All Things Fair 1995 Movie Free 42: The Passionate and Scandalous Romance of Stig and Viola

The 1995 Release provided a number of examples designed to assist issuers and market intermediaries in meeting their delivery obligations through electronic media. One example provided that documents in close proximity on the same web site menu are considered delivered together.35 Other examples confirmed the proposition that documents hyperlinked to each other are considered delivered together as if they were in the same paper envelope.36 The premise underlying these examples has come to be called the "envelope theory." The purpose of these examples was to provide assurance to issuers and intermediaries that they are delivering multiple documents simultaneously to investors when so required by the federal securities laws. For example, in a registered offering, sales literature cannot be delivered to an investor unless the registration statement has been declared effective and a final prospectus accompanies or precedes the sales literature.37 It is easy to establish concurrent delivery when multiple documents are included in one paper envelope that is delivered by U.S. postal mail or a private delivery service. When electronic delivery is used, however, it is somewhat more difficult to establish whether multiple documents may be considered delivered together. The guidance provided in the 1995 Release about the use of "virtual" envelopes was intended to alleviate this difficulty. Nevertheless, some issuers and intermediaries believe that the envelope theory has created ambiguities as to appropriate web site content when an issuer is in registration.38 Some securities lawyers have expressed concern that if a Section 10 prospectus is posted on a web site, the operation of the envelope theory causes everything on the web site to become part of that prospectus. They also have raised concerns that information on a web site that is outside of the four corners of the Section 10 prospectus, but in close proximity39 to it, would be considered free writing.40 Information on a web site would be part of a Section 10 prospectus only if an issuer (or person acting on behalf of the issuer, including an intermediary with delivery obligations) acts to make it part of the prospectus. For example, if an issuer includes a hyperlink within a Section 10 prospectus, the hyperlinked information would become a part of that prospectus.41 When embedded hyperlinks are used,42 the hyperlinked information must be filed as part of the prospectus in the effective registration statement and will be subject to liability under Section 11 of the Securities Act.43 In contrast, a hyperlink from an external document to a Section 10 prospectus would result in both documents being delivered together, but would not result in the non-prospectus document being deemed part of the prospectus. Issuers nevertheless may be subject to liability under Section 12 of the Securities Act44 for the external document depending on whether the external document is itself a prospectus or part of one. With respect to the free writing concern, the focus on the location of the posted prospectus is misplaced. Regardless of whether or where the Section 10 prospectus is posted, the web site content must be reviewed in its entirety to determine whether it contains impermissible free writing.45 The Commission staff will continue to raise questions about information on an issuer's web site that is either inconsistent with the issuer's Section 10 prospectus or that would constitute an "offer to sell," "offer for sale" or "offer" under Section 2(a)(3) of the Securities Act.

All Things Fair 1995 Movie Free 42

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Broad use of the Internet for exempt securities offerings under Regulation D is problematic because of the requirement that these offerings not involve a general solicitation or advertising.79 When we first considered whether exempt offerings could be conducted over the Internet, we concluded that an issuer's unrestricted, and therefore publicly available, Internet web site would not be consistent with the restriction on general solicitation and advertising. Specifically, the 1995 Release included an example indicating that an issuer's use of an Internet web site in connection with a purported private offering would constitute a "general solicitation" and therefore disqualify the offering as "private."80 Subsequently, the Divisions of Corporation Finance and Market Regulation issued interpretive guidance to a registered broker-dealer and its affiliate, IPONET,81 that planned to invite previously unknown prospective investors to complete a questionnaire posted on the affiliate's Internet web site "as a means of building a customer base and database of accredited and sophisticated investors" for the broker-dealer.82 A password-restricted web page permitting access to private offerings would become available to a prospective investor only after the affiliated broker-dealer determined that the investor was "accredited" or "sophisticated" within the meaning of Regulation D.83 Additionally, a prospective investor could purchase securities only in offerings that were posted on the restricted web site after the investor had been qualified by the affiliated broker-dealer as an accredited or sophisticated investor and had opened an account with the broker-dealer. The Divisions' interpretive letter was based on an important and well-known principle established over a decade ago: a general solicitation is not present when there is a pre-existing, substantive relationship between an issuer, or its broker-dealer, and the offerees.84 We understand that some entities have engaged in practices that deviate substantially from the facts in the IPONET interpretive letter. Specifically, third-party service providers who are neither registered broker-dealers nor affiliated with registered broker-dealers have established web sites that generally invite prospective investors to qualify as accredited or sophisticated as a prelude to participation, on an access-restricted basis, in limited or private offerings transmitted on those web sites. Moreover, some non-broker-dealer web site operators are not even requiring prospective investors to complete questionnaires providing information needed to form a reasonable belief regarding their accreditation or sophistication. Instead, these web sites permit interested persons to certify themselves as accredited or sophisticated merely by checking a box. These web sites, particularly those allowing for self-accreditation, raise significant concerns as to whether the offerings that they facilitate involve general solicitations.85 In these instances, one method of ensuring that a general solicitation is not involved is to establish the existence of a "pre-existing, substantive relationship."86 Generally, staff interpretations of whether a "pre-existing, substantive relationship" exists have been limited to procedures established by broker-dealers in connection with their customers. This is because traditional broker-dealer relationships require that a broker-dealer deal fairly with, and make suitable recommendations to, customers, and, thus, implies that a substantive relationship exists between the broker-dealer and its customers. We have long stated, however, that the presence or absence of a general solicitation is always dependent on the facts and circumstances of each particular case.87 Thus, there may be facts and circumstances in which a third party, other than a registered broker-dealer, could establish a "pre-existing, substantive relationship" sufficient to avoid a "general solicitation."88 Notwithstanding the analysis for purposes of Section 5 of the Securities Act, web site operators need to consider whether the activities that they are undertaking require them to register as broker-dealers. Section 15 of the Exchange Act89 essentially makes it unlawful for a broker or dealer "to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security (other than an exempted security or commercial paper, bankers' acceptances, or commercial bills)" unless the broker or dealer is registered with the Commission.90 The "exempted securities" for which broker-dealer registration is not required under Section 15 are strictly limited.91 They do not include, for example, securities issued under Regulations A, D or S92 or privately placed securities that would be "restricted" securities under Securities Act Rule 144.93 Thus, broker-dealer registration generally is required to effect transactions in securities that are exempt from registration under the Securities Act.94 In other words, third-party service providers that act as brokers in connection with securities offerings are required to register as broker-dealers, even when the securities are exempt from registration under the Securities Act.95

It is undisputed that New York Central Railroad (APU's predecessor) engaged in dumping activities at the Union Road Site at least during the period from 1950 until 1960. Railroad cars carrying drums of waste, such as oil, spoiled food, sludge and scrap were routinely dumped into a pit located on the property approximately once a month, with other items, such as stone and bricks, being dumped in the interim. According to Edmund Wesolowski, a laborer for the New York Central Railroad, the drums used to transport the materials for dumping were not left in the pit, but were emptied and then *1301 reused by the railroad, although Witben claims that Wesolowski's statement that, "you received a carload of somethingsome contractor received a carload of something and he has a barrel of some kind of rubbish, he threw it in there, got rid of it" means that the barrel was also disposed of into the pit. Affidavit of Craig A. Slater, dated May 22, 1995, at p. 22, 68-69. It is also undisputed that, in 1982, the DEC located fifty-six drums at the Union Road Site, and samples of the water at the site revealed the presence of hazardous waste, and that, in 1986, after a period of inaction, the DEC located eighty-one drums at the Union Road Site. Witben again argues that, in 1982, the fifty-six drums were discovered as a result of a visibility inspection while, in 1986, the eighty-one drums were found as the result of a thorough inspection. Affidavit of Craig A. Slater, at pp. 22-23, 71-73. 2ff7e9595c