Marty Dunn Departing the SEC

It does seem I’m covering a lot of action at the SEC these days, hopefully we’ll get back to talking about the reverse merger business once the new proposals are passed.

In any event, the SEC announced on August 6 that Deputy Director of Corporation Finance Martin Dunn is stepping down to join a law firm. Generally well regarded and perceived as extraordinarily talented and dedicated, Marty is also known for his wry wit, especially breaking up otherwise drone PLI lectures to securities lawyers. John White was technically his boss, but Marty’s many years working the bureaucracy at the SEC led most to believe he essentially ran Corporation Finance.

I had talked with Marty a number of times, in particular concerning the Rule 415 issue. He is a patient man who listened to all who were interested in expressing their opinions (even if he didn’t always agree). With the assistance of Carol McGee and Dave Lynn at the SEC, Marty essentially designed the 30% of public float standard which can be registered for resale without a 415 analysis being triggered. Many in the PIPE and RM world thought this would cause the end of many deals and changes to many others. In fact that result has occurred, as has been written many times in this space.

Since the announcement, Marty has also been instrumental in putting together the six new proposals that will indeed help smaller public companies and make the 415 issue less of a concern in many situations. I believe Marty felt strongly that those in the extreme cases seeking to register 2-3 times a company’s float were indirectly conducting a direct public offering. How that translated into no more than 30% of the float is still a bit of a mystery to me. Initially the SEC internally guided its staff to issue a 415 comment when more than 50% of a company’s outstanding stock was seeking to be registered. That seems like a more logical standard, if there has to be one.

As we noted in our comment letter to the SEC proposals, we hope the Commission will take another look at this issue. Congress has asked Chairman Cox about it and his response to their concerns that the 415 issue will stifle capital formation is not to worry, these new proposals will take care of everything. I respectfully disagree, and am hopeful that Marty’s replacement will have more of the spirit of the proposals in mind and recommend an adjustment to the 415 thresholds.

In any event, I respect Marty Dunn and wish him all the best in his new position back with us in the private sector.

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