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  Staff Interpretation Letter 2016-1
Identification Number 1141
This is in response to your request for confirmation that, in the context of a potential acquisition, certain institutional investors with greater than 5% ownership and voting power in the Company’s securities would not each be a Substantial Shareholder as defined in Listing Rule 5635(e)(3) (the “Rule”).
You stated that the Company has two Institutional Investors each having more than 5%, but less than 10%, of the beneficial ownership of, and voting power in, the Company’s securities (together, the “Institutional Investors”). You stated that these positions reflect the composite of a significant number of funds with distinct management objectives and that none of the individual funds have a greater than 5% position. Each of these fund’s advisors have a fiduciary duty to vote its shares in the best interests of that fund and each individual fund’s board or portfolio manager has the ultimate decision making power on how to vote the shares.
Additionally, you note that in the Schedule 13Gs filed with the Securities and Exchange Commission by the Institutional Investors, each certified that it acquired the Company’s common stock in “…the ordinary course of business and [the shares] were not acquired for the purpose of and do not have the effect of changing or influencing the control of the issuer of such securities and were not acquired in connection with or as a participant in any transaction having such purpose or effect.” You stated that the Institutional Investors are fundamentally passive with respect to control of the Company, and accordingly, it is the Company’s belief that the Institutional Investors are not covered by the definition of Substantial Shareholder.
Based on these representations, we have determined that, for purposes of the Company’s proposed acquisition, each Institutional Investor is not a Substantial Shareholder as defined in the Rule. Our conclusion is based on the diffusion of ownership and voting power of the Company’s securities among several funds with no individual fund having a 5% or greater position and that each of the fund’s advisors, in accordance with their fiduciary duty, vote the fund’s shares in the best interests of that individual fund. Our determination is also based on your representations, as evidenced by the certifications included in the Institutional Investors’ Schedule 13Gs, that each Institutional Investor is fundamentally passive with respect to control of the Company. You did not ask and we have not determined as to whether the proposed acquisition would require shareholder approval under Listing Rule 5635(a).
Publication Date*: 1/21/2016 Mailto Link Identification Number: 1141
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