FOR IMMEDIATE RELEASE 2000-53 SEC APPROVES ISSUANCE OF INTERPRETIVE RELEASE ON THE USE OF ELECTRONIC MEDIA Fact Sheet Washington, DC, April 26, 2000 - At an open meeting yesterday, the Commission approved the issuance of an interpretive release discussing the application of the federal securities laws to electronic media. The interpretations build on Commission interpretations in 1995 and 1996 and are intended to help promote the efficient dissemination of information to investors, security holders and the securities markets. In addition, the interpretations are intended to ensure that the evolving use of communication technologies to offer and sell securities is consistent with the Commission's goals of protecting investors and promoting fair and orderly markets. Many publicly-traded companies are incorporating Internet- based technology into their routine business operations, including setting up their own web sites to furnish company and industry information. Some provide information about their securities and the markets in which their securities trade. Investment companies use the Internet to provide investors with fund-related information, as well as security holder services and educational materials. Issuers of municipal securities also are beginning to use the Internet to provide information about themselves and their outstanding bonds, as well as new offerings of their securities. The increased use of the Internet by issuers as a means of widespread information dissemination has resulted in uncertainty about the application of the federal securities laws to these communications. Through the release, the Commission seeks to reduce this uncertainty and remove interpretively some of the barriers to use of electronic media, while preserving important investor protections. Highlights of the Interpretations 1. Electronic Delivery The guidance in the release resolves several issues that have arisen out of the Commission's 1995 and 1996 releases on the use of electronic media to satisfy delivery obligations. In brief, this guidance ú clarifies that, in addition to written consent, investors and security holders may consent to electronic delivery of documents telephonically, as long as the consent is obtained in a manner that assures its validity and a record of the consent is retained; ú permits market intermediaries (such as broker-dealers and banks) to obtain consent to electronic delivery of documents on a "global," multiple-issuer basis, as long as the consent is informed; ú clarifies that issuers and market intermediaries may deliver documents electronically in portable document format, or PDF, as long as investors and security holders are adequately informed of the requirements to download PDF and are provided with any necessary software and assistance; ú clarifies that a hyperlink embedded within a prospectus or any other document required to be filed or delivered under the federal securities laws causes the hyperlinked information to be a part of that document; and ú clarifies that the close proximity of information on a web site to a public offering prospectus does not, by itself, make that information an "offer to sell," "offer for sale" or "offer" within the meaning of the federal securities laws. 2. Permissible Web Site Content The guidance in the release addresses an issuer's responsibility under the anti-fraud provisions of the federal securities laws for information on a third-party web site to which the issuer has established a hyperlink and for its web site communications when conducting a public offering. Issuer Responsibility for Hyperlinked Information. Issuers have been concerned that by establishing a hyperlink from their corporate web sites to information on a third-party web site they may be held liable for any material misrepresentations or omissions contained in the hyperlinked information. The Commission confirms that the attribution of hyperlinked information on the third-party web site to an issuer depends on the facts and circumstances of the particular situation. "Adoption" of the hyperlinked information by an issuer depends upon whether the issuer, explicitly or implicitly, has endorsed or approved the hyperlinked information. The Commission discusses three, non-exclusive factors that are relevant in answering this question: the context of the hyperlink, the risk of investor confusion and the presentation of the hyperlinked information. Web Site Content When in Registration. The Commission reminds issuers that, when in registration, their web site content, like their other communications to the securities markets, is subject to Section 5 of the Securities Act of 1933. Issuers are directed to the Commission's long- standing guidance on permissible factual communications while in registration and instructed on how to apply this guidance to their Internet web sites. The Commission further extends this guidance (which was originally directed only to publicly-traded companies) to non-reporting issuers conducting initial public offerings. 3. Online Offerings The guidance in the release also addresses the rapidly developing areas of online registered and private offerings. Registered Offerings. The guidance discusses the general legal principles that have shaped, and will continue to shape, the Commission's views on the evolving practices for conducting online registered offerings. The Commission reserves the development of detailed procedures for conducting online registered offerings to further staff interpretation and Commission regulatory action as it gains more experience through the review and comment process. Private Offerings. The guidance reminds issuers contemplating an online private offerings that their offering activities must not involve a general solicitation of investors or any general advertising. Current practices have developed for identifying prospective investors for these offerings which deviate from the staff's prior interpretations in this area. The Commission discusses the underlying rationale for these interpretations and the significance of the presence of a broker-dealer to avoid a general solicitation. The Commission also reminds web site operators to consider whether their activities in connection with online private offerings require them to register as broker-dealers under the Securities Exchange Act of 1934. 4. Technology Concepts To facilitate any necessary regulatory action in the future, the Commission solicits comment on a number of issues involving the use of electronic media under the federal securities laws, including ú the circumstances, if any, under which the requirement to deliver a disclosure document could be satisfied by simply posting the document on an Internet web site; ú the circumstances, if any, under which an investor would be deemed to have consented to electronic delivery of a disclosure document because the investor did not affirmatively reject electronic delivery, so-called "implied consent"; ú the circumstances, if any, under which "account messaging" might constitute adequate notice of the availability of electronic disclosure documents; ú issues that arise in the context of "electronic-only" offerings; ú the factors, if any, to be considered in determining anti-fraud liability for outdated information on an issuer's web site; ú permissible communications when in registration by businesses that operate solely through their web sites; and ú issues associated with Internet discussion forums. Effective Date The interpretations being considered for issuance will become effective immediately upon publication in the Federal Register. In addition, the Commission is seeking public comment on the release within 45 days of publication in the Federal Register. # # #