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FINRA

 

 

FOR RELEASE:
CONTACTS:
Thursday, November 11, 2004
Nancy Condon 202-728-8379
Herb Perone 202-728-8464

 


 

NASD Seeks Comment on Possible Fairness Opinion Rule

Washington, D.C. - NASD announced today that it is requesting public comment on a possible new rule establishing procedures and certain disclosure requirements to address potential conflicts of interest when its regulated firms provide fairness opinions in connection with corporate control transactions.


A complete discussion of the issues involved and the proposals under consideration can be found in Notice to Members 04-83.


Investment banks typically provide fairness opinions in corporate control transactions, including: mergers and acquisitions; the disposition or divestiture of material assets, divisions or subsidiaries, and buybacks of outstanding securities. Although fairness opinions are not required by statute or regulation, they have been a regular feature of corporate control transactions for nearly 20 years. Corporations disclose fairness opinions in various Securities and Exchange Commission filings and are often referred to by investors.


“We are concerned that current disclosures in fairness opinions may not sufficiently inform investors about their potential conflicts and limitations, leaving investors unable to accurately assess the information and judgments they contain,” said NASD Chairman Robert R. Glauber. “For instance, investors may evaluate a fairness opinion differently if they know that the investment bank rendering it has acted as financial advisor to one of the companies involved, and will receive compensation when the transaction is successfully completed.”


NASD is requesting comment on the best way to improve the processes by which investment banks render fairness opinions and manage and disclose inherent conflicts. The public comment period expires on January 10, 2005.


NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.  NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms.  For more information, please visit our Web Site at www.nasd.com.