SEC Division of Corporation Finance no-action letter: Wilmington Trust Company

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SECURITIES AND EXCHANGE COMMISSION a WASHINGTON, D.C. 20549 ?4r DIVISION OF March 12,2007 CORPORATION FINANCE Mr. Michael A. DiGregorio Senior Vice President & General Counsel Wilmington Trust Company Rodney Square North 1 100 North Market Street Wilmington, DE 19890-0001 Re: In the matter of Auction Rate Securities Practices (HO-09954), Wilmington Trust Company Waiver Request of Ineligible Issuer Status under Rule 405 of the Securities Act Dear Mr. DiGregorio:
This is in response to your letter dated December 13,2006, written on behalf of Wilmington Trust Corporation (Company) and its subsidiary Wilmington Trust Company (WTC) and constituting an application for relief from the Company and WTC being considered "ineligible issuers" under Rule 405(l)(vi) of the Securities Act of 1933 (Securities Act). The Company and WTC request relief from being considered ineligible issuers under Rule 405, due to the entry on January 9,2007, of a Commission Order (Order) pursuant to Section 8A of the Securities Act of 1933 (Securities Act) naming WTC as a respondent. The Order finds, among other things, that WTC caused violations of Section 17(a)(2) of the Securities Act. Based on the facts and representations in your letter, and assuming the Company and WTC comply with the Order, the Commission, pursuant to delegated authority has determined that the Company has made a showing of good cause under Rule 405(2) and that the Company and WTC will not be considered ineligible issuers by reason of the entry of the Order. Accordingly, the relief described above from the Company and WTC being ineligible issuers under Rule 405 of the Securities Act is hereby granted and the date of effectiveness of the waiver is January 9,2007. Any different facts from those represented or non-compliance with the Order might require us to reach a different conclusion. Sincerely, T??f Mary Kosterlitz &@t$ Chief, Office of Enforcement Liaison Division of Corporation Finance

WILMINGTON Wilmington Trust Corporation b' TRUST Rodney Square North 11 00 North Market Street Wilmington, DE 19890-0001 December 13,2006 Via Federal Express Mary Kosterlitz, Esq. Chief of the Office of Enforcement Liaison Division of Corporation Finance Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: In the Matter of Auction Rate Securities Practices, File No. HO-09954 (Wilmington Trust Company) Dear Ms. Kosterlitz:
I am writing on behalf of my client, Wilmington Trust Corporation ("WL"), and its subsidiary, Wilmington Trust Company ("WTC"), which is a respondent in the above-referenced investigation commenced by the Securities and Exchange Commission (the "Commission"). The investigation relates to certain practices involving auction-rate securities. Two other auction agents are also respondents in this proceeding and, together with WTC, are negotiating a settlement with the Division of Enforcement. I hereby request, pursuant to amended Rule 405 under the Securities Act of 1933 (the "Securities Act"), that the Division of Corporation Finance, on behalf of the Commission, determine that WL, WTC shall not be considered "ineligible issuers" as defined in Rule 405 as a result of the proposed order to be entered in the above-referenced investigation, as described below. I request that this determination be made effective upon entry of the proposed order. I understand that the Division of Enforcement does not object to such determination. BACKGROUND In connection with the above-referenced proceeding, which was brought pursuant to Section 8A of the Securities Act, WTC and the Division of Enforcement have reached an agreement in principle to settle the matter as described below, and WTC expects to submit to the Commission an offer of settlement in which, for the purpose of this proceeding, it will consent to the entry of an order by the Commission (the "Order") without admitting or denying the matters set forth in the Order (except as to the jurisdiction of the Commission and the subject matter of the proceeding). In the Order, the Commission will make findings, without admission or denial by WTC, that WTC caused violations of Section 17(a)(2) of the Securities Act in connection with certain practices relating to auction-rate securities. Based on these findings,

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Mary Kosterlitz, Esq. -2- the Order will require WTC to cease and desist from committing or causing any current or future violations of Section 17(a)(2) and to pay a civil money penalty of $100,000. DISCUSSION Under a number of Securities Act rules that became effective on December 1, 2005, a company that qualifies as a "well-known seasoned issuer" as defined in Rule 405 will be eligible, among other things, to register securities for offer and sale under an "automatic shelf registration statement," as so defined, and to have the benefits of a streamlined registration process under the Securities Act. Companies that qualify as well￾known seasoned issuers will be entitled to conduct registered offerings more easily and with substantially fewer restrictions. Pursuant to Rule 405, however, a company cannot qualify as a "well-known seasoned issuer" if it is an "ineligible issuer." Similarly, the new Securities Act rules will permit an issuer and other offering participants to communicate more freely during registered offerings by using free-writing prospectuses, but only if the issuer is not an "ineligible issuer."' Thus, being an ineligible issuer will disqualify an issuer from a number of significant benefits under the new rules. Rule 405 defines "ineligible issuer" to include any issuer of securities with respect to which the following is true: "Within the past three years . . ., the issuer or any entity that at the time was a subsidiary of the issuer was made the subject of any . . . administrative . . . order arising out of a governmental action that . . . [rlequires that the person cease and desist from violating the anti-fraud provisions of the federal securities laws." Notwithstanding the foregoing, paragraph (2) of the definition provides that an issuer "shall not be an ineligible issuer if the Commission determines, upon a showing of good cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer." The Commission has delegated authority to the Division of Corporation Finance to grant waivers fiom any of the ineligibility provisions of this definiti~n.~ Being an ineligible issuer will disqualify an issuer under the definition of "well-known seasoned issuer," thereby preventing the issuer from using an automatic shelf registration statement (see new Rule 405) and limiting its ability to communicate with the market prior to filing a registration statement (see new Rule 163). In addition, being an "ineligible issuer" will disqualify an issuer, whether or not it is a well-known seasoned issuer, under new Rules 164 and 433, thereby preventing the issuer and other offering participants from using free-writing prospectuses during registered offerings of its securities. Consequently, this request for relief is being made not only for the purpose of qualifying as a "well-known seasoned issuer" but for all purposes of the definition of "ineligible issuer" in Rule 405 -i.e., for whatever purpose the
definition may now or hereafter be used under the federal securities laws, including SEC rules. See 17 C.F.R. 5 200.30-1. See also note 215 in Release No. 33-8591 (July 19,2005).

Mary Kosterlitz, Esq. -3-
The Order might be deemed to be an administrative order of the kind that would result in WL, as well as WTC, becoming an ineligible issuer for a period of three years after the Order is entered. This result would preclude WL (and such other entities) from qualifying as a well-known seasoned issuer and having the benefit of automatic shelf registration and other provisions of the new rules for three years. This would be a significant detriment for WL. WL is a frequent issuer of registered securities. For WL, the shelf registration process provides an important means of access to the U.S. capital markets, and these markets are an essential source of funding for the company's operations. Consequently, automatic shelf registration and the other benefits available to a well-known seasoned issuer will be significant for WL. As described above, Rule 405 authorizes the Commission to determine that a company shall not be an ineligible issuer, notwithstanding that the company becomes subject to an otherwise disqualifying administrative order. WL and WTC believe that there is good cause, in their case, for the Commission to make such a determination with respect to the Order on the following grounds.

1. The conduct at issue to be addresses in the Order does not relate to
   disclosures and offerings of securities by WL of WTC.
2. WL and WTC have a strong record of compliance with the securities
   laws and voluntarily cooperated with the Division of Enforcement's inquiry into this matter. WTC also has implemented policies and procedures designed to help prevent recurrence of the conduct that is the subject of the.Order.
3. Disqualification of WL or WTC as an ineligible issuer would be
   unduly and disproportionately severe. The Order will require WTC to pay a civil money penalty of $100,000. Making WL an ineligible issuer would result in an additional penalty beyond what the Order requires.
4. Disqualification of WL or WTC as an ineligible issuer also would be
   unduly and disproportionately severe given the nature of the violation found in the Order. Instead, the alleged conduct relates primarily to auction agents' conduct of auctions of auction rate securities in ways that were not adequately disclosed or that did not conform to the disclosed procedures. In light of the foregoing, I believe that disqualification of WL, WTC or any of their affiliates as an ineligible issuer is not necessary under the circumstances, either in the public interest or for the protection of investors, and that WL and WTC have shown good cause for the requested relief to be granted. Accordingly, I respectfully request that the Division of Corporation Finance, on behalf of the Commission, pursuant to Rule 405, determine that it is not necessary under the circumstances that WL, WTC or any of their

Mary Kosterlitz, Esq. -4- affiliates be an "ineligible issuer" within the meaning of Rule 405 as a result of the Order. I request that this determination be made for all purposes of the definition of "ineligible issuer," however it may now or hereafter be used under the federal securities laws and the rules thereunder. If you have any questions regarding this request, please contact the undersigned. Sincerely, Michael A. ~i~re~ori% Senior Vice President & General Counsel (302) 65 1-8793 direct dial mdigregorio@wilmingtontrust.com