RE: [gnso-vi-feb10] the "it excludes some applicants" argument

[Jeff Eckhaus <eckhaus@xxxxxxxxxxxxxxx>]

The statements below may be partially true but they are incomplete.

1.     The Resolution, as it stands now,  does allow beneficial ownership of 
registries by registrars;  and
(It allows 2% beneficial ownership, this is not ownership)

2.     It's up to us to recommend policy.  If we like the like the Beneficial 
Ownership language in the DAG we should feel free to incorporate it in our 
proposals.    I do like it.    If incorporated in our proposals it allows 
registrars to own registries -- but places a limit on control and influence of 
that registry.
(Again, this only allows 2% beneficial ownership)




From: owner-gnso-vi-feb10@xxxxxxxxx [mailto:owner-gnso-vi-feb10@xxxxxxxxx] On 
Behalf Of Richard Tindal
Sent: Tuesday, July 06, 2010 8:02 AM
To: Gnso-vi-feb10@xxxxxxxxx
Subject: Re: [gnso-vi-feb10] the "it excludes some applicants" argument


Jeff,

I understand what you're saying.  Given the profile of this issue over the last 
year I'll be very surprised if the Board/ Staff didn't carefully review the 
details of the Nairobi resolution - however I agree with you that we don't know 
this for a fact.

Here are two things we do know though:

1.     The Resolution, as it stands now,  does allow beneficial ownership of 
registries by registrars;  and

2.     It's up to us to recommend policy.  If we like the like the Beneficial 
Ownership language in the DAG we should feel free to incorporate it in our 
proposals.    I do like it.    If incorporated in our proposals it allows 
registrars to own registries -- but places a limit on control and influence of 
that registry.

RT


On Jul 5, 2010, at 7:54 PM, Neuman, Jeff wrote:


Richard,

I appreciate this thread, but we are not sure, nor will they ever confirm or 
deny, what ICANN staff's motivation was behind the language they used.  It 
could be as simple as the comments I filed to DAG 1 or 2 (can't remember) 
asking ICANN staff to look at United States SEC Rule 405 for the definition of 
Affiliate/Associate, Ownership/control (where the notion of beneficial 
ownership is discussed in definitions).  Or it could actually be deliberate.  
Certainly I would not make the assumption that the Board approved or even saw 
this language.

One thing I raised on the last call, which I will repeat in e-mail and will 
repeat in comments, is that ICANN staff did not refer to the complete 
definition of beneficial ownership as used by the applicable regulations.  Rule 
13-d, reprinted below,  talks about how to determine "beneficial ownership" and 
if you look at (b) below, that would seem to narrow down some of the 
alternatives you imply in your e-mail (i.e., no putting shares into a trust or 
pooling agreement, etc.).

Perhaps this was purposely done, but I would not necessarily make that 
assumption since failure to adopt the entire definition as reprinted below in 
(b) would be subject to incredible gaming (now that I have told everyone how to 
do it :)).

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Rule 13d-3 -- Determination of Beneficial Ownership
________________________________

a.     For the purposes of sections 
13(d)<http://www.law.uc.edu/CCL/34Act/sec13.html#d> and 13(g) of the Act a 
beneficial owner of a security includes any person who, directly or indirectly, 
through any contract, arrangement, understanding, relationship, or otherwise 
has or shares:
1.    Voting power which includes the power to vote, or to direct the voting 
of, such security; and/or,
2.    Investment power which includes the power to dispose, or to direct the 
disposition of, such security.
b.    Any person who, directly or indirectly, creates or uses a trust, proxy, 
power of attorney, pooling arrangement or any other contract, arrangement, or 
device with the purpose of effect of divesting such person of beneficial 
ownership of a security or preventing the vesting of such beneficial ownership 
as part of a plan or scheme to evade the reporting requirements of section 
13(d) or (g) of the Act shall be deemed for purposes of such sections to be the 
beneficial owner of such security.
c.     All securities of the same class beneficially owned by a person, 
regardless of the form which such beneficial ownership takes, shall be 
aggregated in calculating the number of shares beneficially owned by such 
person.
d.    Notwithstanding the provisions of paragraphs (a) and (c) of this rule:
1.
                                      i.        A person shall be deemed to be 
the beneficial owner of a security, subject to the provisions of paragraph (b) 
of this rule, if that person has the right to acquire beneficial ownership of 
such security, as defined in Rule 
13d-3(a)<http://www.law.uc.edu/CCL/34ActRls/rule13d-3.html#a> within sixty 
days, including but not limited to any right to acquire:
A.    through the exercise of any option, warrant or right;
B.    through the conversion of a security;
C.    pursuant to the power to revoke a trust, discretionary account, or 
similar arrangement; or
D.    pursuant to the automatic termination of a trust, discretionary account 
or similar arrangement; provided, however, any person who acquires a security 
or power specified in paragraphs (d)(1)(i)(A), (B) or (C), of this section, 
with the purpose or effect of changing or influencing the control of the 
issuer, or in connection with or as a participant in any transaction having 
such purpose or effect, immediately upon such acquisition shall be deemed to be 
the beneficial owner of the securities which may be acquired through the 
exercise or conversion of such security or power. Any securities not 
outstanding which are subject to such options, warrants, rights or conversion 
privileges shall be deemed to be outstanding for the purpose of computing the 
percentage of outstanding securities of the class owned by such person but 
shall not be deemed to be outstanding for the purpose of computing the 
percentage of the class by any other person.
                                     ii.        Paragraph (d)(1)(i) of this 
section remains applicable for the purpose of determining the obligation to 
file with respect to the underlying security even though the option, warrant, 
right or convertible security is of a class of equity security, as defined in 
Rule 13d-1(i)<http://www.law.uc.edu/CCL/34ActRls/rule13d-1.html#i>, and may 
therefore give rise to a separate obligation to file.
2.    A member of a national securities exchange shall not be deemed to be a 
beneficial owner of securities held directly or indirectly by it on behalf of 
another person solely because such member is the record holder of such 
securities and, pursuant to the rules of such exchange, may direct the vote of 
such securities, without instruction, on other than contested matters or 
matters that may affect substantially the rights or privileges of the holders 
of the securities to be voted, but is otherwise precluded by the rules of such 
exchange from voting without instruction.
3.    A person who in the ordinary course of his business is a pledgee of 
securities under a written pledge agreement shall not be deemed to be the 
beneficial owner of such pledged securities until the pledgee AE1 has taken all 
formal steps necessary which are required to declare a default and determines 
that the power to vote or to direct the vote or to dispose or to direct the 
disposition of such pledged securities will be exercised, provided, that:
                                      i.        The pledgee agreement is bona 
fide and was not entered into with the purpose nor with the effect of changing 
or influencing the control of the issuer, nor in connection with any 
transaction having such purpose or effect, including any transaction subject to 
Rule 13d-3(b)<http://www.law.uc.edu/CCL/34ActRls/rule13d-3.html#b>;
                                     ii.        The pledgee is a person 
specified in Rule 
13d-1(b)(1)(ii)<http://www.law.uc.edu/CCL/34ActRls/rule13d-1.html#b.1.ii>, 
including persons meeting the conditions set forth in paragraph (G) thereof; and
                                    iii.        The pledgee agreement, prior to 
default, does not grant to the pledgee;
A.    The power to vote or to direct the vote of the pledged securities; or
B.    The power to dispose or direct the disposition of the pledged securities, 
other than the grant of such power(s) pursuant to a pledge agreement under 
which credit is extended subject to regulation T and in which the pledgee is a 
broker or dealer registered under section 
15<http://www.law.uc.edu/CCL/34Act/sec15.html> of the act.
4.    A person engaged in business as an underwriter of securities who acquires 
securities through his participation in good faith in a firm commitment 
underwriting registered under the Securities Act of 1933 shall not be deemed to 
be the beneficial owner of such securities until the expiration of forty days 
after the date of such acquisition.


Jeffrey J. Neuman
Neustar, Inc. / Vice President, Law & Policy


________________________________
The information contained in this e-mail message is intended only for the use 
of the recipient(s) named above and may contain confidential and/or privileged 
information. If you are not the intended recipient you have received this 
e-mail message in error and any review, dissemination, distribution, or copying 
of this message is strictly prohibited. If you have received this communication 
in error, please notify us immediately and delete the original message.


From: owner-gnso-vi-feb10@xxxxxxxxx<mailto:owner-gnso-vi-feb10@xxxxxxxxx> 
[mailto:owner-gnso-vi-feb10@xxxxxxxxx] On Behalf Of Richard Tindal
Sent: Monday, July 05, 2010 10:20 PM
To: Gnso-vi-feb10@xxxxxxxxx<mailto:Gnso-vi-feb10@xxxxxxxxx>
Subject: [gnso-vi-feb10] the "it excludes some applicants" argument


I've heard comments that some WG proposals would exclude registrars from 
participating in the registry business.  Having re-read the DAG language I 
wanted to push back on that notion -- and stimulate some discussion on the 
topic.

I've thought for some time now the Staff and Board have become very 
sophisticated in their understanding of the cross-ownership issue.   Given 
this, I think the DAG 4 language is very carefully worded so that it does not 
place limits on 'ownership' of a registry by a registrar.  Rather,  it places 
limits on 'beneficial ownership',  which is more akin to limits on control.

As I review the DAG language it seems clear a registrar could own as much of a 
registry as it wanted,  and enjoy any operating profits from that registry, as 
long as its 'beneficial ownership' was  limited.  Beneficial ownership includes 
voting rights or the ability to sell shares.     If the DAG had meant to place 
limits purely on ownership I think it would have used the term "ownership" -  
and not the more specific concept of "beneficial ownership".

If the DAG language is applied then none of the proposals before this WG (e.g.  
RACK+)  would exclude registrars from owning registries.  Rather, it would 
prevent those registrars from having beneficial ownership beyond 15%.    As 
such I dont think registrars are excluded from becoming registries.  I just 
think they are excluded from having control.

Comments welcome.

RT