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

[Carlton Samuels <carlton.samuels@xxxxxxxxx>]

+1.

Carlton Samuels

==============================
Carlton A Samuels
Mobile: 876-818-1799
Strategy, Planning, Governance, Assessment & Turnaround
=============================


On Wed, Jul 7, 2010 at 9:51 AM, Milton L Mueller <mueller@xxxxxxx> wrote:

>  I agree that Richard T. is interpreting the DAGv4 correctly, and I agree
> with Jeff E. that the DAGv4 limitations have no real purpose and no public
> interest justification. Their only purpose is to maintain an ownership
> separation between registries and registrars, and such limitations have
> utterly no justification in new TLDs lacking in market power.
>
>
>
> The idea that applicants are not “excluded” because they can “own” part of
> a registry in such a remote, neutered way (no voting rights, no policy
> control, no ability to sell shares, no direct mgmt) is a pretty lame attempt
> by the status quo advocates to cover their posteriors against antitrust
> arguments. I’m not buying it.
>
>
>
> Imagine if someone proposed that computer manufacturers couldn’t open their
> own retail outlets except under the conditions in the DAGv4. Would this be a
> barrier to computer companies opening retail outlets? Of course it would be.
> The limitations eliminate almost all of the reasons anyone would want to
> open their own retail outlet.
>
>
>
> --MM
>
>
>
> *From:* owner-gnso-vi-feb10@xxxxxxxxx [mailto:
> owner-gnso-vi-feb10@xxxxxxxxx] *On Behalf Of *Jeff Eckhaus
> *Sent:* Tuesday, July 06, 2010 2:07 PM
>
> *To:* Gnso-vi-feb10@xxxxxxxxx
> *Subject:* RE: [gnso-vi-feb10] the "it excludes some applicants" argument
>
>
>
> Sorry, this is your personal interpretation and has not been validated by
> Staff or the Board and actually does not make a lot of sense to me.  You are
> saying the DAG is fine with allowing ownership, but is restricting the sale
> of the stock of that company. What is the purpose of that and how does that
> benefit users?
>
> Not really sure how this thread or line of discussion helps or goals and  I
> think this Working Group should really focus on the charter and how we help
> new TLDs, lets save the interpretation of the DAG for the lawyers and the
> experts in these details.
>
>
>
>
>
>
>
>
>
> *From:* owner-gnso-vi-feb10@xxxxxxxxx [mailto:
> owner-gnso-vi-feb10@xxxxxxxxx] *On Behalf Of *Richard Tindal
> *Sent:* Tuesday, July 06, 2010 10:48 AM
> *To:* Gnso-vi-feb10@xxxxxxxxx
> *Subject:* Re: [gnso-vi-feb10] the "it excludes some applicants" argument
>
>
>
> Jeff E and Jeff N,
>
>
>
> To clarify,  I'm saying the DAG 4 language allows eNom (for example)  to
> own as much of a registry company as it wants as long as the following, four
> criteria are met:
>
>
>
> 1.  eNom cannot have voting rights in the stock
>
>
>
> 2.  eNom cannot dispose of the stock
>
>
>
> 3.  eNom cannot direct management
>
>
>
> 4.  eNom cannot set registry policies
>
>
>
> As long as these criteria are met eNom can own all of the registry company,
> should it choose,  and eNom can receive all of the operating profits of that
> registry company.
>
>
>
> That's what's in the DAG (Module 1 and Draft Registry Contract) now.
>
>
>
> RT
>
>
>
>
>
>
>
> On Jul 6, 2010, at 9:34 AM, Jeff Eckhaus wrote:
>
>
>
> 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 J).
>
>
>
>
> +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
>
>
>  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*
>
>
>      ------------------------------
>
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>
> *From:* 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
> *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
>
>
>
>
>