[Federal Register Volume 62, Number 201 (Friday, October 17, 1997)]
[Rules and Regulations]
[Pages 53948-53955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27523]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230 and 240

[Release Nos. 33-7470 and 34-39227; S7-26-96]
[International Series Release No. 1103]
RIN 3235-AG85


Offshore Press Conferences, Meetings with Company Representatives 
Conducted Offshore and Press-Related Materials Released Offshore

AGENCY: Securities and Exchange Commission.

ACTION: Final Rules.

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SUMMARY: The Commission is adopting two safe harbors designed to 
facilitate U.S. press access to offshore press activities. The two safe 
harbors will clarify the conditions under which journalists may be 
provided access to offshore press conferences, offshore meetings and 
press materials released offshore, in which a present or proposed

[[Page 53949]]

offering of securities or tender offer is discussed, without violating 
the provisions of Section 5 of the Securities Act of 1933, or the 
procedural requirements of the tender offer rules promulgated under the 
Williams Act.

EFFECTIVE DATE: The rule and amendments will become effective November 
17, 1997.

FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Office of 
International Corporate Finance, Division of Corporation Finance, at 
(202) 942-2990.

SUPPLEMENTARY INFORMATION: The Commission is adopting a safe harbor 
with respect to the registration requirements of the Securities Act of 
1933 (``Securities Act'')<SUP>1</SUP> to permit a foreign private 
issuer or foreign government issuer, selling security holder or their 
representatives to provide any journalist, whether foreign or domestic, 
with access to press conferences held outside the United States, to 
meetings with issuer or selling security holder representatives 
conducted outside the United States, or to press-related materials 
released outside the United States, at or in which a present or 
proposed offering of securities is discussed (``Securities Act safe 
harbor''). The safe harbor would clarify that providing press access 
under the safe harbor would not be deemed an ``offer'' for the purposes 
of Section 5 <SUP>2</SUP> of the Securities Act;<SUP>3</SUP> ``directed 
selling efforts'' within the meaning of Regulation S <SUP>4</SUP> under 
the Securities Act; or a ``general solicitation'' within the meaning of 
Regulation D <SUP>5</SUP> under the Securities Act. The Commission also 
is adopting a safe harbor whereby a bidder for the securities of a 
foreign private issuer, as well as the subject company, their 
representatives, or any other person specified in Rule 14d-9(d) 
<SUP>6</SUP> under the Securities Exchange Act of 1934 (``Exchange 
Act''), will not be subject to the filing and procedural requirements 
of Regulations 14D <SUP>7</SUP> and 14E <SUP>8</SUP> under the Exchange 
Act by virtue of providing any journalist, whether foreign or domestic, 
with access to its press conferences held outside the United States, to 
meetings with its representatives conducted outside the United States, 
or to press-related materials released outside the United States, at or 
in which a present or proposed tender offer is discussed (``Tender 
Offer safe harbor'').
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 77e.
    \3\ 17 CFR 230.135e.
    \4\ 17 CFR 230.901 through 17 CFR 230.904 and Preliminary Notes.
    \5\ 17 CFR 230.501 through 17 CFR 230.508 and Preliminary Notes.
    \6\ 17 CFR 240.14d-9.
    \7\ 17 CFR 240.14d-1 through 17 CFR 240.14d-10.
    \8\ 17 CFR 240.14e-1 through 17 CFR 240.14e-2.
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I. Background

    U.S. journalists are being excluded on a regular basis from the 
offshore press activities of foreign issuers.<SUP>9</SUP> This practice 
may not foster the interests of U.S. investors, since the information 
is made available to U.S. press shortly following the release of the 
information offshore. Instead, the practice is both anti-competitive 
and potentially disadvantageous to U.S. investors by delaying their 
access to information made immediately available to investors offshore. 
The purpose of this rulemaking is to eliminate this unintended and 
undesirable consequence of the Commission's rules governing offering 
publicity.
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    \9\ See SEC Rules Not OK, EUROMONEY, July 1997, at 64.
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    The Commission published for comment in October 1996 proposed safe 
harbors to facilitate U.S. press access to offshore press activities 
conducted by issuers, selling security holders and their 
representatives (``Proposing Release'').<SUP>10</SUP>
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    \10\ Release No. 33-7356 (Oct. 10, 1996) [61 FR 54518].
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    The Commission proposed these safe harbors in recognition of the 
difficulties faced by journalists for publications with significant 
U.S. circulation in gaining direct access to offshore press activities 
in which a present or proposed offering of securities or tender offer 
is discussed. Many issuers have denied these journalists access to 
offshore press conferences, offshore meetings with company 
representatives and press materials released offshore that pertain to a 
present or proposed securities offering or tender offer out of concern 
that this access would result in a violation of the U.S. federal 
regulatory requirements for these offerings. Past rulemaking and 
interpretive guidance by the Commission and its staff do not appear to 
have allayed the concerns of companies conducting offshore press 
activities, and U.S. press continue to be denied access to offshore 
press activities even when no U.S. offering is contemplated.
    The U.S. Congress has also been aware of this exclusion. In the 
National Securities Markets Improvement Act of 1996, <SUP>11</SUP> 
Congress directed the Commission to conduct rulemaking to clarify the 
status of offshore press activities under the Securities Act.
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    \11\ Pub. L. No. 104-290, 110 Stat. 3416 (1996) (codified in 
scattered sections of the United States Code).
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    After reviewing the thirteen comment letters received on the 
proposed safe harbors and further considering the proposals, 
<SUP>12</SUP> the Commission is adopting the safe harbors substantially 
as proposed with one significant modification. The Securities Act safe 
harbor as adopted will not be available to U.S. issuers.<SUP>13</SUP> 
Although the Commission initially had proposed making that safe harbor 
available to both foreign and domestic issuers, the Commission has 
determined that relief is unnecessary with respect to U.S. issuers and 
that it may be preferable to address publicity in connection with 
offerings by U.S. issuers in a more comprehensive fashion.
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    \12\ The comment letters are available for inspection and 
copying in the Commission's public reference room. Refer to file 
number S7-26-96. Comment letters that were submitted via electronic 
mail may be viewed at the Commission's web site: http://www.sec.gov.
    \13\ In contrast, the Tender Offer safe harbor will be available 
to both U.S. and foreign bidders as long as the target company 
qualifies as a foreign private issuer.
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    Some foreign jurisdictions, unlike the United States, permit 
companies that are offering securities to conduct press conferences, 
issue press releases, and meet with members of the press during the 
offering as a means of publicizing the offering. Foreign issuers 
adopting those practices are unlikely to be doing so for the purpose of 
circumventing U.S. restrictions on publicity. On the other hand, 
extending the safe harbor to U.S. issuers that have not traditionally 
employed such practices in the offering of securities unnecessarily 
invites that potential for abuse. In addition, the Commission 
understands that the difficulty experienced by the U.S. press in 
obtaining access to foreign press activities is most significant with 
respect to foreign issuers.<SUP>14</SUP> Accordingly, by excluding U.S. 
issuers from the Securities Act safe harbor, the Commission is crafting 
a narrow approach that addresses the concerns of the U.S. press by 
accommodating the anomalies that can result when offshore offering 
practices differ from what is permitted in the United States, yet 
allows the Commission to consider crafting a regulatory approach with 
respect to U.S. issuers in a comprehensive fashion both with respect to 
offshore and domestic press activities.
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    \14\ See supra note 9. See also Roberta S. Karmel & Mary S. 
Head, Barriers to Foreign Issuer Entry into U.S. Markets; Symposium 
on Managing Economic Interdependence, 24 LAW & POL'Y INT'L BUS. 1207 
(1993).
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    The Commission may reconsider the safe harbor adopted today at a 
later date in light of its ongoing reexamination of

[[Page 53950]]

the Commission's regulation of securities offerings under the 
Securities Act and the rules thereunder. In July 1996, the Commission 
issued a Securities Act Concept Release (``Concept Release'') 
<SUP>15</SUP> that reviewed the current regulatory framework for 
securities offerings, particularly with respect to regulating publicity 
in connection with a securities offering. The Concept Release suggested 
a number of alternative approaches and solicited comments from the 
public. Many commenters recognized that this wide-ranging examination 
of the permissible level of publicity in connection with securities 
offerings is fundamental to the Commission's administration of the 
Securities Act. On the other hand, they urged that the practice of 
excluding the U.S. press from foreign press activities itself presents 
ongoing significant policy concerns that should and can be addressed in 
a narrow and expeditious fashion.
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    \15\ Release No. 33-7314 (July 25, 1996) [61 FR 40044].
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II. Securities Act Safe Harbor

A. General

    The Commission is adopting Rule 135e under the Securities Act to 
provide a safe harbor for offshore press activities conducted in 
connection with an offering by a foreign private issuer or foreign 
government issuer.<SUP>16</SUP> Under the Securities Act safe harbor, a 
foreign private issuer or foreign government issuer, selling security 
holder, or their representatives may provide foreign and U.S. 
journalists <SUP>17</SUP> with access to offshore press conferences, 
meetings with issuer or selling security holder representatives 
conducted offshore, or press-related materials released offshore 
without being viewed as making an ``offer'' for purposes of Section 5 
of the Securities Act as long as certain conditions enumerated below 
are satisfied. Press activities that are covered by the Securities Act 
safe harbor also would not constitute a general solicitation or general 
advertising within the meaning of Regulation D, or ``directed selling 
efforts'' within the meaning of Regulation S. The Commission is 
adopting amendments to Rule 502 <SUP>18</SUP> of Regulation D and Rule 
902 <SUP>19</SUP> of Regulation S <SUP>20</SUP> to reflect this.
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    \16\ ``Foreign private issuer'' is defined in Securities Act 
Rule 405 [17 CFR 230.405] and Exchange Act Rule 3b-4(c) [17 CFR 
240.3b-4(c)].
    \17\ Consistent with the recommendation of commenters, the safe 
harbor does not provide a definition of ``journalist.'' In response 
to questions by commenters, the Commission notes that it views on-
line services and independent free-lance writers as bona fide 
``journalists'' under both the Securities Act safe harbor and Tender 
Offer safe harbor.
    \18\ 17 CFR 230.502.
    \19\ 17 CFR 230.902.
    \20\ Preliminary Note 7 of Regulation S is being amended to 
clarify the relationship of that general statement to the Securities 
Act safe harbor and Tender Offer safe harbor.
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    As adopted, the safe harbor will apply to all foreign private 
issuers and foreign governments regardless of whether these issuers 
file periodic Exchange Act reports with the Commission. In addition, 
representatives of the issuer and the selling security holders, such as 
underwriters and public relations firms, may rely on the safe harbor, 
although persons with no relationship to the issuer are excluded from 
the safe harbor.
    As in the proposal, the safe harbor does not cover paid 
advertisements. The Commission also noted in the Proposing Release that 
analysts' research reports would not be covered, since Securities Act 
Rules 138 <SUP>21</SUP> and 139 <SUP>22</SUP> cover those reports. 
Several commenters opposed the exclusion of analysts' reports from the 
Securities Act safe harbor because these reports are often distributed 
as part of the offshore offering process. However, the Commission did 
not intend that providing research reports in written press-related 
materials would cause any materials included in the press package, 
including analysts' research reports, to lose safe harbor protection. 
To clarify, analysts' research reports would be covered by the new safe 
harbor (even if Rules 138 and 139 are not available) to the same 
extent, and under the same conditions, as other written materials in 
the package.<SUP>23</SUP>
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    \21\ 17 CFR 230.138.
    \22\ 17 CFR 230.139.
    \23\ The application of Section 5 of the Securities Act to the 
publication of analysts' reports by analysts themselves, rather than 
by an issuer or selling security holder, will continue to be 
considered separately under Rules 138 and 139 under the Securities 
Act.
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    The safe harbor only applies to the Section 5 registration 
requirements of the Securities Act. The scope of the antifraud or other 
provisions of the federal securities laws, including Sections 12(a)(2) 
<SUP>24</SUP> and 17(a) <SUP>25</SUP> of the Securities Act, that 
relate to both oral and written material misstatements and omissions in 
the offer and sale of securities will not be affected by the safe 
harbor.
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    \24\ 15 U.S.C. 77l(a)(2).
    \25\ 15 U.S.C. 77q(a).
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B. Conditions to the Safe Harbor

    The Securities Act safe harbor is available only if the conditions 
described below are satisfied. These conditions are intended to 
minimize the possibility that issuers may use the safe harbor to 
circumvent important Securities Act protections.
    The safe harbor as adopted is a purely objective test. All of the 
nine commenters who addressed the desirability of an objective test 
supported that approach. Many of them believed that a subjective test 
would result in the continued exclusion of U.S. press from offshore 
press activities. In addition, commenters noted that the antifraud and 
civil liability provisions of the federal securities laws should 
provide adequate protection to investors.
1. Press Activity Must Occur Offshore
    The press activities that are covered by the safe harbor must occur 
outside of the United States.<SUP>26</SUP> To come under the safe 
harbor, a press conference or meeting with issuer or selling security 
holder representatives must be conducted outside the United States, and 
any press-related materials must be released outside of the United 
States. Under this approach, the journalist to whom access is provided 
must receive any written press-related materials at a physical location 
and address that is offshore. In addition, conference calls in which at 
least one of the participants is located in the United States would not 
be covered by the safe harbor.
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    \26\ For clarification, a definition of ``United States'' has 
been included in Rule 135e that is the same as the definition used 
in Rule 902(p) of Regulation S [17 CFR 230.902(p)]. ``United 
States'' is defined to include the United States of America, its 
territories and possessions, as well as the individual states of the 
United States and the District of Columbia.
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    Follow-up press contacts in which the journalist (whether foreign 
or U.S.) is located in the United States at the time of the follow-up 
are not included in the safe harbor. As one of the commenters pointed 
out, this should not be a problem in most cases, since journalists who 
attend offshore press conferences typically are based offshore. As this 
commenter stated in its letter:

    We do not believe follow-up conversations [citation omitted] 
present a major issue because in most cases we believe journalists 
based offshore will be attending the offshore press conferences 
rather than U.S. residents travelling to another country. Attempting 
to cover follow-up conversations or other communications where one 
party is in the United States would pose an unnecessary complication 
for operation of the safe harbor.<SUP>27</SUP>

    \27\ Comment letter from Dow Jones & Company, Inc. of 12/17/96, 
at p. 5.
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    This approach is consistent with the limited goal of accommodating 
different offering practices followed in the issuer's home jurisdiction 
to avoid exclusion of U.S. press from those

[[Page 53951]]

activities. This also is consistent with the general territorial 
approach used in the application of the Securities Act registration 
requirements.<SUP>28</SUP>
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    \28\ See Rule 901 of Regulation S [17 CFR 230.901].
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2. Offshore Offering
    As a condition to the safe harbor, the offering must not occur 
solely within the United States. This condition reflects the 
Commission's concern that an issuer not conduct press activities solely 
to ``condition the market'' in the United States for the issuer's 
securities. There is a far greater likelihood that offshore publicity 
with respect to offerings that are made exclusively in the United 
States is intended for that purpose.
    Some commenters urged the Commission to include U.S.-only offerings 
in the Securities Act safe harbor. They noted that these offerings may 
be newsworthy events in the home jurisdictions of foreign issuers, and 
that certain foreign jurisdictions may even require disclosure of these 
offerings. Rules 134,<SUP>29</SUP> 135 <SUP>30</SUP> and 135c 
<SUP>31</SUP> under the Securities Act should provide adequate 
protection for issuers giving notice of offerings. In addition, even if 
the new safe harbor and Rules 134, 135 and 135c do not cover the press 
activities for U.S.-only offerings of foreign issuers, this does not 
necessarily mean that allowing U.S. press access would cause a Section 
5 violation. Instead, that question would depend on an analysis of all 
the facts and circumstances.<SUP>32</SUP>
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    \29\ 17 CFR 230.134.
    \30\ 17 CFR 230.135.
    \31\ 17 CFR 230.135c.
    \32\ Preliminary Note 7 to Regulation S should continue to 
provide guidance in that instance.
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    The condition that at least part of the offering be made offshore 
does not impose any requirement that a specific amount be offered 
offshore. The commenters that addressed this issue strongly supported 
this approach. Commenters noted that requiring a specific minimum 
portion of the offering to take place offshore would undercut the 
benefit of the safe harbor. Because issuers may not know how much of an 
offering will be made offshore, this uncertainty could lead them to 
exclude journalists from offshore press activities unnecessarily. There 
must, however, be an intent to make a bona fide offering offshore; the 
mere offering of a token amount will not suffice to bring the 
transaction within the safe harbor. Should the Commission become aware 
of abuses involving offerings that do not appear to include a bona fide 
offshore component, it will revisit the rule to consider imposing a 
stricter, more objective standard.
3. Access Provided to Both U.S. and Foreign Journalists
    Another condition of the safe harbor is that the offshore press 
activity must be available to foreign journalists, as well as to U.S. 
journalists. The safe harbor would not be available if only U.S. 
journalists were permitted to attend the offshore press activity or to 
receive the offshore press-related materials. This minimizes the 
possibility that the safe harbor would be used to channel publicity 
regarding the offering solely into the United States. Foreign 
journalists must have the same access to the offshore press activity or 
materials, although the safe harbor does not require the issuer to 
monitor whether foreign journalists actually attend the offshore press 
activity or actually receive the offshore press-related materials for 
the safe harbor to apply. The Commission has determined that the actual 
attendance or receipt of materials by foreign journalists is beyond the 
issuer's control, and that a monitoring requirement would be too 
burdensome.
    In the Proposing Release, the Commission indicated that it would 
view ``one-on-one'' interviews with a U.S. journalist as covered by the 
safe harbor. However, if the ``one-on-one'' meeting was conducted on an 
``exclusive'' basis with a purely ``U.S. publication'' and no other 
``one-on-one'' interviews with other foreign publications were given, 
the Commission expressed its concern that the exclusive ``one-on-one'' 
presentation might signal a scheme to channel publicity regarding the 
offering into the United States. Nonetheless, the Commission indicated 
in the Proposing Release that if an issuer or its representatives 
conducts a press conference that complies with the requirements of the 
safe harbor (e.g., where both U.S. and foreign journalists are allowed 
to attend) either before or after the exclusive ``one-on-one'' meeting 
with a purely domestic publication,<SUP>33</SUP> the Commission would 
view the exclusive interview as covered by the safe harbor. A few 
commenters objected to this interpretation as unduly restrictive and 
unnecessary.<SUP>34</SUP> However, the Commission continues to believe 
that there is a real basis for concern that the exclusive ``one-on-
one'' would be used solely to channel publicity into the United States, 
absent an offshore press conference or other foreign press activity 
conducted in connection with an offering.
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    \33\ The Commission does not believe that the press conference 
must be conducted within any particular time frame. In the 
Commission's view, a press conference held in connection with the 
offering would be sufficient evidence that the exclusive ``one-on-
one'' was not an attempt to condition the U.S. markets.
    \34\ Some commenters opposed the press conference requirement 
for purely domestic publications as unnecessary for legitimate news 
coverage. See comment letter from Bloomberg L.P. of 12/17/96, at p. 
8, and comment letter from Sullivan & Cromwell of 12/20/96, at p. 
13.
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4. Written Materials Requirements
    Written materials that are released to journalists under the safe 
harbor present special concerns, especially if the materials are 
released with respect to an offering that is likely to be of 
significant interest to U.S. investors. The Commission is concerned 
that materials may result in offers of securities in the United States 
without the protections of the federal securities laws, or in 
conditioning the market in the United States for the securities to be 
offered. To address these concerns, the Commission proposed additional 
procedural safeguards to be imposed on written materials released to 
journalists. These safeguards were intended to alert recipients that 
such materials should not be considered an offer of securities for sale 
in the United States, and that when and if an offer is made in the 
United States, the appropriate required disclosure would be 
disseminated at that time.
    The Commission is adopting the ``Written Materials Requirements'' 
substantially as proposed.<SUP>35</SUP> These requirements must be met 
whenever written materials released under the safe harbor discuss an 
offering of securities by any foreign private issuer and foreign 
government where part of the offering is or will be conducted in the 
United States. The requirements apply irrespective of whether the U.S. 
portion of the offering is registered or exempt. However, consistent 
with the Proposing Release, the ``Written Materials Requirements'' will 
not be imposed on securities offerings of foreign private issuers and 
foreign governments that are offered and sold wholly offshore because 
those offerings would appear to be of less significant interest to U.S. 
investors.
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    \35\ As originally proposed, the ``Written Materials 
Requirements'' were required to be satisfied whenever the written 
materials discussed an offering of securities by a U.S. issuer. 
Because U.S. issuers will not be covered by the safe harbor, as 
initially contemplated in the Proposing Release, the ``Written 
Materials Requirements'' have been modified to reflect this.
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    The ``Written Materials Requirements'' are as follows:


[[Page 53952]]


    1. The materials must include a statement that the materials are 
not an offer of securities for sale in the United States; that the 
securities may not be offered or sold in the United States unless 
they are registered or exempt from registration; and that any public 
offering of securities to be made in the United States will be made 
by means of a prospectus that will contain detailed information 
about the company and management, as well as financial statements. 
In addition, if any portion of the offering will be registered in 
the United States, the materials must include a legend stating this 
intention.
    2. The issuer or selling security holder cannot attach to, or 
otherwise make a part of, the written materials any form of purchase 
order or coupon that could be returned indicating interest in the 
offering.

    Several commenters objected to certain aspects of the ``Written 
Materials Requirements,'' most notably the legending requirements and 
the coupon prohibition. They contended that these requirements would 
make the safe harbor difficult to apply without improving investor 
protection. Nonetheless, the Commission believes that these 
requirements significantly reduce the possibility that written 
materials released to U.S. journalists, and that may come into the 
hands of U.S. investors, will be used to offer securities in the United 
States without the protections of the U.S. securities laws. Since the 
requirements are only imposed when the issuer is otherwise required to 
meet U.S. offering regulations because a portion of the offering is to 
be made in the United States, the requirements are not unduly 
burdensome and the possibility of inadvertent violations is minimal.

III. Tender Offer Safe Harbor

A. General

    The Commission is adopting the Tender Offer safe harbor as 
proposed. The safe harbor is only available with respect to a target 
company that is a foreign private issuer,<SUP>36</SUP> and is narrowly 
crafted to permit both the bidder and foreign target to conduct their 
activities in a manner consistent with local offering practices. 
Pursuant to Rule 14d-1 under the Exchange Act, <SUP>37</SUP> as 
amended, a bidder for the securities of a foreign private issuer, as 
well as the foreign target company, the representatives of either and 
any other person who may have a filing obligation under the Williams 
Act would not be deemed to have triggered the filing and procedural 
requirements of the Williams Act <SUP>38</SUP> by virtue of providing 
U.S. or foreign journalists with access to offshore press conferences, 
offshore meetings with representatives, and press-related materials 
released offshore, at or in which a present or proposed tender offer of 
securities is discussed.<SUP>39</SUP> Although the safe harbor will be 
available to either a U.S. or a foreign bidder, the safe harbor will 
only be applicable if the target company is a foreign private issuer. 
The safe harbor will not be available for the securities of a U.S. 
target issuer because there appears to be no need to accommodate 
foreign offering practices in that instance.
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    \36\ Several commenters objected to this limited application of 
the safe harbor. They noted, among other things, that bidders may 
have difficulty ascertaining whether a target company qualifies as a 
foreign private issuer. However, the Commission has determined that 
the safe harbor is easiest to apply if a foreign private issuer 
definition is used. A bidder may presume that a target company 
qualifies as a ``foreign private issuer'' if the target company is a 
foreign issuer that files registration statements with the 
Commission on the disclosure forms specifically designated for 
foreign private issuers (such as Form F-1 or Form 20-F), claims the 
exemption from Exchange Act registration pursuant to Exchange Act 
Rule 12g3-2(b) [17 CFR 240.12g3-2(b)], or is not reporting in the 
United States.
    \37\ 17 CFR 240.14d-1.
    \38\ Offshore press activity during a tender offer would not 
trigger the following requirements: Section 14(d)(1) [15 U.S.C. 
78n(d)(1)] through Section 14(d)(7) [15 U.S.C. 78n(d)(7)] of the 
Exchange Act, Regulation 14D [17 CFR 240.14d-1 through 17 CFR 
240.14d-10), and Rules 14e-1 [17 CFR 240.14e-1] and 14e-2 [17 CFR 
240.14e-2].
    \39\ The Tender Offer safe harbor, however, would not exempt 
from the Securities Act registration requirements exchange offers in 
which a U.S. bidder is involved.
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    The safe harbor only affects the triggering of the filing and 
procedural requirements of the Williams Act, and would not affect the 
scope or applicability of the antifraud prohibition of Section 14(e) 
<SUP>40</SUP> of the Exchange Act, or the prohibition against trading 
on material nonpublic information regarding a tender offer in Rule 14e-
3<SUP>41</SUP> under the Exchange Act.
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    \40\ 15 U.S.C. 78n(e).
    \41\ 17 CFR 240.14e-3.
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    The purpose of the Tender Offer safe harbor is to prevent the 
application of the U.S. tender offer rules before a bidder is prepared 
to proceed with the offer. After an offer has commenced with the filing 
of documents with the Commission under Regulation 14D, the safe harbor 
would not be available.

B. Conditions

    The applicability of the Tender Offer safe harbor is subject to 
several conditions that are analogous to the Securities Act safe harbor 
conditions. Both U.S. and foreign journalists must have access to the 
offshore press activity, and the written materials that are covered by 
the safe harbor must be appropriately legended in circumstances where 
significant U.S. investor interest in the tender offer is likely. In 
addition, no means to tender securities, or coupons that could be 
returned to indicate interest in the tender offer may be provided as 
part of any press-related materials.
    If the present or proposed tender offer described in the written 
materials released under the proposed tender offer safe harbor is for 
equity securities registered under Section 12 <SUP>42</SUP> of the 
Exchange Act, the materials must comply with certain requirements 
(``Written Materials Requirements'').<SUP>43</SUP> These requirements 
are as follows:

    \42\ 15 U.S.C. 78l.
    \43\ As with the Written Materials Requirements under the 
Securities Act safe harbor, some commenters objected to the 
legending and coupon conditions of the Tender Offer safe harbor. The 
Commission believes that these conditions reduce the possibility 
that the Tender Offer safe harbor will be used to circumvent the 
protections provided by the federal securities laws. The Written 
Materials Requirements do not apply where those protections are not 
applicable, including in the case of tender offers for a class of 
equity securities that is not registered with the Commission, or 
tender offers for debt securities.
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    1. The materials must include a statement that the materials are 
not an extension of the tender offer in the United States for a 
class of equity securities of the subject company. In addition, if 
the bidder intends to extend the tender offer in the United States 
at some future time for a class of equity securities of the subject 
company, the materials must include a legend stating this intention 
and stating that the procedural and filing requirements of the 
Williams Act will be satisfied at that time.
    2. No means to tender securities, or coupons that could be 
returned to indicate interest in the tender offer may be provided as 
part of, or attached to, any press-related materials.

IV. Certain Findings

    Section 23(a) of the Exchange Act <SUP>44</SUP> requires the 
Commission to consider the anti-competitive effects of any rules it 
adopts thereunder, if any, and the reasons for its determination that 
any burden on competition imposed by such rules is necessary or 
appropriate to further the purposes of the Exchange Act. Furthermore, 
Section 2 <SUP>45</SUP> of the Securities Act and Section 3 
<SUP>46</SUP> of the Exchange Act, as amended by the National 
Securities Markets Improvement Act of 1996,<SUP>47</SUP> provide that 
whenever the Commission is engaged in rulemaking and is required to 
consider or determine whether an action is necessary or appropriate in 
the public interest, the Commission also shall consider, in addition to 
the protection of investors, whether the action will

[[Page 53953]]

promote efficiency, competition, and capital formation.
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    \44\ 15 U.S.C. 78w(a).
    \45\ 15 U.S.C. 77b.
    \46\ 15 U.S.C. 78c.
    \47\ Pub. L. No. 104-290, Sec. 106, 110 Stat. 3416 (1996).
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    The Commission has considered the rule and amendments discussed in 
this release in light of the comments received in response to the 
Proposing Release and the standards in Section 23(a) of the Exchange 
Act. The rule and amendments are intended to reduce anti-competitive 
barriers between U.S. and foreign journalists. As a result of the rule 
and amendments, U.S. journalists will have increased access to offshore 
press activities conducted by issuers and selling security holders and, 
in the case of tender offers, by bidders for foreign private issuers, 
as well as the foreign target company itself. Although some of the 
requirements under the safe harbors, such as the legending requirements 
and coupon prohibition, may place certain burdens on those who wish to 
rely on the safe harbors, the overall effect of the safe harbors is to 
decrease anti-competitive barriers. Without the safe harbors, U.S. 
press will continue to be excluded from the offshore press activities 
of foreign issuers. This may harm U.S. investors because they 
eventually receive the information disseminated offshore, but on a 
delayed basis. With the safe harbors, U.S. investors will have access 
to information about their investments in a more timely and efficient 
manner. The safe harbors adopted today will facilitate U.S. press 
access to the offshore press activities, and promote efficiency, 
competition and capital formation by removing information barriers that 
may inadvertently harm U.S. investors and otherwise facilitating 
foreign issuer access to U.S. markets.

V. Cost-Benefit Analysis

    The new rule and amendments will not impose any significant new 
burdens on issuers. No new registration, reporting or filing burdens 
will be imposed on issuers and selling security holders as a result of 
the safe harbors. The purpose of the safe harbors is to increase the 
access of U.S. journalists to the offshore press activities of issuers 
and selling security holders and, in the case of tender offers, bidders 
for foreign private issuers and the target company itself. Currently, 
U.S. journalists are excluded from the offshore press activities of 
foreign issuers. Instead of protecting U.S. investors, this practice 
may disadvantage U.S. investors because their access to information is 
delayed. The new rule and amendments will eliminate this unintended 
consequence of the Securities Act's regulation of offering publicity.
    Although some of the Written Materials Requirements under either 
safe harbor marginally may increase burdens for those wishing to rely 
on the safe harbors, these requirements are intended to ensure that 
activities covered by the safe harbors are not actually offerings of 
securities or tender offers in the United States. Because the safe 
harbors should eliminate barriers to press access, the overall result 
of the safe harbors is to reduce the burdens and costs currently 
associated with limited and uneven press access. Moreover, the burdens 
imposed by the Written Materials Requirements are negligible. Based on 
an informal survey taken by Commission staff of attorneys in private 
practice whose clients could be expected to rely on these safe harbors, 
the Commission has estimated that the maximum compliance costs of these 
legending requirements is $500 in printing costs for each instance that 
the requirements are triggered.
    Under the Securities Act safe harbor, the Written Materials 
Requirements are intended to help ensure that press-related materials 
distributed under the safe harbor will not result in an offering of 
securities to U.S. investors without the protection of the securities 
laws. The written materials must include a legend explicitly stating 
that the materials are not an offer of securities in the United States, 
and that no money or other consideration is being solicited through the 
materials. The issuer or selling security holder also must state if it 
intends to register any part of the offering in the United States. In 
addition to these legending requirements, issuers and selling security 
holders may not include a purchase order or coupon with the written 
materials.
    Although some commenters contended that these requirements are 
unnecessary and burdensome, the Commission has determined that these 
requirements are necessary to safeguard the safe harbor from potential 
abuse. The burdens imposed are minimal, and enable the Commission to 
adopt an objective approach that should reduce needless barriers to 
U.S. press participation in offshore press activities with minimal 
burden.
    The Tender Offer safe harbor contains similar Written Materials 
Requirements. Bidders for the securities of foreign private issuers and 
the foreign target companies must comply with these requirements when 
they release written press-related materials under this safe harbor. 
The materials must include a legend stating that the materials should 
not be construed as extending a tender offer in the United States, and 
that no money or other consideration is being solicited through the 
materials. If the bidder intends to extend the tender offer in the 
United States in the future, the written materials must include a 
statement to that effect. In addition, no coupons or means of tendering 
securities must be included with the materials.
    The requirements under both safe harbors are intended to protect 
U.S. investors from potential use of the safe harbors as a means of 
circumventing the protections provided by the federal securities laws. 
The Commission does not consider these requirements to be unduly 
burdensome, especially in light of the important investor protections 
they provide and the benefits provided by the new safe harbors. 
Moreover, each issuer can engage in its own cost-benefit analysis to 
determine whether the burdens imposed by the legending and coupon 
conditions preclude reliance on the safe harbors.

VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``FRFA'') has been 
prepared in accordance with 5 U.S.C. 604 regarding the new rule and 
amendments. The rule and amendments are intended to provide companies 
with greater certainty in determining when journalists, both foreign 
and domestic, may have access to offshore press conferences, meetings 
with company representatives conducted offshore, or press materials 
released offshore without violating the U.S. federal securities laws.
    The rule and amendments should eliminate an unintended and 
potentially harmful consequence of the Securities Act's regulation of 
offering publicity. Currently, these regulations have been interpreted 
to deny U.S. journalists access to the offshore press activities of 
foreign issuers. This practice may harm U.S. investors because they 
eventually receive the same information, but on a delayed basis. The 
rule and amendments should remedy this unintended and harmful 
consequence.
    The new rule and amendments will not impose any reporting, 
recordkeeping or other compliance burdens other than the Written 
Materials Requirements, which only apply to those issuers that choose 
to rely on the safe harbors. Although the Written Materials 
Requirements will impose certain legending requirements on written 
materials released offshore for those wishing to rely on the safe 
harbors, the Commission does not consider these requirements to be 
unduly burdensome on small businesses. A small issuer will make its own 
determination of whether the requirements would impose too much of a 
burden to make reliance on

[[Page 53954]]

the safe harbors useful to it. As a result, the Commission does not 
consider the rule and amendments unduly burdensome on small businesses.
    The term ``small business,'' as used in reference to an issuer for 
purposes of the Regulatory Flexibility Act, is defined by Rule 157 
<SUP>48</SUP> under the Securities Act as an issuer that had total 
assets of $5 million or less on the last day of its most recent fiscal 
year, and is engaged or proposing to engage in small business 
financing. An issuer is considered to be engaged in small business 
financing if it is conducting or proposes to conduct an offering of 
securities that does not exceed the dollar limitation prescribed by 
Section 3(b) of the Securities Act. When used in reference to an issuer 
other than an investment company, the term also is defined in Rule 0-10 
<SUP>49</SUP> of the Exchange Act as an issuer that had total assets of 
$5 million or less on the last day of its most recent fiscal year.
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    \48\ 17 CFR 230.157.
    \49\ 17 CFR 240.0-10.
---------------------------------------------------------------------------

    The Commission is aware of approximately 1100 Exchange Act 
reporting companies that currently satisfy the definition of ``small 
business'' under Rule 0-10. Because the rule and amendments affect 
multinational offerings by foreign issuers in which there would be 
press interest, it is likely that most of these issuers would not 
satisfy the definition of ``small business.''
    The Commission has considered different alternatives to the rule 
and amendments. However, alternatives for providing different means of 
compliance for small entities or for exempting small entities from the 
rule and amendments would be inconsistent with the Commission's 
statutory mandate of investor protection. The new rule and amendments 
are intended to facilitate U.S. press access to offshore press 
activities of all issuers, regardless of size, such that further 
distinctions between companies based on size would not be appropriate.
    The Commission requested comment with respect to the Initial 
Regulatory Flexibility Analysis (``IRFA'') prepared in connection with 
the Proposing Release, but did not receive any comments that 
specifically addressed the IRFA.

VII. Statutory Basis for the Amendments

    The amendments to the Securities Act rules are being adopted 
pursuant to Sections 3, 4, 5 and 19 of the Securities Act as amended, 
and as required by Pub. L. No. 104-290, Sec. 109, 110 Stat. 3416 
(1996). The amendment to the Exchange Act rule is being adopted 
pursuant to Sections 14(d), 14(e) and 23(a) of the Exchange Act.

List of Subjects in 17 CFR Parts 230 and 240

    Reporting and recordkeeping requirements, Securities.

Text of the Amendments

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is amended as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    The authority citation for Part 230 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30, 
and 80a-37, unless otherwise noted.
* * * * *


Sec. 230.135d  [Added]

    2. Section 230.135d is added and reserved.
    3. By adding Sec. 230.135e to read as follows:


Sec. 230.135e  Offshore press conferences, meetings with issuer 
representatives conducted offshore, and press-related materials 
released offshore.

    (a) For the purposes only of Section 5 of the Act [15 U.S.C. 77e], 
an issuer that is a foreign private issuer (as defined in Sec. 230.405) 
or a foreign government issuer, a selling security holder of the 
securities of such issuers, or their representatives will not be deemed 
to offer any security for sale by virtue of providing any journalist 
with access to its press conferences held outside of the United States, 
to meetings with issuer or selling security holder representatives 
conducted outside of the United States, or to written press-related 
materials released outside the United States, at or in which a present 
or proposed offering of securities is discussed, if:
    (1) The present or proposed offering is not being, or to be, 
conducted solely in the United States;

    Note to Paragraph (a)(1): An offering will be considered not to 
be made solely in the United States under this paragraph (a)(1) only 
if there is an intent to make a bona fide offering offshore.

    (2) Access is provided to both U.S. and foreign journalists; and
    (3) Any written press-related materials pertaining to transactions 
in which any of the securities will be or are being offered in the 
United States satisfy the requirements of paragraph (b) of this 
section.
    (b) Any written press-related materials specified in paragraph 
(a)(3) of this section must:
    (1) State that the written press-related materials are not an offer 
of securities for sale in the United States, that securities may not be 
offered or sold in the United States absent registration or an 
exemption from registration, that any public offering of securities to 
be made in the United States will be made by means of a prospectus that 
may be obtained from the issuer or the selling security holder and that 
will contain detailed information about the company and management, as 
well as financial statements;
    (2) If the issuer or selling security holder intends to register 
any part of the present or proposed offering in the United States, 
include a statement regarding this intention; and
    (3) Not include any purchase order, or coupon that could be 
returned indicating interest in the offering, as part of, or attached 
to, the written press-related materials.
    (c) For the purposes of this section, ``United States'' means the 
United States of America, its territories and possessions, any State of 
the United States, and the District of Columbia.


Sec. 230.502  [Amended]

    4. By amending Sec. 230.502 to remove the period at the end of 
paragraph (c)(2) and to add the following: ``; Provided further, that, 
if the requirements of Sec. 230.135e are satisfied, providing any 
journalist with access to press conferences held outside of the United 
States, to meetings with issuer or selling security holder 
representatives conducted outside of the United States, or to written 
press-related materials released outside the United States, at or in 
which a present or proposed offering of securities is discussed, will 
not be deemed to constitute general solicitation or general advertising 
for purposes of this section.''


Preliminary Note 7  [Amended]

    5. By amending Preliminary Note 7 following the undesignated 
heading ``Regulation S'' and before Sec. 230.901 to add the following 
after the first sentence: ``Where applicable, issuers and bidders may 
also look to Sec. 230.135e and Sec. 240.14d-1(c) of this chapter.''
    6. By amending Sec. 230.902 to add paragraph (b)(8) to read as 
follows:


Sec. 230.902  Definitions.

* * * * *
    (b) Directed Selling Efforts. * * *
    (8) Notwithstanding paragraph (b)(1) of this section, providing any 
journalist

[[Page 53955]]

with access to press conferences held outside of the United States, to 
meetings with issuer or selling security holder representatives 
conducted outside of the United States, or to written press-related 
materials released outside the United States, at or in which a present 
or proposed offering of securities is discussed, will not be deemed 
``directed selling efforts'' if the requirements of Sec. 230.135e are 
satisfied.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    7. The authority citation for part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1, 
78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 79q, 
79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless 
otherwise noted.
* * * * *
    8. By amending Sec. 240.14d-1 by redesignating paragraphs (c) and 
(d) as paragraphs (e) and (f), and adding paragraphs (c) and (d) to 
read as follows:


Sec. 240.14d-1  Scope of and definitions applicable to regulations 14D 
and 14E.

* * * * *
    (c) Notwithstanding paragraph (a) of this section, the requirements 
imposed by sections 14(d)(1) through 14(d)(7) of the Act [15 U.S.C. 
78n(d)(1) through 78n(d)(7)], Regulation 14D promulgated thereunder 
(Secs. 240.14d-1 through 240.14d-10), and Secs. 240.14e-1 and 240.14e-2 
shall not apply by virtue of the fact that a bidder for the securities 
of a foreign private issuer, as defined in Sec. 240.3b-4, the subject 
company of such a tender offer, their representatives, or any other 
person specified in Sec. 240.14d-9(d), provides any journalist with 
access to its press conferences held outside of the United States, to 
meetings with its representatives conducted outside of the United 
States, or to written press-related materials released outside the 
United States, at or in which a present or proposed tender offer is 
discussed, if:
    (1) Access is provided to both U.S. and foreign journalists; and
    (2) With respect to any written press-related materials released by 
the bidder or its representatives that discuss a present or proposed 
tender offer for equity securities registered under Section 12 of the 
Act [15 U.S.C. 78l], the written press-related materials must state 
that these written press-related materials are not an extension of a 
tender offer in the United States for a class of equity securities of 
the subject company. If the bidder intends to extend the tender offer 
in the United States at some future time, a statement regarding this 
intention, and that the procedural and filing requirements of the 
Williams Act will be satisfied at that time, also must be included in 
these written press-related materials. No means to tender securities, 
or coupons that could be returned to indicate interest in the tender 
offer, may be provided as part of, or attached to, these written press-
related materials.
    (d) For the purpose of Sec. 240.14d-1(c), a bidder may presume that 
a target company qualifies as a foreign private issuer if the target 
company is a foreign issuer and files registration statements or 
reports on the disclosure forms specifically designated for foreign 
private issuers, claims the exemption from registration under the Act 
pursuant to Sec. 240.12g3-2(b), or is not reporting in the United 
States.
* * * * *
    Dated: October 10, 1997.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27523 Filed 10-16-97; 8:45 am]
BILLING CODE 8010-01-P