proposed Rule 174 would abolish the 40days delivery requirement for reporting companies.

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registered securities. This is the Wheat Report's view.Assumi~g the trans~ction could be executed promptly, thiswould 1mpose relat1vely little restriction on continuingrecommendations. Again, of course, I am not speaking tomanipulative schemes prohibited by Rule lOb-50

Prior CasesI have not said anything about litigation in the gun-

jumping area up to now. Actually, there has been relativelylittle involving broker-dealers. One reason for this is thatwhere violations on the part of a broker-dealer are detectedthe particular broker will usually drop out of the selling ,group rather than hold up the public offering. As you prob-ably know, the most common administrative tool which theCommission uses if there have been gun-jumping violations isto deny acceleration of the registration statemento

I would like to think that another reason for the absenceof a great deal of litigation involving broker-dealers has beenthe generally responsible attitude on their part. It has beena long time since the Commission has encountered situationssuch as in the Van Alstyne, Noel casell in 1946, where themanaging underwriter engaged in nationwide publicity, formeda selling grrnlp and even entered buy order tickets for custo-mers, all befqre the registration statement was filed. Or theArvida case,~1 in 1959, where the managing underwriters hadissued press releases and held a press conference shortly afterthe public offering had been agreed upon but before filinb•There information was announced concerning not only the termsof the proposed first financing, but also information concern-ing the prospects and plans of the company, It has not beenquite so long since the Gearhart & Otis case91 in 1964 wherea broker-dealer circularized to dealers two months before thefiling of a registration statement two articles discussing theprospects of a product of the company. Even though the articlescontained no reference to the issuer or underwriter, the Com-mission found them to be the first step in the sales campaignfor the securitieso

2/22 SoE.Co 176.~/38 S.E.C. 843.1/Release No. 34-7329, aff'd, 348 F02d 798 (DoCo Ciro 1965)0

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To be sure, the Commission is sensitive to publicityduring the registration period which might have the effect ofconditioning the market for the public offering. Neverthe-less, I do not believe that the financial community as a wholesh~lld have to forget about holders of already outstandingsecurities during the registration period and refrain fromanalyzing the company's business with a view to making invest-ment recommendations and decisions. There is clearly a needto strike a balance between, on one hand, providing reliablepublic information about a company which is already public and,on the other, avoiding the pitfalls of preconditioning themarket for securities to be publicly offered.

It remains to be seen whether the proposed new rules willbe adopted and whether they will appropriately achieve thisbalance. Be assured we are giving serious thought to thisarea.

Thank you.