Mail Stop 0408
June 30, 2006
Mark E. Kaplan, Esquire
General Counsel
Cowen Group, Inc.
1221 Avenue of the Americas
New York, New York 10020
Re: Cowen Group, Inc.
Amendment No. 3 to Registration Statement on Form S-1
File No. 333-132602
Filed June 26, 2006
Dear Mr. Kaplan:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response
to these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or any other aspect of
our
review. Feel free to call us at the telephone numbers listed at
the
end of this letter.
General
1. We note your allocation of restricted stock on page 95 and your
addition of the reserved share program on page 130. Please revise
your references, on page 1 and throughout the document, to the 14
percent of restricted stock that you are awarding employees to
disclose the following:
* after the offering, directors, executive officers and employees
will
beneficially own between 21.5 and 26.5 percent of the outstanding
shares and this percentage will increase further within the first
year
and each year thereafter as you intend to issue additional shares
to
the executive officers and other employees as part of their annual
compensation;
* you are initially awarding 6.5 percent of your outstanding stock
to
Mr. Fennebresque, who serves as your Chairman, CEO and President
and
disclose the value of the award;
* the amount and value of stock you are awarding to executive
officers
and the amount and value of stock you are awarding to senior
employees;
* clarify whether the awards of stock are subject to anti-dilution
protection;
* the amount and value of stock options you are awarding to
executive
officers and the amount and value of stock options you are
awarding to
senior employees; and
* you are reserving 5 percent of the stock being offered for
certain
directors, executive officers and employees as well as other
persons
and disclose how much of this is being offered to directors and
executive officers.
2. From the disclosures about the restricted stock awards, we are
unable to understand whether the shares have been issued but are
subject to restriction or have not been issued but will be issued
upon
vesting requirements being met. Please review the legal status of
the
restricted stock awards and revise the filing throughout to
provide
consistent disclosures about these awards, including disclosures
about
their inclusion or exclusion from common stock issued and
outstanding.
3. We note your responses to comment 1 of our letter to you dated
June
6, 2006. Please revise your various references to Societe
Generale`s
so called "indemnification" of you for litigation expenses to
disclose
of the following information:
* you, not Societe Generale , will be indemnifying Societe
Generale
for the entire estimated costs of $79 million of all known pending
and
threatened litigation and certain known regulatory matters;
* Societe Generale will only indemnify you if the actual costs
exceed
the estimated costs of $79 million;
* Societe Generale will keep the funds to the extent that the
actual
costs are less than the estimated costs of $79 million; and
* disclose when you and Societe Generale will determine the amount
that you will pay for the estimated costs.
Overview, page 1
4. As we requested in comment 3 of our letter to you dated June 6,
2006, please disclose, in the third paragraph, the aggregate range
of
the amount of benefits that Societe Generale will receive in
connection with the offering and separation. In addition, please
disclose the aggregate costs, direct and indirect, to you of the
separation, going public and related transactions and agreements
and
the effects, both immediate and prospective, on your financial
condition and results of operations.
5. As we requested in comment 4 of our letter to you dated June 6,
2006, please revise the section as follows:
* revise your reference, in the second paragraph, that you will
have
$207 million in capital to disclose that you will be reducing your
capital from $387 million because you will be giving $180 million
to
Soc Gen;
* disclose, in the second paragraph, that your revenues from
trading
has declined each year for the past five years from approximately
$176
million in 2001 to approximately over $93 million in 2005; and
* disclose, in the last sentence of the second paragraph, that in
three of the five past years you suffered losses of over $74
million
in 2003, over $229 million in 2002 and over $107 million in 2001
and
disclose the number of quarters in 2004, 2005 and 2006 in which
you
suffered losses.
Benefits to Our Executive Officers and Other Senior Employees,
page 8
6. We note your response to comment 7 of our letter to you dated
June
6, 2006. Please revise this section as follows:
* disclose the range of aggregate value of benefits; and
* disclose how and when these benefits will affect your expenses
and
earnings in future periods.
Failure to Achieve and Maintain Effective Internal Controls, page
17
7. We note your revisions to this section. Please revise as
follows:
* disclose the aggregate amount of the restatements;
* identify, using bullet points, each of the reasons for the
restatements and the amount of the restatements for each of the
affected years;
* clarify that each of the financial statements had been audited
by
your current auditor;
* clarify that your removal of the note form the registration
statement was permitted, but not required, by accounting rules;
and
* disclose the basis for your claim that "management currently
does
not believe the restatement was a result of a material weakness in
our
internal controls" and offer an explanation for the restatements.
Please provide more detailed discussion of this issue,
particularly
detailed analysis of the basis for your claim and a detailed
explanation, in a separately captioned section in the MD&A after
your
discussion of the separation, including your analysis of the
causes of
your failure to properly account for these matters and any changes
you
have made in your internal controls, audits, policies or
procedures as
a result.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 37
Overview, page 37
8. We note your response to comment 11 of our letter to you dated
June
6, 2006. As we have requested, please comply with Instruction 3
to
Item 303(a) which provides that "the discussion and analysis shall
focus specifically on material events and uncertainties known to
management that would cause reported financial information not to
be
necessarily indicative of future operating results or of future
financial condition." At the outlet of your overview, please
quantify in the aggregate and list individually using bullet
points
the various costs of the separation, transition to a public
company
and other expenses and costs including the change in taxes and
disclose when these costs will be incurred.
9. We note your response, on pages 37 and 38, to comment 12 of our
letter to you dated June 6, 2006. Please revise your discussion,
on
page 37, as follows:
* delete your claim, in the first sentence of the third paragraph,
that your financial results have been "significantly impacted by
broader market conditions" since others in your industry have
experienced greater growth in sales and investment banking under
the
same market conditions;
* revise your discussion, on the ninth line of the third paragraph
on
page 37, of the "increase in our volume and of both securities
and
strategic advisory assignments since 2003" to discuss the fact
that
the volume is still below the levels in 2001; and
* revise your statement, on the thirteenth line of the third
paragraph
on page 37, that your "results from time to time have been
different
from those indicated by broader market trends" as follows:
o indicate the periods to which you are referring;
o disclose that generally, not just from time to time, your
results
have been lower than trends; and
o delete the characterization of your results as "different" to
indicate whether they were higher or lower.
10. We note your response, on pages 37 and 38, to comment 12 of
our
letter to you dated June 6, 2006. Please revise your discussion,
on
page 38, as follows:
* revise your references, in the first paragraph on page 38, to
"pricing pressures" and "pressures on trading volumes" to explain
whether you mean lower prices and lower trading;
* disclose, in the third paragraph, whether in prior years, your
compensation and benefits have been at 58% to 60% of total
revenues or
whether this represents an increase;
* revise your statement that the options and restricted stock are
a
"one time grant" to disclose, in the third paragraph, the expense
that
you will incur each year relating to these grants until they are
fully vested; and
* disclose compensation and benefit expense as a percentage of
total
revenues including these grants for the years until they all vest.
11. We note your statements in your response letter, dated June
12,
2006, to comment 27 of our letter to you dated June 6, 2006.
Please
revise this section to include your statement, in the third
paragraph,
that "The company does not calculate marginal costs of providing
services, nor does it price its services using marginal costs."
Please explain how you determine whether it is profitable for you
to
offer a particular service or product.
12. Please provide a separately captioned section, in your MD&A
after
your discussion of the separation, which sets forth disclosure and
analysis of any agreements with your auditor to limit or otherwise
affect your ability, or that of your successors, to bring legal
action
against the auditor and/or limit or otherwise affect the extent
and/or
type of remedies that you may seek from the auditor. Please
analyze
the effect and potential effect on you and your shareholders.
Separation from Societe Generale, page 39
13. We note your response to comment 13 of our letter to you dated
June 6, 2006. As we requested, please identify and quantify the
financial resources you will use to fund this growth.
14. We note your response to comment 14 of our letter to you dated
June 6, 2006. As we requested, please comply with Instruction 3
to
Item 303(a) which provides that "the discussion and analysis shall
focus specifically on material events and uncertainties known to
management that would cause reported financial information not to
be
necessarily indicative of future operating results or of future
financial condition." Please provide detailed discussion and
analysis, in a separately captioned section, of how these
additional
costs and expenses and the change in tax rates will affect your
financial condition and operating results for the current fiscal
year
and subsequent fiscal years including your ability to operate at a
profit and your ability to grow.
Compensation Expense, 46
15. We note your response to comment 16 of our letter to you dated
June 6, 2006. Please revise this section as follows:
* disclose, in the first paragraph how much of your compensation
expense has been attributable to directors and executive officers;
* disclose, in your first paragraph, whether in the past your
compensation and benefits expense has been at the same percentage
of
revenues as you plan for the future and, if not, disclose the
percentages for the past three years;
* quantify, in the second paragraph, the aggregate and individual
cost
of the awards of stock options, restricted stock and cash and
disclose
how much of each cost is attributable to directors and executive
officers; and
* revise this section and other sections on the same subject to
include in this section your statement, in your response letter,
dated
June 12, 2006, to comment 27 that "the Company does not base its
compensation decisions directly on annual or other periodic
revenue
performance" and explain in this section the basis for your
compensation decisions and how this statement is consistent with
your
practice to set compensation as a percentage of revenue.
Clearing Agreement, page 115
16. We note your response, in this section and in your cover
letter,
to our comment 22 of our letter to you dated June 6, 2006. Please
revise this section as follows:
* disclose the extent to which your pricing is "somewhat higher"
under
the new agreement; and
* disclose the estimated increase in annual expenses (based on
last
years activity) as a result of this new agreement.
* * * * * * * * * * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have
made.
In connection with responding to our comments, please
provide, in
writing, a statement from the company and each filing person
acknowledging that:
* the company or filing person is responsible for the adequacy and
accuracy of the disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company or filing person may not assert staff comments as a
defense in any proceeding initiated by the Commission or any
person
under the federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in our review of your filing or in response
to
our comments on your filing.
You may contact Christina M. Harley at (202) 551-3695 or
Donald
A. Walker, Jr. at 202-551-3490 if you have questions regarding
comments on the financial statements and related matters. Please
contact either Jonathan E. Gottlieb at (202) 551-3416 or me at
(202)
551-3491 with any other questions.
Sincerely,
Todd K. Schiffman
Assistant Director
cc. Phyllis G. Korff, Esquire
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Mark E. Kaplan, Esquire
Cowen Group, Inc.
June 30, 2006
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