5150. Fairness Opinions
If at the time a fairness opinion is issued to the board of directors of a company the member issuing the fairness opinion knows or has reason to know that the fairness opinion will be provided or described to the company's public shareholders, the member must disclose in the fairness opinion:
(1) if the member has acted as a financial advisor to any party to the transaction that is the subject of the fairness opinion, and, if applicable, that it will receive compensation that is contingent upon the successful completion of the transaction, for rendering the fairness opinion and/or serving as an advisor;
(2) if the member will receive any other significant payment or compensation contingent upon the successful completion of the transaction;
(3) any material relationships that existed during the past two years or that are mutually understood to be contemplated in which any compensation was received or is intended to be received as a result of the relationship between the member and any party to the transaction that is the subject of the fairness opinion;
(4) if any information that formed a substantial basis for the fairness opinion that was supplied to the member by the company requesting the opinion concerning the companies that are parties to the transaction has been independently verified by the member, and if so, a description of the information or categories of information that were verified;
(5) whether or not the fairness opinion was approved or issued by a fairness committee; and
(6) whether or not the fairness opinion expresses an opinion about the fairness of the amount or nature of the compensation to any of the company's officers, directors or employees, or class of such persons, relative to the compensation to the public shareholders of the company.
Any member issuing a fairness opinion must have written procedures for approval of a fairness opinion by the member, including:
(1) the types of transactions and the circumstances in which the member will use a fairness committee to approve or issue a fairness opinion, and in those transactions in which it uses a fairness committee:
(A) the process for selecting personnel to be on the fairness committee;
(B) the necessary qualifications of persons serving on the fairness committee;
(C) the process to promote a balanced review by the fairness committee, which shall include the review and approval by persons who do not serve on the deal team to the transaction; and
(2) the process to determine whether the valuation analyses used in the fairness opinion are appropriate.
Amended by SR-FINRA-2008-028 eff. Dec. 15, 2008.
Adopted by SR-NASD-2005-080 eff. Dec. 8, 2007.
Selected Notices: 07-54, 08-57.
- Regulatory Notice 08-57October 16, 2008