Broc Romanek reported yesterday that the staff of the Securities and Exchange Commission will no longer require “Tandy Letter” disclaimers in responses to staff comments. Among other things, the Tandy Letter policy required a company to state affirmatively that it would not raise the SEC review process and acceleration of effectiveness as a defense in any legal proceeding. I don’t claim any responsibility for the staff’s change in position, but attentive readers may recall that I questioned both the accuracy and the legality of “Tandy Letter” requests in this post several months ago:
More importantly, I question whether this forced speech is even legally accurate. Section 23 of the Securities Act and Section 26 of the Securities Exchange Act prohibit certain statements regarding registration and the acts of the SEC. Unless the “Tandy Letter” is entirely redundant, it covers more than what is statutorily proscribed. What court has actually held that a company may not assert staff comments as a defense? Indeed, staff comments or responses may be relevant to issues such as scienter or even falsity. While staff comments do not constitute official expressions of the SEC’s views, even the SEC acknowledges that:
[opinions expressed by the staff] represent the views of persons who are continuously working with the provisions of the statute involved. And any statement by the director...
