Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, May 8, 2008

SEC Proposes Changes to Cross-Border Tender and Exchange Offer Rules

On May 6, the SEC proposed amendments to the rules applicable to cross-border tender and exchange offers and other kinds of cross-border business combination transactions. The rule changes are intended to protect U.S. investors while facilitating and streamlining cross-border transactions, as securities markets become increasingly globalized. The Commission also proposed changes to the beneficial ownership reporting requirements for certain foreign institutional investors. If adopted, these rule revisions would allow some foreign institutions to file beneficial ownership reports on a shorter form, under the same circumstances as their U.S. institutional counterparts. In addition, the Commission issued guidance on several cross-border issues, including the exclusion of foreign target security holders from a tender offer subject to U.S. equal treatment requirements, the exclusion of U.S. target security holders in cross-border business combination transactions, and the use of certain transaction structures to provide cash to U.S. target security holders in cross-border exchange offers.

The SEC explained that

after eight years of experience with the current cross-border exemptions adopted in 1999, the Commission is proposing changes to expand and enhance the utility of these exemptions for business combination transactions. Our goal continues to be to encourage offerors and issuers in cross-border business combinations, and rights offerings by foreign private issuers, to permit U.S. security holders to participate in these transactions in the same manner as other holders. Many of the rule changes we propose today would codify existing interpretive positions and exemptive orders in the cross-border area. In several instances, we request comment about whether the rule changes we propose also should apply to tender offers for U.S. companies. In this release, we also address certain interpretive issues of concern for U.S. and other offerors engaged in cross-border business combinations. We hope that this guidance will prove useful in structuring and facilitating these transactions in a manner consistent with U.S. investor protection.

Comments are due 45 days after publication in the Federal Register.

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