99-28354. Cross-Border Tender and Exchange Offers, Business Combinations and Rights Offerings  

  • [Federal Register Volume 64, Number 217 (Wednesday, November 10, 1999)]
    [Rules and Regulations]
    [Pages 61382-61408]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 99-28354]
    
    
    
    [[Page 61381]]
    
    _______________________________________________________________________
    
    Part II
    
    
    
    
    
    Securities and Exchange Commission
    
    
    
    
    
    _______________________________________________________________________
    
    
    
    17 CFR Part 200 et al.
    
    
    
    Cross-Border Tender and Exchange Offers, Business Combinations and 
    Rights Offerings; Final Rule
    
    
    
    Regulation of Takeovers and Security Holder Communications; Final Rule
    
    Federal Register / Vol. 64, No. 217 / Wednesday, November 10, 1999 / 
    Rules and Regulations
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    17 CFR Parts 200, 230, 239, 240, 249 and 260
    
    [Release Nos. 33-7759, 34-42054; 39-2378, International Series Release 
    No. 1208; File No. S7-29-98]
    RIN 3235-AD97
    
    
    Cross-Border Tender and Exchange Offers, Business Combinations 
    and Rights Offerings
    
    AGENCY: Securities and Exchange Commission.
    
    ACTION: Final rule.
    
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    SUMMARY: The Securities and Exchange Commission today is adopting 
    tender offer and Securities Act registration exemptive rules for cross-
    border tender and exchange offers, business combinations, and rights 
    offerings relating to the securities of foreign companies. The purpose 
    of the exemptions is to facilitate U.S. investor participation in these 
    types of transactions.
    
    EFFECTIVE DATE: January 24, 2000, except Secs. 200.30-1(e)(16) and 
    200.30-3(a)(68) will be effective November 10, 1999.
    
    FOR FURTHER INFORMATION CONTACT: Dennis O. Garris, Chief, or Laura 
    Badian, Special Counsel, Office of Mergers and Acquisitions, Division 
    of Corporation Finance at (202) 942-2920; James Brigagliano, Florence 
    Harmon, Irene Halpin, or Michael Trocchio, Office of Risk Management 
    and Control, Division of Market Regulation, at (202) 942-0772; at 
    Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
    DC. 20549.
    
    SUPPLEMENTARY INFORMATION: We are adopting new Rules 800, 801 and 802 
    under the Securities Act of 1933 (``Securities Act''),\1\ Rule 4d-10 
    under the Trust Indenture Act of 1939 (``Trust Indenture Act''),\2\ 
    revisions to Form F-X and Rule 144 under the Securities Act,\3\ 
    revisions to Rules 13e-3, 13e-4, 14d-1, 14d-9, and 14e-2 \4\ under the 
    Securities Exchange Act of 1934 (``Exchange Act''),\5\ portions of new 
    Rule 14e-5 \6\ under the Exchange Act, and Rules 30-1 and 30-3 \7\ of 
    the Commission's Rules Delegating Authority to the Directors of the 
    Division of Corporation Finance and Market Regulation, respectively. We 
    are also adopting new Form CB under the Securities Act and the Exchange 
    Act.
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        \1\ 15 U.S.C. 77a et seq.
        \2\ 15 U.S.C. 77aaa et seq.
        \3\ 17 CFR 239.42 and 17 CFR 230.144.
        \4\ 17 CFR 240.13e-3, 240.13e-4, 240.14d-1, 240.14d-9 and 
    240.14e-2.
        \5\ 15 U.S.C. 78a et seq.
        \6\ The portion of the text of new Rule 14e-5 (formerly Rule 
    10b-13) that is being adopted today is contained in a separate 
    release that updates and simplifies the rules and regulations 
    applicable to takeover transactions. See Regulation of Takeovers and 
    Security Holder Communications, Securities Act Release No. 7760 
    (October 22, 1999) (``Regulation M-A Release'').
        \7\ 17 CFR 200.30-1 and 200.30-3.
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    Table of Contents
    
    I. Executive Summary
        A. Summary of Amendments
        B. Changes from the 1998 Proposals
    II. Discussion
        A. The Tier I Exemption
        1. U.S. Ownership Limitation
        2. Disclosure and Dissemination--Form CB
        3. Equal Treatment
        a. Cash Alternative
        b. Blue Sky Exemption
        c. Loan Notes
        4. Rule 13e-3 Exemption
        5. Sections 13(d), 13(f) and 13(g)
        B. The Tier II Exemption
        C. Other Rules Governing Tender Offers
        1. Rule 14e-5 (Former Rule 10b-13)
        a. Tier I Offers
        b. Market Making by ``Connected
        Exempt Market Makers'' and
        Connected Exempt Principal Traders
        2. Regulation M
        D. Exemption from the Securities Act for Exchange Offers, 
    Business Combinations, and Rights Offerings
        1. Summary
        2. Eligibility Conditions
        a. U.S. Ownership Limitation
        b. Equal Treatment
        c. Transfer Restrictions
        d. Additional Requirements for Rights Offerings
        e. Offeror Eligibility Requirements
        f. Informational Requirements
        g. Trust Indenture Act Exemption
        E. Investment Companies
        F. Determination of U.S. Ownership
        1. Definition of U.S. Holder
        2. Exclusion of Holdings of More Than 10 Percent
        3. Determination of Eligibility by Persons Other Than the Issuer
        G. Internet Disclosure
        1. General Approach
        2. Offshore Tender and Exchange Offers, Rights Offerings and 
    Business Combinations on the Internet
        3. U.S. Exempt Component
        4. Domestic Issuers
    III. Paperwork Reduction Act
    IV. Cost-Benefit Analysis
    V. Findings and Considerations
        A. Effect on Competition/Exchange Act Section 23(a)
        B. Promotion of Efficiency, Competition and Capital Formation
        C. Exemptive Authority Findings
        D. Delegated Authority
    VI. Summary of Final Regulatory Flexibility Analysis
    VII. Statutory Basis and Text of Amendments
    
    Appendix A--Form CB Tender Offer/Rights Offering Notification Form
    
    I. Executive Summary
    
    A. Summary of Amendments
    
        U.S. security holders are often excluded from tender and exchange 
    offers, business combinations and rights offerings involving foreign 
    private issuers. It is very common for bidders to exclude U.S. security 
    holders from these transactions to avoid the application of the U.S. 
    securities laws, particularly when U.S. security holders own a small 
    amount of the securities of the foreign private issuer.\8\ When bidders 
    exclude U.S. security holders from tender or exchange offers, they deny 
    U.S. security holders the opportunity to receive a premium for their 
    securities and to participate in an investment opportunity. Similarly, 
    when issuers exclude U.S. security holders from participation in rights 
    offerings, U.S. security holders lose the opportunity to purchase 
    shares at a possible discount from market price. U.S. investors must 
    react to these transactions, which may significantly affect their 
    existing investment in the foreign private issuer, without the 
    disclosure or other protections afforded by U.S. or foreign law.
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        \8\ As we noted in the proposing release, Cross-Border Tender 
    Offers, Business Combinations and Rights Offerings, Securities Act 
    Release No. 7611 (November 13, 1998) (63 FR 69136) (Section II.A.), 
    because a large percentage of foreign companies have only a small 
    number of U.S. security holders, it is quite common for bidders for 
    the securities of those foreign companies to exclude U.S. holders. 
    For example, based on a sample of 31 tender offers compiled in 1997 
    by the U.K. Takeover Panel (the entity that regulates tender offers 
    in the United Kingdom), when the U.S. ownership of the target was 
    less than 15% (30 offers), the bidders excluded U.S. persons in all 
    of the offers. When the U.S. ownership was more significant, such as 
    38% (one offer), the bidders included U.S. persons. In the 30 offers 
    that excluded U.S. persons, the ownership percentage was as follows: 
    In 27 offers, U.S. persons held less than 5%; in the remaining three 
    offers, U.S. persons held 7%, 8% and 10-15%, respectively.
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        Today, the Commission is adopting exemptive rules that are intended 
    to encourage issuers and bidders to extend tender and exchange offers, 
    rights offerings and business combinations to the U.S. security holders 
    of foreign private issuers. The purpose of the exemptions adopted today 
    is to allow U.S. holders to participate on an equal basis with foreign 
    security holders. In the past, some jurisdictions have permitted 
    exclusion of U.S. holders despite domestic requirements to treat all 
    holders equally on the basis that it would be impracticable to require 
    the bidder to include U.S. holders. The rules adopted today are 
    intended to
    
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    eliminate the need for such disadvantageous treatment of U.S. 
    investors.
        The exemptions balance the need to provide U.S. security holders 
    with the protections of the U.S. securities laws against the need to 
    promote the inclusion of U.S. security holders in these types of cross-
    border transactions. The specific exemptions are:
         Tender offers for the securities of foreign private 
    issuers will be exempt from most provisions of the Exchange Act and 
    rules governing tender offers \9\ when U.S. security holders hold 10 
    percent or less of the subject securities. In addition to bidders, the 
    subject company, or any officer, director or other person who otherwise 
    would have an obligation to file Schedule 14D-9 also may rely on the 
    exemption. We refer to this exemptive relief in this release as the 
    ``Tier I'' exemption.
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        \9\ 15 U.S.C. 78m(e) and 78n(d); 17 CFR 240.13e-3, 240.13e-4, 
    240.14d-1 to 240.14d-10, 240.14e-1 and 240.14e-2.
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         When U.S. security holders hold 40 percent or less of the 
    class of securities of the foreign private issuer sought in the offer, 
    limited tender offer exemptive relief will be available to bidders to 
    eliminate frequent areas of conflict between U.S. and foreign 
    regulatory requirements. We refer to this exemptive relief in this 
    release as the ``Tier II'' exemption. The Tier II exemption represents 
    a codification of current exemptive and interpretive positions.
         Under new Securities Act exemptive Rule 801, equity 
    securities issued in rights offerings by foreign private issuers will 
    be exempt from the registration requirements of the Securities Act, if 
    U.S. security holders own 10 percent or less of the issuer's securities 
    that are the subject of the rights offering.
         Under new Securities Act exemptive Rule 802, securities 
    issued in exchange offers for foreign private issuers' securities and 
    securities issued in business combinations involving foreign private 
    issuers will be exempt from the registration requirements of the 
    Securities Act and the qualification requirements of the Trust 
    Indenture Act, if U.S. security holders hold 10 percent or less of the 
    subject class of securities.
         Tender offers for the securities of foreign private 
    issuers will be exempt from new Rule 14e-5 \10\ (formerly Rule 10b-13) 
    of the Exchange Act, which prohibits a bidder from purchasing 
    securities otherwise than pursuant to the tender offer. This exemption 
    will allow purchases outside the tender offer during the offer when 
    U.S. security holders hold 10 percent or less of the subject 
    securities.
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        \10\ Rule 10b-13 was revised and redesignated as new Rule 14e-5 
    in the Regulation M-A Release, supra note 6.
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        The U.S. anti-fraud and anti-manipulation rules and civil liability 
    provisions will, however, continue to apply to these transactions. 
    Certain commenters believed that this liability will remain a hurdle to 
    including U.S. security holders, particularly in view of the amount of 
    litigation in the United States and the ability of subject companies to 
    institute litigation as a defensive measure. However, in a transaction 
    eligible for the exemptions adopted today, many of the disclosure and 
    procedural protections of the federal securities laws will not be 
    available. Therefore, it is necessary that the anti-fraud provisions 
    continue to provide a basic level of protection for U.S. security 
    holders participating in these transactions. The application of these 
    provisions, however, may be different in the context of foreign 
    disclosure requirements and practices. The Commission considers the 
    information that is required to be disclosed by a form or schedule 
    generally to be important in investment decisions. However, the 
    omission of the information called for by U.S. forms in the context of 
    foreign disclosure requirements and practices would not necessarily 
    violate the U.S. disclosure requirements. An antifraud action could be 
    brought by the Commission and investors if the omitted information is 
    material in the context of the transaction and the disclosure provided 
    is misleading as a result of the omission of the information.
        In addition to the above exemptions, we are adopting amendments to 
    the Commission's general organization rules. These amendments delegate 
    to the Directors of the Divisions of Corporation Finance and Market 
    Regulation authority to exempt tender offers from specific tender offer 
    requirements. The delegation of authority is intended to conserve 
    Commission resources by permitting the staff to review and act on 
    exemptive applications under sections 14(d) and 36(a) \11\ of the 
    Exchange Act when appropriate. Nevertheless, the staff may submit 
    matters to the Commission for consideration as it deems appropriate. In 
    addition, under section 4A(b) \12\ of the Exchange Act, the Commission 
    retains discretionary authority to review, upon its own initiative or 
    upon application by a party adversely affected, any exemption granted 
    or denied by the Division pursuant to delegated authority.\13\
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        \11\ 15 U.S.C. 78mm(a).
        \12\ 15 U.S.C. 78d-1(b).
        \13\ Information concerning the filing of exemptive relief 
    applications can be found in Release No. 34-39624; Rule 0-12 under 
    the Exchange Act (17 CFR 240.0-12).
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    B. Changes From the 1998 Proposals
    
        The rules adopted today differ from those contained in the November 
    1998 proposing release \14\ in significant respects. These 
    modifications are being made in response to comments we received on the 
    proposals.\15\ The following is a list of the most important changes 
    from the proposals:
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        \14\ See the proposing release, supra note 8. Similar exemptions 
    were originally proposed in International Tender and Exchange 
    Offers, Securities Act Release No. 6897 (June 5, 1991) (56 FR 27582) 
    and Cross-Border Rights Offers, Securities Act Release No. 6896 
    (June 4, 1991) (56 FR 27564).
        \15\ We received 19 letters of comment on the 1998 proposals. 
    Those letters can be obtained for public inspection and copying by 
    requesting File No. S7-29-98 through our public reference room in 
    Washington DC. Electronically submitted comments are available on 
    our Internet web site (http:/www.sec.gov).
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         Offerors may offer cash to U.S. persons and securities to 
    non-U.S. persons in a Tier I tender offer without violating the equal 
    treatment requirements of that exemption.
         The Tier II exemption has been revised to harmonize it 
    with the amendments to the tender offer rules (``Regulation M-A'') that 
    also are being adopted today in a separate release.\16\
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        \16\ Regulation M--A Release, supra note 6.
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         The U.S. ownership limitations for the exemptions from the 
    Securities Act registration requirements for exchange offers, business 
    combinations and rights offerings have been increased from five to 10 
    percent.
         Securities held by all persons owning 10 percent or more 
    of the outstanding securities, as well as the securities held by the 
    offeror, are excluded from the calculation of the percentage of the 
    class held by U.S. owners, rather than securities owned by just foreign 
    10 percent holders, as proposed.
         Securities purchased in a rights offering conducted under 
    Rule 801 will only be restricted to the extent that the securities held 
    by the U.S. holder at the time of the offering were restricted.
         We have modified the method of determining U.S. ownership. 
    An offeror must ``look through'' the record ownership of certain 
    brokers, dealers, banks or nominees holding securities of the subject 
    company for the accounts of their customers to determine the percentage 
    of the securities held in nominee accounts that have U.S. addresses. We 
    are adopting, with minor
    
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    changes, the proposal that a third-party bidder in an unsolicited or 
    ``hostile'' tender offer may rely upon a presumption that the U.S. 
    ownership percentage limitations of the Tier I, Tier II and Rule 802 
    exemptions are not exceeded based on the relative level of trading 
    volume in the United States. We are not adopting the proposed 
    rebuttable presumption that persons holding through ADR facilities are 
    U.S. holders.
         In order to provide a level playing field in the case of 
    competing offers, we have provided that if an offeror commences a 
    tender offer or a business combination during an ongoing tender offer 
    or business combination for securities of the same class that is the 
    subject of its offer, the second offeror will be eligible to use the 
    same exemption (Tier I, Tier II, or Rule 802) as the prior offeror, so 
    long as all the conditions of the exemption, other than the limitation 
    on U.S. ownership, are satisfied by the second offeror. In light of 
    this change, we are not adopting the proposal that if an offeror 
    commences an offer during an ongoing tender or exchange offer for 
    securities of the same class that is the subject of its offer, the 
    offeror could calculate the percentage of subject securities held by 
    U.S. holders as of the same date used by the initial offeror.
         We provide guidance regarding when bidders can provide 
    information on the Internet about offshore tender and exchange offers 
    without triggering U.S. requirements.
         The Tier I and Tier II tender offer exemptions are 
    available if the subject company is a closed-end investment company 
    that is registered under the Investment Company Act of 1940 (the 
    ``Investment Company Act'').\17\ As proposed, the Tier I and Tier II 
    tender offer exemptions would not have been available if the subject 
    company was any type of investment company registered or required to be 
    registered under the Investment Company Act.
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        \17\ 15 U.S.C. 80a-1 et seq.
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         The registration exemptions for rights offerings, business 
    combinations and exchange offers provided by Rules 801 and 802 are 
    available for securities issued by closed-end investment companies that 
    are registered under the Investment Company Act. As proposed, Rules 801 
    and 802 would not have been available for securities issued by any type 
    of investment company, whether foreign or domestic, that is registered 
    or required to be registered under the Investment Company Act.
    
    II. Discussion
    
    A. The Tier I Exemption
    
        Under the Tier I exemption adopted today, eligible issuer and 
    third-party tender offers will not be subject to Rules 13e-3, 13e-4, 
    Regulation 14D or Rules 14e-1 and 14e-2. These provisions contain 
    disclosure, filing, dissemination, minimum offering period, withdrawal 
    rights and proration requirements that are intended to provide security 
    holders with equal treatment and adequate time and information to make 
    a decision whether to tender into the offer. The Tier I exemption 
    provides that tender offers for the securities of foreign private 
    issuers are exempt from these U.S. tender offer requirements, so long 
    as:
    
         U.S. security holders hold 10 percent or less of the 
    class of securities sought in the tender offer;
         In the case of an offer that otherwise would be subject 
    to Rule 13e-4 or Regulation 14D under the Exchange Act, bidders 
    submit, rather than file, an English language translation of the 
    offering materials to the Commission under cover of Form CB and, in 
    the case of a foreign offeror, file a consent to service on Form F-
    X;
         U.S. security holders participate in the offer on terms 
    at least as favorable as those offered to any other holders; and
         Bidders provide U.S. security holders with the tender 
    offer circular or other offering documents, in English, on a 
    comparable basis to that provided to other security holders.
    
    The exemption is available to U.S. and foreign bidders. The domicile or 
    reporting status of the bidder is not relevant. Instead of complying 
    with the U.S. tender offer rules, a bidder taking advantage of the 
    exemption will comply with any applicable rules of the foreign subject 
    company's home jurisdiction or exchange.
    1. U.S. Ownership Limitation
        We are adopting, as proposed, 10 percent as the maximum level of 
    ownership by U.S. security holders that a subject company can have and 
    be eligible for the Tier I exemption.\18\ Under the proposals, we 
    solicited comment on whether to increase the 10 percent limitation for 
    U.S. ownership to 15 or 20 percent. Commenters on the proposals largely 
    favored adopting a higher eligibility percentage. We have decided, 
    however, that 10 percent is an appropriate level of U.S. ownership for 
    exclusive reliance on home jurisdiction requirements. At and below that 
    level of U.S. ownership, broad-based exemptions are necessary to 
    encourage inclusion of U.S. security holders.\19\ We believe that U.S. 
    holders' interests are best served by being able to participate in, 
    rather than being excluded from, the tender offer, even though they do 
    not receive the full protections of the U.S. tender offer rules. Above 
    the 10 percent level of U.S. ownership, more tailored relief of the 
    type permitted by the new Tier II exemption would address conflicting 
    regulatory mandates and offering practices.
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        \18\ See Section II.F. infra for a discussion of how U.S. 
    ownership is determined.
        \19\ See the proposing release, supra note 8, at note 15.
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        We also believe that it is appropriate to set the Tier I and 
    Securities Act registration exemption limit on U.S. ownership at the 
    same percentage to level the playing field for stock and cash tender 
    offers. As discussed below, we have decided to raise the ownership 
    level for the Securities Act exemption from five to 10 percent. As a 
    result, an exchange offer would be exempt both from the tender offer 
    and Securities Act registration requirements if U.S. security holders 
    hold 10 percent or less of the subject company's securities.
        In order to provide a level playing field in the case of competing 
    offers, we also believe it is appropriate to provide that if a bidder 
    commences a tender offer or a business combination during an ongoing 
    tender offer or business combination for securities of the same class 
    that is the subject of its offer, the second bidder will be eligible to 
    use the same exemption (Tier I, Tier II, or Rule 802) as the prior 
    offeror provided that all the conditions of the exemption, other than 
    the limitation on U.S. ownership, are satisfied by the second bidder. 
    Thus, if the initial bidder relies on the Tier I exemption to make a 
    tender offer, a subsequent competing bidder would not be subject to the 
    10 percent ownership limitation condition of the Tier I exemption. As a 
    result, the second bidder will not be disadvantaged by any movement of 
    securities into the United States following the announcement of the 
    initial offer.
        Neither the Tier I nor the Tier II tender offer exemption is 
    available for any transaction or series of transactions that 
    technically complies with the exemption but is part of a plan or scheme 
    to evade the tender offer provisions of the Exchange Act.\20\ For 
    example, if an initial offer is commenced solely as a pretext for 
    making a subsequent offer automatically eligible for the exemption, the 
    Tier I exemption would not be available.
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        \20\ See Instruction 4 to paragraphs (h)(8) and (i) to revised 
    Rule 13e-4 and Instruction 5 to paragraphs (c) and (d) of revised 
    Rule 14d-1.
    
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    2. Disclosure and Dissemination--Form CB
        We are adopting, as proposed, the requirement that a bidder or 
    issuer relying on the Tier I exemption submit any offering materials 
    prepared under foreign law to the Commission for notice purposes only, 
    under cover of Form CB.\21\
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        \21\ The subject company, or any officer, director or other 
    person who otherwise would have an obligation to file a Schedule 
    14D-9, may satisfy that obligation by submitting the recommendation 
    to the Commission on Form CB.
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        The requirement to submit a Form CB only applies if the tender 
    offer would have been subject to Regulation 14D or Rule 13e-4, but for 
    the Tier I exemption. If the tender offer would have been subject only 
    to section 14(e) and Regulation 14E, the offering document and any 
    recommendation do not need to be submitted to the Commission because 
    the current regulations do not require a filing in connection with 
    those offers.\22\ The materials submitted under cover of Form CB will 
    not be deemed filed with the Commission. Therefore, the person 
    submitting the materials will not be subject to the express liability 
    provisions of Section 18 of the Exchange Act.\23\
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        \22\ Financial statements submitted under cover of new Form CB 
    that comply with the accounting requirements of the filer's home 
    jurisdiction need not be reconciled to U.S. generally accepted 
    accounting principles, regardless of whether the Form CB is 
    submitted in connection with a Tier I exempt offer or under new Rule 
    801 or 802.
        \23\ 15 U.S.C. 78r.
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        Form CB must be received by the Commission no later than the next 
    business day after the publication or dissemination of the offering 
    circular or disclosure document being filed under cover of Form CB. 
    Thus, filing persons will have one extra day from the date the offering 
    circular or disclosure document is first published, sent or given to 
    security holders to submit the offering circular or disclosure document 
    to the Commission. If the bidder is a foreign company, it must also 
    file a Form F-X with the Commission at the same time as the submission 
    of the Form CB to appoint an agent for service in the United States. 
    Form F-X, which was adopted in 1991, has been modified to reflect its 
    use in connection with the submission of a Form CB.
        A number of commenters argued that Forms CB and F-X would be too 
    burdensome and would discourage offerors from relying on the 
    exemptions. We believe, however, that our interest in monitoring the 
    availability of the exemptions and ensuring that U.S. security holders 
    have access to these documents through their public availability and 
    meaningful recourse for fraudulent statements in the documents justify 
    the minimal burdens of preparing these forms. We will not require the 
    payment of a filing fee with the submission of a Form CB or the filing 
    of a Form F-X.
        We are adopting, as proposed, the requirement that offerors 
    disseminate any tender offer circular or other informational document 
    to U.S. security holders in English on a comparable basis to that 
    provided to security holders in the foreign subject company's home 
    jurisdiction. If the foreign subject company's home jurisdiction 
    permits dissemination solely by publication, the offeror likewise will 
    publish the offering materials simultaneously in the United States, 
    although it may in addition mail the materials directly to U.S. 
    holders. If the materials are disseminated by publication, the offeror 
    must publish the materials in a manner reasonably calculated to inform 
    U.S. investors of the offer.\24\
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        \24\ Cf. Exchange Act Rule 14d-4(b) [17 CFR 240.14d-4(b)].
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    3. Equal Treatment
        Offerors relying on the Tier I exemption must permit U.S. security 
    holders to participate in the offer on terms at least as favorable as 
    those offered to any other holders of the subject securities, subject 
    to certain exceptions for exchange offers, as discussed below. In 
    addition, equal treatment requires that the procedural terms of the 
    tender offer, that is, duration, pro rationing, and withdrawal rights, 
    must be the same for all security holders.\25\
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        \25\ The fact that a foreign security trades in the United 
    States in the form of an American Depositary Receipt (ADR), and the 
    ADR depositary requires holders to provide it with instructions to 
    tender into the offer a reasonable time before the close of the 
    offer, or imposes fees in connection with the tender, would not 
    contravene this condition.
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    a. Cash Alternative
        The proposals would have required as a condition to the Tier I 
    exemption that U.S. security holders be offered the same amount and 
    form of payment, including securities if offered elsewhere. We 
    solicited comments on whether the exemption should permit U.S. security 
    holders to be offered only cash, even if non-U.S. security holders are 
    offered consideration consisting at least partly of securities. 
    Commenters generally believed that we should permit cash-only 
    consideration to be paid to U.S. security holders to avoid the 
    exclusion of U.S. security holders from cross-border tender offers. We 
    agree. As adopted, U.S. holders may be offered only cash, but the 
    bidder must have a reasonable basis to believe that the cash is 
    substantially equivalent to the value of the securities and any cash or 
    other consideration offered to non-U.S. holders.\26\
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        \26\ Revised Rules 13e-4(h)(8)(ii)(C) and 14d-1(c)(iii). The 
    determination should be made at the commencement of the offer. The 
    amount of cash consideration must be adjusted during the term of the 
    offer only if the bidder no longer has a reasonable basis to believe 
    the cash is substantially equivalent to the value of the securities 
    offered to non-U.S. holders, for example, if the bidder increase the 
    offer price.
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        To assure that U.S. security holders receive substantially 
    equivalent value for their securities, if the offered security is not a 
    ``margin security'' within the meaning of Regulation T,\27\ the offeror 
    must provide upon the request of the Commission or a U.S. security 
    holder an opinion from an independent expert stating that the cash-only 
    consideration is substantially equivalent to the securities and any 
    cash offered outside the United States.\28\ If the offered security is 
    a ``margin security'' within the meaning of Regulation T, an opinion 
    would not be required.\29\ Instead, the offeror must undertake to 
    provide any U.S. holder or the Commission staff upon request 
    information on recent trading prices of the offeror's securities.
    ---------------------------------------------------------------------------
    
        \27\ (12 CFR 220.2). The definition of a ``margin security'' in 
    Regulation T, which is issued by the Board of Governors of the 
    Federal Reserve System pursuant to the Exchange Act, inlcudes 
    ``foreign margin stock.'' Foreign margin stock'' comprises both 
    securities on the Federal Reserve Board's List of Foreign Margin 
    Stocks and those deemed to have a ``ready market'' for net capital 
    purposes under Rule 15c3-1 (17 CFR 240.15c3-1) under the Exchange 
    Act. All stocks that appear on the Financial Times/Standard & Poor's 
    World Actuaries Indices (FR/S&P Indices) are effectively treated as 
    having a ``ready market'' for net capital purposes. See Securities 
    Credit Transactions; Borrowing by Brokers and Dealers, 63 FR 2806 
    (January 16, 1998) at II.B.2.
        \28\ The opinion would address only the relative values of the 
    cash and non-cash consideration offered to investors for the subject 
    securities. The opinion would not need to address the fairness of 
    either form of consideration in relation to the value of the subject 
    securities.
        \29\ We believe that securities that are ``margin securities'' 
    under Regulation T would be sufficiently liquid so that a U.S. 
    investor should be able to ascertain the market value of the offered 
    securities.
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        The American Bar Association objected to requiring a valuation 
    opinion because it would raise significantly the cost to issuers and 
    bidders and consequently discourage them from including U.S. security 
    holders in a tender offer.\30\ We believe, however, that an offeror 
    seeking to use this exception to avoid issuing securities to U.S. 
    holders would not find this requirement excessively burdensome, 
    particularly when the
    
    [[Page 61386]]
    
    opinion is required only when the offered security is not a ``margin 
    security'' within the meaning of Regulation T. On the other hand, an 
    independent opinion would provide reasonable assurance that U.S. 
    security holders are receiving equivalent value to that offered to non-
    U.S. holders.
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        \30\ See comment letter dated March 2, 1999, supra note 15.
    ---------------------------------------------------------------------------
    
        In many cases, foreign jurisdictions will not allow the bidder to 
    offer U.S. holders cash when that option is not provided in all other 
    jurisdictions. In addition, the bidder may not have sufficient cash to 
    fund such an offer. Some bidders have used a ``vendor placement,'' in 
    which U.S. holders agree to appoint an independent agent to receive the 
    securities offered in an exchange offer and sell them immediately into 
    an existing offshore trading market for those securities. The agent 
    would then remit the proceeds, minus expenses, to the U.S. holders. The 
    staff has granted no-action relief under the Securities Act 
    registration requirements and the equal treatment requirement of Rule 
    14d-10 to qualifying vendor placements.\31\ That procedure will 
    continue to be available under appropriate circumstances.
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        \31\ See the staff no-action letters TABCORP Holdings Limited 
    (Aug. 27, 1999), Durban Roodepoot Deep, Limited (Feb 23, 1999), and 
    AMP Limited  (Sept. 17, 1998).
    ---------------------------------------------------------------------------
    
    b. Blue Sky Exemption
        If the offeror has determined to offer securities to all U.S. 
    holders on the basis of the new Rule 802 exemption, the offeror may 
    exclude subject company security holders residing in any state that 
    does not provide an exemption from registration or qualification under 
    the state blue sky law. Similarly, if the offeror registers securities 
    under the Securities Act, the offeror may exclude subject company 
    security holders residing in any state that refuses to register or 
    qualify the offer and sale of securities in that state after a good 
    faith effort by the offeror.
        In both cases, however, the offeror must offer those security 
    holders cash consideration instead of excluding them, if it has offered 
    cash consideration to security holders in another state or in a 
    jurisdiction outside the United States. The offeror must offer the cash 
    consideration only if it is offering a cash-only alternative 
    consideration--not merely a partial cash/partial securities form of 
    consideration.
    c. Loan Notes
        Finally, we are adopting, as proposed, the exception to the equal 
    treatment requirement providing that the offeror does not need to offer 
    a ``loan note'' alternative to U.S. security holders. Loan notes, 
    common in the United Kingdom, are short-term notes that may be redeemed 
    in whole or in part for cash at par on any interest date in the future. 
    The purpose of the loan notes is the deferral of the recognition of 
    income and capital gains on the sale of securities under foreign tax 
    laws. Since this tax benefit is not available to U.S. security holders, 
    a bidder would not need to offer loan notes to U.S. security holders.
    4. Rule 13e-3 Exemption
        We are adopting, as proposed, the exemption from the Commission's 
    going private disclosure requirements under Rule 13e-3 for transactions 
    eligible for the Tier I exemption. Rule 13e-3 mandates the filing of a 
    Schedule 13E-3.
    Schedule 13E-3 requires disclosure about the fairness to unaffiliated 
    security holders of the transaction that may cause an equity security 
    to lose its public trading market. As we noted in the proposing 
    release, we believe this exemption is appropriate because it may not be 
    practical to impose Rule 13e-3 procedural, disclosure and filing 
    requirements when there are no other U.S. requirements, including 
    dissemination and disclosure requirements. Rule 13e-3 will continue to 
    apply to offers subject to the Tier II exemptions.
    5. Sections 13(d), 13(f) and 13(g)
        The rules adopted today would not affect the beneficial ownership 
    reporting requirements of Sections 13(d), 13(f) and 13(g) of the 
    Exchange Act.\32\ We solicited comment on whether those provisions 
    should apply to non-U.S. persons owning securities in foreign private 
    issuers. We also solicited comment on whether these rules should apply 
    only if U.S. ownership exceeded a certain percentage. Two commenters 
    believed that these rules should not apply where the security holder 
    bought the shares of a foreign private issuer on a foreign market. 
    These commenters pointed to evidence of uneven compliance with those 
    requirements in that situation as evidence that the scope of the 
    Exchange Act's beneficial ownership disclosure requirements are not 
    widely understood outside the United States. The American Bar 
    Association, on the other hand, submitted a comment letter that urged 
    that the beneficial ownership reporting requirements continue to apply. 
    The ABA did not believe that the application of these requirements to 
    offshore purchases of foreign securities presents a serious compliance 
    problem or that the current approach is an impediment to cross-border 
    transactions.\33\
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        \32\ 15 U.S.C. 78m(d), 78m(g), and 78m(f).
        \33\ Supra note 30.
    ---------------------------------------------------------------------------
    
        We believe that the need for disclosure of the ownership and 
    control of reporting companies trading in our markets, domestic and 
    foreign, justifies any burdens related to filing reports under those 
    rules.
    
    B. The Tier II Exemption
    
        Commenters generally supported the proposed scope and conditions of 
    the Tier II exemption, under which offerors would be entitled to 
    limited relief from the U.S. tender offer rules to minimize conflicts 
    with foreign regulatory schemes. This relief will be available for both 
    issuer and third party tender offers when the subject company is a 
    foreign private issuer and U.S. ownership is no greater than 40 
    percent. The offeror must comply with the remaining tender offer 
    provisions, including the procedural, disclosure, and filing 
    requirements of the Williams Act. Because the offeror would file a 
    Schedule TO,\34\ a Form CB or F-X is not required. We are adopting the 
    Tier II exemption with some modifications from the 1998 proposals, 
    because some of the relief contained in the 1998 proposals is no longer 
    necessary due to the amendments adopted today in the Regulation M-A 
    Release.
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        \34\ Schedules 13E-4 and 14D-1, the schedules previously used 
    for issuer and third-party tender offers, respectively, have been 
    combined into new Schedule TO in the Regulation M-A Release, supra 
    note 6.
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        First, as with Tier I, in order to provide a level playing field in 
    the case of competing offers, if the initial offeror relies on the Tier 
    II exemption to make a tender offer, a subsequent competing bidder 
    would not be subject to the 40 percent ownership limitation condition 
    of the Tier II exemption.
        Second, the proposal that a cross-border tender offer would 
    commence only upon mailing or publishing the offer rather than upon 
    announcement is no longer necessary. In the Regulation M-A Release, we 
    have repealed the requirement that a cash tender offer commence or be 
    withdrawn within five business days of announcement. Instead, an offer 
    commences once the bidder disseminates transmittal forms or discloses 
    instructions on how to tender into an offer.\35\ Only then is the 
    bidder required to file the Schedule TO. Therefore, separate relief for 
    foreign offers is not necessary.
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        \35\ Revised Rule 14d-2.
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        Third, the proposal that a bidder could terminate withdrawal rights 
    in a cross-border tender offer once all
    
    [[Page 61387]]
    
    conditions were satisfied and keep the offer open for acceptances only 
    is also not necessary. The Regulation M-A Release adopted a similar 
    proposal to allow third-party bidders to provide at their election for 
    a ``subsequent offering period'' without withdrawal rights and made it 
    applicable to both domestic and foreign transactions.\36\ Regulation M-
    A provides, in part, that bidders that include a subsequent offering 
    period must promptly pay for tendered securities and announce the 
    approximate number and percentage of outstanding securities that were 
    deposited by the close of the initial offering period no later than 
    9:00 a.m. Eastern time on the next business day after the scheduled 
    expiration date of the initial offering period and immediately begin 
    the subsequent offering period. We have clarified that bidders relying 
    on the Tier II exemption will satisfy the foregoing requirements if the 
    bidder pays for tendered securities and makes the announcement in 
    accordance with the law or practice of the bidder's home jurisdiction 
    and the subsequent offering period commences immediately following such 
    announcement.\37\ The bidder would not have to extend withdrawal rights 
    during the period between the close of the offer and the commencement 
    of the subsequent offering period. Otherwise, separate relief for 
    foreign offers is not necessary.
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        \36\ The text of new Rule 14d-11 is contained in the Regulation 
    M-A Release, supra note 6.
        \37\ Revised Rule 14d-1(d)(2)(v).
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        We are adopting the Tier II provisions relating to the All-Holders/
    Best Price provisions,\38\ notice of extensions,\39\ prompt 
    payment,\40\ and the interpretation regarding a waiver or reduction of 
    minimum conditions as proposed. Under our interpretation on changes to 
    the minimum condition, we will not object if bidders meeting the 
    requirements for the Tier II exemption reduce or waive the minimum 
    acceptance condition without extending withdrawal rights during the 
    remainder of the offer (unless an extension is required by Rule 14e-1), 
    if the following conditions are met:
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        \38\ Revised Rules 13e-4(i)(2)(i), 13e-4(i)(2)(ii), 14d-
    1(d)(2)(i), and 14d-1(d)(2)(ii). A bidder may make one offer to U.S. 
    holders and another only to non-U.S. holders if the offer to U.S. 
    holders is made on terms at least as favorable as those offered any 
    other holder of the same class of securities that is the subject of 
    the tender offers. A bidder may also offer loan notes solely to non-
    U.S. holders.
        The exception to the equal treatment condition of the Tier I 
    exemption for cash only consideration adopted today would not apply 
    to Tier II offers. The staff will continue to consider requests for 
    that type of relief on a case-by-case basis. See Amendments to 
    Tender Offer Rules: All-Holders and Best-Price, Exchange Act Release 
    No. 23421 (July 7, 1986), [51 FR 25973] at Section III.B.3. 
    Likewise, vendor placement arrangements will be considered on a 
    case-by-case basis.
        \39\ Revised Rules 13e-4(i)(2)(iii) and 14d-1(d)(2)(iii) (Notice 
    of extensions may be made in accordance with the requirements of the 
    home jurisdiction law or practice).
        \40\ Revised Rules 13e-4(i)( 2)(iv) and 14d-1(d)(2)(iv) (Payment 
    made in accordance with the requirements of the home jurisdiction 
    law or practice will satisfy the prompt payment requirements of Rule 
    14e-1(c)).
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         The bidder must announce that it may reduce the minimum 
    condition five business days prior to the time that it reduces the 
    condition. A statement at the commencement of the offer that the 
    bidder may reduce the minimum condition is insufficient;
         The bidder must disseminate this announcement through a 
    press release and other methods reasonably designed to inform U.S. 
    security holders, which could include placing an advertisement in a 
    newspaper of national circulation in the United States;
         The press release must state the exact percentage to 
    which the acceptance condition may be reduced and state that a 
    reduction is possible. The bidder must declare its actual intentions 
    once it is required to do so under the regulations of the home 
    jurisdiction;
         During this five-day period, security holders who have 
    tendered their shares in the offer will have withdrawal rights;
         This announcement must contain language advising 
    security holders to withdraw their tenders immediately if their 
    willingness to tender into the offer would be affected by a 
    reduction of the minimum acceptance condition;
         The procedure for reducing the minimum condition must 
    be described in the offering document; and
         The bidder must hold the offer open for acceptances for 
    at least five business days after the revision or waiver of the 
    minimum acceptance condition.
    
        Apparently because the Tier II proposals were codifications of 
    exemptive and interpretive positions that we currently apply in cross-
    border acquisitions, they did not result in significant comment. To the 
    extent that an offeror needs additional relief from that provided in 
    Tier II, the staff, pursuant to delegated authority, will consider 
    applications for exemptions on a case-by-case basis.\41\
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        \41\ The offeror would need to submit a written application 
    requesting relief, along with a discussion of the basis for the 
    request. If the request relates to an issuer tender offer, the 
    request should be directed to the Office of Risk Management and 
    Control in the Commission's Division of Market Regulation and the 
    Office of Mergers and Acquisitions in the Commission's Division of 
    Corporation Finance. If the request relates to a third party tender 
    offer, the request should be directed to the Office of Mergers and 
    Acquisitions.
        The application must comply with the requirements of Rule 0-12 
    under the Exchange Act. When U.S. ownership is greater than 40 
    percent, the staff will consider relief on a case-by-case basis only 
    when there is a direct conflict between the U.S. laws and practice 
    and those of the home jurisdiction. Any relief would be limited to 
    what is necessary to accommodate conflicts between the regulatory 
    schemes and practices.
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    C. Other Rules Governing Tender Offers
    
    1. Rule 14e-5 (Former Rule 10b-13)
        We are adopting two new exceptions to new Rule 14e-5. In the 
    proposing release, we proposed to amend then Rule 10b-13 under the 
    Exchange Act to facilitate the inclusion of U.S. security holders in 
    tender offers for foreign securities by adding two exceptions for 
    cross-border offers.\42\ We are adopting both of the proposed 
    exceptions, the exception for Tier I offers and the exception to permit 
    ``connected exempt market makers'' and ``connected exempt principal 
    traders,'' as defined by the U.K. City Code on Takeovers and Mergers 
    (City Code),\43\ to continue their U.K. market making activities during 
    cross-border offers that are subject to the City Code.
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        \42\ After a comprehensive review of Rule 10b-13, including its 
    application in the context of offers for U.S. issuers, we revised 
    Rule 10b-13 and redesignated it as new Rule 14e-5. The text of the 
    new rule is found in the Regulation M-A Release, supra note 6.
        \43\ The City Code on Takeovers and Mergers and the Rules 
    Governing Substantial Acquisition of Shares (Fifth Edition, Dec. 12, 
    1996). The City Code states general principles for the regulation of 
    takeovers conducted in the United Kingdom and the Republic of 
    Ireland.
    ---------------------------------------------------------------------------
    
        Rule 14e-5 prohibits, in connection with a tender offer for equity 
    securities, a covered person from purchasing or arranging to purchase 
    any subject securities or any related securities except as part of the 
    tender offer. The rule protects investors by preventing an offeror from 
    extending greater or different consideration to some security holders 
    by offering to purchase their shares outside the offer, while other 
    security holders are limited to the offer's terms. The rule applies to: 
    The offeror and its affiliates; the offeror's dealer-manager and its 
    affiliates; any advisor to the offeror, dealer-manager or their 
    affiliates, whose compensation is dependent on the completion of the 
    offer; and any person acting, directly or indirectly, in concert with 
    any of the other covered persons in connection with any purchase or 
    arrangement to purchase any subject securities or any related 
    securities.
        Many foreign jurisdictions do not expressly prohibit an offeror 
    from purchasing or arranging to purchase the subject security outside 
    the terms of the offer. As noted in the proposing release, a strict 
    application of Rule 14e-5 in some cases could disadvantage U.S. 
    security holders where the offeror decides not to extend the offer in 
    the United States because of the rule's restrictions. In that 
    circumstance,
    
    [[Page 61388]]
    
    flexible application of Rule 14e-5 is necessary and appropriate to 
    encourage offerors for the securities of foreign private issuers to 
    extend their offers to U.S. security holders. We believe the two 
    exceptions we are adopting strike the proper balance between the 
    investor protection goals of Rule 14e-5 and the interests of U.S. 
    investors in being included in tender offers.
    a. Tier I Offers
        We are adopting, substantially as proposed, an exception for 
    purchases or arrangements to purchase made outside, but during the time 
    of, a Tier I tender offer. For tender offers that are substantially 
    foreign in character, such as Tier I offers, we suggested in the 
    proposing release that allowing U.S. security holders to participate in 
    these offers outweighs the benefits derived from applying Rule 14e-5 to 
    such offers. Commenters agreed with this evaluation.
        This exception is based primarily on a number of exemptions from 
    Rule 10b-13 to accommodate cross-border tender offers. This limited 
    exception for Tier I tender offers largely represents a codification of 
    the conditions contained in the exemptions previously granted by the 
    Commission. The exception, however, being limited to Tier I offers, 
    only extends to offers where U.S. persons hold of record 10 percent or 
    less of the class of securities sought in the offer.
        The exception requires that: The tender offer is an excepted Tier I 
    offer; \44\ the offering documents furnished to U.S. holders 
    prominently disclose the possibility of any purchases, or arrangements 
    to purchase, or the intent to make such purchases; the offering 
    documents disclose the manner in which any information about any such 
    purchases or arrangements to purchase will be disclosed; the offeror 
    discloses information in the United States about any such purchases or 
    arrangements to purchase in a manner comparable to the disclosure made 
    in the home jurisdiction, as defined in Sec. 240.13e-4(i)(3); and the 
    purchases comply with the applicable tender offer laws and regulations 
    of the home jurisdiction. Although not proposed, we are including a 
    requirement that the offering documents disclose the manner in which 
    any information about any such purchases or arrangements to purchase 
    will be disclosed. This additional requirement ensures that security 
    holders will know how to obtain the information that this exception 
    requires to be disclosed.
    ---------------------------------------------------------------------------
    
        \44\ Excepted by either revised Rule 13e-4(h)(8) or revised Rule 
    14d-1(c).
    ---------------------------------------------------------------------------
    
        Consistent with the proposed rule, we are not limiting the 
    exception to purchases that are made outside the United States. Under 
    the new exception for Tier I offers, offerors may purchase subject 
    securities, subject to the conditions noted above, in transactions in 
    the United States that otherwise would be prohibited under Rule 14e-
    5.\45\ Under the requirement that the offeror disclose information in 
    the United States about any such purchases or arrangements to purchase 
    in a manner comparable to the disclosure made in the home jurisdiction, 
    we expect that such disclosure will be provided in English.
    ---------------------------------------------------------------------------
    
        \45\ Of course, broker-dealers that solicit tenders from U.S. 
    persons would be required to register as broker-dealers under 
    Section 15 of the Exchange Act (15 U.S.C. 78o), absent an available 
    exemption.
    ---------------------------------------------------------------------------
    
        We did not propose, and we are not adopting, an exception to Rule 
    14e-5 for Tier II offers because of the greater U.S. interest in those 
    offers. Despite comments to the contrary, we believe that we should 
    continue to review requests for relief from Rule 14e-5 for offers other 
    than Tier I eligible offers on a case-by-case basis. In that context, 
    we will consider factors such as proportional ownership of U.S. 
    security holders of the subject security in relation to the total 
    number of shares outstanding and to the public float; whether the offer 
    will be for ``any-and-all'' shares or will involve prorationing; 
    whether the offered consideration will be cash or securities; whether 
    the offer will be subject to a foreign jurisdiction's laws, rules, or 
    principles governing the conduct of tender offers that provide 
    protections comparable to Rule 14e-5; and whether the principal trading 
    market for the subject security is outside the United States.\46\
    ---------------------------------------------------------------------------
    
        \46\ As noted in the proposing release, this approach would 
    comport with the Commission's action in a recent cross-border offer 
    involving a U.K. target company with substantial U.S. ownership. See 
    proposing release, supra note 8, at n. 92 and accompanying text.
    ---------------------------------------------------------------------------
    
        In our view, this exception will simplify the procedural 
    requirements for foreign tender offers and further promote the 
    extension of such offers to U.S. security holders, without compromising 
    the investor protections of the rule.
    b. Market Making by ``Connected Exempt Market Makers'' and ``Connected 
    Exempt Principal Traders''
        We are adopting the exception for ``connected exempt market 
    makers'' and ``connected exempt principal traders'' \47\ as proposed. 
    Based upon our experience with U.K. regulatory requirements for tender 
    offers, we recognize that there is sufficient regulatory oversight of 
    purchases by connected exempt market makers and connected exempt 
    principal traders in the United Kingdom to permit them an exception. 
    Commenters supported this exception.
    ---------------------------------------------------------------------------
    
        \47\ Under the City Code, connected exempt market makers and 
    connected exempt principal traders are market makers or principal 
    traders that are affiliated with the bidder's advisors (Eligible 
    Traders).
    ---------------------------------------------------------------------------
    
        The exception permits purchases or arrangements to purchase if: The 
    purchase or arrangement to purchase is effected by a connected exempt 
    market maker or a connected exempt principal trader, as those terms are 
    used in the City Code; the issuer of the subject security is a foreign 
    private issuer; the tender offer is subject to the City Code; the 
    connected exempt market maker or the connected exempt principal trader 
    complies with the applicable provisions of the City Code; and the 
    tender offer documents disclose the identity of the connected exempt 
    market maker or the connected exempt principal trader and disclose, or 
    describe how U.S. security holders can obtain information regarding 
    market making or principal purchases by such market maker or principal 
    trader to the extent that this information is required to be made 
    public in the United Kingdom.\48\
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        \48\ This exception is based on a limited class exemption under 
    Rule 10b-13 to permit ``connected exempt market makers'' and 
    ``connected exempt principal traders'' to continue their U.K. market 
    making activities during a cross-border offer that is subject to the 
    City Code. See Exemption under Rule 10b-13 for Certain Principal 
    Trading and Market Making Activities dated June 29, 1998 (Eligible 
    Trader Class Exemption). Without Rule 10b-13 relief, Eligible 
    Traders would have been forced to withdraw from trading in U.K. 
    target securities, with possible adverse consequences for the 
    liquidity of those securities. This limited class exemption 
    recognized the information barrier and other requirements contained 
    in the City Code that Eligible Traders must satisfy to be exempt 
    from the City Code's ``acting in concert'' provisions. This 
    exemption required the Eligible Trader to comply with specified 
    disclosure and recordkeeping requirements, and the Eligible Trader 
    is prohibited from making purchases in the United States, which are 
    consistent with conditions contained in other Rule 10b-13 exemptions 
    granted in the cross-border context.
    ---------------------------------------------------------------------------
    
        As was proposed, this exception is not limited to Tier I tender 
    offers. The exception applies to offerors or anyone acting on behalf of 
    offerors (such as advisors and other nominees or brokers).
    2. Regulation M
        We are not changing Regulation M in this release. We did not 
    propose any changes to Regulation M for cross-border exchange offers, 
    whether qualifying for the registration exemption under Rule 802 or the 
    Tier I or Tier II exceptions from the U.S. tender offer
    
    [[Page 61389]]
    
    provisions, or for cross-border rights offerings qualifying for the 
    registration exception under proposed Rule 801. In the proposing 
    release, we asked whether exemptions from various rules under 
    Regulation M are necessary to accommodate cross-border rights offerings 
    or exchange offers conducted pursuant to Rules 801 or 802. Several 
    commenters thought that an exception from Regulation M is appropriate 
    in such instances.
        We still are uncertain whether such changes are necessary despite 
    the comments because there continues to be a lack of requests for 
    relief in these contexts. We still believe we should evaluate the need 
    for exemptions from Regulation M after we gain experience with the 
    Regulation's operation in the context of those offerings. We will, 
    however, carefully consider commenters' suggestions for an exception 
    from Regulation M, and determine if we should propose such an 
    exception.
    
    D. Exemption From the Securities Act for Exchange Offers, Business 
    Combinations, and Rights Offerings
    
    1. Summary
        The rules adopted today also provide exemptions from Securities Act 
    registration requirements for securities issued to U.S. security 
    holders of a foreign private issuer in exchange offers, business 
    combinations, and rights offerings. These exemptions are being adopted 
    as Rule 801 for rights offerings and Rule 802 for business combinations 
    and exchange offers. Rule 800 provides common definitions for both 
    rules. The exemptions are available only if the subject company (or the 
    issuer in an issuer tender offer or rights offering) is a foreign 
    private issuer and U.S. security holders hold no more than 10 percent 
    of the subject securities.\49\
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        \49\ As we stated in the proposing release, the exemptions 
    adopted today under new Rules 801 and 802 are non-exclusive. An 
    issuer making an offering in reliance on either of the rules may 
    claim any other available exemption under the Securities Act. 
    Securities issued under new Rules 801 or 802 would not be integrated 
    with any other exempt offerings by the issuer. General Notes 5-7 to 
    new Rules 800, 801, and 802.
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        The exemptions are not available for any transaction or series of 
    transactions that technically complies with the exemptions but is part 
    of a plan or scheme to evade the registration provisions of the 
    Securities Act.\50\ For example, if the exchange offer or rights 
    offering is a sham conducted solely as a pretext for distributing 
    securities in the United States, the exemptions would not be 
    available.\51\
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        \50\ See General Note 2 to new Rules 800, 801, and 802.
        \51\ Therefore, a foreign company could not, for example, 
    conduct a rights offering under Rule 801 that is targeted at the 
    U.S. holders. If the offeror does not have a bona fide expectation 
    that non-U.S. holders would participate in the offering to a similar 
    extent as U.S. holders, the pro rata nature of the offering would be 
    a sham. Another example would be when an initial offer is commenced 
    solely as a pretext for making a subsequent offer automatically 
    eligible for the exemptions.
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    2. Eligibility Conditions
    a. U.S. Ownership Limitation
        As adopted, exchange offers, business combinations, and rights 
    offerings will be exempt from registration under the Securities Act if 
    U.S. security holders own 10 percent or less of the foreign private 
    issuer's securities that are the subject of the offer. Based on the 
    suggestions of commenters, we have increased the U.S. ownership limit 
    from five to 10 percent. When U.S. security holders own 10 percent or 
    less of the issuer, U.S. participation is generally not necessary for 
    the success of the offering. Therefore, it is quite common for offerors 
    to exclude U.S. security holders below this level.\52\ Commenters 
    unanimously indicated that an increase was necessary to facilitate 
    including U.S. persons in these transactions. Commenters' suggestions 
    ranged from 10 to 30 percent.
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        \52\ See note 8, supra.
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        We do not believe it is necessary to increase the level above 10 
    percent for exchange offers. It is common for offerors to include U.S. 
    security holders above that level, since they are usually necessary for 
    the success of the offer.\53\ Because a rights offering may be used as 
    a financing device, we considered keeping the threshold for rights 
    offerings at five percent. However, exclusion of U.S. holders in rights 
    offerings is common even with much higher U.S. ownership levels.\54\ 
    U.S. participation is rarely viewed as necessary for the success of the 
    offer, since from an issuer's viewpoint, the fewer shares sold to 
    existing security holders at a discount, the better. For that reason, 
    the goal of facilitating U.S. participation in foreign rights offerings 
    would be significantly undermined by the proposed lower U.S. ownership 
    ceiling of five percent. This is particularly true in light of our 
    decision to modify the method for calculation of U.S. holdings to make 
    the test reflect U.S. beneficial, rather than merely record, ownership. 
    However, we do not believe that the ownership threshold should be 
    increased above 10 percent for rights offerings because it is our view 
    that the benefits obtained by providing U.S. security holders with the 
    protections of the Securities Act at ownership levels above 10 percent 
    outweigh the benefits that would be obtained by raising the ownership 
    threshold in order to provide incentives for foreign private issuers to 
    include U.S. security holders above the 10 percent level.
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        \53\ Although comprehensive statistics on transactions that 
    exclude U.S. investors is not available, a significant number of 
    transactions with greater than 10 percent U.S. ownership are 
    extended to U.S. holders. For example, U.S. holders owned more than 
    ten percent of the subject class of securities in 31 of the 54 
    requests for exemptive relief received by the Commission between 
    1990 and 1998.
        \54\ Between 1994 and 1998, 78 rights offerings were made to 
    U.S. shareholders holding American or Global depositary receipts 
    held by the Bank of New York. In 30 of the rights offerings (39%), 
    U.S. shareholders were excluded entirely. In the remaining 48 
    offerings (61%), the Bank of New York sold the rights and provided 
    shareholders with the cash, after costs. A significant number of 
    these offerings had U.S. holders who held more than five percent of 
    the securities at issue. See the letter from Emmet, Marvin & Martin, 
    LLP dated February 17, 1999, supra note 15. Costs borne by U.S. 
    shareholders in these cases include transaction fees, ADR cash 
    distribution or issuance fees, and potential liquidity costs if the 
    foreign market is small.
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        Some commenters suggested that we adopt an exemption from both the 
    Securities Act and tender offer provisions if the subject company has 
    less than 300 U.S. holders, regardless of the percentage of the foreign 
    private issuer's securities owned by those investors. We do not believe 
    that it is necessary or appropriate to exempt an offering of securities 
    to up to 300 U.S. investors from the Securities Act registration 
    requirements, in what may be a predominantly U.S. transaction, based 
    solely on the foreign status of the subject company. U.S. investors in 
    cross-border exchange offers should be provided with the protections of 
    Securities Act registration, unless application of those provisions 
    likely would result in the exclusion of U.S. holders from the 
    transaction. Where U.S. participation is not incidental to the 
    transaction, those requirements should continue to apply. With respect 
    to the tender offer provisions, offers involving less than 300 U.S. 
    holders are likely to be subject only to Regulation 14E, not the filing 
    and procedural requirements of Regulation 14D, and thus will not need 
    exemptive relief beyond that adopted today.
        As with the tender offer exemptions, in order to provide a level 
    playing field in the case of competing offers, the rules adopted today 
    provide that if a bidder commences a tender offer or a business 
    combination during an ongoing tender offer or business combination made
    
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    pursuant to Rule 802 for securities of the same class subject to its 
    offer, the second bidder will be eligible to use Rule 802 so long as 
    all the conditions of the exemption, other than the limitation on U.S. 
    ownership, are satisfied. Thus if the initial bidder relies on the Rule 
    802 exemption to make a tender offer, a subsequent competing bidder 
    would not be subject to the 10 percent ownership limitation condition 
    of the Rule 802 exemption. We do not believe it appropriate to provide, 
    however, that if the initial bidder relied on the Tier I exemption but 
    did not also rely on the Rule 802 exemption, a subsequent competing 
    bidder may use the Rule 802 exemption without regard to the ownership 
    limitation condition. As a policy matter, when relief is not necessary 
    to ensure that competing offers are subject to the same regulatory 
    requirements, we believe it is more important to limit relief from the 
    Securities Act registration requirements to situations where it can be 
    verified that U.S. security holders own 10 percent or less of the 
    subject class of securities.\55\
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        \55\ In this situation, the subsequent bidder commencing an 
    exchange offer or business combination will be entitled to calculate 
    the percentage of U.S. ownership 30 days before commencement of its 
    offer. See Section II.F.1. infra. Assuming that the subsequent offer 
    is commenced within 30 days of the announcement of the initial Tier 
    I offer, the subsequent bidder would not be disadvantaged by any 
    movement of securities into the United States following that 
    announcement when calculating the percentage of U.S. ownership of 
    the subject securities for purposes of eligibility under new Rule 
    802.
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    b. Equal Treatment
        The terms and conditions of the offer must be at least as favorable 
    for U.S. security holders as foreign holders. Rules 801 and 802 provide 
    exceptions to the equal treatment requirement similar to the Tier I 
    exemption with respect to state blue-sky requirements.
    c. Transfer Restrictions
        The new exemptions restrict the transferability of the securities 
    acquired in an exempt transaction. To the extent that the subject 
    securities are ``restricted securities'' under Rule 144 in the hands of 
    a U.S. investor prior to the Rule 801 or 802 transaction, securities 
    acquired by that investor in the Rule 801 or 802 transaction will be 
    ``restricted securities.'' \56\ Conversely, if the securities that are 
    the subject of the transaction made pursuant to Rule 801 or 802 are 
    unrestricted, then securities acquired in the transaction will be 
    unrestricted. In the latter case, the securities would be freely 
    tradable by non-affiliate security holders, so long as they are not 
    participating in the offer under circumstances in which they could be 
    deemed statutory underwriters.\57\
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        \56\ See General Note 8 to new Rules 800-802. Under Securities 
    Act Rule 144(d), the holding period for the restricted securities 
    issued in the Rule 801 or 802 transaction will depend on the nature 
    of the transaction. Investors in issuer exchange offers not 
    involving an additional cash investment will be able to ``tack'' the 
    holding period for the tendered restricted security to the holding 
    period for the new security, and thus would calculate the holding 
    period from the time it originally acquired the tendered security 
    from the issuer or an affiliate. The holding periods for restricted 
    securities received in a rights offering or third-party exchange 
    offer, however, would begin with the issuance of those securities in 
    the Rule 801 or 802 transaction.
        \57\ See Section 2(a)(11) of the Securities Act, 15 U.S.C. 
    77b(11).
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        In the case of a rights offering under Rule 801, the proportion of 
    restricted to unrestricted securities will be determined as of the 
    record date that determines the allocation of rights among security 
    holders. In the case of an exchange offer or business combination, the 
    proportion will be based upon the securities tendered or exchanged by 
    the holders.
        We proposed this approach for transfer restrictions only with 
    respect to Rule 802 for exchange offers. In contrast, the Rule 801 
    exemption for rights offerings proposed in 1998 would have required 
    that all securities purchased upon the exercise of the rights be 
    restricted within the meaning of Rule 144. We are persuaded by the 
    large number of commenters who argued that it was not necessary to 
    require unaffiliated U.S. security holders to accept restricted 
    securities in rights offerings where they currently hold unrestricted 
    securities. However, we think it is appropriate to require that 
    security holders receive restricted securities in the transaction if 
    they held restricted securities before the transaction. Otherwise, a 
    rights offering or exchange offer could be used as a pretext for 
    creating a large pool of freely tradable securities in the hands of 
    investors who previously held only restricted securities. This 
    restriction, along with the requirement that the offer be made to all 
    holders on a pro rata basis, and that U.S. ownership in the subject 
    company's securities be limited to 10 percent, should minimize the 
    potential that Rules 801 and 802 will be misused as a means to conduct 
    illegal distributions in the United States. Moreover, securities issued 
    in a rights offering or exchange offer to affiliates of the issuer 
    would not be freely tradable.\58\
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        \58\ Under Rule 144(e)(1) (17 CFR 230.144(e)(1)), affiliates of 
    the issuer are subject to volume restrictions on the resale of their 
    securities.
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    d. Additional Requirements for Rights Offerings
        Rule 801, as adopted today, is available only for rights offerings 
    of equity securities made on a pro rata basis to existing security 
    holders of the same class, including holders of ADRs evidencing those 
    securities. Under Rule 800, the term ``equity security'' does not 
    include convertible securities, warrants, rights, or options.\59\  Rule 
    801 is limited to the offer of securities of the same class of 
    securities as those held by the offerees, because the offerees already 
    have made the decision to invest in that class.
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        \59\ New Rule 800(b).
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        Rule 801 requires that the rights granted to U.S. security holders 
    not be transferable except offshore in accordance with Regulation 
    S.\60\ Certain commenters believed that restricting the transferability 
    of the rights would put U.S. security holders at a disadvantage to non-
    U.S. security holders who could transfer the rights. However, we 
    believe this restriction is appropriate to assure that foreign private 
    issuers do not extend the offerings to new investors in the United 
    States and that a market not develop in the United States for the 
    rights without adequate disclosure regarding the issuer.
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        \60\ 17 CFR 230.901 through 230.905.
    ---------------------------------------------------------------------------
    
    e. Offeror Eligibility Requirements
        As adopted, Rule 801 requires that the offeror be a foreign private 
    issuer. It does not impose any other offeror eligibility requirements. 
    Where U.S. participation is only incidental to the offering, no other 
    offeror eligibility criteria are necessary. Investors are already 
    familiar with the issuer and the security. The commenters concurred 
    that imposition of additional criteria would only diminish the 
    effectiveness of the exemption by narrowing its scope and causing U.S. 
    security holders to continue to be excluded.
        As adopted, Rule 802 does not contain any limitations based on the 
    domicile or reporting status of the offeror. Any offeror can use Rule 
    802 regardless of whether it is a U.S. company or a foreign private 
    issuer and regardless of whether it is a reporting company. The subject 
    company, however, must be a foreign private issuer. Requiring a U.S. 
    bidder for the securities of a foreign subject company to register the 
    U.S. portion of an exchange offer would place the U.S. bidder, 
    particularly a non-reporting U.S. company, at a competitive 
    disadvantage to a foreign bidder for the same company. In the case of a 
    business combination where there is no surviving
    
    [[Page 61391]]
    
    acquiror and the issuer is the successor company to all participating 
    companies, all participants in the business combination must be foreign 
    private issuers.
        Finally, neither Rule 801 nor 802 impose a dollar limitation on the 
    value of securities that may be sold to U.S. investors in an exempt 
    transaction. The American Bar Association commented that a dollar 
    limitation appears to be too arbitrary given the different sizes of 
    companies and the fluctuating market value of securities being 
    offered.\61\ We agree.
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        \61\ Supra note 30.
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    f. Informational Requirements
        Rules 801 and 802 do not mandate that specific information be sent 
    to U.S. security holders. Instead, when any document, notice or other 
    information is provided to offerees, copies (translated into English) 
    must be provided to U.S. security holders in a similar manner. The 
    documents must include a legend regarding the foreign nature of the 
    transaction and the issuer's disclosure practices. The legend also must 
    state that investors may have difficulty in enforcing rights against 
    the issuer and its officers and directors. Some commenters noted that 
    imposing a requirement for a legend on the cover page was unnecessarily 
    burdensome and could discourage offerors from extending offers to U.S. 
    security holders.\62\ To address these concerns, the legend need not be 
    placed on the cover page; rather, it need only be placed in a prominent 
    position in the document.
    ---------------------------------------------------------------------------
    
        \62\ See letter from Sullivan & Cromwell dated February 12, 
    1999, supra note 15 and the letter from the American Bar Association 
    dated March 2, 1999, supra note 30.
    ---------------------------------------------------------------------------
    
        Rules 801 and 802 both require that the offeror provide the notice 
    or offering document to U.S. security holders in English at the same 
    time it provides the information to offshore offerees. We proposed that 
    offerors be required to deliver rights offering materials to U.S. 
    investors, even if those materials were only published overseas. In 
    contrast, exchange offer materials would not be required to be 
    delivered if not delivered in the home jurisdiction. We are persuaded 
    by those commenters who indicated that offerors will not be inclined to 
    avail themselves of Rules 801 or 802 if burdensome documentation and 
    dissemination requirements are imposed by the U.S. rules and who were 
    of the view that U.S. security holders should be provided with 
    information on the same basis as that provided to offerees in other 
    jurisdictions. As noted above, exclusion of U.S. holders in rights 
    offerings is common even at high U.S. ownership levels. U.S. 
    participation is rarely viewed as necessary for the success of the 
    offer, and U.S. investors may thereby be deprived of the opportunity to 
    acquire shares at attractive prices, resulting in their positions being 
    diluted. Requiring the offeror to mail rights offering materials to 
    U.S. security holders might create an additional incentive for offerors 
    to exclude U.S. security holders from participating in the rights 
    offering. In order to encourage foreign private issuers to include U.S. 
    security holders in rights offerings, the rules adopted today provide 
    that for both rights offerings and exchange offers, the offeror must 
    disseminate any informational documents to U.S. holders, in English, on 
    at least a comparable basis to that provided to security holders in the 
    offeror's home jurisdiction. If the offeror disseminates by publication 
    in its home jurisdiction, the offeror must publish the information in 
    the United States in a manner reasonably calculated to inform U.S. 
    holders of the offer. Of course, the offeror may mail to U.S. security 
    holders in any event.
        We are adopting, as proposed, the requirement that an offeror 
    submit a notification to the Commission on new Form CB. A foreign 
    company also must file a Form F-X at the same time it submits the Form 
    CB to appoint an agent for service of process in the United States. The 
    new form will include as an attachment a copy of any document, notice 
    or other information disseminated to U.S. offerees.
    g. Trust Indenture Act Exemption
        We are adopting, as proposed, a new rule under section 304(d) of 
    the Trust Indenture Act that would exempt any debt security issued 
    pursuant to Rule 802 under the Securities Act from having to comply 
    with the provisions of the Trust Indenture Act. Therefore, the rules 
    adopted today will permit offerors to offer debt securities in an 
    exchange offer or business combination without complying with the 
    provisions of the Trust Indenture Act. As one commenter noted, a 
    failure to provide relief under the Trust Indenture Act would 
    essentially undermine the usefulness of the other relief in the case of 
    debt securities.\63\ Accordingly, we believe that the benefits to be 
    obtained by U.S. investors by providing exemptions under the Trust 
    Indenture Act when debt securities are issued pursuant to a Rule 802 
    exemption justify not providing U.S. investors with the protections of 
    the Trust Indenture Act in these types of transactions.
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        \63\ Id.
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    E. Investment Companies
    
        As proposed, Rules 801 and 802 would not have been available for 
    securities issued by an investment company, whether foreign or 
    domestic, that is registered or required to be registered under the 
    Investment Company Act. The proposal excluded foreign investment 
    companies from these exemptions because the Investment Company Act 
    generally prohibits foreign investment companies from publicly offering 
    their securities in the United States or to U.S. persons.\64\ Domestic 
    investment companies were excluded because, unlike other issuers, 
    investment companies that are registered or required to be registered 
    under the Investment Company Act generally must register the securities 
    that they offer or sell outside the United States.\65\ The proposing 
    release noted, however, that a closed-end investment company that is 
    registered under the Investment Company Act, like other non-investment 
    company issuers, may be able to rely on the safe harbor provided by 
    Regulation S under the Securities Act to issue securities abroad 
    without registering those securities under the Securities Act.\66\ We 
    requested comment whether Rule 802 should be available to registered 
    closed-end investment companies.
    ---------------------------------------------------------------------------
    
        \64\ See proposing release, supra note 8, at note 126 and 
    accompanying text.
        \65\ See id. at note 127 and accompanying text.
        \66\ See id. at note 127.
    ---------------------------------------------------------------------------
    
        In response to commenters' suggestions, both Rules 801 and 802, as 
    adopted, are available for securities issued by closed-end investment 
    companies that are registered under the Investment Company Act. We 
    believe that this result is consistent with the Commission's previous 
    decision to permit closed-end investment companies to rely on the 
    Regulation S safe harbor to issue unregistered securities abroad.\67\ 
    These rules, however, are not available to any other type of investment 
    company, whether foreign or domestic, that is registered or required to 
    be registered under the Investment Company Act.\68\
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        \67\ See Offshore Offers and Sales, Securities Act Release No. 
    6863 (April 24, 1990) (55 FR 18306), at notes 151-53 and 
    accompanying text.
        \68\ As explained in the proposing release, both foreign and 
    domestic issuers that are excepted from the definition of 
    ``investment company'' under the Investment Company Act would be 
    permitted to use these exemptions, so long as reliance on the 
    exemptions is consistent with their unregistered status under the 
    Investment Company Act. See proposing release, supra note 8, at 
    notes 128-29 and accompanying text.
    
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    [[Page 61392]]
    
        As proposed, the Tier I and Tier II tender offer exemptions also 
    would not have been available if the subject company was an investment 
    company registered or required to be registered under the Investment 
    Company Act. As adopted these exemptions are available if the subject 
    company is a closed-end investment company registered under the 
    Investment Company Act.\69\ Consistent with the Commission's 
    application of Regulation S and the exemptions in Rules 801 and 802, 
    the Tier I and Tier II tender offer exemptions as adopted are available 
    if the subject company is a closed-end investment company registered 
    under the Investment Company Act.
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        \69\ See supra note 67 and accompanying text. One commenter 
    suggested generally that these exemptions be made available whenever 
    the subject company is a foreign investment company. Because we have 
    not received any requests for relief in connection with a tender 
    offer for a foreign investment company, we have not expanded the 
    Tier I or Tier II exemptions to cover subject companies that are 
    foreign open-end investment companies.
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    F. Determination of U.S. Ownership
    
    1. Definition of U.S. Holder
        Today's amendments revise the method for determining the amount of 
    securities held by U.S. holders from that included in the 1998 
    proposals. The amount owned by U.S. holders is important under both the 
    Tier I and II tender offer exemptions. It is also important in 
    determining the availability of the Securities Act exemptions under 
    Rules 801 and 802. Relief in each case is conditioned, at least in 
    part, on the percentage of the subject company's securities held by 
    U.S. security holders not exceeding a specified threshold.
        The proposed approach was based on the definition of ``foreign 
    private issuer,'' \70\ which at the time was based solely on record, 
    not beneficial ownership. We recently amended that definition to 
    require companies claiming foreign private issuer status to look 
    through certain bank, broker-dealer and other nominees to determine the 
    residence of the nominee's client accounts.\71\ We likewise are 
    adopting that modified approach for the purpose of determining the 
    amount of securities held by U.S. holders under the new exemptive 
    rules. Like the revised foreign private issuer definition, the starting 
    point is Rule 12g3-2(a) under the Exchange Act.\72\ Rule 12g3-2(a) 
    follows the definition of ``securities held of record'' in Rule 12g5-1, 
    but requires the offeror to ``look through'' the record ownership of 
    brokers, dealers, banks or nominees appearing on the issuers' books or 
    those of transfer agents, depositaries, or others acting on the 
    issuer's behalf. If those record owners hold securities for the 
    accounts of customers, the issuer must determine the residency of those 
    customers. This method of calculation more closely reflects the 
    beneficial ownership of the issuer's securities.
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        \70\ Exchange Act Rule 3b-4 (17 CFR 240.3b-4).
        \71\ International Disclosure Standards, Exchange Act Release 
    No. 41936 (September 28, 1999), 64 FR 53900.
        \72\ 17 CFR 240.12g3-2(a).
    ---------------------------------------------------------------------------
    
        We have limited the application of the ``look through'' provisions 
    of Rule 12g3-2(a) to securities held of record (1) in the United 
    States, (2) in the issuer's home jurisdiction, and (3) in the primary 
    trading market for the issuer's securities if different from the 
    issuer's home jurisdiction. These jurisdictions should cover most of 
    the trading volume for the issuer's securities, and searches in these 
    jurisdictions are likely to yield the greatest number of U.S. 
    beneficial owners. This modification to the Rule 12g3-2(a) approach 
    should reduce the burden on foreign companies while still producing a 
    reasonably accurate picture of the size of the U.S. ownership of the 
    foreign issuer.\73\
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        \73\ For example, a German foreign private issuer traded solely 
    on the Frankfurt Stock Exchange would have to query banks and 
    broker-dealers that are either registered owners with the company or 
    appear on participant lists of depositaries and that are based in 
    Germany or the United States. The issuer would request information 
    on the number of shares held by customer accounts that reflect a 
    U.S. address for the customer.
    ---------------------------------------------------------------------------
    
        Some commenters pointed out that it is not always possible for 
    issuers to obtain information about separate customer accounts, as 
    required by Rule 12g3-2(a). Brokers, dealers, banks or other nominees 
    may be unwilling or unable to provide information about their customer 
    accounts. We note, however, that the duty to inquire about separate 
    customer accounts already exists for issuers deciding whether the 
    reporting exemption in Rule 12g3-2(a) is available. In addition, the 
    offeror would not be asking nominees to provide the number of U.S. 
    security holders or the names of those security holders, but only the 
    aggregate amount of the nominee's holdings that are represented by U.S. 
    accounts. Thus, the offeror would not have to ask the nominees for 
    information regarding possible 10 percent holders. If after reasonable 
    inquiry, however, the offeror is unable to obtain information about the 
    nominee's customer accounts, including cases where the nominee's charge 
    for supplying this information would be unreasonable, the offeror may 
    rely on a presumption that the customer accounts are held in the 
    nominee's principal place of business.\74\
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        \74\ Because it will be difficult for third-party offerors in an 
    unsolicited or ``hostile'' tender offer to ascertain whether the 
    exemption is available without information on the subject company's 
    U.S. ownership, we are adopting the proposed presumption that the 
    U.S. ownership percentage limitations are not exceeded based on the 
    relative level of trading volume in the United States. See Section 
    II.F.3. infra.
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        Also similar to the revised approach under the foreign private 
    issuer definition, issuers and offerors must take into account 
    information regarding U.S. ownership derived from beneficial ownership 
    reports that are provided to the issuer or filed publicly in the United 
    States or in the home jurisdiction, as well as beneficial ownership 
    information that otherwise is provided to the issuer or offeror.
        We recognize that by focusing on beneficial ownership rather than 
    record ownership, we have made it more difficult to stay below the 
    relevant ownership ceilings and thus have limited the applicability of 
    the exemptive rules. Indeed, that is one reason why we increased the 
    U.S. ownership threshold under Rules 801 and 802 to 10 percent. 
    Nevertheless, we believe that it is critical that the exemptive rules 
    function based upon a fair assessment of the U.S. participation in the 
    offering. Reliance on record ownership would result in applicability of 
    the exemption when actual U.S. investor interest, and therefore their 
    importance to the success of the transaction, far exceeds the stated 
    ceilings.
        We are not adopting as part of the final rules a proposed 
    rebuttable presumption (also proposed for the purposes of the foreign 
    private issuer definition) that if a foreign private issuer's 
    securities trade in the U.S. markets in the form of ADRs, the 
    securities deposited in the ADR program are held solely by U.S. 
    residents. Commenters on the foreign private issuer proposal pointed 
    out that, for a number of reasons, non-U.S. security holders may choose 
    to hold securities in ADR form. It appears that issuers will not rely 
    on the presumption and will feel the need to query ADR depositaries 
    regarding the owners of ADRs. Therefore, we have eliminated the 
    presumption from these rule revisions as well.\75\ Issuers will thus 
    have to
    
    [[Page 61393]]
    
    examine the participant lists of ADR depositaries and query home 
    country or U.S. broker-dealer or bank nominees appearing on those lists 
    to ascertain the amount of ADRs held by U.S. investors.
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        \75\ The revisions from the proposal do not affect the treatment 
    of bearer securities in determining U.S. ownership. Since neither a 
    U.S. residence nor the name of an offshore nominee will appear on 
    the records of the issuer for the holder of the bearer securities, 
    these securities will not be treated as being held by U.S. 
    residents, unless the offeror knows or has reason to know that these 
    securities are held by U.S. residents.
    ---------------------------------------------------------------------------
    
        We have revised the time period for calculating the percentage of 
    U.S. ownership from the proposal. As proposed, the calculation would 
    have been made at the commencement of the offer. Based on commenters' 
    suggestions, we revised the proposal to include a 30 day ``look back'' 
    period to accommodate the offeror's or issuer's planning process. As 
    revised, the offeror would make the calculation of U.S. ownership 30 
    days before the commencement of the tender offer. Or, in the case of a 
    business combination such as a merger where the securities are issued 
    by the acquiring company, the calculation will be based on U.S. 
    ownership of the company to be acquired 30 days before the commencement 
    of the solicitation for the merger. In business combinations such as an 
    amalgamation, where the securities are issued by a successor company to 
    all participating companies, the calculation would be made based on 
    U.S. holder information available 30 days before commencement, but 
    applied on a pro forma basis as if measured immediately after 
    completion of the business combination.
        We are not adopting the proposal that if a bidder commences an 
    offer during an ongoing tender or exchange offer for securities of the 
    same class subject to its offer, the bidder could calculate the 
    percentage of subject securities held by U.S. holders as of the same 
    date used by the initial bidder. We believe that this proposal is 
    unnecessary because the rules adopted today provide that if a bidder 
    commences a tender offer or a business combination during an ongoing 
    tender offer or business combination for securities of the same class 
    subject to its offer, the second bidder will be eligible to use the 
    same exemption as the prior bidder (Tier I, Tier II, or Rule 802) so 
    long as all the conditions of the exemption, other than the limitation 
    on U.S. ownership, are satisfied by the second bidder. In addition, if 
    the bidder chooses to rely on a different exemption from the initial 
    bidder, the bidder will be entitled to calculate the percentage of U.S. 
    ownership 30 days before commencement of its tender offer or 
    commencement of the solicitation for the merger. Accordingly, the 
    subsequent bidder should not be disadvantaged by any movement of 
    securities into the United States following the announcement of the 
    initial bid.\76\
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        \76\ See note 55, supra.
    ---------------------------------------------------------------------------
    
        The issuer must include securities underlying ADRs in determining 
    the amount of securities outstanding of the class that is the subject 
    of the offer, as well as the amount of the subject class of securities 
    held by U.S. holders. On the other hand, other types of securities that 
    are convertible into or exchangeable for subject securities, such as 
    warrants, options, and convertible securities, would not be taken into 
    account in calculating U.S. ownership.
    2. Exclusion of Holdings of More Than 10 Percent
        We proposed that offerors exclude securities held by non-U.S. 
    security holders of more that 10 percent of the class from the 
    calculation of the U.S. ownership percentage. We requested comment 
    regarding whether it would be appropriate to exclude securities held by 
    affiliates, whether held outside the United States or in the United 
    States, from both elements of the calculation, thus focusing only on 
    the percent of the company's total world-wide non-affiliated float held 
    in the United States. Many commenters objected to excluding only non-
    U.S. 10 percent holders. Commenters argued that since many foreign 
    private issuers have one or more significant security holders--indeed, 
    many are controlled by founding families--their exclusion from the 
    calculation could severely limit the availability of the exemptions.
        Several commenters suggested that a better approach would be to 
    exclude large or institutional U.S. security holders, as well as 
    foreign 10 percent holders. One commenter suggested excluding the 
    securities of the bidder, regardless of the amount. Commenters argued 
    that large U.S. security holders do not need the protections of the 
    securities laws and could easily go overseas to participate in the 
    transaction or participate on a private placement basis. Absent 
    exemptive relief, bidders would extend the offer only to the larger, 
    and exclude the smaller, U.S. security holders (assuming U.S. 
    institutional investor participation would not trigger U.S. all-holders 
    requirements).
        For these reasons, we are persuaded by the commenters that large 
    U.S. holders likewise should be excluded from the calculation of U.S. 
    ownership. Similarly, exclusion of securities held by a bidder or 
    bidding group will provide greater assurance of an accurate assessment 
    of the significance to the offer of the participation by U.S. public 
    investors.
        Because the 10 percent holders are viewed as affiliates for 
    purposes of calculating U.S. ownership, they presumably would be 
    treated as affiliates for purposes of Rule 144 \77\ as well . They 
    would therefore be subject to limitations on the amount of securities 
    received in the offer that they could resell. Treating these securities 
    as control shares should minimize the potential that, in cases where 
    there are a significant number of shares held by a relatively few U.S. 
    holders, the Securities Act exemptions for cross-border rights 
    offerings and exchange offers under Rules 801 and 802 will be misused 
    as a means to conduct illegal distributions in the United States.
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        \77\ 17 CFR 230.144.
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    3. Determination of Eligibility by Persons Other Than the Issuer
        As we noted in the November 1998 release, the principal 
    disadvantage of using a U.S. ownership threshold as a condition for the 
    applicability of the exemptions is that it will be difficult for third-
    party offerors to ascertain whether the exemption is available without 
    information on the subject company's U.S. ownership.\78\ It will be 
    even more difficult for persons other than the issuer to obtain 
    information from nominees, including information on 10% holders, as 
    required under the modified approach adopted today.\79\ We are 
    adopting, with minor changes, the proposal that a third-party bidder in 
    an unsolicited or ``hostile'' \80\ tender offer may rely upon a 
    presumption that the U.S. ownership percentage limitations
    
    [[Page 61394]]
    
    of the Tier I,\81\ Tier II \82\ and Rule 802 exemptions are not 
    exceeded unless:
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        \78\ Exemptions for transactions like issuer tender offers or 
    rights offerings do not pose this problem. An issuer can and must 
    examine its own records and those of transfer agents and 
    depositaries acting on its behalf to obtain the necessary 
    information regarding U.S. ownership of its own securities.
        \79\ This concern is eliminated if the hostile bidder commences 
    its offer after a prior competing tender offer or a business 
    combination for securities of the same class subject to its offer 
    and chooses to rely on the same exemption as the prior offeror 
    because, as previously noted, the second bidder will be eligible to 
    use the same exemption (Tier I, Tier II, or Rule 802) as the prior 
    offeror, provided that all the conditions of the exemption, other 
    than the limitation on U.S. ownership, are satisfied by the second 
    bidder. A presumption remains necessary, however, when the hostile 
    bidder either makes the initial offer or is the subsequent bidder 
    but chooses to rely on a different exemption from that used by a 
    prior offeror.
        \80\ New Rule 802(c)(1) and Instruction 3.i. to revised Rules 
    14d-1(c) and (d) make the presumption inapplicable to offers ``made 
    pursuant to an agreement'' with the issuer. The agreement need not 
    be written.
        \81\ See revised Rules 13e-4(h)(8) and Rule 14d-1(c).
        \82\ See revised Rules 13e-4(i) and 14d-1(d).
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        (1) The aggregate trading volume of the subject class of securities 
    on all national securities exchanges in the United States, on the 
    Nasdaq market or on the OTC market, as reported to the NASD, over the 
    12-calendar-month period ending 30 days before commencement of the 
    offer, exceeds 10 percent in the case of Tier I offers and Rule 802, 
    and 40 percent in the case of Tier II offers, of the worldwide 
    aggregate trading volume of that class of securities over the same 
    period;
        (2) The most recent annual report or other informational form filed 
    or submitted by the issuer or security holders to securities regulators 
    in its home jurisdiction or elsewhere (including with the Commission) 
    indicates that U.S. holdings exceed the applicable threshold; \83\ or
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        \83\ If U.S. ownership of more than 10 percent is reported in 
    public filings with the Commission or a foreign regulator, such as 
    Schedule 13D or 13G, we would take the position that the bidder has 
    reason to know the level of U.S. ownership exceeds 10 percent.
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        (3) The bidder knows or has reason to know from other sources that 
    the level of U.S. ownership of the subject class exceeds the 
    thresholds.
        As to whether the foreign subject company is a foreign private 
    issuer, the bidder can rely on the exemptions if the issuer of the 
    subject securities files reports with the Commission under the foreign 
    integrated disclosure system \84\ or has claimed an exemption from 
    reporting under Exchange Act Rule 12g3-2(b),\85\ unless the bidder 
    knows the foreign subject company is not a foreign private issuer.
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        \84\ This includes Form 20-F and 6-K, which are available only 
    to foreign private issuers.
        \85\ 17 CFR 240.12g3-2(b).
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        One commenter believed that the presumption should be available for 
    both hostile and negotiated transactions. The commenter was concerned 
    that takeover situations are often fluid and that hostile offers often 
    turn friendly shortly after commencement of the tender offer. We 
    believe, however, that application of the exemption should turn on an 
    accurate assessment of U.S. ownership whenever possible. A bidder in a 
    negotiated transaction would be able to arrange to get this information 
    from the subject company as part of the acquisition agreement. We 
    believe that the presumption should be available only when there is no 
    assurance that the issuer will obtain and provide the offeror with 
    current information about U.S. ownership. If information on U.S. 
    ownership can be obtained, that information should determine whether 
    the exemptions are available, rather than a presumption based on 
    trading activity. For this reason, notwithstanding the views of some 
    commenters, an issuer, affiliate, or friendly bidder could not rely 
    upon the presumption.
        Even if the above presumption is not available, the bidder may 
    nevertheless rely on the exemption if it can demonstrate that U.S. 
    ownership is in fact less than the relevant threshold or, in the case 
    of competing bids, if the bidder chooses to rely on the same exemption 
    (Tier I, Tier II, or Rule 802) as that used by a prior offeror.\86\
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        \86\ For example, if a hostile bidder makes a tender offer in 
    reliance on the Tier I exemption, the hostile bidder may rely on the 
    presumption. If the hostile bid is then followed by a subsequent 
    bid, whether by the issuer, an affiliate, or a hostile or friendly 
    third-party bidder, the subsequent bidder also may use the Tier I 
    exemption so long as the subsequent bidder satisfies all of the 
    conditions of the Tier I exemption other than the ownership 
    limitation condition. If, however, the subsequent bidder wishes to 
    rely upon new Rule 802 to make an exchange offer or business 
    combination, the subsequent bidder will have to satisfy the 
    ownership limitation condition of Rule 802 as well as its other 
    conditions even though both Rule 802 and the Tier I exemption each 
    use a 10% ownership threshold. In this situation, if the subsequent 
    bidder is a hostile bidder, it may use the presumption discussed 
    above if all of the conditions of the presumption are satisfied to 
    commence a Rule 802 offer in response to the initial Tier I or Tier 
    II offer. Even if the above presumption is not available, the bidder 
    may nevertheless rely on the Rule 802 exemption if it can 
    demonstrate that U.S. ownership is in fact less than the relevant 
    threshold. The bidder will be entitled to calculate the percentage 
    of U.S. ownership 30 days before commencement of its exchange offer 
    or commencement of the solicitation for the merger.
        Another example would be where a third-party bidder in a 
    negotiated transaction desires to make an exchange offer or business 
    combination in reliance on the Section 802 exemption. The third 
    party bidder would not be entitled to rely on the presumption 
    because it is not a hostile party. If, after calculating the 
    percentage of the issuer's securities held by U.S. holders, the 
    friendly party commences an exchange offer or business combination 
    in reliance on the Section 802 exemption, then a subsequent offeror 
    also may rely on the Section 802 exemption so long as all of the 
    conditions of such exemption, other than the ownership limitation 
    condition, are satisfied.
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    G. Internet Disclosure
    
        There is no limitation under the exemptive provisions adopted today 
    on the use of the Internet to publish offering materials and other 
    information about the cross-border transaction.\87\ However, when 
    materials are required to be disseminated directly to U.S. holders (for 
    example, in a Tier II offer subject to Regulation 14D or when materials 
    are mailed in the home country in a Tier I offer), Internet 
    dissemination of the offering materials would not, without more, 
    constitute adequate dissemination under the new exemptive rules.\88\ If 
    an offeror publishes in its home country, posting the materials on its 
    web site would not constitute adequate publication in the United 
    States. Electronic dissemination could satisfy a dissemination 
    requirement only if conducted in a manner consistent with the guidance 
    provided in our 1995 release on electronic dissemination, including the 
    requirement to obtain the U.S. holder's consent to receive the mandated 
    materials by electronic means or other evidence of delivery.\89\
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        \87\ The Internet materials would be filed or submitted with, or 
    as an amendment to, the Schedule TO or the Form CB, when applicable.
        \88\ See Section II.D.2. of the Regulation M-A Release, supra 
    note 6.
        \89\ See Electronic Dissemination, Securities Act Release No. 
    7233 (Oct. 6, 1995) (60 FR 53458).
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        In response to the request of several commenters, we are providing 
    guidance on whether materials relating to offshore tender and exchange 
    offers could be posted on the Internet without triggering U.S. tender 
    offer and securities registration requirements with respect to that 
    offer. We note that the exemptions adopted today are intended to 
    facilitate the inclusion of U.S. investors in cross-border 
    transactions, not to provide a means to avoid U.S. jurisdiction. 
    However, U.S. investors would benefit from timely and reliable 
    information about foreign corporate actions, even if they are not able 
    to participate in the transactions.
    1. General Approach
        The posting of information on a web site may constitute an offer of 
    securities for purposes of the U.S. securities laws. We recently 
    published our views clarifying when the posting of materials on 
    Internet web sites would not be considered an offer or soliciting 
    activity in the United States for purposes of the registration 
    requirements of the federal securities laws (the ``1998 Internet 
    Release'').\90\ In the 1998 Internet Release, we expressed the view 
    that offering materials posted on a web site would not be viewed as an 
    offer, general solicitation or directed selling efforts in the United 
    States, so long as the offeror implements precautionary measures that 
    are reasonably designed to ensure that the Internet offer is not 
    targeted to persons in the United States or to U.S. persons. The 1998 
    Internet Release stated that when an offeror prominently discloses that 
    the offer is being made to countries other than the United States and 
    implements adequate measures
    
    [[Page 61395]]
    
    reasonably designed to guard against sales to persons in the United 
    States or to U.S. persons in an offshore Internet offer, we will not 
    view the offer as targeted to persons in the United States or to U.S. 
    persons and thus will not treat it as occurring in the United States 
    for Securities Act registration purposes.
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        \90\ Statement of the Commission Regarding Use of Internet Web 
    Sites to Offer Securities, Securities Act Release No. 7516 (March 
    23, 1998) (63 FR 14806).
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        Offshore rights offerings fall squarely within the guidance set 
    forth in that release. As a general matter, an offeror conducting a 
    tender or exchange offer also may rely on the guidance in the 1998 
    Internet release. This discussion provides additional guidance as to 
    what constitutes adequate precautions to prevent participation by 
    persons in the United States or U.S. persons in the context of these 
    types of offshore transactions. What constitutes adequate measures 
    depends on all the facts and circumstances of any particular situation. 
    These procedures are not exclusive; other procedures that suffice to 
    guard against sales to persons in the United States or to U.S. persons 
    also can be used to demonstrate that the offer is not targeted at the 
    United States.
    2. Offshore Tender and Exchange Offers, Rights Offerings and Business 
    Combinations on the Internet
        Posting materials relating to tender and exchange offers and rights 
    offerings on the web site of the offeror or subject company, or a third 
    party, presents special problems not present in the context of public 
    underwritten offerings. U.S. holders of the subject securities already 
    are familiar with the subject company and its securities and are more 
    likely to be alerted immediately to the posting of offering materials. 
    Investors may either monitor the target's web site or employ a search 
    service to alert it to any materials posted on the Internet relating to 
    that company. Also, because of their existing investment in those 
    securities, U.S. investors are more likely to have an incentive to find 
    indirect means to participate in the offer, even though the materials 
    state that the offer is not being made in the United States. As a 
    result, offerors using a web site to publicize their offer should take 
    special care that it is not used as a means to induce indirect 
    participation by U.S. holders of those securities.
        One way in which the offeror could take special care to prevent 
    sales to U.S. holders would be, in responding to inquiries and 
    processing letters of transmittal, to obtain adequate information to 
    determine whether the holder is a person in the United States or a U.S. 
    person. Another example of such special care would be if the offeror 
    obtains representations by the investor, or anyone tendering on the 
    investor's behalf, that the investor is not a person in the United 
    States or a U.S. person. Similarly, in disseminating the cash or 
    securities consideration to tendering investors, special care should be 
    taken to avoid mailing into the United States.
        Despite the use of disclaimers and the implementation of 
    precautionary measures against accepting tenders or the exercise of 
    rights from the United States, a web site posting could be viewed as an 
    offer in the United States if the content of the web page clearly is 
    designed to induce U.S. investors to find an indirect means to 
    participate in the offer through offshore nominees or other means. 
    Offerors cannot accomplish indirectly what they purport not to be doing 
    directly.
        In many cases, even though the offer materials disseminated outside 
    the United States state that the offer is not being made in the United 
    States, the bidder will allow U.S. institutional investors to 
    participate either under Regulation S for offers and sales taking place 
    outside the United States, or as a private or limited placement under 
    section 4(2) or other exemption from registration.\91\ In the 1998 
    release, we concluded that a posting of offering materials on a web 
    site was not necessarily offering activity in the United States, even 
    though the web site is accessible by investors in the United States. 
    This conclusion was premised on the implementation of measures both to 
    prevent the targeting of U.S. investors and to prevent actual sales to 
    persons in the United States or to U.S. persons in the offshore offer. 
    A web site that is accessible in the United States cannot be used to 
    entice U.S. investors to participate in the offering offshore. 
    Accordingly, reliance on Regulation S to allow participation by U.S. 
    persons offshore would not be appropriate with respect to tender or 
    exchange offers posted on an unrestricted web site.
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        \91\ Exchange offers for securities subject to section 14(d) of 
    the Exchange Act could not be made in the United States on a private 
    offering basis, consistent with the all-holders provisions of Rule 
    14d-10.
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        Business combinations present different issues from tender or 
    exchange offers because participation by U.S. holders is not voluntary. 
    In order to attempt to avoid U.S. jurisdiction, offerors often do not 
    provide U.S. investors an opportunity to vote on the transaction. It is 
    neither practicable nor desirable to treat U.S. holders differently 
    from other security holders when their company is merged out of 
    existence. No special precautions should be taken to prevent U.S. 
    holders from receiving the merger consideration in a business 
    combination involving a foreign company merely because the proxy 
    statement/prospectus was posted on a web site available in the United 
    States.
    3. U.S. Exempt Component
        The 1998 Internet Release recognized that a simultaneous private 
    offering in the United States could accompany the offshore Internet 
    offering.\92\ In that case, special precautions must be instituted to 
    assure that the Internet offering is not used as a general solicitation 
    to find qualified investors in the private offering. A general 
    solicitation for participants in a private offering is inconsistent 
    with the requirements of section 4(2) of the Securities Act \93\ as 
    well as Regulation D.\94\ Likewise, to the extent an offeror conducting 
    an offshore exchange offer or rights offering on the Internet wishes to 
    extend that offer to persons in the United States on a private offering 
    basis, means must be in place to provide reasonable assurance that the 
    web site is not used to solicit U.S. investors for the private U.S. 
    offering. Measures to assure that the U.S. participants did not learn 
    about the offering from the web site could include:
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        \92\ See note 90 supra, at Section IV.A.2.
        \93\ 15 U.S.C. 77d.
        \94\ 17 CFR 230.501 through 17 CFR 230.508.
    ---------------------------------------------------------------------------
    
         Not placing U.S. investors that respond to the offshore 
    Internet offering in the U.S. private offering;
         Extending the U.S. offer only to U.S. investors who were 
    solicited before, or independently from, the posting of offering 
    materials on the Internet;
         Using separate contact persons for the Internet 
    solicitation from that for the U.S. offering; and
         Not referring to the private U.S. offering in the web site 
    materials, except to the extent mandated by foreign law.
        These measures are not exclusive. Other procedures that suffice to 
    guard against sales to persons in the United States or to U.S. persons 
    also can be used to demonstrate that the web site is not used to 
    solicit U.S. investors for the private U.S. offering.
    4. Domestic Issuers
        In the 1998 Internet release, we expressed special concerns with 
    U.S. companies' use of the Internet to conduct a purportedly offshore 
    Internet offer. We stated that a domestic company could not use a web 
    site to disseminate the offering materials, unless access to that site 
    was limited to non-U.S. persons. This position was based on the 
    potential for abuse when a U.S. company purports to rely on
    
    [[Page 61396]]
    
    Regulation S to conduct an offering of its securities solely offshore, 
    and on our approach under Regulation S to put offshore unregistered 
    offerings by domestic companies on the same regulatory footing as 
    private placements.
        In light of the exemptive relief adopted today, we believe that 
    there will be very limited circumstances where a U.S. bidder would have 
    a reason to exclude U.S. holders of the foreign subject company from an 
    exchange or tender offer for that company. At a minimum, any U.S. 
    offeror purporting to extend an Internet tender or exchange offer 
    solely to non-U.S. investors should likewise limit access to the web 
    site to non-U.S. persons.
    
    III. Paperwork Reduction Act
    
        Our staff submitted the amendments as proposed to the Office of 
    Management and Budget (``OMB'') for review in accordance with the 
    Paperwork Reduction Act of 1995 (``PRA'').\95\ The title to the 
    affected information collection is ``Form CB'' and revised ``Form F-
    X''. An agency may not conduct or sponsor, and a person is not required 
    to respond to, a collection of information unless it displays a 
    currently valid control number. This collection of information has been 
    assigned OMB Control Nos. 3235-0518 and 3235-0379.
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        \95\ 44 U.S.C. 3501 et seq.
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        The rules and rule amendments exempt from the tender offer and 
    registration rules cross-border tender offers, exchange offers, rights 
    offerings and business combinations when U.S. ownership of the foreign 
    private issuer is not significant. The purpose of these exemptions is 
    to facilitate the ability of offerors to include U.S. security holders 
    of foreign private issuers in these types of transactions. The rules 
    and rule amendments are intended to reduce the regulations applicable 
    to some cross-border transactions and therefore are expected to reduce 
    the existing collection of information requirements. The amendments 
    will eliminate certain existing reporting requirements for entities 
    conducting an exempt tender or exchange offer. Specifically, in a 
    tender offer that qualifies under the Tier 1 exemption, the acquiror 
    will not need to comply with Schedule TO. Further, in an exchange 
    offer, business combination or rights offer for foreign private 
    issuers' securities, when U.S. security holders hold 10 percent or less 
    of the subject securities, an acquiror will not need to file a 
    registration statement registering the securities being issued.
        Rules 13e-4(h)(8)(iii)(B) and 14d-1(c)(3)(i) require bidders to 
    disseminate any informational documents to U.S. holders in English. 
    This may require some bidders to translate documents. We estimate that 
    it costs approximately $.30 per word to translate an information 
    document into English. However, we cannot estimate with certainty how 
    many information documents will be filed, how many will need to be 
    translated into English, or how long such documents will be.
        Rules 801(a)(4)(i) and 802(a)(3)(i) under the Securities Act and 
    Rules 13e-4(h)(8)(iii)(A), 14d-1(c)(3)(iii) under the Exchange Act 
    require that an entity conducting an exempt tender or rights offer in 
    connection with a cross-border transaction pursuant to the exemptions 
    submit Form CB. Similarly, revised Rule 14d-9 requires that the company 
    that is the subject of an exempt third party tender offer, or any 
    officer, director or other person who otherwise would have an 
    obligation to file Schedule 14D-9, will be exempt from such obligation 
    if such person submits Form CB. The collection of information will be 
    necessary so that we can determine whether the transaction meets the 
    eligibility requirements of the exemptive rules. We also have to 
    collect information to assure that information about the transaction 
    will be publicly available. Security holders will thus have the 
    opportunity to make informed investment decisions, particularly since 
    the transactions relate to potential changes in control.
        Form CB is a cover sheet that incorporates the offering documents 
    sent to security holders pursuant to the requirements of the country in 
    which the issuer is incorporated. Form CB also requires disclosure of 
    the identity of the entity conducting the tender or rights offer. Form 
    CB must be submitted to the Commission on the business day following 
    the date the offering documents are published or disseminated to 
    security holders in the home jurisdiction.
        Form CB also requires that a non-U.S. entity must file a consent to 
    service of process on Form F-X. Form F-X is used by certain non-U.S. 
    entities to appoint an agent for service of process in the United 
    States. The revisions to Form F-X add non-U.S. entities submitting a 
    Form CB to the list of entities currently required to file Form F-X. 
    This collection of information is necessary to provide investors with 
    information concerning the U.S. person designated as agent for service 
    of process.
        For the tender and exchange offer exemptions, domestic and foreign 
    entities wishing to engage in cross-border transactions or that are the 
    target of a tender offer will likely be the respondents to the 
    collection of information requirement. With respect to rights 
    offerings, the likely respondents will be foreign private issuers 
    conducting rights offerings. We have no data to help us determine how 
    many entities will actually rely on the exemptions, because reliance on 
    the exemptions is voluntary. As noted in the proposed release, we 
    estimated that 824 Forms CB will be filed each year under the rules 
    adopted today. We estimate that it will impose an estimated burden of 2 
    hours for a total burden of 1648 hours. We estimate that half of the 
    entities submitting Form CB will be foreign entities that will be 
    required to file Forms F-X (412) each year under the adopted rules. 
    Form F-X currently is estimated to impose an estimated burden of 2 
    hours for a total burden of 824 hours.
        The changes that have been made to the proposed rules do not affect 
    our estimate of the number of entities that will file a Form CB for 
    tender offers in reliance on the Tier I exemption or pursuant to an 
    exemption from registration under Rules 801 and 802. Rules 801 and 802 
    use a ten percent threshold for U.S. ownership rather than the five 
    percent threshold that was originally proposed. We also have excluded 
    securities held by 10% U.S. holders and bidders from the calculation of 
    U.S. ownership. We believe that any increase in the number of entities 
    that will file a Form CB pursuant to Rules 801 and 802 because of these 
    changes will be offset at least partially by the change in the method 
    of calculation of U.S. ownership, which requires offerors to ``look 
    through'' the record ownership of brokers, dealers, banks or nominees 
    holding securities for the accounts of their customers.
        Neither we nor OMB received any comments in response to our request 
    for comment regarding the information collection obligation.
    
    IV. Cost-Benefit Analysis
    
        U.S. residents holding securities in foreign private issuers are 
    often excluded from tender offers and rights offerings for the foreign 
    private issuers' securities because of conflicts between U.S. and 
    foreign regulation of these offers. As a result, U.S. security holders 
    of foreign private issuers are unable to benefit fully from any premium 
    offered in a tender offer or are unable to purchase additional 
    securities at a discount in a rights offering.
        The rules and rule amendments adopted today exempt cross-border 
    tender offers from the tender offer rules
    
    [[Page 61397]]
    
    (the ``Tier I exemption'') and exchange offers, rights offerings and 
    business combinations from Securities Act registration requirements 
    when U.S. security holders hold 10 percent or less of the subject 
    securities. When the U.S. ownership in the foreign private issuer does 
    not exceed 40 percent, the proposal also includes exemptions from 
    certain of the tender offer rules (the ``Tier II exemption'').
        The purpose of these exemptions is to facilitate U.S. security 
    holder participation in these types of transactions by removing 
    regulatory barriers. The rules and rule amendments are intended to 
    reduce the tender offer and registration requirements for cross-border 
    transactions. We expect the exemptions to reduce the costs and burdens 
    of extending these types of offers to U.S. security holders. U.S. 
    security holders of foreign private issuers will benefit by being able 
    to participate in these types of transactions. The consideration paid 
    in a tender or exchange offer, merger or similar transaction typically 
    reflects a premium to tendering security holders.\96\ U.S. security 
    holders who are excluded from tender or exchange offers may be 
    subjected to a risk that the consideration they may receive in a back-
    end merger or business combination may not be equivalent to the 
    consideration being paid in the tender or exchange offer. In addition, 
    the market for the securities that are the subject of the tender or 
    exchange offer may not be liquid enough to permit investors to buy or 
    sell securities at comparable prices. In rights offerings, U.S. 
    security holders who are excluded from participation lack the 
    opportunity to purchase the issuer's securities at a discount.\97\ The 
    commenters agreed that the rules would serve to facilitate U.S. 
    investor participation in these transactions.
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        \96\ Of the 403 tender offers for foreign companies by foreign 
    bidders recorded by Securities Data Corporation in 1998, Securities 
    Data Corporation reports an average premium of over 42% for 215 
    transactions, measured from four weeks prior to the first bid. If 
    the premium is measured from the price one day before the bid, the 
    average premium drops to 38%.
        For the period 1971 to 1991, the average historical merger 
    premium was over 23% as reported in G.W. Schwert, ``Markup Pricing 
    in Mergers and Acquisitions,'' Journal of Financial Economics, 41 
    (1996). The premium is measured from four weeks prior to the first 
    bid. Excluding this period, the premium remains over 10%.
        \97\ Supra note 54.
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        Entities relying on the Tier I exemption will benefit from the 
    rules because they will not need to comply with the procedural and 
    filing requirements of the tender offer rules. Specifically, an 
    acquiror will not need to file Schedule TO. In lieu of these forms, an 
    acquiror will submit to the Commission Form CB, which is significantly 
    less burdensome.\98\ Also, a non-U.S. acquiror will file a Form F-X 
    contemporaneously with the Form CB to appoint an agent for service of 
    process in the United States. A number of commenters argued that Forms 
    CB and F-X will be too burdensome and will discourage offerors from 
    relying on the exemptions. We believe, however, that our interest in 
    monitoring the availability of the exemptions and ensuring that U.S. 
    security holders have access to these documents through their public 
    availability justify the minimal burdens of preparing these forms or 
    any increased risk of suit from making service of process and assertion 
    of U.S. jurisdiction marginally easier.
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        \98\ See Section II.A.2. supra for a description of the Form CB. 
    See note 99, infra, for information regarding the estimated burden 
    associated with Form CB as compared to the current reporting 
    requirements.
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        In response to comments, the rules we adopt today permit offerors 
    relying on the Tier I exemption to offer only cash to U.S. holders, 
    even if securities are offered to foreign investors. Offerors offering 
    a cash-only alternative to U.S. security holders, however, must obtain 
    an opinion from an independent third party stating that the cash being 
    offered to U.S. security holders is substantially equivalent to the 
    value of the securities being offered to foreign security holders, 
    unless the offeror's securities are ``margin securities'' within the 
    meaning of Regulation T. In the latter case, the offeror need only 
    provide information on recent trading prices of the offeror's 
    securities in lieu of an opinion.
        Similarly, entities relying on Rules 801 or 802 in connection with 
    a rights offer or exchange offer will benefit from the rules because 
    they will not need to comply with the Securities Act registration 
    requirements. Specifically, an issuer will not need to file the 
    registration forms, including Forms S-1, S-2, S-3, S-4, F-1, F-2, F-3 
    and F-4. Instead of these forms, an issuer will submit Form CB and, if 
    the issuer is a non-U.S. entity, file Form F-X, which as discussed 
    above are significantly less burdensome.
        We estimate that Form CB and Form F-X will take substantially less 
    time to prepare than Schedule TO or a registration statement.\99\ In 
    addition, we believe it takes a lesser degree of professional skill, 
    including that of securities lawyers and accountants, to prepare a Form 
    CB and Form F-X than to prepare a Schedule TO or a registration 
    statement. In some cases, the professional skills required will include 
    the ability to translate from a foreign language into English.
    ---------------------------------------------------------------------------
    
        \99\ For purposes of the Paperwork Reduction Act, we estimate 
    that Forms CB and F-X will impose an estimated burden of two hours 
    per Form. This contrasts with Schedule TO which has an estimated 
    burden of 586 hours per form, and Forms S-1, S-2, S-3, S-4, F-1, F-
    2, F-3 and F-4 which have an estimated burden of 1,239, 470, 397, 
    1,233, 1,868, 1,397, 166, and 1,308 hours per form, respectively.
    ---------------------------------------------------------------------------
    
        Entities relying on the Tier I and Tier II exemptions will also 
    benefit from the proposals because they will not need to comply with 
    all of the procedural requirements of the tender offer rules.\100\ For 
    example, in the Tier I exemption, an acquiror will be exempt from all 
    of the procedural requirements of the U.S. tender offer rules, 
    including those relating to the duration of the offer and withdrawal 
    rights.
    ---------------------------------------------------------------------------
    
        \100\ We cannot quantify the cost savings that will result from 
    not imposing the procedural requirements of the tender offer rules 
    because we do not know how many companies will use the exemption or 
    how much compliance with these particular aspects of the tender 
    offer rules from which an exemption is granted would cost. 
    Commenters did not provide us with any such data.
    ---------------------------------------------------------------------------
    
        In the Tier II exemption, an acquiror will receive limited relief 
    from the Commission's tender offer rules. The Tier II exemption 
    provides relief from the U.S. tender offer rules that are common 
    impediments to extending offers to U.S. security holders. However, an 
    acquiror relying on the Tier II exemption will have to comply with the 
    remaining tender offer provisions. These provisions include, among 
    others, the following: (1) Keeping the offer open 20 business days; (2) 
    filing a Schedule TO; (3) disseminating the offering documents; and (4) 
    offering withdrawal rights. Although compliance with these requirements 
    may impose costs to cross-border tender offers, compliance will still 
    be less burdensome than satisfying all the U.S. tender offer 
    requirements or applying to the Commission for exemptive relief.
        The transfer restrictions that we adopt today provide that to the 
    extent the securities that are the subject of an exchange offer, 
    business combination or rights offering are ``restricted securities'' 
    under Rule 144 in the hands of the U.S. investor, then securities 
    acquired by that investor in the transaction will be ``restricted 
    securities.'' The transfer restrictions are the same as we proposed 
    with respect to exchange offers and business combinations but are less 
    restrictive than those proposed for rights offerings. We had proposed 
    that securities received in a rights offering pursuant to Rule 801 be 
    restricted whether or not the securities that are subject to the 
    offering were restricted. We are persuaded by the large number
    
    [[Page 61398]]
    
    of commenters who argued that requiring unaffiliated U.S. security 
    holders to accept restricted securities when they currently hold 
    unrestricted securities is not necessary nor desirable.
        The rules we adopt today base the method of calculation of the 
    amount of the subject securities held by U.S. holders on the method of 
    calculation used in Rule 12g3-2(a) under the Exchange Act. That method 
    more closely reflects the beneficial ownership of the issuer's 
    securities. Rule 12g3-2(a) requires the offeror to ``look through'' the 
    record ownership of brokers, dealers, banks or nominees holding 
    securities for the accounts of their customers to determine the 
    residency of those customers. Offerors also must take into account 
    information regarding U.S. ownership derived from beneficial ownership 
    reports that are provided to the issuer or filed publicly, whether in 
    the United States or other countries, as well as information that 
    otherwise is provided to the issuer or offeror.
        Several commenters on the proposed release and the international 
    disclosure standards proposing release suggested that using a 
    beneficial ownership test would create a substantial burden for 
    companies that trade in many different markets, and that widely-held 
    companies would have to invest significant effort and expense in 
    determining beneficial ownership in many jurisdictions where the 
    likelihood of finding U.S. owners is small. In order to address these 
    concerns, we have limited the application of the ``look through'' 
    provisions of Rule 12g3-2(a) to voting securities held of record (1) in 
    the United States, (2) in the issuer's home jurisdiction, and (3) in 
    the primary trading market for the issuer's securities if different 
    from the issuer's home jurisdiction. These jurisdictions should cover 
    most of the trading volume for the issuer's securities, and searches in 
    these jurisdictions are likely to yield the greatest number of U.S. 
    beneficial owners. This modification to the test should reduce the 
    burden on foreign companies while still producing a reasonably accurate 
    picture of whether U.S. ownership exceeds the specified thresholds.
        Some commenters pointed out that it is not always possible for 
    issuers to obtain information about separate customer accounts, as 
    required by Rule 12g3-2(a). As noted in the discussion above, we have 
    minimized this burden. In any event, if after reasonable inquiry, the 
    offeror is unable to obtain information about the nominee's customer 
    accounts, including when the nominee's fees would be unreasonable, the 
    offeror may rely on a presumption that the customer accounts are held 
    in the nominee's principal place of business.
        No specific data was provided in response to the Commission's 
    request in the proposing release regarding the costs and benefits 
    associated with today's amendments. We have anecdotal information 
    regarding numerous transactions that have excluded U.S. security 
    holders. The commenters also agreed that these exclusionary offers are 
    common practice. Because offerors do not file documents with the 
    Commission when U.S. security holders are excluded, we cannot calculate 
    the number of cross-border transactions that have excluded U.S. 
    security holders with certainty. Further, if the transaction is a 
    tender offer for securities that are not registered under section 12 of 
    the Exchange Act, and is subject only to Regulation 14E, there is no 
    filing obligation. Therefore, we are unable to estimate the number of 
    entities that will take advantage of the exemptions. While we are 
    unable to determine how many U.S. security holders will benefit from 
    the rules by being able to participate in cross-border tender, exchange 
    and rights offerings, we believe that the rules will benefit U.S. 
    security holders by removing regulatory barriers to including U.S. 
    security holders in these types of offers. The commenters agreed.
    
    V. Findings and Considerations
    
    A. Effect on Competition/Exchange Act Section 23(a)
    
        Section 23(a) of the Exchange Act \101\ requires us, in adopting 
    rules under the Exchange Act, to consider the impact any rule would 
    have on competition. We cannot adopt any rule that would impose a 
    burden on competition not necessary or appropriate in the public 
    interest. We did not receive any information on the impact of increased 
    competition for capital for domestic companies as a result of an 
    increase in securities offered into the United States by foreign 
    companies or as to whether the benefit to U.S. investors will offset 
    the cost of any such increased competition for capital. Because the 
    rules we adopt today are designed to allow U.S. investors to 
    participate in the full benefits of security ownership that they are 
    currently denied when U.S. ownership of the foreign private issuer is 
    relatively small, we do not believe the relative cost will be large. 
    Exempting foreign tender, exchange and rights offers from certain 
    federal securities laws may have a competitive effect on U.S. issuers, 
    who remain subject to all federal securities laws. We believe these 
    effects are justified in order to benefit U.S. shareholders in foreign 
    companies. Therefore, our view is that any anticompetitive effects of 
    the rules adopted today for cross-border tender and exchange offers, 
    business combinations and rights offerings are necessary or appropriate 
    in the public interest.
    ---------------------------------------------------------------------------
    
        \101\ 15 U.S.C. 78w(a).
    ---------------------------------------------------------------------------
    
    B. Promotion of Efficiency, Competition and Capital Formation
    
        Section 2(b) \102\ of the Securities Act and Section 3(f) \103\ of 
    the Exchange Act, as amended by the National Securities Markets 
    Improvement Act of 1996,\104\ 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 promote efficiency, competition and 
    capital formation. For the reasons stated above, we believe the rules 
    will facilitate a variety of cross-border transactions, thereby 
    enhancing the efficiency of global competition for capital.
    ---------------------------------------------------------------------------
    
        \102\ 15 U.S.C. 77b(b).
        \103\ 15 U.S.C. 78c(f).
        \104\ Pub. L. No. 104-290, section 106, 110 Stat. 3416 (1996).
    ---------------------------------------------------------------------------
    
    C. Exemptive Authority Findings
    
        We find that it is appropriate, in the public interest and 
    consistent with the protection of investors, as well as the purposes 
    fairly intended by the Trust Indenture Act: (i) To exempt eligible 
    tender offers from certain provisions of the Exchange Act and the rules 
    thereunder relating to tender offers, as described in this release, 
    (ii) to exempt eligible tender and exchange offers, business 
    combinations and rights offerings from the registration provisions of 
    the Securities Act, as described in this release, (iii) to exempt 
    eligible exchange offers or business combinations from the Trust 
    Indenture Act, as described in this release, and (iv) to amend the 
    Commission's general organization rules in order to delegate to the 
    Directors of the Divisions of Corporation Finance and Market Regulation 
    authority to exempt tender offers from specific tender offer 
    requirements.
        We make these findings based on the reasons described in the 
    release. In particular, we believe that U.S. investors will benefit by 
    the exemptions because they will facilitate the inclusion of U.S. 
    investors in cross-border tender and
    
    [[Page 61399]]
    
    exchange offers, business combinations and rights offerings. Our use of 
    exemptive authority will enable U.S. holders to have the opportunity to 
    receive a premium for their securities in a tender or exchange offer 
    and to participate in investment opportunities on an equal basis with 
    foreign security holders. Similarly, the rules will enable U.S. 
    security holders to have the opportunity to purchase shares at a 
    possible discount from market price in cross-border rights offerings. 
    Moreover, investors will still receive the protections of the antifraud 
    provisions of the federal securities laws.
    
    D. Delegated Authority
    
        The Commission also finds, in accordance with section 553(d) of the 
    Administrative Procedure Act,\105\ that the delegation of exemptive 
    authority in this release relates to agency organization, procedure, or 
    practice. Accordingly, the delegation is effective upon publication.
    ---------------------------------------------------------------------------
    
        \105\ 5 U.S.C. 553(d).
    ---------------------------------------------------------------------------
    
    VI. Summary of Final Regulatory Flexibility Analysis
    
        A Final Regulatory Flexibility Analysis (``FRFA'') has been 
    prepared in accordance with 5 U.S.C. 604 regarding the rules being 
    adopted today. The analysis notes that the adopted rules are intended 
    primarily to facilitate tender and rights offerings for securities of 
    foreign private issuers held by U.S. residents. The resulting reduction 
    in the expense, time and effort of making such offerings will benefit 
    U.S. security holders. These persons normally are excluded from such 
    offerings. Entities that wish to extend these offers to U.S. security 
    holders also will benefit because it will be cheaper for them to comply 
    with U.S. securities laws and easier to make offers to U.S. security 
    holders.
        The adopted rules are limited to tender offers and exchange offers 
    for the securities of foreign private issuers. But both foreign and 
    domestic bidders, whatever their size, are eligible to use these 
    exemptions. Only foreign private issuers are eligible to use the 
    exemption for rights offerings. Small entities can rely on the adopted 
    tender and exchange offer exemptions on the same basis as larger 
    entities, so long as they meet the conditions for relying on them.
        We know of approximately 836 Exchange Act reporting companies that 
    are not investment companies that currently satisfy the definition of 
    ``small business'' under Rule 0-10. There are approximately 320 
    investment companies that satisfy the ``small business'' definition. We 
    have no data to determine how many reporting or non-reporting small 
    businesses may actually rely on the rules, or may otherwise be affected 
    by the rules. However, we believe that the rules will result in a 
    substantial savings to entities (both small and large) that qualify for 
    the exemptions. Qualifying entities under the Tier I and Securities Act 
    exemptions will not have to comply with the tender offer and 
    registration requirements of the U.S. securities laws.
        The FRFA notes that the adopted rules will eliminate certain 
    existing reporting requirements for entities conducting an exempt 
    tender or exchange offer. Specifically, an acquiror under Tier I will 
    not need to file Schedule TO. Further, in a rights or exchange offer, 
    an acquiror will not need to register the securities being issued. In 
    place of these filing obligations, an acquiror relying on the new 
    exemptions will submit, rather than file, Form CB. Form CB is merely a 
    cover sheet that incorporates the offering documents sent to security 
    holders pursuant to the requirements of the country in which the issuer 
    is incorporated. Also, a non-U.S. acquiror will file a Form F-X 
    contemporaneously with the Form CB to appoint an agent for service of 
    process in the United States. We believe Form CB and Form F-X are 
    significantly less burdensome to prepare than a Schedule TO or a 
    registration statement.
        As stated in the analysis, we considered several alternatives to 
    the rules adopted today, including:
         The Commission considered requiring that offerors deliver 
    rights offering materials to U.S. investors, even if those materials 
    were only published overseas, as proposed. In order to encourage 
    foreign private issuers to include U.S. security holders in rights 
    offerings, the rules adopted today provide that for both rights 
    offerings and exchange offers, the offeror must disseminate any 
    informational documents to U.S. holders, in English, on a comparable 
    basis to that provided to security holders in the offeror's home 
    jurisdiction. If the offeror disseminates by publication in its home 
    jurisdiction, the offeror must publish the information in the United 
    States in a manner reasonably calculated to inform U.S. holders of the 
    offer. We were persuaded by those commenters who indicated that 
    offerors will not be inclined to avail themselves of Rules 801 or 802 
    if burdensome documentation and dissemination requirements are imposed 
    by the U.S. rules. This will minimize the burden on offerors in rights 
    offerings, including small businesses.
         The Commission considered whether to require a valuation 
    opinion in all cases where an offeror chooses to offer U.S. security 
    holders cash in lieu of the securities, cash and other consideration 
    offered to non-U.S. security holders in reliance on the Tier I 
    exemption. We decided to only require a valuation opinion where the 
    offered securities are not ``margin securities'' within the meaning of 
    Regulation T in order to minimize the burden on offerors, including 
    small businesses.
         The Commission considered whether to use a beneficial 
    ownership test in determining U.S. ownership. In reviewing the method 
    of determining U.S. ownership, we were persuaded by those commenters 
    that suggested that a beneficial ownership test would create a 
    substantial burden for companies that trade in many different markets, 
    and that widely-held companies would have to invest significant effort 
    and expense in determining beneficial ownership in many jurisdictions 
    where the likelihood of finding U.S. owners is small. In order to 
    address these concerns, we limited the application of the ``look 
    through'' provisions of Rule 12g3-2(a) to voting securities held of 
    record (1) in the United States, (2) in the issuer's home jurisdiction, 
    and (3) in the primary trading market for the issuer's securities if 
    different from the issuer's home jurisdiction. This modification to the 
    test should reduce the burden on companies, including small businesses, 
    while still producing a reasonably accurate picture of whether U.S. 
    ownership exceeds the specified thresholds.
         The Commission considered permitting registration of 
    securities issued in rights offering and exchange offers to be based on 
    home country documents. However, the Commission determined not to 
    repropose a home-country based registration system because the 
    disclosure and accounting standards of foreign jurisdictions are not 
    always consistent with the level of prospectus disclosure expected in a 
    registered offer under the Securities Act. Further, a registration-
    based exemption would lead to a periodic reporting obligation that 
    small entities might find burdensome.
        The analysis also indicates that the rules and forms being adopted 
    today do not duplicate or conflict with any existing federal rule 
    provisions.
        We requested but received no comments on the Initial Regulatory 
    Flexibility Analysis prepared in connection with the proposing release. 
    A copy of the FRFA may be obtained by
    
    [[Page 61400]]
    
    contacting Laura Badian, in the Office of Mergers and Acquisitions, 
    Division of Corporation Finance, Securities and Exchange Commission, 
    450 Fifth Street, NW., Washington, DC. 20549, at (202) 942-2920.
    
    VII. Statutory Basis and Text of Amendments
    
        We are adopting these revisions pursuant to sections 3(b), 7, 8, 
    10, 19 and 28 of the Securities Act, sections 12, 13, 14, 23 and 36 of 
    the Exchange Act, and section 304 of the Trust Indenture Act.
    
    List of Subjects
    
    17 CFR Part 200
    
        Authority delegations (Government agencies).
    
    17 CFR Parts 230, 239, 240, 249 and 260
    
        Reporting and recordkeeping requirements, Securities.
    
    Final Rule
    
        In accordance with the foregoing, we are amending Title 17, Chapter 
    II of the Code of Federal Regulations as follows:
    
    PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
    REQUESTS
    
        1. The authority citation for part 200 continues to read in part as 
    follows:
    
        Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 78mm, 79t, 
    77sss, 80a-37, 80b-11, unless otherwise noted.
    * * * * *
        2. By amending Sec. 200.30-1 by adding paragraph (e)(16) to read as 
    follows:
    
    
    Sec. 200.30-1  Delegation of authority to Director of Division of 
    Corporation Finance.
    
    * * * * *
        (e) * * *
        (16) To grant requests for exemptions from:
        (i) Tender offer provisions of sections 13(e) and 14(d)(1) through 
    14(d)(7) of the Act (15 U.S.C. 78m(e) and 78n(d)(1) through 78n(d)(7)), 
    Rule 13e-3 (Sec. 240.13e-3 of this chapter) and Rule 13e-4 
    (Sec. 240.13e-4 of this chapter), Regulation 14D (Secs. 240.14d-1 
    through 240.14d-11 of this chapter) and Schedules 13E-3, TO, and 14D-9 
    (Secs. 240.13e-100, 240.14d-100 and 240.14d-101 of this chapter) 
    thereunder, pursuant to Sections 14(d)(5), 14(d)(8)(C) and 36(a) of the 
    Act (15 U.S.C. 78n(d)(5), 78(d)(8)(C), and 78mm(a)); and
        (ii) The tender offer provisions of Rules 14e-1, 14e-2 and 14e-5 of 
    Regulation 14E (Secs. 240.14e-1, 240.14e-2 and 240.14e-5 of this 
    chapter) pursuant to section 36(a) of the Act (15 U.S.C. 78mm(a)).
    * * * * *
        3. By amending Sec. 200.30-3 by adding paragraph (a)(68) to read as 
    follows:
    
    
    Sec. 200.30-3  Delegation of authority to Director of Division of 
    Market Regulation.
    
    * * * * *
        (a) * * *
        (68) Pursuant to Section 36(a) of the Act, 15 U.S.C. 78mm(a), to 
    grant requests for exemptions from the tender offer provisions of Rule 
    14e-1 of Regulation 14E (Sec. 240.14e-1 of this chapter).
    * * * * *
    
    PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
    
        4. The authority citation for part 230 continues to read in part as 
    follows:
    
        Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77r, 77s, 77sss, 
    78c, 78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-24, 80a-
    28, 80-29, 80a-30, and 80a-37, unless otherwise noted.
    
    * * * * *
        5. By amending Sec. 230.144 as follows:
        a. By removing the word ``and'' at the end of paragraph (a)(3)(iv),
        b. Removing the period and adding in its place ``;'' at the end of 
    paragraph (a)(3)(v), and
        c. Adding paragraphs (a)(3)(vi) and (vii) to read as follows:
    
    
    Sec. 230.144  Persons deemed not to be engaged in a distribution and 
    therefore not underwriters.
    
    * * * * *
        (a) * * *
        (3) * * *
        (vi) Securities acquired in a transaction made under Sec. 230.801 
    to the same extent and proportion that the securities held by the 
    security holder of the class with respect to which the rights offering 
    was made were as of the record date for the rights offering 
    ``restricted securities'' within the meaning of this paragraph (a)(3); 
    and
        (vii) Securities acquired in a transaction made under Sec. 230.802 
    to the same extent and proportion that the securities that were 
    tendered or exchanged in the exchange offer or business combination 
    were ``restricted securities'' within the meaning of this paragraph 
    (a)(3).
    * * * * *
        6. By adding Secs. 230.800 through 230.802 and an undesignated 
    center heading to read as follows:
    
    Exemptions for Cross-Border Rights Offerings, Exchange Offers and 
    Business Combinations
    
    General Notes to Secs. 230.800, 230.801 and 230.802
    
        1. Sections 230.801 and 230.802 relate only to the applicability 
    of the registration provisions of the Act (15 U.S.C. 77e) and not to 
    the applicability of the anti-fraud, civil liability or other 
    provisions of the federal securities laws.
        2. The exemptions provided by Sec. 230.801 and Sec. 230.802 are 
    not available for any securities transaction or series of 
    transactions that technically complies with Sec. 230.801 and 
    Sec. 230.802 but are part of a plan or scheme to evade the 
    registration provisions of the Act.
        3. An issuer who relies on Sec. 230.801 or an offeror who relies 
    on Sec. 230.802 must still comply with the securities registration 
    or broker-dealer registration requirements of the Securities 
    Exchange Act of 1934 (15 U.S.C. 78a et seq.) and any other 
    applicable provisions of the federal securities laws.
        4. An issuer who relies on Sec. 230.801 or an offeror who relies 
    on Sec. 230.802 must still comply with any applicable state laws 
    relating to the offer and sale of securities.
        5. Attempted compliance with Sec. 230.801 or Sec. 230.802 does 
    not act as an exclusive election; an issuer making an offer or sale 
    of securities in reliance on Sec. 230.801 or Sec. 230.802 may also 
    rely on any other applicable exemption from the registration 
    requirements of the Act.
        6. Section 230.801 and Sec. 230.802 provide exemptions only for 
    the issuer of the securities and not for any affiliate of that 
    issuer or for any other person for resales of the issuer's 
    securities. These sections provide exemptions only for the 
    transaction in which the issuer or other person offers or sells the 
    securities, not for the securities themselves. Securities acquired 
    in a Sec. 230.801 or Sec. 230.802 transaction may be resold in the 
    United States only if they are registered under the Act or an 
    exemption from registration is available.
        7. Unregistered offers and sales made outside the United States 
    will not affect contemporaneous offers and sales made in compliance 
    with Sec. 230.801 or Sec. 230.802. A transaction that complies with 
    Sec. 230.801 or Sec. 230.802 will not be integrated with offerings 
    exempt under other provisions of the Act, even if both transactions 
    occur at the same time.
        8. Securities acquired in a rights offering under Sec. 230.801 
    are ``restricted securities'' within the meaning of 
    Sec. 230.144(a)(3) to the same extent and proportion that the 
    securities held by the security holder as of the record date for the 
    rights offering were restricted securities. Likewise, securities 
    acquired in an exchange offer or business combination subject to 
    Sec. 230.802 are ``restricted securities'' within the meaning of 
    Sec. 230.144(a)(3) to the same extent and proportion that the 
    securities tendered or exchanged by the security holder in that 
    transaction were restricted securities.
        9. Section 230.801 does not apply to a rights offering by an 
    investment company registered or required to be registered under the 
    Investment Company Act of 1940 (15
    
    [[Page 61401]]
    
    U.S.C. 80a-1 et seq.), other than a registered closed-end investment 
    company. Section 230.802 does not apply to exchange offers or 
    business combinations by an investment company registered or 
    required to be registered under the Investment Company Act of 1940 
    (15 U.S.C. 80a-1 et seq.), other than a registered closed-end 
    investment company.
    
    
    Sec. 230.800  Definitions for Secs. 230.800, 230.801 and 230.802.
    
        The following definitions apply in Secs. 230.800, 230.801 and 
    230.802.
        (a) Business combination. Business combination means a statutory 
    amalgamation, merger, arrangement or other reorganization requiring the 
    vote of security holders of one or more of the participating companies. 
    It also includes a statutory short form merger that does not require a 
    vote of security holders.
        (b) Equity security. Equity security means the same as in 
    Sec. 240.3a11-1 of this chapter, but for purposes of this section only 
    does not include:
        (1) Any debt security that is convertible into an equity security, 
    with or without consideration;
        (2) Any debt security that includes a warrant or right to subscribe 
    to or purchase an equity security;
        (3) Any such warrant or right; or
        (4) Any put, call, straddle, or other option or privilege that 
    gives the holder the option of buying or selling a security but does 
    not require the holder to do so.
        (c) Exchange offer. Exchange offer means a tender offer in which 
    securities are issued as consideration.
        (d) Foreign private issuer. Foreign private issuer means the same 
    as in Sec. 230.405 of Regulation C.
        (e) Foreign subject company. Foreign subject company means any 
    foreign private issuer whose securities are the subject of the exchange 
    offer or business combination.
        (f) Home jurisdiction. Home jurisdiction means both the 
    jurisdiction of the foreign subject company's (or in the case of a 
    rights offering, the foreign private issuer's) incorporation, 
    organization or chartering and the principal foreign market where the 
    foreign subject company's (or in the case of a rights offering, the 
    issuer's) securities are listed or quoted.
        (g) Rights offering. Rights offering means offers and sales for 
    cash of equity securities where:
        (1) The issuer grants the existing security holders of a particular 
    class of equity securities (including holders of depositary receipts 
    evidencing those securities) the right to purchase or subscribe for 
    additional securities of that class; and
        (2) The number of additional shares an existing security holder may 
    purchase initially is in proportion to the number of securities he or 
    she holds of record on the record date for the rights offering. If an 
    existing security holder holds depositary receipts, the proportion must 
    be calculated as if the underlying securities were held directly.
        (h) U.S. holder. U.S. holder means any security holder resident in 
    the United States. To determine the percentage of outstanding 
    securities held by U.S. holders:
        (1) Calculate percentage of outstanding securities held by U.S. 
    holders as of the record date for a rights offering, or 30 days before 
    the commencement of an exchange offer or the solicitation for a 
    business combination.
        (2) Include securities underlying American Depositary Shares 
    convertible or exchangeable into the securities that are the subject of 
    the tender offer when calculating the number of subject securities 
    outstanding, as well as the number held by U.S. holders. Exclude from 
    the calculations other types of securities that are convertible or 
    exchangeable into the securities that are the subject of the exchange 
    offer, business combination or rights offering, such as warrants, 
    options and convertible securities. Exclude from those calculations 
    securities held by persons who hold more than 10 percent of the subject 
    securities in an exchange offer, business combination or rights 
    offering, or that are held by the offeror in an exchange offer or 
    business combination;
        (3) Use the method of calculating record ownership in Rule 12g3-
    2(a) under the Exchange Act (Sec. 240.12g3-2(a) of this chapter), 
    except that your inquiry as to the amount of securities represented by 
    accounts of customers resident in the United States may be limited to 
    brokers, dealers, banks and other nominees located in the United 
    States, the subject company's jurisdiction of incorporation or that of 
    each participant in a business combination, and the jurisdiction that 
    is the primary trading market for the subject securities, if different 
    from the subject company's jurisdiction of incorporation;
        (4) If, after reasonable inquiry, you are unable to obtain 
    information about the amount of securities represented by accounts of 
    customers resident in the United States, you may assume, for purposes 
    of this provision, that the customers are residents of the jurisdiction 
    in which the nominee has its principal place of business.
        (5) Count securities as owned by U.S. holders when publicly filed 
    reports of beneficial ownership or information that is otherwise 
    provided to you indicates that the securities are held by U.S. 
    residents.
        (i) United States. United States means the United States of 
    America, its territories and possessions, any State of the United 
    States, and the District of Columbia.
    
    
    Sec. 230.801  Exemption in connection with a rights offering.
    
        A rights offering is exempt from the provisions of Section 5 of the 
    Act (15 U.S.C. 77e), so long as the following conditions are satisfied:
        (a) Conditions.--(1) Eligibility of issuer. The issuer is a foreign 
    private issuer on the date the securities are first offered to U.S. 
    holders.
        (2) Limitation on U.S. ownership. U.S. holders hold no more than 10 
    percent of the outstanding class of securities that is the subject of 
    the rights offering (as determined under the definition of ``U.S. 
    holder'' in Sec. 230.800(h)).
        (3) Equal treatment. The issuer permits U.S. holders to participate 
    in the rights offering on terms at least as favorable as those offered 
    the other holders of the securities that are the subject of the offer. 
    The issuer need not, however, extend the rights offering to security 
    holders in those states or jurisdictions that require registration or 
    qualification.
        (4) Informational documents. (i) If the issuer publishes or 
    otherwise disseminates an informational document to the holders of the 
    securities in connection with the rights offering, the issuer must 
    furnish that informational document, including any amendments thereto, 
    in English, to the Commission on Form CB (Sec. 239.800 of this chapter) 
    by the first business day after publication or dissemination. If the 
    issuer is a foreign company, it must also file a Form F-X (Sec. 239.42 
    of this chapter) with the Commission at the same time as the submission 
    of Form CB to appoint an agent for service in the United States.
        (ii) The issuer must disseminate any informational document to U.S. 
    holders, including any amendments thereto, in English, on a comparable 
    basis to that provided to security holders in the home jurisdiction.
        (iii) If the issuer disseminates by publication in its home 
    jurisdiction, the issuer must publish the information in the United 
    States in a manner reasonably calculated to inform U.S. holders of the 
    offer.
        (5) Eligibility of securities. The securities offered in the rights 
    offering are equity securities of the same class as the securities held 
    by the offerees in the
    
    [[Page 61402]]
    
    United States directly or through American Depositary Receipts.
        (6) Limitation on transferability of rights. The terms of the 
    rights prohibit transfers of the rights by U.S. holders except in 
    accordance with Regulation S (Sec. 230.901 through Sec. 230.905).
        (b) Legends. The following legend or an equivalent statement in 
    clear, plain language, to the extent applicable, appears on the cover 
    page or other prominent portion of any informational document the 
    issuer disseminates to U.S. holders:
    
        This rights offering is made for the securities of a foreign 
    company. The offer is subject to the disclosure requirements of a 
    foreign country that are different from those of the United States. 
    Financial statements included in the document, if any, have been 
    prepared in accordance with foreign accounting standards that may 
    not be comparable to the financial statements of United States 
    companies.
        It may be difficult for you to enforce your rights and any claim 
    you may have arising under the federal securities laws, since the 
    issuer is located in a foreign country, and some or all of its 
    officers and directors may be residents of a foreign country. You 
    may not be able to sue the foreign company or its officers or 
    directors in a foreign court for violations of the U.S. securities 
    laws. It may be difficult to compel a foreign company and its 
    affiliates to subject themselves to a U.S. court's judgment.
    
    
    Sec. 230.802  Exemption for offerings in connection with an exchange 
    offer or business combination for the securities of foreign private 
    issuers.
    
        Offers and sales in any exchange offer for a class of securities of 
    a foreign private issuer, or in any exchange of securities for the 
    securities of a foreign private issuer in any business combination, are 
    exempt from the provisions of section 5 of the Act (15 U.S.C. 77e), if 
    they satisfy the following conditions:
        (a) Conditions to be met.--(1) Limitation on U.S. ownership. Except 
    in the case of an exchange offer or business combination that is 
    commenced during the pendency of a prior exchange offer or business 
    combination made in reliance on this paragraph, U.S. holders of the 
    foreign subject company must hold no more than 10 percent of the 
    securities that are the subject of the exchange offer or business 
    combination (as determined under the definition of ``U.S. holder'' in 
    Sec. 230.800(h)). In the case of a business combination in which the 
    securities are to be issued by a successor registrant, U.S. holders may 
    hold no more than 10 percent of the class of securities of the 
    successor registrant, as if measured immediately after completion of 
    the business combination.
        (2) Equal treatment. The issuer must permit U.S. holders to 
    participate in the exchange offer or business combination on terms at 
    least as favorable as those offered any other holder of the subject 
    securities. The issuer, however, need not extend the offer to security 
    holders in those states or jurisdictions that require registration or 
    qualification, except that the issuer must offer the same cash 
    alternative to security holders in any such state that it has offered 
    to security holders in any other state or jurisdiction.
        (3) Informational documents. (i) If the issuer publishes or 
    otherwise disseminates an informational document to the holders of the 
    subject securities in connection with the exchange offer or business 
    combination, the issuer must furnish that informational document, 
    including any amendments thereto, in English, to the Commission on Form 
    CB (Sec. 239.800 of this chapter) by the first business day after 
    publication or dissemination. If the bidder is a foreign company, it 
    must also file a Form F-X (Sec. 239.42 of this chapter) with the 
    Commission at the same time as the submission of Form CB to appoint an 
    agent for service in the United States.
        (ii) The issuer must disseminate any informational document to U.S. 
    holders, including any amendments thereto, in English, on a comparable 
    basis to that provided to security holders in the foreign subject 
    company's home jurisdiction.
        (iii) If the issuer disseminates by publication in its home 
    jurisdiction, the issuer must publish the information in the United 
    States in a manner reasonably calculated to inform U.S. holders of the 
    offer.
        (b) Legends. The following legend or an equivalent statement in 
    clear, plain language, to the extent applicable, must be included on 
    the cover page or other prominent portion of any informational document 
    the offeror publishes or disseminates to U.S. holders:
    
        This exchange offer or business combination is made for the 
    securities of a foreign company. The offer is subject to disclosure 
    requirements of a foreign country that are different from those of 
    the United States. Financial statements included in the document, if 
    any, have been prepared in accordance with foreign accounting 
    standards that may not be comparable to the financial statements of 
    United States companies.
        It may be difficult for you to enforce your rights and any claim 
    you may have arising under the federal securities laws, since the 
    issuer is located in a foreign country, and some or all of its 
    officers and directors may be residents of a foreign country. You 
    may not be able to sue a foreign company or its officers or 
    directors in a foreign court for violations of the U.S. securities 
    laws. It may be difficult to compel a foreign company and its 
    affiliates to subject themselves to a U.S. court's judgment.
        You should be aware that the issuer may purchase securities 
    otherwise than under the exchange offer, such as in open market or 
    privately negotiated purchases.
    
        (c) Presumption for certain offers. For exchange offers conducted 
    by persons other than the issuer of the subject securities or its 
    affiliates, the issuer of the subject securities will be presumed to be 
    a foreign private issuer and U.S. holders will be presumed to hold 10 
    percent or less of the outstanding subject securities, unless:
        (1) The exchange offer is made pursuant to an agreement with the 
    issuer of the subject securities;
        (2) The aggregate trading volume of the subject class of securities 
    on all national securities exchanges in the United States, on the 
    Nasdaq market or on the OTC market, as reported to the NASD, over the 
    12-calendar-month period ending 30 days before commencement of the 
    offer, exceeds 10 percent of the worldwide aggregate trading volume of 
    that class of securities over the same period;
        (3) The most recent annual report or annual information filed or 
    submitted by the issuer with securities regulators of the home 
    jurisdiction or with the Commission indicates that U.S. holders hold 
    more than 10 percent of the outstanding subject class of securities; or
        (4) The offeror knows, or has reason to know, that U.S. ownership 
    exceeds 10 percent of the subject securities.
    
    PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
    
        7. The authority citation for part 239 continues to read, in part, 
    as follows:
    
        Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77sss, 78c, 
    78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 
    79l, 79m, 79n, 79q, 79t, 80a-8, 80a-24, 80a-29, 80a-30 and 80a-37, 
    unless otherwise noted.
    * * * * *
        8. By amending Sec. 239.42 as follows:
        a. By revising the section heading;
        b. At the end of paragraph (e), removing the word ``and'';
        c. At the end of paragraph (f), removing the period and adding ``; 
    and''; and
        d. By adding paragraph (g).
        The revisions to Sec. 239.42 read as follows:
    
    [[Page 61403]]
    
    Sec. 239.42  Form F-X, for appointment of agent for service of process 
    and undertaking for issuers registering securities on Form F-8, F-9, F-
    10, or F-80 (Secs. 239.38, 239.39, 239.40, or 239.41 of this chapter) 
    or registering securities or filing periodic reports on Form 40-F 
    (Sec. 249.240f of this chapter), or by any issuer or other non-U.S. 
    person filing tender offer documents on Schedule 13E-4F, 14D-1F or 14D-
    9F (Secs. 240.13e-102, 240.14d-102 or 240.14d-103 of this chapter), by 
    any non-U.S. person acting as trustee with respect to securities 
    registered on Form F-7 (Sec. 239.37 of this chapter), F-8, F-9, F-10, 
    F-80 or SB-2 (Sec. 239.10 of this chapter), or by a Canadian issuer 
    qualifying an offering statement pursuant to Regulation A (Sec. 230.251 
    et seq.) on Form 1-A (Sec. 239.90 of this chapter), or registering 
    securities on Form SB-2, or by any non-U.S. issuer providing Form CB to 
    the Commission in connection with a tender offer, rights offering or 
    business combination.
    
    * * * * *
        (g) By any non-U.S. issuer providing Form CB to the Commission in 
    connection with a tender offer, rights offering or business 
    combination.
    
    
    Sec. 239.42  (Form F-X) [amended]
    
        8a. By amending Form F-X (referenced in Sec. 239.42 of this 
    chapter) General Instruction 1 by adding paragraph (g) and revising 
    Item II.F.(b) to read as follows:
        [Note: Form F-X does not and this amendment will not appear in 
    the Code of Federal Regulations.]
    
    Form F-X
    
    General Instructions
    
        1. Form F-X must be filed with the Commission:
    * * * * *
        (g) by any non-U.S. issuer providing Form CB to the Commission 
    in connection with a tender offer, rights offering or business 
    combination.
    * * * * *
        II. * * *
        F. * * *
        (b) The use of Form F-8, Form F-80 or Form CB stipulates and agrees 
    to appoint a successor agent for service of process and file an amended 
    Form F-X if the Filer discharges the Agent or the Agent is unwilling or 
    unable to accept service on behalf of the Filer at any time until six 
    years have elapsed following the effective date of the latest amendment 
    to such Form F-8, Form F-80 or Form CB;
    * * * * *
        9. By adding Sec. 239.800 and Form CB to read as follows:
    
    
    Sec. 239.800  Form CB, report of sales of securities in connection with 
    an exchange offer or a rights offering.
    
        This Form is used to report sales of securities in connection with 
    a rights offering in reliance upon Sec. 230.801 of this chapter and to 
    report sales of securities in connection with an exchange offer or 
    business combination in reliance upon Sec. 230.802 of this chapter.
    
        Note: Form CB does not appear in the Code of Federal 
    Regulations. Form CB is attached as Appendix A.
    
    PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
    1934
    
        10. 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, 78j-1, 78k, 78k-
    1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 
    78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 
    80b-11, unless otherwise noted.
    * * * * *
        11. By amending Sec. 240.13e-3 by adding paragraph (g)(6) to read 
    as follows:
    
    
    Sec. 240.13e-3  Going private transactions by certain issuers or their 
    affiliates.
    
    * * * * *
        (g) Exceptions. * * *
    * * * * *
        (6) Any tender offer or business combination made in compliance 
    with Sec. 230.802 of this chapter, Sec. 240.13e-4(h)(8) or 
    Sec. 240.14d-1(c).
        12. By amending Sec. 240.13e-4 as follows:
        a. By removing the word ``or'' at the end of paragraph (h)(7);
        b. Redesignating paragraph (h)(8) as (h)(9); and to
        c. Adding new paragraphs (h)(8) and (i) to read as follows:
    
    
    Sec. 240.13e-4  Tender offers by issuers.
    
    * * * * *
        (h) * * *
        (8) Cross-border tender offers (Tier I). Any issuer tender offer 
    (including any exchange offer) where the issuer is a foreign private 
    issuer as defined in Sec. 240.3b-4 if the following conditions are 
    satisfied.
        (i) Except in the case of an issuer tender offer which is commenced 
    during the pendency of a tender offer made by a third party in reliance 
    on Sec. 240.14d-1(c), U.S. holders do not hold more than 10 percent of 
    the class of securities sought in the offer (as determined under 
    Instruction 2 to paragraph (h)(8) and paragraph (i) of this section); 
    and
        (ii) The issuer or affiliate must permit U.S. holders to 
    participate in the offer on terms at least as favorable as those 
    offered any other holder of the same class of securities that is the 
    subject of the offer; however:
        (A) Registered exchange offers. If the issuer or affiliate offers 
    securities registered under the Securities Act of 1933 (15 U.S.C. 77a 
    et seq.), the issuer or affiliate need not extend the offer to security 
    holders in those states or jurisdictions that prohibit the offer or 
    sale of the securities after the issuer or affiliate has made a good 
    faith effort to register or qualify the offer and sale of securities in 
    that state or jurisdiction, except that the issuer or affiliate must 
    offer the same cash alternative to security holders in any such state 
    or jurisdiction that it has offered to security holders in any other 
    state or jurisdiction.
        (B) Exempt exchange offers. If the issuer or affiliate offers 
    securities exempt from registration under Sec. 230.802 of this chapter, 
    the issuer or affiliate need not extend the offer to security holders 
    in those states or jurisdictions that require registration or 
    qualification, except that the issuer or affiliate must offer the same 
    cash alternative to security holders in any such state or jurisdiction 
    that it has offered to security holders in any other state or 
    jurisdiction.
        (C) Cash only consideration. The issuer or affiliate may offer U.S. 
    holders cash only consideration for the tender of the subject 
    securities, notwithstanding the fact that the issuer or affiliate is 
    offering security holders outside the United States a consideration 
    that consists in whole or in part of securities of the issuer or 
    affiliate, if the issuer or affiliate has a reasonable basis for 
    believing that the amount of cash is substantially equivalent to the 
    value of the consideration offered to non-U.S. holders, and either of 
    the following conditions are satisfied:
        (1) The offered security is a ``margin security'' within the 
    meaning of Regulation T (12 CFR 220.2) and the issuer or affiliate 
    undertakes to provide, upon the request of any U.S. holder or the 
    Commission staff, the closing price and daily trading volume of the 
    security on the principal trading market for the security as of the 
    last trading day of each of the six months preceding the announcement 
    of the offer and each of the trading days thereafter; or
        (2) If the offered security is not a ``margin security'' within the 
    meaning of Regulation T (12 CFR 220.2), the issuer or affiliate 
    undertakes to provide, upon the request of any U.S. holder or the 
    Commission staff, an opinion of an independent expert stating that the 
    cash consideration offered to U.S. holders is substantially equivalent 
    to the value of
    
    [[Page 61404]]
    
    the consideration offered security holders outside the United States.
        (D) Disparate tax treatment. If the issuer or affiliate offers 
    ``loan notes'' solely to offer sellers tax advantages not available in 
    the United States and these notes are neither listed on any organized 
    securities market nor registered under the Securities Act of 1933 (15 
    U.S.C. 77a et seq.), the loan notes need not be offered to U.S. 
    holders.
        (iii) Informational documents. (A) If the issuer or affiliate 
    publishes or otherwise disseminates an informational document to the 
    holders of the securities in connection with the issuer tender offer 
    (including any exchange offer), the issuer or affiliate must furnish 
    that informational document, including any amendments thereto, in 
    English, to the Commission on Form CB (Sec. 249.480 of this chapter) by 
    the first business day after publication or dissemination. If the 
    issuer or affiliate is a foreign company, it must also file a Form F-X 
    (Sec. 239.42 of this chapter) with the Commission at the same time as 
    the submission of Form CB to appoint an agent for service in the United 
    States.
        (B) The issuer or affiliate must disseminate any informational 
    document to U.S. holders, including any amendments thereto, in English, 
    on a comparable basis to that provided to security holders in the home 
    jurisdiction.
        (C) If the issuer or affiliate disseminates by publication in its 
    home jurisdiction, the issuer or affiliate must publish the information 
    in the United States in a manner reasonably calculated to inform U.S. 
    holders of the offer.
        (iv) An investment company registered or required to be registered 
    under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), 
    other than a registered closed-end investment company, may not use this 
    paragraph (h)(8); or
    * * * * *
        (i) Cross-border tender offers (Tier II). Any issuer tender offer 
    (including any exchange offer) that meets the conditions in paragraph 
    (i)(1) of this section shall be entitled to the exemptive relief 
    specified in paragraph (i)(2) of this section provided that such issuer 
    tender offer complies with all the requirements of this section other 
    than those for which an exemption has been specifically provided in 
    paragraph (i)(2) of this section:
        (1) Conditions. (i) The issuer is a foreign private issuer as 
    defined in Sec. 240.3b-4 and is not an investment company registered or 
    required to be registered under the Investment Company Act of 1940 (15 
    U.S.C. 80a-1 et seq.), other than a registered closed-end investment 
    company; and
        (ii) Except in the case of an issuer tender offer which is 
    commenced during the pendency of a tender offer made by a third party 
    in reliance on Sec. 240.14d-1(d), U.S. holders do not hold more than 40 
    percent of the class of securities sought in the offer (as determined 
    under Instruction 2 to paragraphs (h)(8) and (i) of this section).
        (2) Exemptions. The issuer tender offer shall comply with all 
    requirements of this section other than the following:
        (i) Equal treatment--loan notes. If the issuer or affiliate offers 
    loan notes solely to offer sellers tax advantages not available in the 
    United States and these notes are neither listed on any organized 
    securities market nor registered under the Securities Act (15 U.S.C. 
    77a et seq.), the loan notes need not be offered to U.S. holders, 
    notwithstanding paragraph (f)(8) and (h)(9) of this section.
        (ii) Equal treatment--separate U.S. and foreign offers. 
    Notwithstanding the provisions of paragraph (f)(8) of this section, an 
    issuer or affiliate conducting an issuer tender offer meeting the 
    conditions of paragraph (i)(1) of this section may separate the offer 
    into two offers: One offer made only to U.S. holders and another offer 
    made only to non-U.S. holders. The offer to U.S. holders must be made 
    on terms at least as favorable as those offered any other holder of the 
    same class of securities that is the subject of the tender offer.
        (iii) Notice of extensions. Notice of extensions made in accordance 
    with the requirements of the home jurisdiction law or practice will 
    satisfy the requirements of Sec. 240.14e-1(d).
        (iv) Prompt payment. Payment made in accordance with the 
    requirements of the home jurisdiction law or practice will satisfy the 
    requirements of Sec. 240.14e-1(c).
    
        Instructions to paragraph (h)(8) and (i) of this section:
        1. Home jurisdiction means both the jurisdiction of the issuer's 
    incorporation, organization or chartering and the principal foreign 
    market where the issuer's securities are listed or quoted.
        2. U.S. holder means any security holder resident in the United 
    States. To determine the percentage of outstanding securities held 
    by U.S. holders:
        i. Calculate the U.S. ownership as of 30 days before the 
    commencement of the issuer tender offer;
        ii. Include securities underlying American Depositary Shares 
    convertible or exchangeable into the securities that are the subject 
    of the tender offer when calculating the number of subject 
    securities outstanding, as well as the number held by U.S. holders. 
    Exclude from the calculations other types of securities that are 
    convertible or exchangeable into the securities that are the subject 
    of the tender offer, such as warrants, options and convertible 
    securities. Exclude from those calculations securities held by 
    persons who hold more than 10 percent of the subject securities;
        iii. Use the method of calculating record ownership in 
    Sec. 240.12g3-2(a), except that your inquiry as to the amount of 
    securities represented by accounts of customers resident in the 
    United States may be limited to brokers, dealers, banks and other 
    nominees located in the United States, your jurisdiction of 
    incorporation, and the jurisdiction that is the primary trading 
    market for the subject securities, if different than your 
    jurisdiction of incorporation;
        iv. If, after reasonable inquiry, you are unable to obtain 
    information about the amount of securities represented by accounts 
    of customers resident in the United States, you may assume, for 
    purposes of this definition, that the customers are residents of the 
    jurisdiction in which the nominee has its principal place of 
    business; and
        v. Count securities as beneficially owned by residents of the 
    United States as reported on reports of beneficial ownership that 
    are provided to you or publicly filed and based on information 
    otherwise provided to you.
        3. United States. United States means the United States of 
    America, its territories and possessions, any State of the United 
    States, and the District of Columbia.
        4. The exemptions provided by paragraphs (h)(8) and (i) of this 
    section are not available for any securities transaction or series 
    of transactions that technically complies with paragraph (h)(8) or 
    (i) of this section but are part of a plan or scheme to evade the 
    provisions of this section.
    
        13. By amending Sec. 240.14d-1 as follows:
        a. By redesignating paragraphs (c), (d), (e), and (f) as paragraphs 
    (e), (f), (g) and (h);
        b. Removing the reference to ``Sec. 240.14d-1(c)'' in newly 
    redesignated paragraph (f) and adding in its place ``Sec. 240.14d-1(e); 
    and
        c. Adding new paragraphs (c) and (d) and Instructions thereto to 
    read as follows:
    
    
    Sec. 240.14d-1  Scope of and definitions applicable to Regulations 14D 
    and 14E.
    
    * * * * *
        (c) Tier I. Any tender offer for the securities of a foreign 
    private issuer as defined in Sec. 240.3b-4 is exempt from the 
    requirements of sections 14(d)(1) through 14(d)(7) of the Act (15 
    U.S.C. 78n(d)(1) through 78n(d)(7)), Regulation 14D (Sec. 240.14d-1 
    through Sec. 240.14d-10) and Schedules TO (Sec. 240.14d-100) and 14D-9 
    (Sec. 240.14d-101) thereunder, and Sec. 240.14e-1 and Sec. 240.14e-2 of 
    Regulation 14E under the Act if the following conditions are satisfied:
        (1) U.S. ownership limitation. Except in the case of a tender offer 
    which is
    
    [[Page 61405]]
    
    commenced during the pendency of a tender offer made by a prior bidder 
    in reliance on this paragraph or Sec. 240.13e-4(h)(8), U.S. holders do 
    not hold more than 10 percent of the class of securities sought in the 
    offer (as determined under Instruction 2 to paragraphs (c) and (d) of 
    this section).
        (2) Equal treatment. The bidder must permit U.S. holders to 
    participate in the offer on terms at least as favorable as those 
    offered any other holder of the same class of securities that is the 
    subject of the tender offer; however:
        (i) Registered exchange offers. If the bidder offers securities 
    registered under the Securities Act of 1933 (15 U.S.C. 77a et seq.), 
    the bidder need not extend the offer to security holders in those 
    states or jurisdictions that prohibit the offer or sale of the 
    securities after the bidder has made a good faith effort to register or 
    qualify the offer and sale of securities in that state or jurisdiction, 
    except that the bidder must offer the same cash alternative to security 
    holders in any such state or jurisdiction that it has offered to 
    security holders in any other state or jurisdiction.
        (ii) Exempt exchange offers. If the bidder offers securities exempt 
    from registration under Sec. 230.802 of this chapter, the bidder need 
    not extend the offer to security holders in those states or 
    jurisdictions that require registration or qualification, except that 
    the bidder must offer the same cash alternative to security holders in 
    any such state or jurisdiction that it has offered to security holders 
    in any other state or jurisdiction.
        (iii) Cash only consideration. The bidder may offer U.S. holders 
    only a cash consideration for the tender of the subject securities, 
    notwithstanding the fact that the bidder is offering security holders 
    outside the United States a consideration that consists in whole or in 
    part of securities of the bidder, so long as the bidder has a 
    reasonable basis for believing that the amount of cash is substantially 
    equivalent to the value of the consideration offered to non-U.S. 
    holders, and either of the following conditions are satisfied:
        (A) The offered security is a ``margin security'' within the 
    meaning of Regulation T (12 CFR 220.2) and the issuer undertakes to 
    provide, upon the request of any U.S. holder or the Commission staff, 
    the closing price and daily trading volume of the security on the 
    principal trading market for the security as of the last trading day of 
    each of the six months preceding the announcement of the offer and each 
    of the trading days thereafter; or
        (B) If the offered security is not a ``margin security'' within the 
    meaning of Regulation T (12 CFR 220.2) the issuer undertakes to 
    provide, upon the request of any U.S. holder or the Commission staff, 
    an opinion of an independent expert stating that the cash consideration 
    offered to U.S. holders is substantially equivalent to the value of the 
    consideration offered security holders outside the United States.
        (iv) Disparate tax treatment. If the bidder offers loan notes 
    solely to offer sellers tax advantages not available in the United 
    States and these notes are neither listed on any organized securities 
    market nor registered under the Securities Act of 1933 (15 U.S.C. 77a 
    et seq.), the loan notes need not be offered to U.S. holders.
        (3) Informational documents. (i) The bidder must disseminate any 
    informational document to U.S. holders, including any amendments 
    thereto, in English, on a comparable basis to that provided to security 
    holders in the home jurisdiction.
        (ii) If the bidder disseminates by publication in its home 
    jurisdiction, the bidder must publish the information in the United 
    States in a manner reasonably calculated to inform U.S. holders of the 
    offer.
        (iii) In the case of tender offers for securities described in 
    section 14(d)(1) of the Act (15 U.S.C. 78n(d)(1)), if the bidder 
    publishes or otherwise disseminates an informational document to the 
    holders of the securities in connection with the tender offer, the 
    bidder must furnish that informational document, including any 
    amendments thereto, in English, to the Commission on Form CB 
    (Sec. 249.480 of this chapter) by the first business day after 
    publication or dissemination. If the bidder is a foreign company, it 
    must also file a Form F-X (Sec. 239.42 of this chapter) with the 
    Commission at the same time as the submission of Form CB to appoint an 
    agent for service in the United States.
        (4) Investment companies. The issuer of the securities that are the 
    subject of the tender offer is not an investment company registered or 
    required to be registered under the Investment Company Act of 1940 (15 
    U.S.C. 80a-1 et seq.), other than a registered closed-end investment 
    company.
        (d) Tier II. A person conducting a tender offer (including any 
    exchange offer) that meets the conditions in paragraph (d)(1) of this 
    section shall be entitled to the exemptive relief specified in 
    paragraph (d)(2) of this section provided that such tender offer 
    complies with all the requirements of this section other than those for 
    which an exemption has been specifically provided in paragraph (d)(2) 
    of this section:
        (1) Conditions. (i) The subject company is a foreign private issuer 
    as defined in Sec. 240.3b-4 and is not an investment company registered 
    or required to be registered under the Investment Company Act of 1940 
    (15 U.S.C. 80a-1 et seq.), other than a registered closed-end 
    investment company;
        (ii) Except in the case of a tender offer which is commenced during 
    the pendency of a tender offer made by a prior bidder in reliance on 
    this paragraph or Sec. 240.13e-4(i), U.S. holders do not hold more than 
    40 percent of the class of securities sought in the offer (as 
    determined under Instruction 2 to paragraphs (c) and (d) of this 
    section); and
        (iii) The bidder complies with all applicable U.S. tender offer 
    laws and regulations, other than those for which an exemption has been 
    provided for in paragraph (d)(2) of this section.
        (2) Exemptions.--(i) Equal treatment--loan notes. If the bidder 
    offers loan notes solely to offer sellers tax advantages not available 
    in the United States and these notes are neither listed on any 
    organized securities market nor registered under the Securities Act of 
    1933 (15 U.S.C. 77a et seq.), the loan notes need not be offered to 
    U.S. holders, notwithstanding Sec. 240.14d-10.
        (ii) Equal treatment--separate U.S. and foreign offers. 
    Notwithstanding the provisions of Sec. 240.14d-10, a bidder conducting 
    a tender offer meeting the conditions of paragraph (d)(1) of this 
    section may separate the offer into two offers: one offer made only to 
    U.S. holders and another offer made only to non-U.S. holders. The offer 
    to U.S. holders must be made on terms at least as favorable as those 
    offered any other holder of the same class of securities that is the 
    subject of the tender offers.
        (iii) Notice of extensions. Notice of extensions made in accordance 
    with the requirements of the home jurisdiction law or practice will 
    satisfy the requirements of Sec. 240.14e-1(d).
        (iv) Prompt payment. Payment made in accordance with the 
    requirements of the home jurisdiction law or practice will satisfy the 
    requirements of Sec. 240.14e-1(c).
        (v) Subsequent offering period/Withdrawal rights. A bidder will 
    satisfy the announcement and prompt payment requirements of 
    Sec. 240.14d-11(d), if the bidder announces the results of the tender 
    offer, including the approximate number of securities deposited to 
    date, and pays for tendered securities in accordance with the 
    requirements of the
    
    [[Page 61406]]
    
    home jurisdiction law or practice and the subsequent offering period 
    commences immediately following such announcement. Notwithstanding 
    section 14(d)(5) of the Act (15 U.S.C. 78n(d)(5)), the bidder need not 
    extend withdrawal rights following the close of the offer and prior to 
    the commencement of the subsequent offering period.
    
        Instructions to paragraphs (c) and (d):
        1. Home jurisdiction means both the jurisdiction of the subject 
    company's incorporation, organization or chartering and the 
    principal foreign market where the subject company's securities are 
    listed or quoted.
        2. U.S. holder means any security holder resident in the United 
    States. Except as otherwise provided in Instruction 3 below, to 
    determine the percentage of outstanding securities held by U.S. 
    holders:
        i. Calculate the U.S. ownership as of 30 days before the 
    commencement of the tender offer;
        ii. Include securities underlying American Depositary Shares 
    convertible or exchangeable into the securities that are the subject 
    of the tender offer when calculating the number of subject 
    securities outstanding, as well as the number held by U.S. holders. 
    Exclude from the calculations other types of securities that are 
    convertible or exchangeable into the securities that are the subject 
    of the tender offer, such as warrants, options and convertible 
    securities. Exclude from those calculations securities held by 
    persons who hold more than 10 percent of the subject securities, or 
    that are held by the bidder;
        iii. Use the method of calculating record ownership in Rule 
    12g3-2(a) under the Act (Sec. 240.12g3-2(a) of this chapter), except 
    that your inquiry as to the amount of securities represented by 
    accounts of customers resident in the United States may be limited 
    to brokers, dealers, banks and other nominees located in the United 
    States, the subject company's jurisdiction of incorporation or that 
    of each participant in a business combination, and the jurisdiction 
    that is the primary trading market for the subject securities, if 
    different than the subject company's jurisdiction of incorporation;
        iv. If, after reasonable inquiry, you are unable to obtain 
    information about the amount of securities represented by accounts 
    of customers resident in the United States, you may assume, for 
    purposes of this definition, that the customers are residents of the 
    jurisdiction in which the nominee has its principal place of 
    business; and
        v. Count securities as beneficially owned by residents of the 
    United States as reported on reports of beneficial ownership that 
    are provided to you or publicly filed and based on information 
    otherwise provided to you.
        3. In a tender offer by a bidder other than an affiliate of the 
    issuer of the subject securities, the issuer of the subject 
    securities will be presumed to be a foreign private issuer and U.S. 
    holders will be presumed to hold 10 percent or less (40 percent or 
    less in the case of 14d-1(d)) of such outstanding securities, 
    unless:
        i. The tender offer is made pursuant to an agreement with the 
    issuer of the subject securities;
        ii. The aggregate trading volume of the subject class of 
    securities on all national securities exchanges in the United 
    States, on the Nasdaq market, or on the OTC market, as reported to 
    the NASD, over the 12-calendar-month period ending 30 days before 
    commencement of the offer, exceeds 10 percent (40 percent in the 
    case of 14d-1(d)) of the worldwide aggregate trading volume of that 
    class of securities over the same period;
        iii. The most recent annual report or annual information filed 
    or submitted by the issuer with securities regulators of the home 
    jurisdiction or with the Commission indicates that U.S. holders hold 
    more than 10 percent (40 percent in the case of 14d-1(d)) of the 
    outstanding subject class of securities; or
        iv. The bidder knows or has reason to know that the level of 
    U.S. ownership exceeds 10 percent (40 percent in the case of 14d-
    1(d)) of such securities.
        4. United States. United States means the United States of 
    America, its territories and possessions, any State of the United 
    States, and the District of Columbia.
        5. The exemptions provided by paragraphs (c) and (d) of this 
    section are not available for any securities transaction or series 
    of transactions that technically complies with paragraph (c) or (d) 
    of this section but are part of a plan or scheme to evade the 
    provisions of Regulations 14D or 14E.
    * * * * *
        14. By amending Sec. 240.14d-9 by revising the introductory text of 
    paragraph (d)(2) and adding paragraph (d)(2)(iii) to read as follows:
    
    
    Sec. 240.14d-9  Recommendation or solicitation by the subject company 
    and others.
    
    * * * * *
        (d) * * *
    * * * * *
        (2) Notwithstanding paragraph (d)(1) of this section, this section 
    shall not apply to the following persons:
    * * * * *
        (iii) Any person specified in paragraph (d)(1) of this section if:
        (A) The subject company is the subject of a tender offer conducted 
    under Sec. 240.14d-1(c);
        (B) Any person specified in paragraph (d)(1) of this section 
    furnishes to the Commission on Form CB (Sec. 249.480 of this chapter) 
    the entire informational document it publishes or otherwise 
    disseminates to holders of the class of securities in connection with 
    the tender offer no later than the next business day after publication 
    or dissemination;
        (C) Any person specified in paragraph (d)(1) of this section 
    disseminates any informational document to U.S. holders, including any 
    amendments thereto, in English, on a comparable basis to that provided 
    to security holders in the issuer's home jurisdiction; and
        (D) Any person specified in paragraph (d)(1) of this section 
    disseminates by publication in its home jurisdiction, such person must 
    publish the information in the United States in a manner reasonably 
    calculated to inform U.S. security holders of the offer.
    * * * * *
        15. By amending Sec. 240.14e-2 by adding paragraph (d) to read as 
    follows:
    
    
    Sec. 240.14e-2  Position of subject company with respect to a tender 
    offer.
    
    * * * * *
        (d) Exemption for cross-border tender offers. The subject company 
    shall be exempt from this section with respect to a tender offer 
    conducted under Sec. 240.14d-1(c).
    
    PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
    
        16. The authority citation for part 249 continues to read in part 
    as follows:
    
        Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
    * * * * *
        17. By adding Subpart E, Sec. 249.480 and Form CB to read as 
    follows:
    
    Subpart E--Forms for Statements Made in Connection With Exempt 
    Tender Offers
    
    
    Sec. 249.480  Form CB, tender offer statement in connection with a 
    tender offer for a foreign private issuer.
    
        This form is used to report an issuer tender offer conducted in 
    compliance with Sec. 240.13e-4(h)(8) of this chapter and a third-party 
    tender offer conducted in compliance with Sec. 240.14d-1(c) of this 
    chapter. This report also is used by a subject company pursuant to 
    Sec. 240.14e-2(d) of this chapter.
    
        Note: Form CB does not appear in the Code of Federal 
    Regulations. Form CB is attached as Appendix A.
    
    PART 260--GENERAL RULES AND REGULATIONS, TRUST INDENTURE ACT OF 
    1939
    
        18. The authority citation for part 260 continues to read as 
    follows:
    
        Authority: 15 U.S.C. 77eee, 77ggg, 77nnn, 77sss, 78ll(d), 80b-3, 
    80b-4, and 80b-11.
    
        19. By adding Sec. 260.4d-10 to read as follows:
    
    
    Sec. 260.4d-10  Exemption for securities issued pursuant to 
    Sec. 230.802 of this chapter.
    
        Any debt security, whether or not issued under an indenture, is 
    exempt from the Act if made in compliance with Sec. 230.802 of this 
    chapter.
    
        By the Commission.
    
    
    [[Page 61407]]
    
    
        Dated: October 22, 1999.
    Margaret H. McFarland,
    Deputy Secretary.
    
    Appendix A--Form CB
    
        Note: Form CB does not appear in the Code of Federal 
    Regulations.
    
    Securities and Exchange Commission
    
    Washington, D.C. 20549
    
    Form CB--Tender Offer/Rights Offering Notification Form
    
    (Amendment No. ____)
    
        Please place an X in the box(es) to designate the appropriate 
    rule provision(s) relied upon to file this Form:
    
    Securities Act Rule 801 (Rights Offering) {time} 
    Securities Act Rule 802 (Exchange Offer) {time} 
    Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer) {time} 
    Exchange Act Rule 14d-1(c) (Third Party Tender Offer) {time} 
    Exchange Act Rule 14e-2(d) (Subject Company Response) {time} 
    ----------------------------------------------------------------------
    (Name of Subject Company)
    ----------------------------------------------------------------------
    (Translation of Subject Company's Name into English (if applicable))
    ----------------------------------------------------------------------
    (Jurisdiction of Subject Company's Incorporation or Organization)
    ----------------------------------------------------------------------
    (Name of Person(s) Furnishing Form)
    ----------------------------------------------------------------------
    (Title of Class of Subject Securities)
    ----------------------------------------------------------------------
    (CUSIP Number of Class of Securities (if applicable))
    ----------------------------------------------------------------------
    (Name, Address (including zip code) and Telephone Number (including 
    area code) of Person(s) Authorized to Receive Notices and 
    Communications on Behalf of Subject Company)
    ----------------------------------------------------------------------
    (Date Tender Offer/Rights Offering Commenced)
    
        *An agency may not conduct or sponsor, and a person is not 
    required to respond to, a collection of information unless it 
    displays a currently valid control number. Any member of the public 
    may direct to the Commission any comments concerning the accuracy of 
    this burden estimate and any suggestions for reducing this burden. 
    This collection of information has been reviewed by OMB in 
    accordance with the clearance requirements of 44 U.S.C. 3507.
    
    General Instructions
    
    I. Eligibility Requirements for Use of Form CB
    
        A. Use this Form to furnish information pursuant to Rules 13e-
    4(h)(8), 14d-1(c) and 14e-2(d) under the Securities Exchange Act of 
    1934 (``Exchange Act''), and Rules 801 and 802 under the Securities 
    Act of 1933 (``Securities Act'').
    
    Instructions
    
        1. For the purposes of this Form, the term ``subject company'' 
    means the issuer of the securities in a rights offering and the 
    company whose securities are sought in a tender offer.
        2. For the purposes of this Form, the term ``tender offer'' 
    includes both cash and securities tender offers.
        B. The information and documents furnished on this Form are not 
    deemed ``filed'' with the Commission or otherwise subject to the 
    liabilities of Section 18 of the Exchange Act.
    
    II. Instructions for Submitting Form
    
        A. You must furnish five copies of this Form and any amendment 
    to the Form (see Part I, Item 1.(b)), including all exhibits and any 
    other paper or document furnished as part of the Form, to the 
    Commission at its principal office. Each copy must be bound, stapled 
    or otherwise compiled in one or more parts, without stiff covers. 
    The binding must be made on the side or stitching margin in such 
    manner as to leave the reading matter legible.
        B. The persons specified in Part IV may manually sign the 
    original and at least one copy of this Form and any amendments. You 
    must conform any unsigned copies. Typed signatures are acceptable so 
    long as manually signed copies are retained by the filing person for 
    five years.
        C. You must furnish this Form to the Commission no later than 
    the next business day after the disclosure documents submitted with 
    this Form are published or otherwise disseminated in the subject 
    company's home jurisdiction.
        D. In addition to any internal numbering you may include, 
    sequentially number the manually signed original of the Form and any 
    amendments by handwritten, typed, printed or other legible form of 
    notation from the first page of the document through the last page 
    of the document and any exhibits or attachments. Further, you must 
    set forth the total number of pages contained in a numbered original 
    on the first page of the document.
    
    III. Special Instructions for Complying With Form CB
    
        Under Sections 3(b), 7, 8, 10, 19 and 28 of the Securities Act 
    of 1933, and Sections 12, 13, 14, 23 and 36 of the Exchange Act of 
    1934 and the rules and regulations adopted under those Sections, the 
    Commission is authorized to solicit the information required to be 
    supplied by this form by certain entities conducting a tender offer, 
    rights offer or business combination for the securities of certain 
    issuers.
        Disclosure of the information specified in this form is 
    mandatory. We will use the information for the primary purposes of 
    assuring that the offeror is entitled to use the Form and that 
    investors have information about the transaction to enable them to 
    make informed investment decisions. We will make this Form a matter 
    of public record. Therefore, any information given will be available 
    for inspection by any member of the public.
        Because of the public nature of the information, the Commission 
    can use it for a variety of purposes. These purposes include 
    referral to other governmental authorities or securities self-
    regulatory organizations for investigatory purposes or in connection 
    with litigation involving the Federal securities laws or other 
    civil, criminal or regulatory statutes or provisions.
    
    Part I--Information Sent to Security Holders
    
    Item 1. Home Jurisdiction Documents
    
        (a) You must attach to this Form the entire disclosure document 
    or documents, including any amendments thereto, in English, that you 
    have delivered to holders of securities or published in the subject 
    company's home jurisdiction that are required to be disseminated to 
    U.S. security holders or published in the United States. The Form 
    need not include any documents incorporated by reference into those 
    disclosure document(s) and not published or distributed to holders 
    of securities.
        (b) Furnish any amendment to a furnished document or documents 
    to the Commission under cover of this Form. Indicate on the cover 
    page the number of the amendment.
    
    Item 2. Informational Legends
    
        You may need to include legends on the outside cover page of any 
    offering document(s) used in the transaction. See Rules 801(b) and 
    802(b).
    
        Note to Item 2. If you deliver the home jurisdiction document(s) 
    through an electronic medium, the required legends must be presented 
    in a manner reasonably calculated to draw attention to them.
    
    Part II--Information Not Required To Be Sent to Security Holders
    
        The exhibits specified below must be furnished as part of the 
    Form, but need not be sent to security holders unless sent to 
    security holders in the home jurisdiction. Letter or number all 
    exhibits for convenient reference.
        (1) Furnish to the Commission any reports or information (in 
    English or an English summary thereof) that, in accordance with the 
    requirements of the home jurisdiction, must be made publicly 
    available in connection with the transaction but need not be 
    disseminated to security holders.
        (2) Furnish copies of any documents incorporated by reference 
    into the home jurisdiction document(s).
        (3) If any name is signed to this Form under a power of 
    attorney, furnish manually signed copies of the power of attorney.
    
    Part III--Consent to Service of Process
    
        (1) When this Form is furnished to the Commission, the person 
    furnishing this Form (if a non-U.S. person) must also file with the 
    Commission a written irrevocable consent and power of attorney on 
    Form F-X.
        (2) Promptly communicate any change in the name or address of an 
    agent for service to the Commission by amendment of the Form F-X.
    
    Part IV--Signatures
    
        (1) Each person (or its authorized representative) on whose 
    behalf the Form is submitted must sign the Form. If a person's 
    authorized representative signs, and the authorized representative 
    is someone other than an executive officer or general partner, 
    provide evidence of the representative's authority with the Form.
    
    [[Page 61408]]
    
        (2) Type or print the name and any title of each person who 
    signs the Form beneath his or her signature.
        After due inquiry and to the best of my knowledge and belief, I 
    certify that the information set forth in this statement is true, 
    complete and correct.
    
    (Signature)------------------------------------------------------------
    (Name and Title)-------------------------------------------------------
    (Date)-----------------------------------------------------------------
    
    [FR Doc. 99-28354 Filed 11-9-99; 8:45 am]
    BILLING CODE 8010-01-P
    
    
    

Document Information

Effective Date:
11/10/1999
Published:
11/10/1999
Department:
Securities and Exchange Commission
Entry Type:
Rule
Action:
Final rule.
Document Number:
99-28354
Dates:
January 24, 2000, except Secs. 200.30-1(e)(16) and 200.30-3(a)(68) will be effective November 10, 1999.
Pages:
61382-61408 (27 pages)
Docket Numbers:
Release Nos. 33-7759, 34-42054, 39-2378, International Series Release No. 1208, File No. S7-29-98
RINs:
3235-AD97: Exemptions for International Tender and Exchange Offers
RIN Links:
https://www.federalregister.gov/regulations/3235-AD97/exemptions-for-international-tender-and-exchange-offers
PDF File:
99-28354.pdf
CFR: (23)
17 CFR 230.144(a)(3)
17 CFR 240.14d-1(c)
17 CFR 240.14d-11(d)
17 CFR 240.14e-2(d)
17 CFR 240.12g3-2(a)
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