Free Redacted Document - District Court of Delaware - Delaware

case 1:04-ev-00260-.1.1F Doeumenr 108-17 Filed oaN;42§@ Aglagpgsoghr
"~· I -• . .
1 U W- ¤
1 g 1; a To Hot IPO Shares
2 g N .
e 5 5 F s 1 T
é OT OTTLQ HUQSEOTS
1 c> gg I: _______ 1
G Z1 : · ‘
9 E 1,, *1; ¤ _ ByTcrrz1u~r Ewrrvc , 1
3; 7:,- 3 St¤ffReporter of Tue; Wxu. Srnsrer Joumur. 1
i Q ,5; 2.* lg The National Association of Securities l
1 E E 3 ¥ Dealers approved a rule change that bars 1
1 G 3 B § some big investors from participating in
1 ,, c> E, hot initial public stock offerings. ~1 1
1 § if g qa The new rule is designed to eliminate 1
1 :2- O tz L confusion over whether certain investors 1
i E 3 _g § are restricted from receiving shares in hot I
i E g stock deals, Gary Goldsholle, assistant 1
_ 8 ~§ n. Z3 general counsel at NASD Regulation, said: -
j ‘ The proposal requires Securities and Ex- l
- change Commission approval.
in practice, the new rule also would take 1
© a step toward reducing the practice of IPO
, "spinrzing." That’s when investment
banks allocate LP0 shares to the personal 1
brokerage accounts of executives at ven- 1.
turecapital and other firms—-and sell, or '
I "spin,"themforaquicl< proiit—inabidf0r
future business from the flrrns. · ` 1
Q Ifthe proposed new rule takes effect, ln- 1
dividuals responsible for managing other
Z m people's money would be barred from get- l
g ting shares in a hot stock issue, according 11
to the NASD. 1
_ 2 That would prohibit hedge-fund man- ;
- agers, investment advisers and some ven-
§ turecapital managers from receiving 1 1
E shares from such deals in their personal 1,
Q: brokerage accounts, the NASD said. indi-
E-1 viduals in investment clubs and family ‘
U3 partnerships would not be restricted. , _ L
_ hq Most venture capitalists won‘t be reg
,.J stricted under the new rule, because they
§ don't manage pools of money from outside
investors. 1
E] >_* "This lrulel wasnt designed to say »‘
` I "Here's spinning and how we deal with it,'
"Mr. Goldsholle said. "lt says that certain 1
. El people who were previously treated as
conditionally restricted' [from] receiving
hot-stock allocations] now will béjust plain
G ' restricted. And certain of those people
could be viewed as being in a position to
beneiitbankersf .
A November t997 Wall Street Journal
» article on spinning spurred regulatory in-
quiries into the practice; Diose probes are
pending. In late 1997, the NASD warned rn-
_ vi vestment banks that allocating hot newr
c, 3 (-3 stocks to venture capitalists often violated
existing rules. Y .
5 $° §° Another part of the proposed rule,
1 E °~· L which applies only to stock and stock-re-
5 lated offerings, redefines a "hot issue" as Q
Q _Q 5 one whose price rises 5% or more initsfirst ®
E gg K ’j five minutes of trading. Under current G
- ~> E E rules,any lPOpnceincreasetriggers rules M
vg `• Z1 T'
S 5; ° W restricting some investors from receivin `-
E N Q " 1 g M
G E B 3 shares.
¤> ¤¤ 1;: g- e, ··r——— <
ar I N ° ‘ Q
§ E E g Cresvale Says It Paid ·» E
°= U 3 r 1 It V
g Q ri _§ E R€b&t€S to COY1C€YDS,lj
~ =· E as ~ · - 111.1
© ’ ~ ·~ -5 Hav1ngSteep1 osses .11 J
Ex. 16 ·‘ -1**- ‘

Case 1:04-cv-00360-JJF

Document 108-17

Filed 03/17/2006

Page 1 of 1