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Speech by SEC Chairman: Shell Company Rules: Opening Statements before the SEC Open Meeting by Chairman William H. Donaldson U.S. Securities and Exchange Commission Washington, D.C. June 29, 2005
The next item on our agenda is a recommendation from the Division of Corporation Finance that we adopt final rules regarding shell companies. Specifically, the Division recommends 3 primary actions regarding shell companies:
* prohibit the use of Form S-8 by most shell companies;
* revise Form 8-K to require a shell company to include additional information when it reports it is no longer a shell company; and
* require foreign private issuers that are shell companies to report shell company transactions on Form 20-F.
The amendments are intended to protect investors by deterring fraud and abuse in the securities markets by the use of shell companies. The amendments address two ways shell companies are used to commit fraud and manipulate the markets.
One involves the inappropriate use of Form S-8 registration statements by shell companies to circumvent Securities Act requirements.
The second involves using shell companies to effect "reverse mergers" and deprive the trading market of information that would otherwise be required by the Exchange Act.
I believe it is important to note that, while we continue to see abuse with some transactions involving shell companies, we recognize that companies and their professional advisors often use shell companies for many legitimate corporate structuring purposes. The rules we are considering today do not prohibit or limit those transactions. Rather, these rules provide a much-needed, disclosure-based approach to abuses involving shell companies.
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SEC Open Meeting Agenda Wednesday, June 29, 2005, 10:00 a.m.
Item 2: Use of Form S-8, Form 8-K, and Form 20-F by Shell Companies Division: Division of Corporation Finance Staff: Mauri Osheroff, Gerald Laporte, Kevin O'Neill
Item 2:
The Commission will consider whether to adopt final rules amending Form S-8, Form 8-K, and Form 20-F, as well as defining the term "shell company" and amending the definition of the term "succession." The rules would address: (1) the use of Form S-8 by shell companies; and (2) the information required to be disclosed in a report on Form 8-K or Form 20-F filed when a company becomes a shell company or ceases to be a shell company. The rules are designed to assure that investors in shell companies that acquire operations or assets have access on a timely basis to the same kind of information as is available to investors in public companies with continuing operations.
For further information, please contact Gerald J. Laporte, Chief, or Kevin M. O'Neill, Special Counsel, Office of Small Business Policy, Division of Corporation Finance, at (202) 551-3460.
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By Siobhan Hughes Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The U.S. Securities and Exchange Commission on Wednesday voted to close some of the loopholes that have allowed "shell" companies to be used for abusive purposes.
The commission unanimously approved a package of rules aimed at giving investors in shell companies that acquire operating businesses timely access to the same information available to investors in companies with continuing operations.
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