0809007 Informal Interpretation

From:

(redacted)

Sent:

Tuesday, September 16, 2008 11:28 AM

To:

Verne, B. Michael

Subject:802.60/801.10

Mike,

We have a client("Client") acting as an underwriter for a specific placement ofshares newly issued by a company ("Company"). Our client isperforming the normal functions of an underwriter, although it is unclear ifthey operate as an underwriter in the ordinary course of business. The Clientdoes not solely offer or perform underwriting services, and such services wouldbe a small portion of its usual activity. In addition, Client already holdsshares in Company. An HSR filing was made for the acquisition of the sharespresently held.

Pursuant to theUnderwriting and Placement Agreement, Client has agreed to purchase all sharesof Company that are not placed with third parties. Would such a purchase beexempt under 802.60? Does it turn on whether the Client's services as an underwritercan be considered services in the ordinary course of its business?

While theunderwriting agreement was entered into in good faith, there was a reasonablelikelihood that some or all of the shares to be issued would not be placed, andClient would likely have to acquire any such shares not placed.

Alternatively, ifthe acquisition of the shares are HSR reportable, can we deduct theunderwriting fee from the purchase price. Specifically, Client had agreed tounderwrite the shares for a fee of X% of their face value. The contract issilent on whether this fee will be treated as a discount to the offering price,or as a separate payment. Is this fee (or a pro-rata portion of this fee)correctly considered an expense associated with their purchase, and can weexclude it from our valuation of the voting securities acquired? Recall thatthere was a strong likelihood that the shares would not be placed and that ourClient would acquire them per the terms of the Underwriting and PlacementAgreement.

(Note that thetrading value of the shares is well below the placement price.)

Thanks,