[Federal Register Volume 62, Number 201 (Friday, October 17, 1997)]
[Rules and Regulations]
[Pages 53948-53955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27523]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 230 and 240
[Release Nos. 33-7470 and 34-39227; S7-26-96]
[International Series Release No. 1103]
RIN 3235-AG85
Offshore Press Conferences, Meetings with Company Representatives
Conducted Offshore and Press-Related Materials Released Offshore
AGENCY: Securities and Exchange Commission.
ACTION: Final Rules.
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SUMMARY: The Commission is adopting two safe harbors designed to
facilitate U.S. press access to offshore press activities. The two safe
harbors will clarify the conditions under which journalists may be
provided access to offshore press conferences, offshore meetings and
press materials released offshore, in which a present or proposed
[[Page 53949]]
offering of securities or tender offer is discussed, without violating
the provisions of Section 5 of the Securities Act of 1933, or the
procedural requirements of the tender offer rules promulgated under the
Williams Act.
EFFECTIVE DATE: The rule and amendments will become effective November
17, 1997.
FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Office of
International Corporate Finance, Division of Corporation Finance, at
(202) 942-2990.
SUPPLEMENTARY INFORMATION: The Commission is adopting a safe harbor
with respect to the registration requirements of the Securities Act of
1933 (``Securities Act'')1 to permit a foreign private
issuer or foreign government issuer, selling security holder or their
representatives to provide any journalist, whether foreign or domestic,
with access to press conferences held outside the United States, to
meetings with issuer or selling security holder representatives
conducted outside the United States, or to press-related materials
released outside the United States, at or in which a present or
proposed offering of securities is discussed (``Securities Act safe
harbor''). The safe harbor would clarify that providing press access
under the safe harbor would not be deemed an ``offer'' for the purposes
of Section 5 2 of the Securities Act;3 ``directed
selling efforts'' within the meaning of Regulation S 4 under
the Securities Act; or a ``general solicitation'' within the meaning of
Regulation D 5 under the Securities Act. The Commission also
is adopting a safe harbor whereby a bidder for the securities of a
foreign private issuer, as well as the subject company, their
representatives, or any other person specified in Rule 14d-9(d)
6 under the Securities Exchange Act of 1934 (``Exchange
Act''), will not be subject to the filing and procedural requirements
of Regulations 14D 7 and 14E 8 under the Exchange
Act by virtue of providing any journalist, whether foreign or domestic,
with access to its press conferences held outside the United States, to
meetings with its representatives conducted outside the United States,
or to press-related materials released outside the United States, at or
in which a present or proposed tender offer is discussed (``Tender
Offer safe harbor'').
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\1\ 15 U.S.C. 77a et seq.
\2\ 15 U.S.C. 77e.
\3\ 17 CFR 230.135e.
\4\ 17 CFR 230.901 through 17 CFR 230.904 and Preliminary Notes.
\5\ 17 CFR 230.501 through 17 CFR 230.508 and Preliminary Notes.
\6\ 17 CFR 240.14d-9.
\7\ 17 CFR 240.14d-1 through 17 CFR 240.14d-10.
\8\ 17 CFR 240.14e-1 through 17 CFR 240.14e-2.
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I. Background
U.S. journalists are being excluded on a regular basis from the
offshore press activities of foreign issuers.9 This practice
may not foster the interests of U.S. investors, since the information
is made available to U.S. press shortly following the release of the
information offshore. Instead, the practice is both anti-competitive
and potentially disadvantageous to U.S. investors by delaying their
access to information made immediately available to investors offshore.
The purpose of this rulemaking is to eliminate this unintended and
undesirable consequence of the Commission's rules governing offering
publicity.
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\9\ See SEC Rules Not OK, EUROMONEY, July 1997, at 64.
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The Commission published for comment in October 1996 proposed safe
harbors to facilitate U.S. press access to offshore press activities
conducted by issuers, selling security holders and their
representatives (``Proposing Release'').10
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\10\ Release No. 33-7356 (Oct. 10, 1996) [61 FR 54518].
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The Commission proposed these safe harbors in recognition of the
difficulties faced by journalists for publications with significant
U.S. circulation in gaining direct access to offshore press activities
in which a present or proposed offering of securities or tender offer
is discussed. Many issuers have denied these journalists access to
offshore press conferences, offshore meetings with company
representatives and press materials released offshore that pertain to a
present or proposed securities offering or tender offer out of concern
that this access would result in a violation of the U.S. federal
regulatory requirements for these offerings. Past rulemaking and
interpretive guidance by the Commission and its staff do not appear to
have allayed the concerns of companies conducting offshore press
activities, and U.S. press continue to be denied access to offshore
press activities even when no U.S. offering is contemplated.
The U.S. Congress has also been aware of this exclusion. In the
National Securities Markets Improvement Act of 1996, 11
Congress directed the Commission to conduct rulemaking to clarify the
status of offshore press activities under the Securities Act.
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\11\ Pub. L. No. 104-290, 110 Stat. 3416 (1996) (codified in
scattered sections of the United States Code).
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After reviewing the thirteen comment letters received on the
proposed safe harbors and further considering the proposals,
12 the Commission is adopting the safe harbors substantially
as proposed with one significant modification. The Securities Act safe
harbor as adopted will not be available to U.S. issuers.13
Although the Commission initially had proposed making that safe harbor
available to both foreign and domestic issuers, the Commission has
determined that relief is unnecessary with respect to U.S. issuers and
that it may be preferable to address publicity in connection with
offerings by U.S. issuers in a more comprehensive fashion.
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\12\ The comment letters are available for inspection and
copying in the Commission's public reference room. Refer to file
number S7-26-96. Comment letters that were submitted via electronic
mail may be viewed at the Commission's web site: http://www.sec.gov.
\13\ In contrast, the Tender Offer safe harbor will be available
to both U.S. and foreign bidders as long as the target company
qualifies as a foreign private issuer.
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Some foreign jurisdictions, unlike the United States, permit
companies that are offering securities to conduct press conferences,
issue press releases, and meet with members of the press during the
offering as a means of publicizing the offering. Foreign issuers
adopting those practices are unlikely to be doing so for the purpose of
circumventing U.S. restrictions on publicity. On the other hand,
extending the safe harbor to U.S. issuers that have not traditionally
employed such practices in the offering of securities unnecessarily
invites that potential for abuse. In addition, the Commission
understands that the difficulty experienced by the U.S. press in
obtaining access to foreign press activities is most significant with
respect to foreign issuers.14 Accordingly, by excluding U.S.
issuers from the Securities Act safe harbor, the Commission is crafting
a narrow approach that addresses the concerns of the U.S. press by
accommodating the anomalies that can result when offshore offering
practices differ from what is permitted in the United States, yet
allows the Commission to consider crafting a regulatory approach with
respect to U.S. issuers in a comprehensive fashion both with respect to
offshore and domestic press activities.
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\14\ See supra note 9. See also Roberta S. Karmel & Mary S.
Head, Barriers to Foreign Issuer Entry into U.S. Markets; Symposium
on Managing Economic Interdependence, 24 LAW & POL'Y INT'L BUS. 1207
(1993).
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The Commission may reconsider the safe harbor adopted today at a
later date in light of its ongoing reexamination of
[[Page 53950]]
the Commission's regulation of securities offerings under the
Securities Act and the rules thereunder. In July 1996, the Commission
issued a Securities Act Concept Release (``Concept Release'')
15 that reviewed the current regulatory framework for
securities offerings, particularly with respect to regulating publicity
in connection with a securities offering. The Concept Release suggested
a number of alternative approaches and solicited comments from the
public. Many commenters recognized that this wide-ranging examination
of the permissible level of publicity in connection with securities
offerings is fundamental to the Commission's administration of the
Securities Act. On the other hand, they urged that the practice of
excluding the U.S. press from foreign press activities itself presents
ongoing significant policy concerns that should and can be addressed in
a narrow and expeditious fashion.
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\15\ Release No. 33-7314 (July 25, 1996) [61 FR 40044].
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II. Securities Act Safe Harbor
A. General
The Commission is adopting Rule 135e under the Securities Act to
provide a safe harbor for offshore press activities conducted in
connection with an offering by a foreign private issuer or foreign
government issuer.16 Under the Securities Act safe harbor, a
foreign private issuer or foreign government issuer, selling security
holder, or their representatives may provide foreign and U.S.
journalists 17 with access to offshore press conferences,
meetings with issuer or selling security holder representatives
conducted offshore, or press-related materials released offshore
without being viewed as making an ``offer'' for purposes of Section 5
of the Securities Act as long as certain conditions enumerated below
are satisfied. Press activities that are covered by the Securities Act
safe harbor also would not constitute a general solicitation or general
advertising within the meaning of Regulation D, or ``directed selling
efforts'' within the meaning of Regulation S. The Commission is
adopting amendments to Rule 502 18 of Regulation D and Rule
902 19 of Regulation S 20 to reflect this.
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\16\ ``Foreign private issuer'' is defined in Securities Act
Rule 405 [17 CFR 230.405] and Exchange Act Rule 3b-4(c) [17 CFR
240.3b-4(c)].
\17\ Consistent with the recommendation of commenters, the safe
harbor does not provide a definition of ``journalist.'' In response
to questions by commenters, the Commission notes that it views on-
line services and independent free-lance writers as bona fide
``journalists'' under both the Securities Act safe harbor and Tender
Offer safe harbor.
\18\ 17 CFR 230.502.
\19\ 17 CFR 230.902.
\20\ Preliminary Note 7 of Regulation S is being amended to
clarify the relationship of that general statement to the Securities
Act safe harbor and Tender Offer safe harbor.
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As adopted, the safe harbor will apply to all foreign private
issuers and foreign governments regardless of whether these issuers
file periodic Exchange Act reports with the Commission. In addition,
representatives of the issuer and the selling security holders, such as
underwriters and public relations firms, may rely on the safe harbor,
although persons with no relationship to the issuer are excluded from
the safe harbor.
As in the proposal, the safe harbor does not cover paid
advertisements. The Commission also noted in the Proposing Release that
analysts' research reports would not be covered, since Securities Act
Rules 138 21 and 139 22 cover those reports.
Several commenters opposed the exclusion of analysts' reports from the
Securities Act safe harbor because these reports are often distributed
as part of the offshore offering process. However, the Commission did
not intend that providing research reports in written press-related
materials would cause any materials included in the press package,
including analysts' research reports, to lose safe harbor protection.
To clarify, analysts' research reports would be covered by the new safe
harbor (even if Rules 138 and 139 are not available) to the same
extent, and under the same conditions, as other written materials in
the package.23
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\21\ 17 CFR 230.138.
\22\ 17 CFR 230.139.
\23\ The application of Section 5 of the Securities Act to the
publication of analysts' reports by analysts themselves, rather than
by an issuer or selling security holder, will continue to be
considered separately under Rules 138 and 139 under the Securities
Act.
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The safe harbor only applies to the Section 5 registration
requirements of the Securities Act. The scope of the antifraud or other
provisions of the federal securities laws, including Sections 12(a)(2)
24 and 17(a) 25 of the Securities Act, that
relate to both oral and written material misstatements and omissions in
the offer and sale of securities will not be affected by the safe
harbor.
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\24\ 15 U.S.C. 77l(a)(2).
\25\ 15 U.S.C. 77q(a).
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B. Conditions to the Safe Harbor
The Securities Act safe harbor is available only if the conditions
described below are satisfied. These conditions are intended to
minimize the possibility that issuers may use the safe harbor to
circumvent important Securities Act protections.
The safe harbor as adopted is a purely objective test. All of the
nine commenters who addressed the desirability of an objective test
supported that approach. Many of them believed that a subjective test
would result in the continued exclusion of U.S. press from offshore
press activities. In addition, commenters noted that the antifraud and
civil liability provisions of the federal securities laws should
provide adequate protection to investors.
1. Press Activity Must Occur Offshore
The press activities that are covered by the safe harbor must occur
outside of the United States.26 To come under the safe
harbor, a press conference or meeting with issuer or selling security
holder representatives must be conducted outside the United States, and
any press-related materials must be released outside of the United
States. Under this approach, the journalist to whom access is provided
must receive any written press-related materials at a physical location
and address that is offshore. In addition, conference calls in which at
least one of the participants is located in the United States would not
be covered by the safe harbor.
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\26\ For clarification, a definition of ``United States'' has
been included in Rule 135e that is the same as the definition used
in Rule 902(p) of Regulation S [17 CFR 230.902(p)]. ``United
States'' is defined to include the United States of America, its
territories and possessions, as well as the individual states of the
United States and the District of Columbia.
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Follow-up press contacts in which the journalist (whether foreign
or U.S.) is located in the United States at the time of the follow-up
are not included in the safe harbor. As one of the commenters pointed
out, this should not be a problem in most cases, since journalists who
attend offshore press conferences typically are based offshore. As this
commenter stated in its letter:
We do not believe follow-up conversations [citation omitted]
present a major issue because in most cases we believe journalists
based offshore will be attending the offshore press conferences
rather than U.S. residents travelling to another country. Attempting
to cover follow-up conversations or other communications where one
party is in the United States would pose an unnecessary complication
for operation of the safe harbor.27
\27\ Comment letter from Dow Jones & Company, Inc. of 12/17/96,
at p. 5.
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This approach is consistent with the limited goal of accommodating
different offering practices followed in the issuer's home jurisdiction
to avoid exclusion of U.S. press from those
[[Page 53951]]
activities. This also is consistent with the general territorial
approach used in the application of the Securities Act registration
requirements.28
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\28\ See Rule 901 of Regulation S [17 CFR 230.901].
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2. Offshore Offering
As a condition to the safe harbor, the offering must not occur
solely within the United States. This condition reflects the
Commission's concern that an issuer not conduct press activities solely
to ``condition the market'' in the United States for the issuer's
securities. There is a far greater likelihood that offshore publicity
with respect to offerings that are made exclusively in the United
States is intended for that purpose.
Some commenters urged the Commission to include U.S.-only offerings
in the Securities Act safe harbor. They noted that these offerings may
be newsworthy events in the home jurisdictions of foreign issuers, and
that certain foreign jurisdictions may even require disclosure of these
offerings. Rules 134,29 135 30 and 135c
31 under the Securities Act should provide adequate
protection for issuers giving notice of offerings. In addition, even if
the new safe harbor and Rules 134, 135 and 135c do not cover the press
activities for U.S.-only offerings of foreign issuers, this does not
necessarily mean that allowing U.S. press access would cause a Section
5 violation. Instead, that question would depend on an analysis of all
the facts and circumstances.32
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\29\ 17 CFR 230.134.
\30\ 17 CFR 230.135.
\31\ 17 CFR 230.135c.
\32\ Preliminary Note 7 to Regulation S should continue to
provide guidance in that instance.
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The condition that at least part of the offering be made offshore
does not impose any requirement that a specific amount be offered
offshore. The commenters that addressed this issue strongly supported
this approach. Commenters noted that requiring a specific minimum
portion of the offering to take place offshore would undercut the
benefit of the safe harbor. Because issuers may not know how much of an
offering will be made offshore, this uncertainty could lead them to
exclude journalists from offshore press activities unnecessarily. There
must, however, be an intent to make a bona fide offering offshore; the
mere offering of a token amount will not suffice to bring the
transaction within the safe harbor. Should the Commission become aware
of abuses involving offerings that do not appear to include a bona fide
offshore component, it will revisit the rule to consider imposing a
stricter, more objective standard.
3. Access Provided to Both U.S. and Foreign Journalists
Another condition of the safe harbor is that the offshore press
activity must be available to foreign journalists, as well as to U.S.
journalists. The safe harbor would not be available if only U.S.
journalists were permitted to attend the offshore press activity or to
receive the offshore press-related materials. This minimizes the
possibility that the safe harbor would be used to channel publicity
regarding the offering solely into the United States. Foreign
journalists must have the same access to the offshore press activity or
materials, although the safe harbor does not require the issuer to
monitor whether foreign journalists actually attend the offshore press
activity or actually receive the offshore press-related materials for
the safe harbor to apply. The Commission has determined that the actual
attendance or receipt of materials by foreign journalists is beyond the
issuer's control, and that a monitoring requirement would be too
burdensome.
In the Proposing Release, the Commission indicated that it would
view ``one-on-one'' interviews with a U.S. journalist as covered by the
safe harbor. However, if the ``one-on-one'' meeting was conducted on an
``exclusive'' basis with a purely ``U.S. publication'' and no other
``one-on-one'' interviews with other foreign publications were given,
the Commission expressed its concern that the exclusive ``one-on-one''
presentation might signal a scheme to channel publicity regarding the
offering into the United States. Nonetheless, the Commission indicated
in the Proposing Release that if an issuer or its representatives
conducts a press conference that complies with the requirements of the
safe harbor (e.g., where both U.S. and foreign journalists are allowed
to attend) either before or after the exclusive ``one-on-one'' meeting
with a purely domestic publication,33 the Commission would
view the exclusive interview as covered by the safe harbor. A few
commenters objected to this interpretation as unduly restrictive and
unnecessary.34 However, the Commission continues to believe
that there is a real basis for concern that the exclusive ``one-on-
one'' would be used solely to channel publicity into the United States,
absent an offshore press conference or other foreign press activity
conducted in connection with an offering.
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\33\ The Commission does not believe that the press conference
must be conducted within any particular time frame. In the
Commission's view, a press conference held in connection with the
offering would be sufficient evidence that the exclusive ``one-on-
one'' was not an attempt to condition the U.S. markets.
\34\ Some commenters opposed the press conference requirement
for purely domestic publications as unnecessary for legitimate news
coverage. See comment letter from Bloomberg L.P. of 12/17/96, at p.
8, and comment letter from Sullivan & Cromwell of 12/20/96, at p.
13.
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4. Written Materials Requirements
Written materials that are released to journalists under the safe
harbor present special concerns, especially if the materials are
released with respect to an offering that is likely to be of
significant interest to U.S. investors. The Commission is concerned
that materials may result in offers of securities in the United States
without the protections of the federal securities laws, or in
conditioning the market in the United States for the securities to be
offered. To address these concerns, the Commission proposed additional
procedural safeguards to be imposed on written materials released to
journalists. These safeguards were intended to alert recipients that
such materials should not be considered an offer of securities for sale
in the United States, and that when and if an offer is made in the
United States, the appropriate required disclosure would be
disseminated at that time.
The Commission is adopting the ``Written Materials Requirements''
substantially as proposed.35 These requirements must be met
whenever written materials released under the safe harbor discuss an
offering of securities by any foreign private issuer and foreign
government where part of the offering is or will be conducted in the
United States. The requirements apply irrespective of whether the U.S.
portion of the offering is registered or exempt. However, consistent
with the Proposing Release, the ``Written Materials Requirements'' will
not be imposed on securities offerings of foreign private issuers and
foreign governments that are offered and sold wholly offshore because
those offerings would appear to be of less significant interest to U.S.
investors.
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\35\ As originally proposed, the ``Written Materials
Requirements'' were required to be satisfied whenever the written
materials discussed an offering of securities by a U.S. issuer.
Because U.S. issuers will not be covered by the safe harbor, as
initially contemplated in the Proposing Release, the ``Written
Materials Requirements'' have been modified to reflect this.
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The ``Written Materials Requirements'' are as follows:
[[Page 53952]]
1. The materials must include a statement that the materials are
not an offer of securities for sale in the United States; that the
securities may not be offered or sold in the United States unless
they are registered or exempt from registration; and that any public
offering of securities to be made in the United States will be made
by means of a prospectus that will contain detailed information
about the company and management, as well as financial statements.
In addition, if any portion of the offering will be registered in
the United States, the materials must include a legend stating this
intention.
2. The issuer or selling security holder cannot attach to, or
otherwise make a part of, the written materials any form of purchase
order or coupon that could be returned indicating interest in the
offering.
Several commenters objected to certain aspects of the ``Written
Materials Requirements,'' most notably the legending requirements and
the coupon prohibition. They contended that these requirements would
make the safe harbor difficult to apply without improving investor
protection. Nonetheless, the Commission believes that these
requirements significantly reduce the possibility that written
materials released to U.S. journalists, and that may come into the
hands of U.S. investors, will be used to offer securities in the United
States without the protections of the U.S. securities laws. Since the
requirements are only imposed when the issuer is otherwise required to
meet U.S. offering regulations because a portion of the offering is to
be made in the United States, the requirements are not unduly
burdensome and the possibility of inadvertent violations is minimal.
III. Tender Offer Safe Harbor
A. General
The Commission is adopting the Tender Offer safe harbor as
proposed. The safe harbor is only available with respect to a target
company that is a foreign private issuer,36 and is narrowly
crafted to permit both the bidder and foreign target to conduct their
activities in a manner consistent with local offering practices.
Pursuant to Rule 14d-1 under the Exchange Act, 37 as
amended, a bidder for the securities of a foreign private issuer, as
well as the foreign target company, the representatives of either and
any other person who may have a filing obligation under the Williams
Act would not be deemed to have triggered the filing and procedural
requirements of the Williams Act 38 by virtue of providing
U.S. or foreign journalists with access to offshore press conferences,
offshore meetings with representatives, and press-related materials
released offshore, at or in which a present or proposed tender offer of
securities is discussed.39 Although the safe harbor will be
available to either a U.S. or a foreign bidder, the safe harbor will
only be applicable if the target company is a foreign private issuer.
The safe harbor will not be available for the securities of a U.S.
target issuer because there appears to be no need to accommodate
foreign offering practices in that instance.
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\36\ Several commenters objected to this limited application of
the safe harbor. They noted, among other things, that bidders may
have difficulty ascertaining whether a target company qualifies as a
foreign private issuer. However, the Commission has determined that
the safe harbor is easiest to apply if a foreign private issuer
definition is used. A bidder may presume that a target company
qualifies as a ``foreign private issuer'' if the target company is a
foreign issuer that files registration statements with the
Commission on the disclosure forms specifically designated for
foreign private issuers (such as Form F-1 or Form 20-F), claims the
exemption from Exchange Act registration pursuant to Exchange Act
Rule 12g3-2(b) [17 CFR 240.12g3-2(b)], or is not reporting in the
United States.
\37\ 17 CFR 240.14d-1.
\38\ Offshore press activity during a tender offer would not
trigger the following requirements: Section 14(d)(1) [15 U.S.C.
78n(d)(1)] through Section 14(d)(7) [15 U.S.C. 78n(d)(7)] of the
Exchange Act, Regulation 14D [17 CFR 240.14d-1 through 17 CFR
240.14d-10), and Rules 14e-1 [17 CFR 240.14e-1] and 14e-2 [17 CFR
240.14e-2].
\39\ The Tender Offer safe harbor, however, would not exempt
from the Securities Act registration requirements exchange offers in
which a U.S. bidder is involved.
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The safe harbor only affects the triggering of the filing and
procedural requirements of the Williams Act, and would not affect the
scope or applicability of the antifraud prohibition of Section 14(e)
40 of the Exchange Act, or the prohibition against trading
on material nonpublic information regarding a tender offer in Rule 14e-
341 under the Exchange Act.
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\40\ 15 U.S.C. 78n(e).
\41\ 17 CFR 240.14e-3.
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The purpose of the Tender Offer safe harbor is to prevent the
application of the U.S. tender offer rules before a bidder is prepared
to proceed with the offer. After an offer has commenced with the filing
of documents with the Commission under Regulation 14D, the safe harbor
would not be available.
B. Conditions
The applicability of the Tender Offer safe harbor is subject to
several conditions that are analogous to the Securities Act safe harbor
conditions. Both U.S. and foreign journalists must have access to the
offshore press activity, and the written materials that are covered by
the safe harbor must be appropriately legended in circumstances where
significant U.S. investor interest in the tender offer is likely. In
addition, no means to tender securities, or coupons that could be
returned to indicate interest in the tender offer may be provided as
part of any press-related materials.
If the present or proposed tender offer described in the written
materials released under the proposed tender offer safe harbor is for
equity securities registered under Section 12 42 of the
Exchange Act, the materials must comply with certain requirements
(``Written Materials Requirements'').43 These requirements
are as follows:
\42\ 15 U.S.C. 78l.
\43\ As with the Written Materials Requirements under the
Securities Act safe harbor, some commenters objected to the
legending and coupon conditions of the Tender Offer safe harbor. The
Commission believes that these conditions reduce the possibility
that the Tender Offer safe harbor will be used to circumvent the
protections provided by the federal securities laws. The Written
Materials Requirements do not apply where those protections are not
applicable, including in the case of tender offers for a class of
equity securities that is not registered with the Commission, or
tender offers for debt securities.
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1. The materials must include a statement that the materials are
not an extension of the tender offer in the United States for a
class of equity securities of the subject company. In addition, if
the bidder intends to extend the tender offer in the United States
at some future time for a class of equity securities of the subject
company, the materials must include a legend stating this intention
and stating that the procedural and filing requirements of the
Williams Act will be satisfied at that time.
2. No means to tender securities, or coupons that could be
returned to indicate interest in the tender offer may be provided as
part of, or attached to, any press-related materials.
IV. Certain Findings
Section 23(a) of the Exchange Act 44 requires the
Commission to consider the anti-competitive effects of any rules it
adopts thereunder, if any, and the reasons for its determination that
any burden on competition imposed by such rules is necessary or
appropriate to further the purposes of the Exchange Act. Furthermore,
Section 2 45 of the Securities Act and Section 3
46 of the Exchange Act, as amended by the National
Securities Markets Improvement Act of 1996,47 provide that
whenever the Commission is engaged in rulemaking and is required to
consider or determine whether an action is necessary or appropriate in
the public interest, the Commission also shall consider, in addition to
the protection of investors, whether the action will
[[Page 53953]]
promote efficiency, competition, and capital formation.
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\44\ 15 U.S.C. 78w(a).
\45\ 15 U.S.C. 77b.
\46\ 15 U.S.C. 78c.
\47\ Pub. L. No. 104-290, Sec. 106, 110 Stat. 3416 (1996).
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The Commission has considered the rule and amendments discussed in
this release in light of the comments received in response to the
Proposing Release and the standards in Section 23(a) of the Exchange
Act. The rule and amendments are intended to reduce anti-competitive
barriers between U.S. and foreign journalists. As a result of the rule
and amendments, U.S. journalists will have increased access to offshore
press activities conducted by issuers and selling security holders and,
in the case of tender offers, by bidders for foreign private issuers,
as well as the foreign target company itself. Although some of the
requirements under the safe harbors, such as the legending requirements
and coupon prohibition, may place certain burdens on those who wish to
rely on the safe harbors, the overall effect of the safe harbors is to
decrease anti-competitive barriers. Without the safe harbors, U.S.
press will continue to be excluded from the offshore press activities
of foreign issuers. This may harm U.S. investors because they
eventually receive the information disseminated offshore, but on a
delayed basis. With the safe harbors, U.S. investors will have access
to information about their investments in a more timely and efficient
manner. The safe harbors adopted today will facilitate U.S. press
access to the offshore press activities, and promote efficiency,
competition and capital formation by removing information barriers that
may inadvertently harm U.S. investors and otherwise facilitating
foreign issuer access to U.S. markets.
V. Cost-Benefit Analysis
The new rule and amendments will not impose any significant new
burdens on issuers. No new registration, reporting or filing burdens
will be imposed on issuers and selling security holders as a result of
the safe harbors. The purpose of the safe harbors is to increase the
access of U.S. journalists to the offshore press activities of issuers
and selling security holders and, in the case of tender offers, bidders
for foreign private issuers and the target company itself. Currently,
U.S. journalists are excluded from the offshore press activities of
foreign issuers. Instead of protecting U.S. investors, this practice
may disadvantage U.S. investors because their access to information is
delayed. The new rule and amendments will eliminate this unintended
consequence of the Securities Act's regulation of offering publicity.
Although some of the Written Materials Requirements under either
safe harbor marginally may increase burdens for those wishing to rely
on the safe harbors, these requirements are intended to ensure that
activities covered by the safe harbors are not actually offerings of
securities or tender offers in the United States. Because the safe
harbors should eliminate barriers to press access, the overall result
of the safe harbors is to reduce the burdens and costs currently
associated with limited and uneven press access. Moreover, the burdens
imposed by the Written Materials Requirements are negligible. Based on
an informal survey taken by Commission staff of attorneys in private
practice whose clients could be expected to rely on these safe harbors,
the Commission has estimated that the maximum compliance costs of these
legending requirements is $500 in printing costs for each instance that
the requirements are triggered.
Under the Securities Act safe harbor, the Written Materials
Requirements are intended to help ensure that press-related materials
distributed under the safe harbor will not result in an offering of
securities to U.S. investors without the protection of the securities
laws. The written materials must include a legend explicitly stating
that the materials are not an offer of securities in the United States,
and that no money or other consideration is being solicited through the
materials. The issuer or selling security holder also must state if it
intends to register any part of the offering in the United States. In
addition to these legending requirements, issuers and selling security
holders may not include a purchase order or coupon with the written
materials.
Although some commenters contended that these requirements are
unnecessary and burdensome, the Commission has determined that these
requirements are necessary to safeguard the safe harbor from potential
abuse. The burdens imposed are minimal, and enable the Commission to
adopt an objective approach that should reduce needless barriers to
U.S. press participation in offshore press activities with minimal
burden.
The Tender Offer safe harbor contains similar Written Materials
Requirements. Bidders for the securities of foreign private issuers and
the foreign target companies must comply with these requirements when
they release written press-related materials under this safe harbor.
The materials must include a legend stating that the materials should
not be construed as extending a tender offer in the United States, and
that no money or other consideration is being solicited through the
materials. If the bidder intends to extend the tender offer in the
United States in the future, the written materials must include a
statement to that effect. In addition, no coupons or means of tendering
securities must be included with the materials.
The requirements under both safe harbors are intended to protect
U.S. investors from potential use of the safe harbors as a means of
circumventing the protections provided by the federal securities laws.
The Commission does not consider these requirements to be unduly
burdensome, especially in light of the important investor protections
they provide and the benefits provided by the new safe harbors.
Moreover, each issuer can engage in its own cost-benefit analysis to
determine whether the burdens imposed by the legending and coupon
conditions preclude reliance on the safe harbors.
VI. Final Regulatory Flexibility Analysis
This Final Regulatory Flexibility Analysis (``FRFA'') has been
prepared in accordance with 5 U.S.C. 604 regarding the new rule and
amendments. The rule and amendments are intended to provide companies
with greater certainty in determining when journalists, both foreign
and domestic, may have access to offshore press conferences, meetings
with company representatives conducted offshore, or press materials
released offshore without violating the U.S. federal securities laws.
The rule and amendments should eliminate an unintended and
potentially harmful consequence of the Securities Act's regulation of
offering publicity. Currently, these regulations have been interpreted
to deny U.S. journalists access to the offshore press activities of
foreign issuers. This practice may harm U.S. investors because they
eventually receive the same information, but on a delayed basis. The
rule and amendments should remedy this unintended and harmful
consequence.
The new rule and amendments will not impose any reporting,
recordkeeping or other compliance burdens other than the Written
Materials Requirements, which only apply to those issuers that choose
to rely on the safe harbors. Although the Written Materials
Requirements will impose certain legending requirements on written
materials released offshore for those wishing to rely on the safe
harbors, the Commission does not consider these requirements to be
unduly burdensome on small businesses. A small issuer will make its own
determination of whether the requirements would impose too much of a
burden to make reliance on
[[Page 53954]]
the safe harbors useful to it. As a result, the Commission does not
consider the rule and amendments unduly burdensome on small businesses.
The term ``small business,'' as used in reference to an issuer for
purposes of the Regulatory Flexibility Act, is defined by Rule 157
48 under the Securities Act as an issuer that had total
assets of $5 million or less on the last day of its most recent fiscal
year, and is engaged or proposing to engage in small business
financing. An issuer is considered to be engaged in small business
financing if it is conducting or proposes to conduct an offering of
securities that does not exceed the dollar limitation prescribed by
Section 3(b) of the Securities Act. When used in reference to an issuer
other than an investment company, the term also is defined in Rule 0-10
49 of the Exchange Act as an issuer that had total assets of
$5 million or less on the last day of its most recent fiscal year.
---------------------------------------------------------------------------
\48\ 17 CFR 230.157.
\49\ 17 CFR 240.0-10.
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The Commission is aware of approximately 1100 Exchange Act
reporting companies that currently satisfy the definition of ``small
business'' under Rule 0-10. Because the rule and amendments affect
multinational offerings by foreign issuers in which there would be
press interest, it is likely that most of these issuers would not
satisfy the definition of ``small business.''
The Commission has considered different alternatives to the rule
and amendments. However, alternatives for providing different means of
compliance for small entities or for exempting small entities from the
rule and amendments would be inconsistent with the Commission's
statutory mandate of investor protection. The new rule and amendments
are intended to facilitate U.S. press access to offshore press
activities of all issuers, regardless of size, such that further
distinctions between companies based on size would not be appropriate.
The Commission requested comment with respect to the Initial
Regulatory Flexibility Analysis (``IRFA'') prepared in connection with
the Proposing Release, but did not receive any comments that
specifically addressed the IRFA.
VII. Statutory Basis for the Amendments
The amendments to the Securities Act rules are being adopted
pursuant to Sections 3, 4, 5 and 19 of the Securities Act as amended,
and as required by Pub. L. No. 104-290, Sec. 109, 110 Stat. 3416
(1996). The amendment to the Exchange Act rule is being adopted
pursuant to Sections 14(d), 14(e) and 23(a) of the Exchange Act.
List of Subjects in 17 CFR Parts 230 and 240
Reporting and recordkeeping requirements, Securities.
Text of the Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is amended as follows:
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
The authority citation for Part 230 continues to read in part as
follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c,
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30,
and 80a-37, unless otherwise noted.
* * * * *
Sec. 230.135d [Added]
2. Section 230.135d is added and reserved.
3. By adding Sec. 230.135e to read as follows:
Sec. 230.135e Offshore press conferences, meetings with issuer
representatives conducted offshore, and press-related materials
released offshore.
(a) For the purposes only of Section 5 of the Act [15 U.S.C. 77e],
an issuer that is a foreign private issuer (as defined in Sec. 230.405)
or a foreign government issuer, a selling security holder of the
securities of such issuers, or their representatives will not be deemed
to offer any security for sale by virtue of providing any journalist
with access to its press conferences held outside of the United States,
to meetings with issuer or selling security holder representatives
conducted outside of the United States, or to written press-related
materials released outside the United States, at or in which a present
or proposed offering of securities is discussed, if:
(1) The present or proposed offering is not being, or to be,
conducted solely in the United States;
Note to Paragraph (a)(1): An offering will be considered not to
be made solely in the United States under this paragraph (a)(1) only
if there is an intent to make a bona fide offering offshore.
(2) Access is provided to both U.S. and foreign journalists; and
(3) Any written press-related materials pertaining to transactions
in which any of the securities will be or are being offered in the
United States satisfy the requirements of paragraph (b) of this
section.
(b) Any written press-related materials specified in paragraph
(a)(3) of this section must:
(1) State that the written press-related materials are not an offer
of securities for sale in the United States, that securities may not be
offered or sold in the United States absent registration or an
exemption from registration, that any public offering of securities to
be made in the United States will be made by means of a prospectus that
may be obtained from the issuer or the selling security holder and that
will contain detailed information about the company and management, as
well as financial statements;
(2) If the issuer or selling security holder intends to register
any part of the present or proposed offering in the United States,
include a statement regarding this intention; and
(3) Not include any purchase order, or coupon that could be
returned indicating interest in the offering, as part of, or attached
to, the written press-related materials.
(c) For the purposes of this section, ``United States'' means the
United States of America, its territories and possessions, any State of
the United States, and the District of Columbia.
Sec. 230.502 [Amended]
4. By amending Sec. 230.502 to remove the period at the end of
paragraph (c)(2) and to add the following: ``; Provided further, that,
if the requirements of Sec. 230.135e are satisfied, providing any
journalist with access to press conferences held outside of the United
States, to meetings with issuer or selling security holder
representatives conducted outside of the United States, or to written
press-related materials released outside the United States, at or in
which a present or proposed offering of securities is discussed, will
not be deemed to constitute general solicitation or general advertising
for purposes of this section.''
Preliminary Note 7 [Amended]
5. By amending Preliminary Note 7 following the undesignated
heading ``Regulation S'' and before Sec. 230.901 to add the following
after the first sentence: ``Where applicable, issuers and bidders may
also look to Sec. 230.135e and Sec. 240.14d-1(c) of this chapter.''
6. By amending Sec. 230.902 to add paragraph (b)(8) to read as
follows:
Sec. 230.902 Definitions.
* * * * *
(b) Directed Selling Efforts. * * *
(8) Notwithstanding paragraph (b)(1) of this section, providing any
journalist
[[Page 53955]]
with access to press conferences held outside of the United States, to
meetings with issuer or selling security holder representatives
conducted outside of the United States, or to written press-related
materials released outside the United States, at or in which a present
or proposed offering of securities is discussed, will not be deemed
``directed selling efforts'' if the requirements of Sec. 230.135e are
satisfied.
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
7. The authority citation for part 240 continues to read in part as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee,
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1,
78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 79q,
79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless
otherwise noted.
* * * * *
8. By amending Sec. 240.14d-1 by redesignating paragraphs (c) and
(d) as paragraphs (e) and (f), and adding paragraphs (c) and (d) to
read as follows:
Sec. 240.14d-1 Scope of and definitions applicable to regulations 14D
and 14E.
* * * * *
(c) Notwithstanding paragraph (a) of this section, the requirements
imposed by sections 14(d)(1) through 14(d)(7) of the Act [15 U.S.C.
78n(d)(1) through 78n(d)(7)], Regulation 14D promulgated thereunder
(Secs. 240.14d-1 through 240.14d-10), and Secs. 240.14e-1 and 240.14e-2
shall not apply by virtue of the fact that a bidder for the securities
of a foreign private issuer, as defined in Sec. 240.3b-4, the subject
company of such a tender offer, their representatives, or any other
person specified in Sec. 240.14d-9(d), provides any journalist with
access to its press conferences held outside of the United States, to
meetings with its representatives conducted outside of the United
States, or to written press-related materials released outside the
United States, at or in which a present or proposed tender offer is
discussed, if:
(1) Access is provided to both U.S. and foreign journalists; and
(2) With respect to any written press-related materials released by
the bidder or its representatives that discuss a present or proposed
tender offer for equity securities registered under Section 12 of the
Act [15 U.S.C. 78l], the written press-related materials must state
that these written press-related materials are not an extension of a
tender offer in the United States for a class of equity securities of
the subject company. If the bidder intends to extend the tender offer
in the United States at some future time, a statement regarding this
intention, and that the procedural and filing requirements of the
Williams Act will be satisfied at that time, also must be included in
these written press-related materials. No means to tender securities,
or coupons that could be returned to indicate interest in the tender
offer, may be provided as part of, or attached to, these written press-
related materials.
(d) For the purpose of Sec. 240.14d-1(c), a bidder may presume that
a target company qualifies as a foreign private issuer if the target
company is a foreign issuer and files registration statements or
reports on the disclosure forms specifically designated for foreign
private issuers, claims the exemption from registration under the Act
pursuant to Sec. 240.12g3-2(b), or is not reporting in the United
States.
* * * * *
Dated: October 10, 1997.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27523 Filed 10-16-97; 8:45 am]
BILLING CODE 8010-01-P
