PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LOUIS F. ALLEN; CARL K. BAKER;
JOYCE P. BAKER; PETER D.
BERRINGTON; OLIVER BIRCKHEAD;
FLORENCE BLAUSTEIN; MARY L.
BRAY; T. K. BROOKER; DONALD J.
BROOKS; JOSEPH CALLAGHAN; JAMES
CASSEL; TERRY G. CHAPMAN; J. A.
CLAWSON; JOHN K. COLVIN; FRED B.
COX; JOHN RAWLYN CHARLES
CRABTREE; CHRISTOPHER P. CLUP;
GORDON C. DAVIDSON; RUTHERFORD
DAY; DONALD D. DOTY; M. D. A.
EMBLIN; AUDREY FISHER; DONALD B.
GIMBEL; KENNETH J. GIMBEL;
KATHERINE GOOCH; B. G. HARRISON;   No. 96-2158
YUMIKO HONDA; HERBERT W.
HOOVER, III; MARGARET W. JONES;
DONALD K. KENT; E. R.
KINNEBREW, III; WALTER J. LEVY;
ROLAND LEY; SUZANNE RHULEN
LOUGHLIN; GEORGE C. LYMAN, JR.;
CHARLES P. LYON; MICHAEL L.
MCDERMOTT; ROBERT T. MCINERNY;
ARTHUR G. MICHELS; WALTER P.
MUSKAT; WALTER W. MUSKAT; A. D.
PISTILLI; ROBERT A. POSNER;
JUDSON P. REIS; HARRY W. RHULEN;
WALTER A. RHULEN; J. O. RICKE;
E. JOY ROSE;
MARK S. ROSE; A. F. SMITH; OWN B.
TABOR; ALLEN M. TAYLOR; TRUDE C.
TAYLOR; KARL ARONSON; JOAN R.
FARROWAND JONATHAN M.
FARROWFOR THE ESTATE OF JESSE M.
FARROW; JACK FLECK; MARILYN
FRANCKX; ISABEL L. GALLAGHER;
JENNIFER A. GALLAGHER; MARY
CLAIR GALLAGHER; ROBERT E.
GALLAGHER; ROBERT E.
GALLAGHER, JR.; THOMAS J.
GALLAGHER; THOMAS H. GREEN;
HENRY G. HAGER; THORNTON
HUTCHINS; VINCE A. KONEN; C. C.
LUCAS; HERBERT A. MIDDENDORFF;
ROBERT S. DENEBEIM; DANA FISHER,
SR.; WILLIAM ALEXANDER FLORENCE;
ANNE M. GALLAGHER; J. PATRICK
GALLAGHER; MARK E. GALLAGHER;
MARY CLAIRE GALLAGHER AS
EXECUTRIX FOR JOHN P. GALLAGHER;
KATHERINE GALLAGHER GOESE;
ALLEN S. GREEN; ROBERT W. HATCH;
MARY CLAIR G. JOHNSON; THOMAS V.
LEEDS; GUY A. MAIN; EUGENE F.
MIDDLEKAMP; MICHAEL MONTANA;
BARBARA H. PISANI; RICHARD B.
SANDERS; JACK R. TAYLOR; KEN
NOACK; ROBERT L. PISANI; LARRY D.
STROUP; NEVILLE G. WILLIAMS,
Plaintiffs-Appellees,

v.

              2
LLOYD'S OF LONDON, an
unincorporated association;
CORPORATION OF LLOYD'S, a/k/a
Society and Council of Lloyd's;
COUNCIL OF LLOYD'S,
Defendants-Appellants,

and

EQUITAS HOLDINGS LIMITED; EQUITAS
REINSURANCE LIMITED; EQUITAS
LIMITED, a/k/a Equitas or Equitas
Group,
Defendants.

ASSOCIATION OF LLOYD'S MEMBERS;
GOVERNMENT OF THE UNITED KINGDOM
OF GREAT BRITAIN AND NORTHERN
IRELAND; NATIONAL ASSOCIATION OF
INSURANCE BROKERS; CALIFORNIA
INSURANCE COMMISSIONER,
Amici Curiae.

Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Robert E. Payne, District Judge.
(CA-96-522)

Argued: August 27, 1996

Decided: September 3, 1996

Before NIEMEYER, MICHAEL, and MOTZ, Circuit Judges.

_________________________________________________________________

Reversed and remanded by published opinion. Judge Niemeyer wrote
the opinion, in which Judge Michael and Judge Motz joined.

_________________________________________________________________

                    3
COUNSEL

ARGUED: Harvey L. Pitt, FRIED, FRANK, HARRIS, SHRIVER &
JACOBSON, New York, New York, for Appellants. Alexander Ste-
phens Clay, IV, KILPATRICK & CODY, Atlanta, Georgia, for
Appellees. ON PLEADINGS: Michael H. Rauch, Bonnie Steingart,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, New York,
New York; Cynthia T. Andreason, LEBOEUF, LAMB, GREENE &
MACRAE, L.L.P., Washington, D.C.; Henry H. McVey, Warren E.
Zirkle, Darryl S. Lew, MCGUIRE, WOODS, BATTLE & BOOTHE,
L.L.P., Richmond, Virginia, for Appellants. Richard R. Cheatham,
Susan A. Cahoon, Stephen E. Hudson, Christopher B. Lyman, KIL-
PATRICK & CODY, Atlanta, Georgia; Conrad M. Shumadine, Wal-
ter D. Kelley, Jr., WILLCOX & SAVAGE, Norfolk, Virginia, for
Appellees. Timothy M. Kaine, Rhonda M. Harmon, MEZZULLO &
MCCANDLISH, Richmond, Virginia, for Amicus Curiae Association
of Lloyd's Members. Mark R. Joelson, Joseph P. Griffin, Thomas J.
O'Brien, MORGAN, LEWIS & BOCKIUS, L.L.P., Washington,
D.C., for Amicus Curiae United Kingdom. Ronald A. Jacks,
David M. Spector, MAYER, BROWN & PLATT, Chicago, Illinois,
for Amicus Curiae NAIB; Martin Shulman, Paul H. Falon,
MANATT, PHELPS & PHILLIPS, L.L.P., Washington, D.C.; Rich-
ard A. Brown, Leonard D. Venger, Donald R. Brown, MANATT,
PHELPS & PHILLIPS, L.L.P., Los Angeles, California; William W.
Palmer, General Counsel, CALIFORNIA DEPARTMENT OF
INSURANCE, San Francisco, California, for Amicus Curiae Insur-
ance Commissioners.

_________________________________________________________________

OPINION

NIEMEYER, Circuit Judge:

In 1995, Lloyd's of London announced a $22 billion"Plan for
Reconstruction and Renewal" to restructure the Lloyd's market's
reinsurance needs and to revitalize the market. The Plan included an
offer by Lloyd's managers to settle, for $4.8 billion, all intra-market
disputes, including existing and potential lawsuits by "Names," mem-
bers of the Lloyd's market who underwrite insurance there. Ninety-

                    4
three American Names filed this action in the Eastern District of Vir-
ginia under United States securities laws to compel Lloyd's to dis-
close more financial information about its proposed plan. The Names
also sought a preliminary injunction prohibiting Lloyd's from forcing
American Names to make "an irrevocable election respecting their
investment" by an August 28, 1996 deadline established by Lloyd's.

Applying United States securities laws, the district court granted
the Names' motion for a preliminary injunction on August 23, 1996.
The court directed Lloyd's to make disclosures as required by § 14(a)
of the Securities Exchange Act of 1934 by September 23, 1996, and
prohibited Lloyd's from taking steps to collect any amounts from
American Names pending completion of the disclosure and review
process. The court also scheduled a trial on the merits for November
4, 1996.

Lloyd's appealed the district court's preliminary injunction and
sought expedited review because Names wishing to accept the settle-
ment proposal that Lloyd's offered as part of its Plan were required
to advise Lloyd's of their decision by noon on August 28, 1996. We
scheduled oral argument for August 27, 1996, and, following argu-
ment, entered the following order from the bench, reversing the dis-
trict court:

          On the motion of appellants to stay the district court's
          injunction entered August 23, 1996, and upon consideration
          of the briefs, papers, and extensive arguments of counsel,
          the court grants the motion. Because the court's decision
          rests on its determination, to be articulated in a later opinion,
          that the contractual provisions among the parties selecting
          the law of and a forum in the United Kingdom should be
          enforced, we reverse and remand this case with instructions
          that the district court dismiss it.

This opinion provides the reasoning for our order.

I

Lloyd's of London manages an insurance market that was created
over 300 years ago in a London coffee shop to insure shipping risks.

                    5
The market today is a large, complex arrangement under which
"Names," who as members of the Society of Lloyd's become mem-
bers in the market, join individual underwriting syndicates formed to
insure a broad range of risks. Managing agents assemble the syndi-
cates, collect premiums from the insureds, assess the Names, manage
the risks, and provide annual accountings to the Names. The under-
writing capital for each syndicate is supplied by cash advanced by the
Names, and excess losses -- those that exceed the premiums paid --
are insured by the Names' commitment to pay losses from their per-
sonal assets "down to their last cufflinks." The integrity of the market
is also assured by a Central Fund, created from assessments of
Names, which the market's managing body, the Council of Lloyd's,
controls and maintains to disburse to insureds when Names default.

The Lloyd's market is governed by a series of acts of Parliament,
enacted over the last 100 years, authorizing the Council of Lloyd's to
adopt rules and bylaws to regulate the market. As a condition of their
membership in the Society, Names are required to execute a "General
Undertaking," by which they agree to comply with the controlling
acts of Parliament as well as the rules and bylaws of Lloyd's.

Over 34,000 Names from 80 different countries participate in the
Lloyd's market; 3,000 Names are Americans. While individuals are
solicited in countries other than the United Kingdom, each prospec-
tive Name is required to travel to London to participate in a personal
interview during which the Name's financial commitment is
explained. Names are advised that they undertake unlimited personal
liability for their respective shares of the risks insured by the policies
they underwrite and that they cannot resign from the market until all
such obligations have been discharged. They are also advised that any
disputes over their participation in the market must be resolved in
British courts according to British law.

The Lloyd's market operates under a three year accounting cycle.
At the end of the third year after a syndicate is formed, underwriting
profits and losses for each syndicate year are calculated, and the esti-
mated liabilities are routinely reinsured by another syndicate.
Through this process, Lloyd's reinsures undischarged risks to close
the account. When the magnitude of potential liabilities for a syndi-
cate cannot reasonably be estimated at the end of three years, the syn-

                     6
dicate cannot reinsure them, and the participating Names remain
liable on their undertaking.

During the late 1980's and early 1990's, unanticipated losses from
asbestosis and pollution claims, together with a string of catastrophic
events such as Hurricane Hugo and the bombing of Pan Am Flight
103, caused losses far greater than the amounts of premiums that had
been collected. By Lloyd's estimation, the excess losses for the years
before 1993 will total approximately $22 billion.

As losses mounted, intra-market disputes arose. Names accused
managing agents and underwriters of mismanagement in assessing
risks and even fraud in assessing and disclosing the risks to Names
choosing syndicates. A considerable number of Names also became
unable or unwilling to satisfy their obligations and began to incur
debts to the Central Fund, and the ensuing litigation made it difficult
for the Central Fund to collect from non-paying Names. The integrity
and viability of the entire Lloyd's market was thus called into doubt.

To restore the integrity of its market, Lloyd's embarked on a mas-
sive and complex effort to develop a restructuring plan. After three
years and the expenditure of over $100 million, Lloyd's issued a Plan
for Reconstruction and Renewal with two gross components: (1) the
settlement of intra-market litigation whereby Names release all claims
against Lloyd's and its various market participants in exchange for
$4.8 billion in credits and (2) the reinsurance of Names' pre-1993
underwriting obligations by a newly formed company, Equitas Rein-
surance Ltd. Under the Plan, Equitas' capital is to be funded by loans,
a cash call on Names, and the $4.8 billion in credits assembled by
Lloyd's for the settlement of the Names' claims.

Lloyd's circulated its Plan and offered each Name the opportunity
to settle with Lloyd's for a specified share of the settlement funds.
The Plan provides that if enough Names agree to settle, those Names
who do not agree will nevertheless be forced to contribute capital to
Equitas through assessments authorized by their original commitment
to Lloyd's. Under the Plan, any capital that remains after Equitas has
satisfied all outstanding pre-1993 obligations will be returned to the
Names. Lloyd's offered its settlement with Names subject to the con-
dition that Names respond by August 28, 1996, a deadline that

                    7
Lloyd's claims was necessary because the continued solvency of its
market is in jeopardy and the season for underwriting reinsurance tra-
ditionally begins in the fall.

The 93 American Names who have demanded more information
about the Plan filed suit in the Virginia district court, claiming that
Lloyd's was denying them disclosure rights guaranteed by United
States securities laws. Lloyd's moved to dismiss the complaint on the
ground that the Names had agreed to litigate all disputes relating to
the Lloyd's market in the United Kingdom under British law. The dis-
trict court denied Lloyd's motion. Applying United States securities
laws, the court also enjoined Lloyd's from demanding settlement
from the American Names without providing the disclosures required
by the securities laws and ordered that Lloyd's provide such disclo-
sures within 30 days. This appeal followed.

II

In reversing the district court by our August 27, 1996 order, we
determined that "the contractual provisions among the parties select-
ing the law of and a forum in the United Kingdom should be
enforced." Those contractual provisions, which appear in the General
Undertaking between Lloyd's and the Names, specify that "any dis-
pute and/or controversy of whatsoever nature arising out of or relating
to" Names' participation in Lloyd's be submitted to the exclusive
jurisdiction of the British courts and that British law govern all mat-
ters referred to in the General Undertaking, including the parties'
"rights and obligations . . . arising out of or relating to" the Names'
participation in Lloyd's.

Since its seminal decision in The Bremen v. Zapata Off-Shore Co.,
407 U.S. 1 (1972), the Supreme Court has consistently accorded
choice of forum and choice of law provisions presumptive validity,
rejecting the "parochial concept" that "notwithstanding solemn con-
tracts . . . all disputes must be resolved under our laws and in our
courts." Id. at 9; see also Vimar Seguros Y Reaseguros, S.A. v. M/V
Sky Reefer, 115 S. Ct. 2322, 2329 (1995); Carnival Cruise Lines, Inc.
v. Shute, 499 U.S. 585, 595 (1991); Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985); Scherk v. Alberto-
Culver Co., 417 U.S. 506, 519 (1974). But the presumption of en-

                    8
forceability that forum selection and choice of law provisions enjoy
is not absolute and, therefore, may be overcome by a clear showing
that they are " `unreasonable' under the circumstances." The Bremen,
407 U.S. at 10. Choice of forum and law provisions may be found
unreasonable if (1) their formation was induced by fraud or over-
reaching; (2) the complaining party "will for all practical purposes be
deprived of his day in court" because of the grave inconvenience or
unfairness of the selected forum; (3) the fundamental unfairness of the
chosen law may deprive the plaintiff of a remedy; or (4) their enforce-
ment would contravene a strong public policy of the forum state. See
Carnival Cruise Lines, 499 U.S. at 595; The Bremen, 407 U.S. at
12-13, 15, 18.

In determining whether any of the foregoing circumstances apply
in this case to preclude enforcement of the parties' choice of forum
and law, the district court first observed that"there is no contention
by the Names that they were fraudulently induced into agreeing to the
forum selection or choice of law clauses." Nor did the court believe
it " `gravely inconvenient' for the Names to litigate in England." Not-
ing that "United States courts have consistently found English tribu-
nals to be neutral and just," the district court further found that the
"plaintiffs would not be effectively `denied their day in court' were
they forced to present their claims in front of an English tribunal." But
applying the last basis for unreasonableness, the court denied enforce-
ment to the parties' choice of forum and law provisions on the ground
that they subverted a strong public policy of the United States--
namely, the unwaivable investor protections provided by the Ameri-
can securities laws' disclosure requirements.

Although we agree with the district court that the first three bases
for finding unreasonableness do not apply here, we disagree with its
conclusion that the public policy underlying the United States securi-
ties laws justify denying enforcement of the parties' choice of forum
and law clauses.

III

By adopting a policy of full disclosure of relevant information to
replace the doctrine of caveat emptor, the United States securities
laws play a critical role in sustaining honest and efficient domestic

                    9
capital markets. See, e.g., SEC v. Capital Gains Research Bureau,
Inc., 375 U.S. 180, 186-87 (1963). Indeed, the United States securities
laws prohibit attempts to waive their disclosure requirements. See 15
U.S.C. §§ 77n, 78cc(a). But the question remains in this case whether
the choice of forum and law clauses to which the Names agreed when
entering the Lloyd's insurance market implicate the anti-fraud and
disclosure policies that underlie the United States securities laws to
the extent that those clauses cannot be enforced.

We do not believe that enforcing the parties' forum selection and
choice of law provisions in this case will subvert the United States
securities laws' policy of prohibiting fraud. British law not only pro-
hibits fraud and misrepresentations as do the United States securities
laws, but also affords Names adequate remedies in the United King-
dom. See Shell v. R.W. Sturge Ltd., 55 F.3d 1227, 1231 (6th Cir.
1995); Bonny v. Society of Lloyd's, 3 F.3d 156, 161 (7th Cir. 1993),
cert. denied, 510 U.S. 1113 (1994); Roby v. Corporation of Lloyd's,
996 F.2d 1353, 1365 (2d Cir.), cert. denied, 510 U.S. 945 (1993);
Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 958
(10th Cir.), cert. denied, 506 U.S. 1021 (1992). Under British law, the
Names could bring claims based on the tort of deceit, breach of con-
tract, negligence, and breach of fiduciary duty, and could obtain
injunctive, declaratory, rescissionary, and restitutionary relief. See
Shell, 55 F.3d at 1230-31. And "[t]he fact that an international trans-
action may be subject to laws and remedies different or less favorable
than those of the United States is not a valid basis to deny enforce-
ment." Riley, 969 F.2d at 958.

Moreover, we do not believe that Congress intended that the
disclosure requirements of the United States securities law be
exported and imposed as governing principles on markets conducted
entirely in other countries simply because membership in such mar-
kets is solicited in the United States. See Leasco Data Processing
Equip. Corp. v. Maxwell, 468 F.2d 1326, 1334 (2d Cir. 1972) (finding
language of Securities Exchange Act "too inconclusive" to find that
"Congress meant to impose rules governing conduct throughout the
world in every instance where an American company bought or sold
a security"). "[C]onfronted with [a] transaction that on any view [is]
predominantly foreign, [we] must seek to determine whether Con-
gress would have wished the precious resources of United States

                    10
courts and law enforcement agencies to be devoted to them rather
than leave the problem to foreign countries." Bersch v. Drexel Fire-
stone, Inc., 519 F.2d 974, 985 (2d Cir.), cert. denied, 423 U.S. 1018
(1975).

For over 300 years, Lloyd's has been regulating an insurance mar-
ket in London where members underwrite risks which are pooled into
syndicates and managed by agents. While Lloyd's offers membership
in the market to persons outside the United Kingdom, including
Americans, syndicates are formed and managed at the market. When
an individual from a country other than the United Kingdom is solic-
ited for membership, market rules require that he travel to London for
a personal interview. The would-be Name is provided with written
materials advising him that he will be joining underwriting syndicates
formed in London to insure risks from around the world under laws
adopted by Parliament and bylaws promulgated by Lloyd's regula-
tors. Prospective Names are also informed of the commitment of
membership, which requires that Names have sufficient means com-
mitted to the market in London.

Relieving Names of their agreements is not justified in these cir-
cumstances simply because solicitation for membership in the market
occurs in the United States. Membership solicitation is incidental to
the formation of underwriting syndicates and the management of
risks, all of which occur in London. Moreover, when members are
solicited for membership, they are not solicited to join particular syn-
dicates or to underwrite identified risks. Those matters are unknown
until syndicates are actually created at the market. The United States
nexus to the transactions involved in this case is thus incidental and
tangential.

Although American courts have on occasion applied United States
securities laws' anti-fraud provisions to predominantly foreign trans-
actions, the "anti-fraud provisions of American securities laws have
broader extraterritorial reach than American filing requirements."
Consolidated Gold Fields PLC v. Minorco S.A., 871 F.2d 252, 262
(2d Cir. 1989). This is because "an interest in punishing fraudulent or
manipulative conduct is entitled to greater weight than are routine
administrative requirements." Restatement (Third) of the Foreign
Relations Law of the United States § 416 cmt. a (1986).

                     11
To permit the Names to escape their agreements to be bound by the
laws and rules of the British market just at a time when they face
losses would also violate the most fundamental precepts of interna-
tional comity. See Consolidated Gold Fields, 871 F.2d at 263 ("[A]
court may abstain from exercising enforcement jurisdiction when the
extraterritorial effect of a particular remedy is so disproportionate to
harm within the United States as to offend principles of comity").
Imposing United States securities laws on this foreign market would
directly contravene the very rules and regulations adopted in Britain
for the creation and operation of the Lloyd's market to which the
Names subscribed.

Finally, significant United States and foreign interests would be
adversely affected if we were to insist that Lloyd's insurance under-
writing syndicates comply with United States disclosure require-
ments. Such a ruling would place at risk billions of dollars of
insurance coverage for United States citizens because American
Names could demand rescission on the ground that their syndicates,
even though they include citizens of various countries, did not comply
with United States securities registration and disclosure requirements.
Insurance commissioners from several states have described the
potential mass confusion and damage to the domestic insurance mar-
ket that such a ruling would cause.

In short, we conclude that enforcement of the Names' agreements
to litigate disputes in the United Kingdom under British law does not
contravene or undermine any policy of the United States securities
laws. And we reach that same conclusion when we apply the specific
provisions of the securities laws, to which we now turn.

IV

The Names advance two arguments to support their assertion that
United States securities laws apply to the Lloyd's Reconstruction and
Renewal Plan. First, they argue that the interests in Equitas offered by
Lloyd's as part of the Plan are "investment contracts," subject to the
disclosure and anti-fraud requirements of the 1933 and 1934 Acts.
And second, they argue that their investments in Lloyd's pursuant to
the General Undertaking are equity securities under the applicable
securities acts and that the Plan is, therefore, a solicitation for "con-

                     12
sent or authorization in respect of [a] security," subject to the require-
ments of § 14(a) of the 1934 Act, 15 U.S.C.§ 78n(a).

To determine whether Lloyd's Plan constitutes an"investment con-
tract" subject to the requirements of the securities laws, we apply the
test announced in SEC v. W.J. Howey Co., 328 U.S. 293 (1946). In
Howey, the Supreme Court established that "an investment contract
. . . means a contract, transaction or scheme whereby a person [1]
invests his money [2] in a common enterprise and [3] is led to expect
profits [4] solely from the efforts of [others]." Id. at 298-99. And the
Court later instructed that the Howey test is to be applied with an eye
to "the substance -- the economic realities of the transaction -- rather
than the names that may have been employed by the parties." United
Hous. Found., Inc. v. Forman, 421 U.S. 837, 851-52 (1975).

Focusing on the substance of the Plan before us, we discern two
components: the settlement offer and the reinsurance through Equitas.
The settlement component satisfies none of the Howey factors and,
therefore, cannot make the Plan a security. And, whatever else might
be said about the Equitas component, it does not satisfy the third
Howey factor; none of the Names can expect to receive profits from
their participation in Equitas. Indeed, the Plan creates Equitas solely
to reinsure and discharge Names' preexisting obligations, not to
underwrite new risks for profit. While Names may receive rebates
should Equitas' initial capitalization ultimately prove greater than
needed to discharge the Names' outstanding liabilities, such rebates
are not profits, but rather a return of capital. See Forman, 421 U.S.
at 854. Furthermore, Equitas is forbidden by its Articles of Associa-
tion from paying dividends, and Lloyd's has indicated that, in the
unlikely event that it generates profits by investing Equitas' capital
during its operation, Lloyd's would donate such profits to charity.
Because Lloyd's is not "induc[ing] purchases [in Equitas] by empha-
sizing the possibility of profits" or offering"profits [from Equitas]
. . . in the form of capital appreciation or participation in earnings,"
Teague v. Bakker, 35 F.3d 978, 987 (4th Cir. 1994), cert. denied, 115
S. Ct. 1107 (1995), we readily conclude that no part of the Plan quali-
fies as a security for purposes of the securities laws.

We are similarly unpersuaded by the Names' second argument --
that their initial investment in Lloyd's pursuant to the General Under-

                     13
taking is a security and that the Plan is, therefore, a solicitation for
"consent or authorization in respect of [a] security" subject to § 14(a)
of the 1934 Act. Section 14(a) makes it "unlawful for any person, by
the use of . . . any means or instrumentality of interstate commerce
. . . to solicit . . . any proxy or consent or authorization in respect of
any [registered] security" in contravention of the rules and regulations
prescribed by the Securities Exchange Commission. 15 U.S.C.
§ 78n(a). Although the parties vigorously dispute whether the Names'
initial investment in Lloyd's qualifies as an "equity security" within
the meaning of the Act, we need not resolve that issue because the
Plan does not "solicit . . . any proxy or consent or authorization."

Section 14(a) embodies a policy of broad disclosure designed to
protect the basic right of corporate suffrage. See J.I. Case Co. v.
Borak, 377 U.S. 426, 431-32 (1964); see also Mills v. Electric Auto-
Lite Co., 396 U.S. 375, 381 (1970); H.R. Rep. No. 1383, 73d Cong.,
2d Sess., at 13 (1934) ("Fair corporate suffrage is an important right
that should attach to every equity security bought on a public
exchange"). But not every communication from management to cor-
porate shareholders amounts to solicitation under§ 14(a). Sargent v.
Genesco, 492 F.2d 750, 767 (5th Cir. 1974); see also Brown v. Chi-
cago, Rock Island & Pacific R.R., 328 F.2d 122, 125 (7th Cir. 1964);
see generally 4 Louis Loss & Joel Seligman, Securities Regulation
1952 (3d ed. 1990) (listing examples of communications not covered
by § 14(a) rules). Rather, it is only when management seeks consent
or authorization for actions "requiring such approval" that § 14(a)
steps in to ensure that approval is given with full knowledge. Gaines
v. Haughton, 645 F.2d 761, 775 (9th Cir. 1981), cert. denied, 454
U.S. 1154 (1982); see also Ash v. GAF Corp., 723 F.2d 1090, 1094
(3d Cir. 1983) (holding that "complainant must show that he suffered
harm from the infringement of his corporate suffrage rights" to state
a claim under § 14(a)); cf. TSC Indus., Inc. v. Northway, Inc., 426
U.S. 438, 449 (1976) (indicating that securities laws require accurate
disclosure only of facts that would have assumed actual significance
in a reasonable investor's decisionmaking).

Neither British law nor the General Undertaking signed by each
Name grants Names any role in the decision to form and capitalize
Equitas. Authorization to impose reinsurance through Equitas on the
Names does not derive from their consent, but by virtue of a Lloyd's

                     14
bylaw passed in December 1995. Thus, the Plan is not a solicitation
within the meaning of § 14(a).

Similarly, Lloyd's settlement offer is not subject to the disclosure
requirements of § 14(a). The offer of settlement presents each Name
with the choice of whether to waive his claim against Lloyd's and its
agents in exchange for Lloyd's partial funding of his share of the
Equitas premium. The Names have not presented, and we have been
unable to find, any authority indicating that settlement offers in secur-
ities cases seek "consent or authorization in respect of [a] security,"
and we cannot conclude that Congress intended to bring all such com-
munications within the purview of the securities laws.

V

In summary, the policies of the United States securities laws do not
override the parties' choice of forum and law for resolving disputes
in this case. Indeed, because Lloyd's Plan for Reconstruction and
Renewal is neither a security nor a solicitation in respect of a security,
the Plan is not regulated by the United States securities laws. For
these reasons we vacated the district court's August 23, 1996 order
by our August 27, 1996 order and remanded this case with instruc-
tions to the district court to dismiss the action.

REVERSED AND REMANDED WITH INSTRUCTIONS

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