No Action Letters from the SEC and Section 16 (b) of the 1934 Act

Below is a link to the SEC definition of a No Action Letter:

https://www.sec.gov/fast-answers/answersnoactionhtm.html


Below is the SEC definition of

No Action Letters
An individual or entity who is not certain whether a particular product, service, or action would constitute a violation of the federal securities law may request a "no-action" letter from the SEC staff. Most no-action letters describe the request, analyze the particular facts and circumstances involved, discuss applicable laws and rules, and, if the staff grants the request for no action, concludes that the SEC staff would not recommend that the Commission take enforcement action against the requester based on the facts and representations described in the individual's or entity's request. The SEC staff sometimes responds in the form of an interpretive letter to requests for clarifications of certain rules and regulations.

The no-action relief is provided to the requester based on the specific facts and circumstances set forth in the request. In some cases, the SEC staff may permit parties other than the requestor to rely on the no-action relief to the extent that the third party's facts and circumstances are substantially similar to those described in the underlying request. In addition, the SEC staff reserves the right to change the positions reflected in prior no-action letters.

You can find a compilation of Staff No Action, Interpretive, and Exemptive Letters from the Divisions of Corporation Finance, Investment Management, and Trading and Markets, and the Office of the Chief Accountant in the "Staff Interpretations" section of our website.

------End of the SEC's statement of what a No Action letter is.

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In summary, a No action letter is a response to the request of a person who states the particular terms of a possible future transaction and requests whether the SEC Commission will enforce a SEC statute against the person making the transaction.

The Second Circuit court of Appeals in Gryl v. Shire Pharma ruled that a SEC No action letter can not be used in a Section 16 (b) enforcement since the SEC does not enforce Section 16 (b). The SEC in an Amicus Curiae Brief also stated to the Court in Gryl v. Shire Pharma that the SEC can not issue or use a  No-Act letter in Section 16 (b) suits to avoid recovery of profits made in violation of Section 16 (b).

Since January of 1999, attorneys, who understand the Gryl v. Shire decision in regard to No Action letters, know that No Action letters can not be used in their clients defense of Section 16 (b) suits and have stopped asserting such a claim of defense.

However, there are still some attorneys, who believe that SEC No Action letters of January and February 1999 can be used to stop the enforcement of Section 16 (b) by owners of shares for violations by top executives.

Or perhaps these attorneys don't know that the SEC does not enforce Section 16 (b).

But these attorneys will twist the fact that the SEC can not even grant a No Action letter in a Section 16 (b) case in order to deceive the courts.

 

John Olagues 



 



 

Edited Thu, Aug 22, 2019 9:25 AM

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