Question: Is the Section 3(a)(9) exemption available for the issuance of securities of one issuer to the holders of debt securities of another issuer if the obligation on such debt securities of the other issuer has been fully and unconditionally assumed by the issuer of the new securities?

Answer: Yes. Once the issuer has fully and unconditionally assumed the obligations on the debt securities of the other issuer, the transaction becomes the exchange of that obligation for the new security of the issuer with its existing security holders. [Nov. 26, 2008]

Question: Section 3(a)(9) is not available if any commission or other remuneration is paid for soliciting the exchange. An issuer proposes to use the services of a proxy solicitor in connection with an exchange transaction. Would Section 3(a)(9) be available for the transaction?

Answer: Yes, but only if the services of the solicitor are ministerial and involve no recommendation with respect to the proposed exchange or encouragement to vote in a particular manner. [Nov. 26, 2008]

Question: Would Section 3(a)(9) be available for the conversion of preferred stock into common stock if a condition of the conversion is the waiver of accrued but unpaid dividends on the preferred stock?

Answer: Yes. The waiver of accrued but unpaid dividends would not make the exemption unavailable. [Nov. 26, 2008]

Question: A subsidiary has outstanding a class of debentures guaranteed by its parent. The subsidiary proposes to offer a new debenture in exchange for the guaranteed debenture. The new debenture will not be guaranteed by its parent. Will the Section 3(a)(9) exemption be available for the exchange?

Answer: No, because the proposed exchange of the parent guarantee for the subsidiary’s debt involves two different issuers. [Nov. 26, 2008]

Question: An issuer proposes to retain a third party for the purpose of consulting with institutional investors as to what they would consider to be an acceptable exchange offer. Would the issuer satisfy the condition of Section 3(a)(9) that “no commission or other remuneration be paid or given directly or indirectly for soliciting such exchange” if it paid such third party?

Answer: No. Accordingly, Section 3(a)(9) would not be available. For examples of the types of activities of a third party, such as a financial advisor, that are consistent with the Section 3(a)(9) exemption, see the Seaman Furniture Co., Inc. no-action letter (Oct. 10, 1989) issued by the Division. [Apr. 24, 2009]

Question: An issuer proposes to conduct a going private issuer tender offer in which it will offer debt securities for its outstanding common stock. Would the issuer be precluded from relying on the exemption from registration provided by Section 3(a)(9) for the issuance of the debt securities simply because it pays an investment banker’s fee for a fairness opinion on the terms of the transaction?

Answer: No. In order to constitute the disqualifying type of remuneration or commission specified in Section 3(a)(9), the remuneration must be paid or given for soliciting the exchange of securities. Payment of a fee for an investment banker’s opinion as to the fairness of the transaction is not considered to be a fee paid for soliciting the exchange of securities. It should be noted, however, that if the investment banker is also conducting soliciting activities, the Section 3(a)(9) exemption would not be available. [Nov. 26, 2008]

Question: When securities are exchanged for other securities of the issuer under Section 3(a)(9), do the securities received assume the character of the exchanged securities?

Answer: Yes. For example, if restricted securities are exchanged, the new securities are deemed to be restricted securities and tacking of the holding period of the former securities is permitted. [Nov. 26, 2008]

Question: Rule 415 applies to registered offerings made on an immediate, delayed or continuous basis. In the case of a registration statement pertaining to an offering of convertible debentures and the common stock underlying the debentures, Rule 415 typically is not applicable to the continuous offering of the underlying common stock because that offering is exempt from registration pursuant to Section 3(a)(9). In cases where the Section 3(a)(9) exemption is unavailable (for example, where securities are convertible into securities of another issuer, where conversion terms require that the shareholder pay consideration at the time of conversion, or where conversion arrangements involve the payment of compensation for soliciting the conversion) and absent another exemption, which part of Rule 415 is applicable?

Answer: Rule 415(a)(1)(iv). [Nov. 26, 2008]

Question: U.S. issuers acquiring Canadian companies often use an offering structure designed to allow Canadian security holders of the acquired business to defer a tax event in the sale of those securities. Canadian law will currently tax the disposition of shares in a Canadian enterprise through a business combination, but provides an exemption where the consideration is paid in securities of another Canadian issuer. To allow Canadian shareholders to qualify for this tax deferral, U.S. issuers have effected acquisitions with the shares of a Canadian subsidiary whereby holders of common shares in the Canadian subsidiary indirectly share the same dividend, liquidation, and voting rights as held by common stockholders of the U.S. parent. The Canadian subsidiary's shares also carry the right to convert into shares of the U.S. parent. May the U.S. parent rely on Securities Act Section 3(a)(9) to exempt the conversion of subsidiary shares into parent shares?

Answer: No. Section 3(a)(9) exempts from registration exchanges of securities by the issuer exclusively with its own security holders. By its terms, the exemption is not available for issuer exchanges of its securities with the security holders of another person, even including security holders of a subsidiary. Notwithstanding other similarities between the parent and subsidiary shares, ownership of a subsidiary's securities in this fact pattern intrinsically represents an ownership interest in the subsidiary that is not directly shared by security holders of the parent. As a result, conversion to the parent's securities cannot satisfy the "same-issuer" requirement of Section 3(a)(9). [Aug. 14, 2009]

Question: A company is structuring a pre-packaged bankruptcy. Prior to the bankruptcy filing, may the company rely on Section 3(a)(9) for a solicitation of security holders, and then, following the bankruptcy filing, complete the exchange pursuant to the registration exemption in Section 1145 of the Bankruptcy Code?

Answer: Yes. In this instance, the company would need to file a Form T-3 before commencing the pre-bankruptcy filing solicitation. [June 4, 2010]