On October 5, 2016, the SEC unceremoniously dropped a long-standing requirement that issuers affirmatively state that they will not raise the SEC review process and acceleration of effectiveness as a defense to legal proceedings.
The so-called Tandy representations (named in honor of the first issuer that the SEC required to make them) required each issuer, in a letter responding to SEC staff comments to a registration statement or an amendment, to acknowledge that:
- It is responsible for the adequacy and accuracy of the disclosure in its registration statement;
- SEC Staff comments or changes to disclosure in response to Staff comments in its registration statement reviewed by the Staff do not foreclose the SEC from taking any action with respect to the registration statement; and
- It may not assert Staff comments as a defense in any proceeding initiated by the Commission or any party under the federal securities laws of the United States.
Presumably, the SEC required the Tandy acknowledgement to preclude an issuer from claiming as a defense in an administrative proceeding or lawsuit that the SEC staff impliedly approved particular disclosure in a registration statement because the SEC did not object to it in a comment letter or as part of its review process.
Eliminating the Tandy representations, of course, does not let issuers off the hook. Indeed, the staff said it will remind issuers that they are responsible for the accuracy and adequacies of their disclosures, regardless of any review, comments, or action or inaction by the SEC staff. But, this has always been the case.
Our take
No one will miss the Tandy representations. Tandy representations: R. I. P.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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