ML17206A688

Responds to 780809 NRC Ltr Re Public Availability of Util'S Financial Info.Forwards Guidelines for Disclosure of Projected Future Economic Performance & Proposed Safe Harbor Rule for Projections

ML17206A688
Person / Time
Site:	Saint Lucie
Issue date:	12/14/1978
From:	Jackie Cook SECURITIES & EXCHANGE COMMISSION
To:	Grossman M NRC OFFICE OF THE EXECUTIVE LEGAL DIRECTOR (OELD)
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ML17206A687	List: ML17206A688
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NUDOCS 7903190327
Download: ML17206A688 (60)

Text

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4 n SECURITIES AND EXCHANGE COMMISSION

+Coax& WASHINGTON, D.C. 20549 DIVISIONOF CO> ORATION FINANCE December 14, 1978 Milton J. Grossman,,',Esguir e Chief )Hear ing Counsel 05fice of the .'Executive

>Legal Director Nuclear Regulatory Commission Nashington D. C. 20555

Dear Mr. Gros'sman:

I am writing in response to your letter of August 9.

1978 and several subsequent conversations with members of the staff regarding the public availability of certain

>financial information supplied to the Nuclear Regulatory Commission ("NRC") by Duke !Power Company. Cleveland Electric Illuminating Company, and other applicants for nuclear facility construction permits and operating licenses (the "applicants" ).

The >facts, as more fully detailed in your letter and enclosures,,are as >follows. !Pursuant to section 182(a) of the Atomic .'Energy Act of 1954 and NRC rules and regula-tions, the NRC staff must determine the >financial qualifi-cations of applicants >for nuclear >facility construction permits. Accordingly, the NRC requests applicants to subm'it certain additional >financial information which includes a projected source of funds statement over the relevant construction period'. with underlying assumptions.

showing how anticipated construction expenditures might be covered by internal and external >financing sources.

'Your previous letter dated January 2, 1976 (.'Enclosure 1 with your August 9. 1978 letter) indicates that the NRC sta5f does not consider the sources of funds statement as a >financial >forecast, but rather loaks to the state-ment >for a demonstration of one possible way by which further construction projects, including the subject

>facility of the application, 'might reasonably be >fi-nanced Applicants generally have included a disclaimer on their sources of funds statements to the e5fect that they should not be considered >forecasts.

Milton J. Grossman'..'Esquir e

!Page 2 The NRC has a general policy of ~full public dis-closure regarding any information submitted to or pre-pared by it that forms part of the basis of its regulatory decisions regarding nuclear reactors. You indicate that the applicants have requested the withholding >from public availability of portions of their projected sources of funds statements over the period of construction. iIn support of these requests, the applicants have argued that (1) the federal securities laws as currently administered by this Commission prohibit or materially restrict the publication of projections and (2) if the NRC places these projections in the public domain, these .appl,icants .will have to comply with all duties and liabilities of making projections on a reasonable basis and keeping them up to date by proper public revision.

As you are award, in Securities Act Release No'.. 5992, (copy enclosed) November 1, 1978, the Commission issued a statement generally encouraging companies to disclose projections both in their filings with the Commission and in general:. To that end, the Commission also adopted revised guidelines for the. disclosure of projections in Commission filings and proposed ~for comment a "safe-harbor" rule that would provide protection from the liability provisions of the federal securities laws for reasonably based projections that are disclosed in good faith.

ln Release No. 5992, the Commission specifically noted that issuers have raised,questions,regarding their obliga-tions under the federal securities laws with respect to projection information required to be submitted to other federal and state regulatory authorities. The Commission further stated that in its view, the submission of this type of information to ~federal or state regulatory authori-ties pursuant to their requirements under circumstances in which it would be publicly available would not in and of itself violate the federal securities laws or require issuers to make public projections in >filings with the Commission or otherwise. The Commission also reminded issuers of their general obligation to assure that material facts concerning their financial condition are

Milton J. Grossman, 'Esquire

'!Page 3 promptly and fully disclosed and that information sub-mitted does not become misleading by virtue of subsequent events. However, in this regard, it was suggested that issuers may wish to consider the appropriateness of clearly distinguishing such information from any projections already made'. or clearly indicating that the information should not be considered as a projection for any purpose other than consideration by the reguesting authority. Et was also suggested that issuers may wish to consider the appropriateness of filing a report on the Commission's Form 8-K, in which the furnishing of this information could be disclosed and,.the purpose og,its submission and nature of its use clarified Based upon the information presented in your letter.

it is the opinion of this Division that submission of this information to the NRC by the applicants and subsequent release of it to the public would not contravene the requirements of this Commission. This opinion assumes that any projection information contained therein has a reasonable basis. Moreover, since the NRC does not regard this information as a ifinancial forecast and applicants include a disclaimer to this effect with their submissions, this Division does not believe that the public availability of this information would impose on applicants a burden to publicly revise and update the material contained therein.

However, to the extent that subsequent material ~facts regarding the financial condition of applicants would indicate that previously .disclosed assessments no longer have a reasonable basis. full and prompt disclosure of these facts may be required.

Sincerely, Rowland Coak, Chief 05fice of Disclosure ~Policy and Proceedings Enclosure

Title 17 Cov;ndity and Securities Exch~mres CffAPTER ZZ SECURITIES A":iD E;rCfVr,GE CC:r'fISSICN

[R'ease Nos. 33-5992, 34-15305]

PART 231 IN'l~"ZRETATZ/E REL"--'SES REKATING 10 T.".E SECURITIES i

ACT OF 1933 b~Z) Gc~iERAL KiLES WiD R'ULATZC!$ T.".r,BEi.".. DER PART 241 - Pi'TEBPRE<MTIVE BELZPSES REE TD'G TO THE SECURITI&

EXCf~AXGE ACT OF 1934 P~4D G" FERAL RULES AM) BECULATICi S THEREEiDER Guid s for Disclosure of Projections of Future Econcnic Peforzance AGBiCY: Securities and Exchance Commission.

ACTION: Public t'on of revi ed auices.

SU.'""L~EY: ission The Cc . is is uirg a s" te~nt encouraci.".~

the disclosure of projections and has au"".ori"ed "ubl c "icr.

of Guices 62 and 5 of the Guices for Pre= ration =.".d ilj.".c of Registration St te.-..erts un=er the Sec rit'es ..c" o '933 and of the Guices 'for t.'".e "Pre"aration ~".d 'Fi'i.".c; "of .=e"orts and Proxy and Fagistration S"ate."..ents "n"er the Secu it es Excharce Act o 1934, res~~ ctively. .he Cu;des rela"e to the voluntary "ubllc di closure oy an i- "er of "rojectic..s o its future ecorczic mrfor-.;.ance, both with re~me to coc"-,e.".ts filed Qursuart to the recuirezen s of ii~ f~ceral securities la~s ard other'~ise. ~e Guxces set for"~ "".e Di; is cn of

Corporation Finance's views regarding significant consider tions to be taken into account in the disclo ure of projections.

In a related action, to further encourage the voluntary dis-closure of projections by public companies the Cmmission is proposing for comment a rule to the effect that registrants gen erally would not be held liable under the federal ecu-rities laws for reasonably based projections made in gocd faith that are subsequently proven erroneous. See Release No.

33-5993 under Proposed Rules in this issue.

EFFECTIVE DATE: The Guides will be followed by the Cc~ission upon publication in the Federal ~~ister.

FOR FUK'HER I JFOPZATIOV. CCiF~CT: Steven J. Pacgioli, Office of Disclosure Policy and Proceedings, Division of Corporation Finance, Securities and Exchange Cc~ission, l'ashirgton, D.C.,

202-376-8090.

SJPPEZKiVLKRY T.'Jr~.=."~TIC.'J: "2:e Commission has iss ed a s".etew~n" indicating that it encouraces certain iss"ers of securiti s to publish pro-'ected financial information in il'."."s with t.".e Ccm mission or otherwise. he Cornissicn also .".as au".'.".oriz~ --i'"-

lication of Guices 62 and 5, "Disclosure of Projections cf F ". re Economic P rfor;..a..c ," of the Guides for t.".e Pr para"i" n a.".c Filing of R 'stration Stata~pts up-ar pea Sec"ritic s Act cf

1/

1933 (the "Securities Act") (15 U.S.C. 77a et s~. ) and the Guides for the Preparation 'and Filing of R ports and Proxy and Registration Statements under the Securities Excharre Act of 1934 (the "Exchange Act") (15 U.S.C. 78a et seq.). The Guides are not Cormission rules nor do they bear th Corrmission's official approval; they represent practices followed by the Divi-sion of Corporation Finance in administering the disclosure requirerrents of the Securiti Act and the Exchange Act.

ln Securities Act Release No. 33-5699, April 23, 1976, 41 FR 19986, the Corrmission expressed i"s general views on the incl"sion of projections in Commission f'lings and authorized t.".e publica-2/

tion for public corn.ent of then prc"osed Guic s 62 and 4.

Although the Guides were published, for cc ...,.ent in Release 5699, the Coznission indicat"d tha" the Division o. Con>ratio . 'a . e wculd follow the guices perdi.".c final action. Ti~e 'disc'alon which follows accresses certain issues raised in Release Lio.

33-5699 ard the cc.,<.en s received t.'".ereon..-.cwever, at"~n" icn is directed to ~.e text of t.".e Guices for a mre cc'"late rcer-standing o 1/ Securities Ac" Rel ase '.,'o. 4936, "ece.-.er 9, 1958 (33 FR 18617) as a~need, 17 C.=R 231.4936, as -.e..c d.

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Securit'es Ex"'".=-"."e Ac" .=.e' -1:6:9, 4" FR 3'"-0 ( '-.". 23, 1977). Ac ordi,. y~ t+e =,ended Gu>ce "cer the Exc.',~ .ce

Backqcound and Pucocse The issue of projections, econcmic forec sts, ard ot.".er forward-lcoking information has be n urder active consideration by 3/

the Cormission for several years.

On Noverrber 1, 1972, the Ccami sion an.".ounced a public rule-making proceeding relating to the use, both in Cormission fi'ing otherwise, of projections by i suers whose securities are 3/ The Accounting Standards Division of the D,.~rican Irstitute o Certified Public Accountarts ".'l'shed a sta=e.:.ent of "o.-,ition on Presentation and Disclosure of ."-inancial Forecasts" in August, 1975. The definitions of "financi 1 forecas-" a.".d "financial projection" set fcrth there distir." ish bet;zen a projection, which rela es 0 "firm.cial resu] - 'sed on assu tions which are rot necessarily t.".e ;..ost likel;," ~".d a forecast,. which foc 'ses on ""'".e ."..cs> "rcbab'e results cf c= rations a..c c'.".~"..=es in .ina",.ci fi.".anci=-'osition, sition

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confor..~ ov r a pericd of t'.". Cc~issicn e..'.".as z=-s that in address'".a "".e area of "ro"'ecticns it en:isic.".s a conceot "hich e.".cc.-.."asses '"c"0 .crecas"s -."." "ro~ecticrs, as those ter;..s w-re used "v "=.e 2CPA. ".:".; s, -";v =-". te.-.ent

'bv the issuer ccrcerni.".c " re .inancial ~r cr."..=-".ce c=u" herein, ircl ci.".g "'-.ose =crt'cns cf ".'". " i"e h'ch r~ 're that t.. iss' na;e a reascnab

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"as's cr iss i."." s"ch data; that the format ~".d cortent of t.".e "roject'on rot "e suscepti"le of ;,~is'eading i.".=ere.".ces; a.",d that "".e -r"-ec" cn be presented in such a manner as will "remote in'estor u.".cer-StandLIlge Also, ee Report of the Advi o r Ccn-...itt cn Ccr=cr ". 0's-clcsure to the SEC (.".e e .".a== r ".-.=-.xr""), House Cc. ...i""ee on Inter tate ard ccr~iz Cc, ~rce, 9.."h C rg.

Cogyt~v Di j<<w oi .9 ( 2 ' i ~ <<e-r-<<-r 3 > o~ . '<<.".<<~ i )

X-A cr a ceneral disc's'cn c "".e cevelc"-..ant o" "'.-.e C=."..

mission's practices relat'."." to p ojec" io.".s, a" .~- 5=.

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publicly traded. These hearings were ordered by the Cc.-;.nission

'"for t.he purpose of gathe ing informat'on rel vant to.a re s=.ess-ment of its pol'c'es relating to d'sclosure of project'd sales ard earnings.

Information gathered at the hearings, held from Nove~r."er 10 to D cember 12, 1972, reinforc d the Cormission's obs rva"'on that.

management's assessment of a company's futu"e performance is of importance to investors, that such as ossment should w co.-.""e-hensible in '1'i'ght of the a'ssumptions made and should be ava'-

able, if at all, on an ecuitable bas' to all investo"s. ~'.";e hearings also revealed widespre-d d'sa"' ac"'on w'h the abse.,ce of guidel'nes or standards that 'ssue s, f'n ncial analysts, o=

investors can rely on 'n issuing or inte pret'ng proj ct'cns.

On Feo-ua=y 2, 1973, the Ccm.ission "eleased a "Sta e:-.ant "y the Ccznission cn the Disclosure of P=ojecticns of Fu". = Kccro-,'c 5/

Perform ~ce." In this st tement, the Commission de.e"-.....ed ".hat on .the bases-of the nfo- .at'on obta'.".ed "t'."-'a" "'" he-"-'".'"s staff recor;. enda"icns, a.".d 'ts exxr'ence 'n ac",l n ste ng t.".e federal secu i ' laws, cha."."es 'n it- lorg standing col'-r 4/ Secu '"es Kxcha."ae Act Release No. 9844, ('.:ove..~- 1 1972) 37 ER 23850.

5/ +coqvs ~ g >

ca J. a c'oe s352 ( 'v u v 2i 494 3) 7220.

gene=ally not to permit the 'nclusion of p:ojections 'n .. gistra-tion statements and reports filed with 'the Commission would as"='st in the prot ction of investors arid would b= in the publ'c 'nt. est.

The Comnission also set forth several conclusions rega"d'ng the manner in which project'ons should be re+de and announc d that '

had directed the Division of Corporat'on Finance to prepare specific releases and rule and form changes to impl ment the Co:..

mission's plan to integrate project'ons into the d'sclosu=e

'system.

On April 25, 1975 the Commission publ'shed a se=e of rule and form prooo als =clat'ng to p=ojec.'cns of futu-e eccncm'c 6/

performance. These p=ooosals would ha'e establ's'.".ed an elan"ate disclosu=e system for ccmmies choosing to ..~'(e "ubl'c pro."'ec. 'cns.

Acoroxiqately 420 let e s of co.. ient we e ecei"ed Qn 'sp proposals. Although the majority of cd-..ent=-tors ag=e'" that ==o-jection inform t inhibit rat.".er on the proposed svstem because han foster o t.".~y 't is s='gni"'cant, v'=t ally al' ojec.'cn co.

~".at t.".e p='posa' t"..em oppcs=d

,...unications bet~wn would 6/ Secu- Ac" 'el . se '.lo. 5521 ( April 25, 1975) -'.0 ."-." 20315.

These prcposa s a'so dealt with w=e t'v=ly report'ng of chan e" in ccntro1 of a =-"-'t an on :o ...

t le c..ance '1 c ol d'c> oau a, ncu'~~i of -o ~ 9-"

adopted in Sec'".'es =xc=-n"-.e Act Relea e ."o. 13156, Jan~~ry 13i 1977, 4 .=.~ 4~24.

7/

management and the investment community. Due to the important legal, disclosure policy, and t ehnical issues rai ed by the corrmentators, the Commission on April 23, 1976, cet rmined to wi'h draw'll but one of the proposed rule and form changes regarding 8/

projectiors.

I The Commission did, however, express its general views in the April 1976 relea e on the inclusion of projections in Cormi..

sion filings, ard authorized the public tion for comment of pro-posed guid 's for 'the d'isclosure of projecticns in 'Securities Act registration statements and Exchange Act reports.

Release 33-5699 and the P.ocosed Cuices In its statexent of general views in Pele e 33-:"699, th Commission indicated that it wculd rot objet to d sclcsure in filings with the Ccmmissicn of prcjec"ic..s hich are ...-"e in good faith and have a reascna"le basis, provided that they are presented in an a~rcpriate for.-,.at ard accc, .. anied by in"or. ..a"ion

-adequate for investors to make their cwn juc=. ..ents. ."..e Cc. ... is-sion also expressed i"s corcern over the "roolem o" selecti;e 7/ See "Eval atior. of ~- "-n'icies ard P ac-ices Pc~ard.'.".c Pro-jectione," in .= cert =-""-t rote 3, et A-"65.

Securiti s .-.c" ."-. 'ea e .'o. =699 ( ." '1 23, ' 9".5) -".1 .""R '9936.

~ ace t d 8.~~ c' ~ ~ ~ ~~2 ed ' lca.s as "o S eC1 lc ""tu" e 1 c" a s,w w' I~

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cescrl'=~" ln .".one (cj "o  %

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(17 C."-R'240.14a-9) as mi.".g possible mis'eac lnga

disclosure of material non-public information regarding cgis-trants and rem'nded issuers of their responsibilities un"e= th'.

federal securi:t'es laws in connection with the disa.mination of management's assessment of a company's future oe for-mc . T!:=

Comnission noted that registrant's responsibilities to make full and prom'isclosure of material facts, both favorable and unfavorable, regard'ng thei" financial condite on may extend to situations where management knows its p viou ly disclosed a se s-ments no longer have a reasonable bas's.

Advisory-Co...:ttee -Rco~nd t ons

'lhe CoTmission's d'sclosu e policy on p=oj ct'ons and oth =

items of'soft information was among the ubjects ccnside=ea by the Advisory Ccrmittee on Corporate Disclosu=e . In 's final recort, issued Nov v~r 3, 1977( tNe Adv'so=y Co.....ittee ~ade 9/

seve al recommendations fo= signif'cant ch ag s en that pol'cy.

Generally, the Carnittee =ecc~i. need that th Cor.. ission 'ss a public statem nt encou:ag'ng compa.'es volunta="ly to d'sclose management project'ons in their f'1'ngs w'th t.".e omission an" elsewhere. ln mak'ng th s reco~i. nda. cn, t.".e Adv'sor r Coin.i" tee noted that its position on specific asaccts of project'on d's-closu=e wou d hermit wide lat't'e to co.,.-znies issuing c o-ject'ons and stated that the Cerniss on should =e w and -...cn'".o.

9/ P oo:t, a == note 3, at 344-79.

C projection disclo ure to dete mine the ut'lity to 'nvestors of such information and the costs to is uers.

Pile 'CGTiilkss'i l ' 'Views The Commission concurs in the Adv'ory Cca;wittee's "ecom-mendation and findings As noted by the Adv'sory Cc~t. ittee, thie availability of forward-looking and analytical info:zatson 's important to an investor's as essz nt of a coroo at'on's futu=e earning po~ r and may be material to infor-..ed investment 1'0/

d cision-making. P.oject'ons and ot".e= tlap:-s of forward-look'.".g information are generally available within t'.".e inves".mnt co...

11/

munity and are obtained a..d used by investo s and thei= adv'o s.

In addition, a major'ty of the co~ntators on the gu'"es proposed in Release No. 5699 were in favor of a cosition tha" would pe zit the snclusicn of project'cns in filings w'th "."..e Ccz-miss'on by those 'ssuers with the ab'1'"v ~d will'cness ".o "..~ke 12/

them. Accordingly, 'n ligh of ti:e sim'ficanc attached ;o 10/  ? "-.t, sc"-.a note 3, at. 349-=0.

The Pdvisorv Come. 't ee'- su=vev of 'nc';.='"uzi n;es"o=s nea~l] half of t'e 'n s cvs su'eved fago~er dlsclosu ~ ' e "L ual 0 s 0" co;a.~~v s 0 ~c ea:n'n9s x. s'.".a=e 'o= a "1'=.a=. :sax>-.: at ".90. 9' ila lv, t:-.e .-'nrso= r"-" Cm-:=-e st "= s"=; r'o= cc": 'r analvs s '"d-'"~"~" -a =c~~.a"'- "-o-'"-" 'cn" o" ""-"""v Cpa ghhg) ghQ phh 'Ivy vh Vs p~ ~

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12/ See cents collected in ."-'le ~o. S7-:"61.

Ig projection information and the prevalence o" projections in the cor"orat and investment ccr.,unity, tho Co-..n'i sion -has deter-.,i.".r;-

to follow the recorzendaticn of the Adviso y Corzittee and wi hes to encourage co.;"anies to disclose manage.;~nt proj ctions both in 13/

their filings with the Conmission and in general. In orcer to further encourage such disclosure, the Co@mission has, in a separate release is ued tod y, prcposed for cor.,ent a saf -har"or ru'e for projection information whether or not incl'ed in Commission 14/

.filings..The Corrnission al o has determined to.authorize publication of revised staff guides to ssi t implementation of the Advisory Committee s reco i.erdation. A sugary of the recc'-,

mendations of the Advisory Committee regard ng particular; CC hP~'

of projection disclosure, corres-ording cc. ,.ents received c< 4Lll guides as prcposed in Release ",o. 5699 ad in response to el ea-e 13/ The Advisorv Cc..., i" ee a so recc,....e.". rd that "'".~ C .....iss ion encourage t'.".e c'sc-cs"re oi 0 . r l . Of " i I "= '

such as planrec ca"i: l ez" nc't r s a."." ;inane,':.a, .an-ce...e..t plans azd cbjec"i'=s, state.";ents cf c'; icend =c'ic', a.".d statemen"s of ca"i" 1 str"c"ure pol'cies. See .=.e"-crt a-365-3SO. In ~~~s r~"r", cu'cela.".es "cr "'-. c~=-clcsu e c-this information are '"ei.".g- c"..s -e e..er 1':, as "ell h as in connec"'cn wi".h s"ecific prc"csa's to re=.".a Cu'c s-4fsa \s

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".'.".e i.".="r-..a-Advisory Ccrnittee's recc.....encaticns regar"i.".g tion.

14/ Securities Ac" Release '.,'o. 5993, See Frcposed ."-. >>s i.".

this i sue.

15/

No. 5707, 'nd the position adopted in the Cinal gu'.'.~s is set forth imaediatcly ~low.

Discussion.oC.th" StaCf's Guid s Pal'sh d .I! re'n Voluntary versus-.'!~~dator.r D'sc?osure In the propo ed guides published in Release 33-5699, the Div-ision of Corporation Finance set forth its view that man gement should have the option to present in Commission filings 'ts good faith assessment of a comply's future performance. The advisory Comnittee and the cmxentators are in accord w'th the vew that a voluntary projection system is more appropriate than a mandatory system. The Advisory Committee noted that a mandatory system would require the adoption of specific d'sclosure rules and regulat'ons and felt that th Camissicn d d not yet have an a"propriate basis for formulat'ng uch requirements. In addition, the Co...

mittee did not 'celieve that all cor;.~mi s should b =e ired to susta'n the expenses a..d bu=cens tha m'ght a associated "'th mandatorv disclosure. FJ="he", the C~i""ee was of "he view " at In Secu='t es Act ";elease .'lo. 5707, ."ay 13, 1976, Oi 21370 g co~< ~ i . "s 'A sol .d b> .e ~. v'o v CC"-i.it .

FR

'n fil'ngs to wt forth;.ore forward-lx'e'.;g and =-".'1': c 1 info xtcorside on reca-d .".g the co~.~zv's bus .".ess oxrat'cn"~"

(Please he legal liability and cc-.;~tit"e ==cb-lems assoc'at " with such a = cJirewnt ~."." <<'ht:t..er such i n for~gt 4 oq s4culA ~~ <<cvi cr~a8 Qv pu~ >o pevg~ea ep The Commiss'on's 197~ rule proposals 'ncl"ded a thre year Exchange Act reco ting h'story and pr'or bucgeting exnrienc 16!  ? oo=t, aoo=a rote 3, at 354-55.

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requirem nt 'n order to aualify for the safe.ha"..bor,p otection.

Several coa~si ntators took issue with th's requirement, and su"-

gested that projection information regarding new and promotional companies may be more significant in that forecast information may be most valuable regarding companies that do not have a history of public information.

Although the 1975 proposals were ultimately withdra~~, t"..e guides proposed in Belease 5699,indicated th Div's:on',s v ew that a history of operations or exmrienc in oroj ct'ng may be among the facto s providing a reasonable b sis for management's assessment of a company's futu=e econom'c perfor~~ ce. ~evert."ie-less, it would not appear that such h'sto=y and experience wou'"

be necessa=y in all instances to p:ov.ce :easonably bawd pro-ject'ons. Accord'ngly, the =evised gu'ces do riot p=ov'"e rer3orting, operating history, o= other status c='te"'a fo: t'.".ose 4O/

vl publ' companies cesi='g to make j public pro ection " 'clcsu=e.

Disclosu=e of -~=-s.=.ticns En oa=ag=a"h (c) of t?:e proposed guid s t"..e D av

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wn indicated 'ts bel'ef that 'nvesto= uncerstarding of the basis o=

and limitat'cns of p:ojections would m enhanced by d'sclos'e of 17/ Securities Act ~~lease io. 5531, A"ril 23, 1975, 40:"R:"31o.

18/ See Feoo=t, s:---. rote 3, t 356. h's =esult is c"osis.=ot with tre:ecc~..oatioos of t;-.e Ado'-o y Co...,.'t

the a sumptions which in management's opinion are significant to the: projections or -are -the key factors uccn which 'the finan-cial results of the enterprise depend. The co.<<rentators c=nerally were in accord with the po ition that disclosure of a umition is perhaps the most signific nt'actor in facilit ting investor understanding. As noted by the Advisory Committee, such disclo-sure provides a framework for analysis of the orojection ar."

further reflects on management's planning capabilit'es. However,

.the Advisory Corrnittee,reccrr.-,.ended that, disclosure of ass" i."tions be encouraged but not reouired, in order to make projecting n attractive to registrants, until there is vore ev~ rience with 19/

projection disclosure.

h>ile the Division believes that disclosure o as u .. tic,.s would help investors to cc,.. re'.".end pro"'ections a..d assist sn establishing a reasonable basis for "rojections disc'"=-=-d, t'.".ere may be instances Ahere reasonably based a .d adecuatelv re=a 19/ Reoort., ""-r rote 3, at 328. ~ re'.sM caices Co;.ot reflect t.'.e =c ition that cro ec"'ons d'=-c'csee .'.c '"

assur-..oticns are "e" se .-..islead'.".". :-:"we er, C . "-'-e=:".=r v.

sJJ f Jl s l e vL~va) ~ 3 (veDe ~ ~ ~ ~

1

)>>al s) ee ~ >>el J4 +44 ~ ~ v be disclosed i'".eir  ;.=-'di".y is sufficiently '.". cc '"t t..at rdent investor, i=:",e k.-.ew of ":.e a re=-sc.".aolv unde lvxno a s . " c.-.s, mac"..t "= ce"err~ =- ..

rh>>>>g>> q>> rt>>] q>>>> g cr

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echoer c u>>t went cn to r..c a e 1 ro r-c

>>p>>q g Cn <<e~~qe>>ee>> a ~ . >>>>gw>>c. e.>> ss O>> ~ >> i >>'>> res so reascnaole and so like'v to "e borne ou" by ~". f ct-t.' a

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projections would significantly dd to the mix of information available to investors in the absence of disclosure of underlyi;;g assumptions. However, the Divi ion believes under c rtain circum tances the disclosure of underlying as umtions may be material to an und rstanding of the projected results. For example', where projected results are based to a signi icant degre upon the introduction of a new produc" or service meeting certain anticipated levels of sales and contribution to earnings, d'lo-sure of the projection without this information micht be misleading.

Items to be Prospected Paragraoh (b) of t?se procosed guid s indicat d that-traditionally projections have been civen for three items r~en-erally considered to be of primary interest to investors: sales or revenues, net ircct,., and earnings per h re. hese items usually are pre"ented toget'.".er in orcer to avoid a..y mis ea ';.g inferences that  ;,.ay ari e when ircivi" 1 i=e-.- rei ect ccn-tradictory trends. Althouch "'".ese three i" .s

. us ally are "..":

key elements in an appro"ria"e "resentat'on of a projec"ion, ".".o Division recognizes that t.".e e .-,ay be circ .=-tances when cc ny manacement should be given flexibility in determining whether 20/

other or additional financial items shculd a'so be "resented.

20/ 588 Rxc, s'-'-t .".0 2 3, dt 302...

'll:-:0 c'-c2s co

~ %o4 racaire "..".ac '-.".'-==-ci;c '".a...s ro sc ~"',-:-'c r, selec"ive arojec"'"n o" onl r favcra'"'.~ ite.-." ~av create misleading inferences.

%bird Part~rior The proposed guides suggested that additional su""ort for projections could b furnished through an outsice review. If such a review were to be included, disclosure of the reviewer's qualifications, the relationship of the revi wer to the registr nt, and the 'extent of the review would be required. A reviewer would be deemed an expert and an appropriat consent wculd ce recuired to be filed with a registration statement urder the Securities Act, 21/

if the reviewed projection and report were included therein.

A few commentators opposed outside review "~r se, suggesting that outside review cculd lend a fal e aura o greater credibili".:

to projection information. It was further sue"e ted that "shcpping" for favorable reviews would be pcssib'e under "".e pro-posed guides ard that only "".ose perscns who can cle rly cemn-strate indeoerdence from manacezent shculd "e cer-...itted to review projections.

The Advisorv Ccmmitt e conc rred with t'.". position cn o ". i":e review as set forth in the propo ed guices wi".hout further co. ...ent or recommendation. The final cuides do not chance this pos'tion on outside revi w.

Althcugh the Division shares "".e expressed ccncern rega "i.".g relationship of r viewers to c"m"anies t.".at za'ce pro.-'"ions, i" 21/ See Section 7 of the Securities Act of 1933. 15 U.S.C. 77g.

~ ~

believes that outside review hould be permitt d, orovid&

appropriate disclosures are made about relationships bet-e n 22/

reviewers and registrants. In this regard, a p=rson should not be naned as an outside r viewer if he actively assisted in I

the preparation of the projection.

Revision and QAatirc of Proiections In Release 33-5699, the Corrnission reminded issuers of their responsibility to make full and prompt disclo ure of material facts, 'both 'favorable and unfavor&1'e, regarding their fin. zcial condition, and that this re~nsibility ..ay extend to situations where management knows its previously disclosed as essmnts no longer have a reasonable basis. In acdition, the propos ~ Gu'ces recormended that investors be infor;,.M of manacement's intentions with res"ect to furnishing c=c ted project'crs. Al"'".ough ":".e 22/ s " lls.. g c 1 for o' c-" 0 t..

cualifications cf ~".e reviewer, rd ~".e extent of "'".e review ana] yoked and eval " ted t and t~e basis cr ~.e c..elusion material factors cc.".cerni.".a an'~~t o= "'".e "recess '"v which any out~ice review ~as scuc'.".t or cbtai.".ed. De"~n".'.".c tpn t.'".e . c"s, this "rovis'cn .-..i":".t r ~ >re cise'csure o:

a registrart's uns"ccess ul ef=o"ts:o c'-tain an outside review. Also, t.".e Aud'ti.".g St=-".d ds Oirision c" t'.". A C?A currently has stancarcs fcr review of "<<ojec"icns urcer consideration.

Advisory Committee concluded that periodic updating of projection information should not be rcwuired, it re or;.tended that this 23/

position again be noted.

The Advisory Committee also recom;ended that public cox"ani s be allowed to revise their projections while "in registraticn,"

and that current projection would be acoropriatelg incluc d in registration stat ments (updated as necessary) filed under the 24/

Securities Act.

25/

In Release 33-5180, "Guidelines for the Re'ease of Infor-mation by Issuers "nose Securities are in Registration," the Cc".-

mission stated that issuers in regist"ation should avoid t.".e issuance of forecasts, projections, or predicticns rela"ing b t not limited to revenues, incor'., or earnings ~r share. Although an issuer in reg'stration should care'ully consicer all acts .."."

circumstances in cet rmining whether a projection c' ld "e dee;.M to constitute an of=er in violat'on of Secticn 5 of t.'".e Act, to the extent t.".e =csi"ion expressed in Re'ease 33-51".0 wcu'd prevent issuers in reg'stration fr"m ;..a.',ing "ro"'ectio.".s or incluc'.".a .'.":=-m in their filings that position is im eced.

23/ This reco...erdation is incor"orated in ".". "ublished " i": s.

24/ See Feoot-, -etta rote 3, at 360- 61.

25/ Securities Act Release No 5180 i ~unjust i 6a 1971 4 36 16506.

Time Period for Pro"',ections; Discontinuance ard I'.os'.-..".ticn The proposed guides did not sugc..st a specific tire per'od that may be approoriately covered bv a projection. Due to f=ctors that vary among irdustries, companies di closing orojection" should have the responsibility for selecting the most appropriate time period depending on all the fact" ard circumstances. The Advisory Ccmmittee concurred in the aroroach taken by the oroposed guices and the final guides reflect this position.

The Advi ory Conmittee was also of the opinion that th use of projections would "e encouraced if companies we e cermitt d to discontinue making orojections. Changed busiress corcitions ."..ay make sound projections possibl in one year ard impracticable in another. Accordirgly, the final guides incorporate, the Acvisory Corrmittee's reconxendation, but irdic te that cc.".."-ar.'es shc 'd not discontirue or resume ~akirg projecticrs in Cc, ,.ission fili."."s without a reasonable basis fcr such acticn. n the view o" t.".e Division, if the registrant were to r..'sh projecticns crly . n they are favorable ard not when ther are r. avorable, this "at".

of disclosure might be viewed as misleadinc.

Cheer /!atters Tax Fi:el" s 26/

In a footrote to the "rc"osed cuides in release 33-=699

't is stated t.".at in view of "". d : ere.".t cc",.s'" ration" ".-.=-"

amply to.tax:shelter .inve tm nts, th guid .:culd not a-sly to filings covering uch securities. meaningful proj ction" for tax shelter investment may involve a much longer ti..e period, with a correspondingly more limited accuracy and reliability; items to be projected other than those traditionally u"ed, such as sales/revenues, net income, and earnings per shire may be more relevant in considering these investments.

Accordingly', the guides as proposed and adopted have been formulated with regard to projections made outside the cont xt of tax shelter investments. However, certain ite.-s zay be ca"ab e of more accurate prediction in tax shelters, (e.g., depr ciat'cn, anortization and debt service) and reasonably based anc ad~uat presented projecticns of such items are not intenced to be -"re-cluded.

Pro'ectiors ."-~cui ~d bv .=jaculatory '.u".'".or'"ies Frecuently issuers,are r~vired to su'"...it pro-'ection in or-mation to ot.".er fe'eral and state regu'atory authorities. ..".'s information o "en is rec~ested with respect to a lengt.".y t'.

..e period g e.g., ten years or mre. This infor.,.ation .-..ay of "en '-"e publicly avail=-'"le and ."..ay c"nsist of .".aterial "Le acc"=acy o" which might be c"est'cnp eg in view Qf t..e 1 .. of '~2 c when considered "rcm t.".e vie'~mint o" i".."estors. Ac'ordirg ':,

issuers ha;e raisec res"lors rc r"'.".c "".eir cb'i-" "ic.".s the federal securities laws with respect to t:.is infer-... t'o.""

aply to tax shelter investments, the. guides would not-a"ply to filings covering uch ecurities. meaningful proj ction for tax shelter investment may involve a much longer time period, with a correspondingly more limited accuracy and reliability; items to be projected other than tho e tradition'ally u ed, such s sales/revenues, net incoFe, and earnings per share may be ..ore relevant in considering these investments.

Accordingly, .the guides as. proposed .and,adopted have be n formulated with regard to projections r,.ade outside the context of tax shelter investments. However, certain ite."s zay be ca"-able of more accurate prediction in tax shelters, (e.g., depreciat'cn, anartization and debt service) and reasonably based anc ad~ 'atel':

presented projecticns of such items are not interced to he ":e-cluded.

Pro'ections F~cuired bv ."-jaculatory '.u".'".or'"ies Freouently issuers are rewired to su'"-...it projection inf"r-mation to other federal and state recu'atory aut.".orities. .';.'s information o .en is re~~ested with res~et to a- len t'.".: t'...e period, e.g., ten v ars or mre. This infer-.,ation . ..ay of en '"e publicly avai'-'"le and ."..av c"nsist of ma erial "".e acc'cv of whicn micht ~w c"estion""l~ in v'ew of "".e le.".c"'.". of '...~ ccvere",

when con idered rem t+e v'e'~%oint o .."estor-. ~ccordi""'"

issuers ha;e raisec cues"'cns rc ar"'.".c "".eir c"licatic..s the federal securities laws with respect to this infer-...ation.

I Nhile the submis ion of this type of information to f.=~eral

'or state regulatory authorities pursuant to their rec:uirem .,ts under circum tances in which it would be publicly available

~auld not in and of itself violate the federal securities laws cr require issuers to make corresponding public projections in filings with the Carmission or otherwise, issuers should consider their obligation to assure that material facts concerning its financia1 condition are promptly and fully disclosed and that

.the info@nation.,s~itted .does not beccme. misleading by vi tue 27/

of subsequent events.

ration of he Guides As indicated above, publication of the azerded guices is intended to implement t.".e position of t.".e Cmmission a.".d of t.".e Acvisory Ccamittee that "".e making of p o-'ions be encour--=-'.

Because of tho Camission's responsibility to protect investors and safeguard the public interest in connection with sa'es an" 27/ In this re"-ard, issuers may wish to consider ~".e a=re"ria"e-ness of clearly cist';-.~ "shing =- 'ch in"".,..t'-n:c.". -.".y projections already ."..ade, or cle~rl r i.".cleat.'.-.g "'.".=-" t.".e information should rot be ccnsi-ered .s a ">>oj=c 'cn =": '

e Qt4 r t an ceps icer g 'cp b g Late rec esti c ut'r a.".'llrgo

~

In this cc"am icn, issuers 'ay also ~ish to consice t.".

appropriatene s of fi'.".g a r mrt on .cra B-K, 17 C:"2 249.3C8, urce>> Item ", in which "".e furnis'.".>n of t'.".'s inFor.-,.ation c"u'" "~ d'sclcsed "~ "'".e "urws~ o i "s mission and nature oi its use clari=i~.

purchas s of securities, the encouragement of projection infor-.

tion is an experiv. nt and the relaxation of .the Ccn~is.".ion's policy in this area will be monitored. Since the a.-, rd d gui" s substantially have been the subject of public corrrent, the guides will be effective irrz~diately upon publication in the Federal

%crister. However, since the Cossission is also prooosing for comment a safe-harbor rule for projection disclosure (See Secu-rities Act Release No. 5993 in this separate part), cc rant is also invited .on;the,.cperration of;the,Guides. in, conjunction .with the proposed rule. Corments should refer to File No. S7-760 and should be submitted in triplicate to C~orge A. Fitzsi;,.-,ons, Secretary, Securities and Exchang Ccmission, 500 ."orth Capitol Street, washington, D.C. 20549. All coments will "e avail~1 for public ins"ection.

Text of the Guides Guide 62, "Disclosure of Projections of "ut 're Ec"nc.".,ic Performance."

Prelimin rv '.ate In fur"'".erance of the Ccr...ission's colicy of ercour=gi.".g projections, as set forth in Sec'rities Ac" Release .',o. 33-5..2, this guide sets forth the views of the Division of Cor-craticn Finance on the voluntary disclos re of projecticns of f ture economic pe fcr;..a.".ce in registrat;on s:.t .".sents iled

~ ~

under the Securities Act of 1933. The Division encourages the use in registration statements of management's projections of future econanic performance that have a reasonable basis and ar presented in an appropriate format. The guidelines et forth herein represent the Division's views on important factors to be considered in formulatirg such projections..

il The guides are not rules of the Carnission nor a e they pub-lished as bearing the Cemnission's official apprcval; they represent practices followed 'by 'the 'Carni'ssion' Division 'of Corporation Finance in ministering the disclcsure recu're..e. "s of the federal ecurities la~+.

1. Basis for Pro'tions The Division believes that m sage.-..ent shculd ha'e t.'".e o"tion to present in Ccmission filings i"s goe3 faith as es=-.ent of a registrant's future perfor.ance. Man~~e.-..ent must, however, h ve a reasonable basis for such an as<<s~ent. Dt.".cough a h'storv ol

'operatiors 'or experience in pro'z ting -...ay "e ~..cng "'".e f ctors providing a basis for man~ e.;ent's asse sment, t.".e Division cces not believe that a ccmmy alwa's must have had such a history or experience in order to for...ulate pro-'ect'ors with a reascna'" e basis.

Pz ou"side review of .-..~~w~=..ent's "ro"ections .-., ': "r.".'="h additionaL supcort for havirg a reasonab'e basis or a "ro,"'ec".'c."..

If management decides to include a report of such a review in the registration statement, there hould also'be di'sclo"ure of th qualifications'of the reviewer, the extent of the review, the relationship between the reviewer and the registrant and any other material factors concerning the proce s by which any outside review was sought or obtained. Moreover, the reviewer would be deemed an expert and an appropriate consent must be filed with the registration statem nt.

2. Format '-:for Projections In determining the appropriate format for pro,"'ections included in Commission filings, consid ration must be given to, annng other things, the financial ite..s to be projected, the period to be covered, and the manner of presentation to be used.

Although traditionally projections have "e n given for thre financial items generally considered to be of ri.-.ary irmrtance to investors (revenues, net irco;,.e and earnings "er share), projection in or;,.ation rM rot nece sarily "e limited to these three items. Hcwever, manacement hould take ca e to assure that the choice of items projected is rot susce"-ible cf misleading inferences througn selective pro"ection of cnlv favorable items.

Revenues, net incci-.e, and earni.".gs "er =-'.".are usually presented tcget.".er in order to avoid any misleading in erences

that may arise when the individual items reflect contradictory trends. .There may be instanc s, however, when it is a'propriate to present earnings from continuing op rations, or incc;..e before extraordinary items in addition to or in lieu of net incor'. It generally would be misleading to present sales or revenue projec-tions without one of the foregoing measures of income.

The period that may appropriately b covered by a projection depends to a large extent on the particular circumstances of the company, involved. For certain companies in certain irdu tries, a projection covering a two or three year period may "e entirely reasonable. Other companies may not have a reasonable basis for projections beyord the current year. Accordingly, mana-" ment should select the period most appropriate in the circu;,. tances.

In adaition, manacement in m~<ing a projection should disclose what in its opinion is t".,e most probable unific amur.t or t'.".e nest reasonable range for each financial ite.".. projectec based on the select d assu."..ptions. Pages should not, .".cwever, be so wice as to make the disclosures mearinaless. 'oreover, several pro-jections based cn varying assumptions may "e jucced by manage.;.ent to be tagore meanirgful than a single ru~er or rance ard wculd be permitted.

3. Lv:estor Lrderstanci.".c

@hen ~agemnt c.".ccses to i.".cluce i"s projections in a Cc..

mission t

filing, the disclosures acco..-aryin' the "roject'cns

should facilitate investor understanding of the basis for and limitations of projections. In this regard investors should be cautioned against attributing undue certainty to managem nt's assessment, and the Division believes that investors would be aided by a statement indicating management's intention regarding the furnishing of updated projections. The Division also believes that investor understanding would be enhanced by disclo ure of the assumptions which in management's opinion are most significant to the projections or are the key factors upon which the financial results of the enterprise depend, and encourages di closure of assumptions in a manner that will provide a fra-cwork for analysis of the projection.

Management should also consider whether disclosure of the accuracy or inaccuracy of previous projections would provide investors with i~rtant insights into t.".e limitations of "ro-jections. In this regard, consiceration should be given to pre-senting the projections in a format tha" will facilitate s '"-

secuent analysis of ""e reasons for di ferences between actual and forecast results. An imrtant "enefit may arise from "'".e systematic analysis of variances between project d ard actu l results on a continuing basis, since such disclosure .".,ay high'ight for investors ..cst t.".e . sic..i ic "," r'=-k ".d "ro it i ':

e.".

ip a business c"-eration.

"With res~et -to previously issued projection, registrants are reminded of their re~nsibility to make full ard prox""

disclosure of material facts, both favorable and unfavord~le, regarding their financial condition. This re ponsibility may extend to situations where managerr. nt knows or has reason to krow that its previously disclosed projections no longer have a rea onable basis.

.Since,a company',s:.ability .to.make .projections with ~relative confidence may vary with all the facts and circumstances, the responsibility for determining whether to di contirue or r sur..

making projections is best left to manage...ent. However, the Division encouraces corrpanies not to discontinue or resume pro-jections in Corrmission filings without a reasonable basis.

Guide 5 CQIDES FOR THE PPZPPZATICN MH) FIII';G OF REPCRTS i'D PROXY AND REGIST ATION SIR~i~'" ~ S VLZER T.":E SECURITIES L'<C:-~':GE ACT OF 1934 DISCLOSURE OF PKUBCTIC'.S GF Fr>~iJPZ ECO'LiC.'IIC PE."==Or"..'5='~CE

[The guide is identical to Guide 62 exce"t (1) the first sentence of the Preliminary Vote refers to "regist ation state-

@ants, reports, ard proxy statements filed urcer the Secu ities Exchance Act of 1934", and (2) the last senterc of re second paragraph urder t.'". caption "Basis for ?roj c 'cns" cc,.

cerning the filirg of a consent by the reviewer~~rt would "e

Authorization of Publication for Guides The Cmmission hereby authorizes publication of Guides 62 ard 5, pursuant to the Securities Act of 1933, particularly sections 7 and 10 thereof, and the Securities Exchange Act of 1934, particulary sections 12, 13, 15(d ) and 23(a).

(Secs. 7, 10, 48 Stat. 78, 81; secs. 12, 13, 15(d), 23(a), 48 Stat. 892, 894, 895, 901; ec. 205, 48 Stat. 906; ec. 203( ),

49 Stat. 704; secs. 1, 3, 8, 49 Stat. 1375, 1377, 1379; secs. 8, 202, 68 Stat.,685, 686; .s cs.,3, 4,, 10 78;; ecs.,1,,2, 28(c).,

84 Stat. 1435, 1497; sec. 105(b), 88 Stat. 1503; ecs. 8, 9, 10, 18, 89 Stat. 117, 118, 119, 155; 15 U.S.C. 77g, 77j, 781, 7',

78o(d), 78w(a).)

By the Conmission.

George A. Fitz i~ns Secretary November 7, 1978

~

~ 0 SECURITIES M'cD EXClb~ÃGC CO:s"(ISSICiR

[1 7 CFR "Par ts'30 g '240 g '250 g 260]

Release Nos. 33-5993, 34-15306, 35-20764,39-517 PROPOSED SAFE-HAREOR RULE FOR PLCOECTIGitS AGWi CY: Securities ard Exchange Commission.

ACTIO'8: Propo ed rules.

SURGERY: The Corrnission is proposing the acoption of a rule pro-viding a "safe harbor" from liability under the federal securities laws 'for-nmager.. nt- projections of .revenues, inccrre, ard,earnings per share. Under the rule as proposed (Version "A"), such projm-tions wculd be deemed not to be false or misleading urder the liability provisions of the federal securities laws,. if t~~v (1) were prepared with a reasonable basis and (2) were dis-cloml in good faith. The Commission s also re est'ng cc.....ents on an alternative version of the "safe harbor" rule reco~...erced by the Advisory Ccm:ittee on Ccrporat Disc'osure (Version "B").

DATE: Ccn-.i,ents should "e submitted on or before Dece~"er 29, 1978.

ADDRESS: C~ents should refer to File No. S7-760 ard should be submitted in tr.'plicat to C~crce A. Fit"signs, Secret ry, Securities and Exchange Ccr;..ission, 00 North Capitol Street/

Washington, D.C. 20549. All co. ,...ents will be avai'bl or public lrspect ion FOR FUPLHER LNFC~~R ICN C:~=-'.CT: Ste:en J. Paggioli, Of ice of Disclcsur Policy -.".d "-roce c'.".gs, Di.vision of Cor oraticr. ":'."..".-",

Securities and Exchange Cormission, 500 North Capitol Street, Washington, D.C. 20549 (202) 376-8090.

SUPPLEYiEi~TArK INFO!ATICN 'he Secur ities and Exchange, Cor ~ii ss ion today proposed for cogent a rule that is designed to provide a "safe harbor" from the liability provi ions of the federal ecu-rities laws for management statements of projections of comp..ny economic performance that h-ve a reasonable basis and are di-closed in good faith. The Ccrrnission is also requesting cc. ...=nts on an alternative version of the "safe harbor" rule reco=... n.-.ed by the Advisory Committee on Corporat Disclosure. In a sepa ate 1/

release issued today, the Cormission published revised Guic s 62 and 5 "Disclosure of Projections of Future Economic Per~or;..,"..nce,"

(the "Guides" ) under the Securities Act of 1933 (the "Ac""), (15 U.S.C 77a et sea. as a;.end& bv Pub. L. No. 94-29) (Jure 4, 1975) and the Securities c.xcharge Act of 1934 (t,.'".e "Exc.'".ange Ac"") ('15 U.S.C 78a et sea. as a.".enced bv Pub. L. No. 94-29 (Ju.".e 4, 1975) .

The Guides set fcrth "".o views of t.'".e Div'sicn of Cor".orat'on Finance regarding i~rtant factors to "e considered in disclcs'..c projections of future cc.,.~nr econcmic cer or;ance. In Re'ease Securities Act Release '.:o. 5992, '.:cve.,'r 7, 1978. Se Release ."o. 5992 in t.".'s separate =art. n thi- release, corzent w-s also inv'ed on t.".e cperation cf -".e Guices in e'>at'o

~ 'p ~ ~ 4 ~ ~~

ccnJL ac ivn A s ~ ~ e va @~044P ~ g ~rema w or s i5 - ~~1 a

~ > g

~ ~ ~ 4 ~ ~ t a

th.e "ro"-csee '

1 conte n a "rel;..;.".ar" rcte ."c c="z."."-

.n c r= in cc'si e" "'cns to " cen into the Guices cont acccunt in t.'".e disclosure of "ro"'ecticrs.

Cy 33-5992, the Ccrrnission stated that it wished to encourage the making of projections by registrants both in Ccmi sion fili.n"s and in general, reflecting the reco..,.erdation of the Cor;.ission's 2/

Advisory Committee on Corporate Disclosure. The "safe barer" rule is proposed for the sane reason. Tni release contains a N

discus ion of the background vd purpose of the prcpoM~ rule and a brief description thereof. Attention is directed to the text of the prcpo~ rule for a more complete understanding.

Back round and Purmse 3/

In Securities Act Release tfo. 5699, the Conmission pub-lished for corzent proposed staff Guides 62 and 4 on Disclcsure of Future Economic Perfor;anc . Tnes prcoo als o'rojections serVed as the basis for the revised staff Guides that are " blis.':="

today. In Release 33-56 9, the Commission stated its belief t.".at reasonably based and ac~mately presented projectic..s s'.".c 'd rot subject issuers to liability urcer ~".e federal securities lz~s, solely becau e th projected results did rct r.".at rialize. In thi-regard, the Commission ncted t'at even the r.cst c ref "ly -re"ared and thorouchly coc"-..e..ted "rojections may ". rove inac"urete.

2/ Report of the .-'.c'scrv Cc~ittee on Ccr"crate D'sclosure to the Securities and Exc."..".c C"... issicn,: o .se Ccz,.itt cn a..d :creign ic...,.erce, 9=th Cc."...., 1st sess.

P'nterstate c."..

X-A o" " at re- r for cis "ss'on of Cc... issic . pc s and practices regarding ". ro.ec" ors.

3/ Securities Act Release "..o. 5699, 41 FR 19986, .-.=ril 23, 1975.

g/

Several of the commentators on the propose~ d Guid " urge]

the adoption of a safe-harbor, rule for projections -made by issuers and reviewed by third parties, stating that the absence of a safe harbor rule may discourage the dissemination of projection .

While the propomd Guides were p nding, the Commission's Advisory Cmnittee on Corporate Di closure consic red th subject of "soft information" disclosure generally. In its final report, the Advisory Cmnittee concurred with the Ccmmission's views but recomrendedanthe, adoption. of a<<, aXe-harbor .rule in. order,to encourage voluntary projection disclosure, noting that the law is 5/

not conclusively settled in this regard.

Accordingly, the Ccmnis ion is proposing for ccrzent a "saf harbor" rule (Version "A") and is recuestirg con-...ents on t.".e r le 6/

recommended by the Advisory Committee in i"s final repor" (Version "B").

4/ See con-.(ents collected a" File ~r'o. S7-561.

5/ See, e.g., t!arx v. . u"er Sciences Cc. Corp., 507 F. 2d -'.85 (9th Cir. 1974); Eolgcw v. '".+ rscn, 53 F.R.D. 66-'. (" '.Z 1971, aff'd ter c'- -'-"a -'.6<<R."-d <<3r (M. Cir. 1972); R~<<Ec-r s",

Inc. v. Inta ~av coro ,-'.10 E.'. su"o. 92 (6~:rf, 1976) Reec.".er v.

Able, 374 F. S~=p. 341 (~.'sv 1974); Green v. Jchncp, 'nc.,

358 F. Supp. 413 (D. Ore. 1973).

6/ Rep>rtsu- r,a no"ts 2, at 364-66. As natal infr, v sion "A" of the "safe hat~mr" rule -s "rc"o o va 'es -:cn t.".a of ":-.e Advisory Ccni=-ee in ce "=- n re~its. ""....ent as (footnote continued cn next " ce)

The proposed rule (Version "A") provides th t for pu."uses 7/

of the liability provisions of th federal ecurities laws a statement containing a projection of revenues, inco . (loss, and earnings (loss) per share, shall be de rr% not to be an untrue statement of a material fact, a statem nt false or misleading with re~ct to any material fact, an omission to state a material 6/ (footnote continued) pacifically invited on whether the the Advisory Ccmmittee's rule ~ould be prefer ble. The text of that rule is as follows:

A statement of a manage.-.ant projec ion of future cc.-.pany economic per or-... rc or a statement of awa"e~nt ala.".s a"..d objectives for future c';.'myoperations shall be ceemed rot to "o an un=rue state;,.ent of ;. "= ial f-ct; a state.-ent false or mlslea '.ic with r" ~ t to anv ~

material fact; an c.,i -ion to s"ate a material -."" .".ec "=.'rv "o;,'.'.e a sta" . .ent rot misleadi.".c; or t'-e e.-.oloy-fraucu en'ev ce, c"nt ivanc sc..e3 transact on, ac.", ":=c"ice, cc rse o-busin ss, or an rt'fice =o defra ; as t icse te "s are Use 'n . Secu l -'es Act of 1934, cr "".e 2 "lic Utility Holding Cc. ..pany .-.ct o '93:-, cr rules and reculaticns t.'-.ereu.".der, unless suc>

information:

(1) <Nas pr pared wit.".cut a reasonable basis; or (footnot centi.".ued on nex" "="-e) 7/ See Sec"ions ll, 12 a:d 17 (15 U.S.C 77k, 1, a;d c) cf ":".e Sec"-

rities Act of 1933; Sections 10, ls a.d 20 (15 U.S.C 7',

fact nece sary to make a stater,.=nt not mis3eadirg, or the e,i~loy-ment of a manipulative, deceptive, or fraudulent device, con-trivance, schem , transaction, act, practice, cour of busin or an artifice to defraud as those terms are used in the a:~licable statutory provisions or I

any rules t¹reunder if the staten. nt:

(1 ) was prepared with a reasonable basis; and ( 2) wa disclo~R in good faith; The rule differs substantially from the Advisory Cnmittee's proposed rule (Version "B"). The propo~a rule (Version "A")

Q6 (footnote contirued)

(2) ('s disclosed other than in grad faith.

As part of its acccuntirg regulatic.".s, 5 u =tion S-:<, the Commission a re:;dv h.s =.cc"..tcd safe h=rbor "rcri=-ic.".s c"n-cernir." t.".~ c scl;sure of re"'=c ~ ".= ccs" irf"r .,:;t'"n (17 CFR 210.317(g) a.".d fu" re ret,reven"es frc:3 the ".rcd c 'cn of roved oj.l ard - s rc ."

disclcs 're o" -rojectic.".s r1 ci's C= > 210

="";"..

-'<('()

"here

-reas

6) ('I ) )

o'.

The disclcsure .". "".a" "ro-'.=-"='on cise'csure is vol"r "'"'r hard paring pro ec icns 'r acclt'Gn( it is l..tenored .iat t..e safe barer r le co.".cer..'.".g rro-.'.ec ic.".s "c ld .=': to =

oro-'ectiors, .-.'".eth cr .".ot = in i'i."."" ~ith the "c.

."., ....'s-uture sion; the rules corcer.".ira re"lace. ;.ert ccst cata a.".-:

net revenues " oz t.".e "roduc"ion c" "roved reach cnly such cata as a"pears in ci'eserves filirgs wi;h the Ccrnnis sion.

7/ (footnote continued) t) of t'.".e Se ri"ies =xcha;"e r.ct of 193q, <=c" ion 14 (15 U~C 70 c= "'">>'"3.ic itllj.tv ':"~ ";a Cc..">>v '~"

- cc 1935; and Sation 323 (15 US' 77ssw) of the Trust Indent re Act of:1939.

protects statetrients made by or on behalf: of the issuer ard thus includes statennnts of an outside reviewer of maragemnt's projec-tions, in response to sugcestion made by corn:entators on R lease 8/

33-5699. The Advisory Coi~ittee recommended rule (Version "9")

applies to "management" statements and do s not sp cific lly agly to statements by third party reviewers or define "management."

In addition, the rule as proposed is not limited to projm-tions made in filings with the Ccznission. T.".e Advisory Committee also recor. end d that the safe harbor provision be avail.ble or 9/

all management projection information, whether or rot set forth in a filing with the Commission.

e The prooosed rule (Version "A") is aif erent from t",.e Aevi ory Committee rule in ore other respec . he icvisory Committee re"-

o-.rended that the Ccm'.i sion enccurac disc'csure of manse..",.".nt'"

plans and objectives for fut 're cc..."any operations, pier.".ed c-.'ital expenditures and financirg, -rd t ter,.=nts of divicend and c=."it I structure policies in accit'on to f ture ec ncmic per'or.-..anc .

Guidelines for disclosure cf these ard ot'..er categories of so ".

information are "eirg consicered cererally, as well as in ccr."..

tion with possible ~inc.-.;ents to Guides 22 (:!a.age~nt Anal;sis of the Financial Statements) and 26 (State...ent of Dividerd Folic') "o 8/ See corr.-.. nts col'ected in Fil '. o. S7-:"6'.

9/ Report at 365.

implement the Advisory Committee's other reccmendation regarding soft information. Accordingly, the prcpo ed rule only relates to statements which include orojection" of: (1) revenues; (2) incom (loss); (3) earnings (loss) per share; or (4) oth financial items.

The Advisory Ccmmittee orooosal (Version "0") also relates to statement[s] of managen.ent's olans and cbj ctives for future company operation . "Vhen'<further propo" ls celating to.oth c categories of forward looking information ace published for com-m nt, corres~ndir:g safe harbor rules will be ccnsicered.

The prcposed rule (Version "A") a lies to ocojections nade by issuers (other than regi tered investment co... anies):

(1) with a class of securiti s registe ed "ursuant to Gecticn 12 of the Exchange Act; (2) "'".e securities of which ace exe.. t from that Act " rsuant to Secticn 12(g)(2)(G) t:".ecec.; cr (3) which are subject .to t'.".e re"orting c~ire.-..ents cf Section 15(d) of the c.xchange Act..".e Acvisory Committee "cc"csa'Version "B") is rot so li.".,ited. ~".e Cc.... ission dces rot "el.'eve a't this time that t.,e e.. f 's fccm encouragl..g project'cr.s of future economic performance br non eportirg cc., anies cu"~eichs the risks to investors, particJlarly since, in general, r.cn-repcrting i."

cc. ..i s .-. ro" ' ~'--"ry o'ro-~c"io"s other information about the cm-.any may rot "e "ublicly a:ail-aLle

In addition, the proposed rule as drafted does not acidly to projections made by registered invest...ent companies. In lig?>t of the different considerations that may amply to investment cod  ;. anies in this context, the Cormission has determined at this time not to propose a safe harbor rule ~ific to projections mac by such companies. However, comment is specifically invited as to whether a safe harbor rule for investm nt ccmpanies would be appropriate and whether version A, version B, or some other rule would be preferable for invest..ent cc.-,.pan'es.

Co. ,...ent is also specifically invited as to whether distinctions shculd be made among different kinds of investment ccr, nies (e.g., cpen-end and closed-end, unit inve ".-,.ent tru"t and .",.anace..ent) for the pur-pose of encourag'ng projection cisclosure a".d providing sa e harbor protection.

Finally, and est sic.".ificantly, t?:e "reposed r 'e (Version

'"A") dif ers frcm he Acvisory Ccwittee prccosal (Version "B") in that Version A casts the burden of "roof cn '".e c ncant to "ro e that the projection was prepar d with a reason"'"le "asis and "as isclosed in cccd fai"~. T?:e Acvisory Cc~ittee "ro~sal would place the burcen of proof on t.".e "laintiff to establish that t.".e

'projection did not have a re onable basis or was rot mace in gcod faith.

The Ccmission is proposing t'.".e rule in this mar.er since i" Ls concer..ec ~~aat t..e bur en 1 o~M

the Cottmission could be insurr<<ountable. Et would be extrerre3.'i'fficult to -prove the absence of a reasonable basis or gocd faith, especially as to plaintiffs who wculd not have the Co~is-sion's investigatory procedures available and cannot engage in discovery prior to the filing of a ccrplaint alleging a violation.

bloreover, Version A reflects the recognition'hat an issuer likely would be in a better position to prove that a projecticn was prepared with a reasonable basis and disclosed in gccd faith by virtue of-:its ~ace ss <<to,all,the.facts and circumstances sur-rounding the disclosure of a particular projection for which protection under the rule wculd be sought.10/ However, cc<<; ..ent ao/ This position was al"-o r cc"nized by Ccrgress in the course of draftirg S=ctiors 1>>".d 12 of "'".' Sec riti=s Act of 1933. A pass-ce frca t'.".e .'-. u '"-:-"cr" cr. t'.".e "i11 which even"ually 'as enac"ed "cu'c a ear to ha:e e;val applicability in this ccn:ext.

v~mry ] ai "'nv 'e r ~ ~Q-.+ gi >Q a1 ]

the facts in t'.".e "ont ol cf t.'"."

c ferdart it is "r .ctic lly .ws-sible for a "";er to prov a s"a" i

of kncwlec" cr a ailu e to exercis.

due care cn "".o "a" t c" t.".e -=-=e.".d=-".t.

Unless res"cnsibilitr is to invo':e rerely pa"e li=-"ility it is recessa y to threw ".'".o "ur"en of cis"-rcvirg reversibility for re"-re'.".e.".si'"le acts of emission cr cc...:.is="icn cn "".cse who purport to iss"e s" te.-..ents or

{footnote continued on next age)

~~

is specifica3.1y invited as to vhether version A or version P ~ould have significantly different impacts on the Conmission's goal of encouraging the disclosure of projections.

The Coninission has proposed the foregoing amenc".rent pursuant to its authority under Section 19(a) of the Sccuritie.. Ac" of 1933 (15 U.S.C. 77s(a)), Sections 3(b) and 23(a)(l) of the Securitie Exchange Act of 1934 (15 U.S.C 78c and 78'(a)(1), Section 20 of the Publi'c Utili'ty Hole'ng Company Ac" of 1935 (15 U."S.C. 79t), and Section 319(a) of the Trust Iree>>ture Act of 1939 (15 U.S.C.

77sss(a)). In addition to the definiticnal authority provided therein, Section 19(a) of the Securities Act, Section 23(a.)(')

of the Exchange Act, Sect'on 20(d) (15 U.S.C. 79t(d)) of th Holci;..-.

Ccm~y Act, ard Section 319(c) of t.".e Trust Iree..t r Ac" (15 10/ (footnote ccn"'.". ed) the cublic's relia.".ce. T.".e re . cns'-

t .at C. a tru-t xt 1s a response

~

bilitv t'.". " .".o '.".crea= '=.;..'.er ard .".o avoid or fear. To ';."cse a les er reansibi i": "cubic .". '. ='I "'". ""r-poses Gf thi s leo'sl at'cn ~ c L. Gse a ere er re ~ .si ' " c.c" r ro.

con - tltutlo..al 8'~~~~

cu s g '~'cu c ".l.ecessa llv re B C+~ 8 'l r

tl

~

+

4 <<(j

~ ~v ~  % I ni 0

~ DPI ~ 0 8'alla 0 i ~ ~ ~ ~ \ a t~on o honest buss.".ess ~i"h no c"m-pensatxrc acvan"a" to "'".=- =""1'".

H.R. Reo. No. 85, 73rd Ccrc., 1st Sess. at 9 V+~

U.S.C. 77sss(c)) provide that no liability un"er those Acts "sh 11 apply to any act dono or omitted in good faith in ccnformity" ~ith any rule or regulation of the Commission notwithstanding Sat such I

rule or regulation may later be a;,ended, rescinded, or determined invalid.

Pursuant to Section 23(a)(2) of the Exchange Act, (15 USC 78w(a)(2)) the Commission has consicered the effect that the oro-posed arendment would have on competition and is not aware, at this time, of any burden that such amendment, if adopted, wculd impose on competition not necessary or appropriate in fur"".era".ce of the purposes of that Act. However, the Cci. ission s"-ecif'cal y invites cogent as to the antico;..petitive effects, if any, t.".e proposed rule li.'<ely Hcu e g c r.

All interested xrscns a e invited to submit t".. ir views a.".c comments on t.'".e foregoing "rc"cs 1, in writing, to Cecrge A.

roti ".ge C"..,ass.on, "ra Fi zsixens e et ry, Sec s an =:<c.". =GO North Ca'ltol Street, Nasnrngtcn, D.C. 2G:"~9, on or c for Such c".... nic tc..s - J.le December 29, 1978.

S7-760 ard will "e available for "u"lic lnscec t 1cil ~

,The -text of the propose~ d rules (Version "A") is as follows.

r Title 17 Corrnodity na Securities Exchanges Chapter I4 SECURITIES AlQ E/C!Q."GE CO!:~)ISSIPJ is proposed to be amended as follows:

SECURITIES ACT OF 1933 5 230.132A Projections by issuers of future economic performance pce1imina~rÃoto Scour'ities"Act Release No. '5992, ".Guides for Disclosure of Projections of Future Economic Performance," contains the views of the Commission's Division of Cor"oration Finance regarding significant considerations to be taken into account in the disclo-sure of projections.

(a) A statem nt containing a projection of revenues, income (loss) earninas (loss) per share or other financial items sha'1 be cee~ not to be an untrue staterent of a material fact, a,state.-..ent f lse or misle cing.wi'th res"ect to any,. te i 1 fact, an omission to state a mat rial fact necessary to t".. ke a statement rot misleadin", or the erplom;ent of a 'anipulati:e, ceceptive, or fr uculent device, contrivance, 'sc.'".e~, trans ction, act, practic, course of business, or an artifice to c " uc, as those terms are used in the Securities Act of 1933 or rules and rmulaticns t". r u.."er, i s"ch s"ate...ent (1) w-s "recared <<i"".

~ a reasonable basis a".d (2) was disclosed in cooc fai~a.

(b) This rule apolies only to statem nts made by or on behalf of the issuer to which the statement relates if, at the tim of such statement: (1) a class of securities of the issuer is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934 (2) the issuer is ei mat from the recuire-ments of 'Section 12(g) of that Act by virtue of Section 12(g)(2)(G) thereof; or (3) the issuer is .subject to the reporting reauirements of Section 15(d).of .the .Securities..Exchange Act of 1934'.and (4) at the time the statement is made, the issuer has filed all the material recuired to be filed pursuant to sections 13, 14, or 15(d) of the Securities Exch.z.ge Act, as acolic&le, provided, however, that this rule dc s not apoly to statements ;ade by or on behalf of an issuer which is an inves"-,.ent corn-any registered under the Investment Cc ,. ny .ct of 1940 (15 U.S .C. 70a et sea.)

SECURITIES EXC!t~:CE ACT OF 1934 5 240.3b-5 Projections by issuers of future economic per cr.",.ance

[The tex" of the orc"oM rule is icentical to that above, exceot that reference to the Securities Ac" of 1933 should read "Securities xchange Act of 1934.)

PUBLIC tnILIrx HOLOD;G CD:ZmtY ACT OF 1935 5 250.103A Projections by issuers of future economic per ormanc

[The text of the propo~ rule is identical to that above, except that reference to the Securities Act of 1933 should read "Public Utility Holding Company Act of 1935,"]

TRUST INDEMHHE ACT OF 1939 g 260.0-11 Projections by issuers of future economic p rforzance Rule O-ll, (17 CFR 260.0-11)

[The text of the prooosed rule is identical to that above, except that reference to the Securities Act of 1933 hould r ad "Trust Identure Act of 1939."]

The text of tne prcpo~ rules (Version B) is as follows.-

SECUBITIFS ACT OF 1933 5 250.132A Projections by i suers of future economic performance Preliminary Mte

('%he preliminary not is identical to that in Ve sion A.)

A statement of a manage, nt projection of future corn"any economic performance or a statement of ~v~aqement plans and objec-tives for fut re ccm"any cperaticns shall '=e de=-md not to e an untrue statement of ~v terial fact; a statement false'or misleading with respect to any material fact; an omission to state a material fac" necessary to make a stat ment not mis'eading; or

the employment of a manipulative, deceptive, or fraudulent device, contrivance, scherre, transaction, act, practice, course of bus-iness, or an artifice to defraud; as those terms are used in the Securities Act of 1933 or rules and regulations thereunder, use s such information: (1) was prepared without a reasone3Qe basis; or (2) was disclosed other than in good faith.

SECURITIES EXCFWNGE ACT OF 1934 5 240.3b-6 Projections by issuers of future economic performance

'[The -text "of the proposed rule is identical to -that dmve, except the reference to the Securities Act of 1933 should read Securities Exchange Act of 1934.]

PUBLIC UTILITY HOLDING CCNPAVZ ACT OP 1935 g 250.103A Projections by issuers of future economic performance

['Ihe text of the proposed rule is identical to that above, except that the reference to the Securities Act of 1933 should read Public Utility Holding Ccr.~ay Act of 1935.]

TRUST IN<'DEVIURE ACT OF 1939

$ 260.0-11 Projections by issuers of future economic perfor-.a.".ce

[The text of the prcposed rule is identical to that above,

except that reference to the Securities Act of 1933 should read "Trust Indenture Act of 1939."]

By the Commission.

George A. Fitzsimnons Secretary November 7, 1978

FEB 13 1979 r

t1 ger 5'ote LL.E to LWR 22 5'5525 5 2 REQUEST FOR WITKKOLDING INFORMATION FROM PUBLIC DISCLOSURE I have reviewed your draft response to withholding financial projections of the Florida Power and Light Company. Attached on Enclosure A hereto is my suggestion for modifying your draft letter. If you accept this redraft, it will not be necessary to resubmit this letter for OELD concurrence.

If you have any further questions regarding this matter, please contact me on Ext. 27242 Edward C. Shomaker, Attorney

'perations and Administration Division Office 'of the Executive Legal Director Enclosure A

4

~ ~

~

~4~ IL r v IIr n AE C

REoo C+gpss Mp, UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D. C. 20555

.'>pJJIl(~P'

+)t*++

Docket No. 50-389 Dr. Robert E. Uhrig Vice President of Nuclear and General-Engineering Florida Power 8 Light Company P *'0. Bo'x Miami, =Florida 33152

Dear Dr. Uhrig:

SUBJECT:

RE(VEST FOR WITHHOLDING INFORMATION FROM PUBLIC DISCLOSURE (St..Lucie Plant Unit No. 2)

By'your'1'etters dated January 21, February 10 and April 15, 1977,. you sub-mitted financial information relating to forecasts of revenues, earnings, dividends or future financings of Florida Power and Light Company and supporting affidavits signed by Michael C. Cook, Treasurer for Florida Power and Light Company. You requested that the financial information, be withheld. from public disclosure pursuant to 10 CFR 2.790 for the following rea'sons:

1. The release .of the information .would prejudice the integrity of the'ate-making process;

2. The rele'ase of the information could seriously impair the ability of Florida Power and Light Company to compete for funds in the money market at .favorable I

rates;

3. The flexibility'and release of the information might obligate Florida Power'and Light Company to constantly revise and redistribute the fore-casted informati on, thereby impairing management ' decision-making its credibility with investors; and

4. The reliance on Florida'ower and Light Company's forecast's could mislead investors and lay the groundwork for lawsuits.

Me have reviewed your requests and find that the reasons as to why the release of the submitted information would cause substantial= harm to your company are conclusory in nature and do not provide us with a sufficient

~he 0p basis

'u on which to approve your appli'cation. Specifically, you failed to ow his information could prejudice the integrity of the rate-making process and how the release of this information could a'ffect -the p, gpo& market for the company's 'securities. Moreover, we have had no indica-tion that either one 'of, these results has befallen any of the many appli-

. cants who have provided us the same type of information in the past.

gt I

'l l (w~

a '1 k

0 t'r.

'Y Robert E. Uhrig On@

gyp g c~4p gpcvMT>y' Pgy 5 5 f'05'~

U EO With regard to Items (3) and (4) from the Securities and Excha~gd

~ have requested andreceived advice Coomission (SEC). A copy of the response from the SEC, dated Dece eF 14, 1978, is enclosed. We have also enclosed a copy of recently- ew- SEC regulation) governing disclosure of management financial projections.

Accordingly, we have concluded that the information sought to be withheld from public disclosure does not meet the requirements of 10 CFR 2.790.

Therefore, your requests to withhold the financial information from public disclosure are denied.

If you do not provide us with information whi'ch will establish- a sufficient basis upon which to approve your application, you are advised that in not less than thirty (30) days from the date of this letter, the subject docu-ments will be placed in the Public Document Room. If, viithin thirty (30) days of the date of this letter, you request withdrawal of the documents in accordance with 10 CFR 2.790 (c), your request will be considered in the light of applicable statutes and regulations and a determination made whether the documents will be withheld from the Public Document Room and returned to you.

Sincerely, Robert L. Baer, Chief Light Water Reactors Branch No. 2 Division of Project Management

Enclosures:

As Stated ccs w/enclosures:

See next pages

1q

'I U

I

Di stributi on w/encl.osure Docket File, FEB o 8 1979 NRC PDR Local PDR RABirkel Distributi n w/o enclosure Docket No. 50-38 RSBoyd LWR ¹2- F' DBVassal o RLBaer Dr. Robert E. Uhrig JLee Yice President of Nuc ear and WPato General Engineering ESho ker Florida Power 8 Light C pany FJWi liams P. 0. Box MRu brook Miami, Florida 33152 JRB chanan TB bernathy

Dear Dr. Uhrig:

A RS(16)

SUBJECT:

REQUEST FOR WITHHOLDI INFOR TION FROM PUBLIC DISCLOSURE.

(St. Lucfe Plant Unit N 2)

By your letters dated January 21, Fe ary 10 and April 15, 1977, you sub-mitted financial information relatfn o forecasts of revenues, earnings, di vidends or future financings of Fl ri a Power and= Light Company and supporting affidavits signed by f1ic ael Cook, Treasurer for Florida Power and L'ight Company., You requ ted th t the financial information be withheld from public disclosure pu suant to. 0 CFR 2.790 for the following reasons:

1. The release of the informati n would prejudi e the integrity of the rate-"making process;

2. The release of the inf(rm ion could seriously i air the abi'lity of Fl ori da Power and 4i gh Company to compete for unds in the money market at favorhbl rates;

3. The release of the info mation might obligate Florida ower.and Light Company to const ntly revise and redistribute the fore-ca'sted information, t ereby impairing management's decis n-making flexibility a its credibility with investors; an

4. The reliance on Flo ida,Power and Light Company's. forecasts could .mislead 'nve ors and lay the groundwork for lawsuits.

'We have reviewed our requests and, find that the reasons as to why the release of the s bmitted information would cause substantial harm to your company are conclusory in n'ature and do not- provide us with a sufficient basis upon which to approve your application. Specifically, yo'u failed to address how this information could prejudice the integrity .of the rate-making process and how the release of this information could affect the ma e or ec mpany s secur ties. Noreo r, we have h d no indica-orricagj ..that-either. one-of- these- esults-has-b aH en-any: of. the eany-appl ~0 ~ ~ ~ ~ ~ ~ ~ ~ ~~~~

OURNAMCQ s who have p ovided us the same type of nformation i the pygt, OAVC~ ~ ~ s ~ ~

HGC ~EM 518 (9-76) NRC5K OX40 4 U 4 oovcRNMONT PRINCINC orrlccs Ieye 444 744

'l 0

l l

C

/

I 1

4 0

/

. Robert E. Uhrig t'Ee a t'979 With regard to Ite (3) and (4), we have requested nd received advice from the Securities nd Exchange Coranission (SEC). A copy of the response from the SEC, dated D ember 14, 1978,,is enclosed We have also enclosed a copy of recently prop ed new SEC regulations g erning disclosure of .

'anagement financial pro ctions.

9 Accordingly, we have conclu d that the inform ion sought to be withheld from public disclosure does n meet the req ements of 10 CFR 2.790.

Therefore, your requests to wit old=the fi cial informatiori from public disclosure are denied.

If you do not provide us with inform tio ti v ich will establish a sufficient that in not basis upon which to approve your appl> n, you are advised less than thirty (30) days from the da f this letter, the subject docu-ments will be placed in the Public Do t Room. If, vtithin thirty (30) days of the 'date of'his letter, you re ue withdrawal of the documents in accordance with 10 CFR 2.790 (c), y ur re est will be considered in

'a determination made the light of applicable statutes'and egulatio s and whether the documents will be withhel from the ublic Document Room and returned to you.

Sincerely, I

Robert L. Baer, Chief Light Water Reactors Branch No. 2 Division of Project management Encl osures:

As Stated ccs w/enclosures:

She next pages OFIIIOII~ LWR ¹2. DPti:LWR ¹2 I ~ DPf1:LWR ¹3 ELD. DPIIi.'LWR ¹2

~ ~ ~ e gf)egF3f ~ ~ ~ 10 ~~ ~~~ ~~

'I

ab RABirkel P~er-sen- )1Rushbrook EShomaker RLBaer OURNASIIIW DATE~ 79 l=

/~/79 /79 , ( /gb/79 /. /79 / /79 O',

'iec 1/

penner sos <s-76> Nmcg oculo . UNN OOVNNNMICNT I'NINTINO ONNICNI'I~ 1 ~ tO ~ TO ~

l(f

0 I

P lI