60050 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

1 7 CFR 230.162. 

2 17 CFR 230.800. 

3 17 CFR 230.802. 

4 15 U.S.C. 77a et seq. 

5 17 CFR 232.101. 

6 17 CFR 232.10 et seq. 

7 17 CFR 240.13d–1. 

8 17 CFR 240.13e–3. 

9 17 CFR 240.13e–4. 

10 17 CFR 240.14d–1. 

11 17 CFR 240.14d–11. 

12 17 CFR 240.14e–5. 

13 17 CFR 240.16a–1. 

14 15 U.S.C. 78a et seq. 

15 17 CFR 239.25. 

16 17 CFR 239.34. 

17 17 CFR 239.42. 

18 17 CFR 239.800 and 17 CFR 249.480. 

19 17 CFR 240.13d–102. 

20 17 CFR 240.14d–100. 

21 Generally, the rule citations to the cross-border 

exemptions throughout this release refer to the 

exemptions that were adopted in 1999. When 

applicable, we specify that a citation is to a ‘‘new’’ 

or ‘‘amended’’ rule. 

22 ‘‘Foreign private issuer’’ is defined in Exchange 

Act Rule 3b–4(c) [17 CFR 240.3b–4(c)]. 

23 ‘‘U.S. holder’’ is defined in the cross-border 

exemptions as any security holder resident in the 

United States. See Securities Act Rule 800(h) [17 

CFR 230.800(h)]; Instruction 2 to Exchange Act 

Rules 13e–4(h)(8) and (i) [17 CFR 240.13e–4(h)(8) 

and 240.13e–4(i)] and 14d–1(c) and (d) [17 CFR 

240.14d–1(c) and 240.14d–1(d)]. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 230, 231, 232, 239, 240, 

241, and 249 

[Release Nos. 33–8957; 34–58597; File No. 

S7–10–08] 

RIN 3235–AK10 

Commission Guidance and Revisions 

to the Cross-Border Tender Offer, 

Exchange Offer, Rights Offerings, and 

Business Combination Rules and 

Beneficial Ownership Reporting Rules 

for Certain Foreign Institutions 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule and interpretation. 

SUMMARY: Almost nine years after the 

adoption of the original cross-border 

exemptions in 1999, the Commission is 

adopting changes to expand and 

enhance the utility of these exemptions 

for business combination transactions 

and rights offerings and to encourage 

offerors and issuers to permit U.S. 

security holders to participate in these 

transactions on the same terms as other 

target security holders. Many of the rule 

changes we are adopting today codify 

existing interpretive positions and 

exemptive orders in the cross-border 

area. We also are setting forth 

interpretive guidance on several topics. 

In two instances, we have extended the 

rule changes adopted here to apply to 

acquisitions of U.S. companies as well, 

because we believe the rationale for the 

changes in those instances applies 

equally to acquisitions of domestic and 

foreign companies. We also are adopting 

changes to allow certain foreign 

institutions to file on Schedule 13G to 

the same extent as would be permitted 

for their U.S. counterparts, where 

specified conditions are satisfied. We 

also are adopting a conforming change 

to Rule 16a–1(a)(1) to include the 

foreign institutions eligible to file on 

Schedule 13G. 

DATES: The final rule is effective 

December 8, 2008, except that the 

amendments to part 231 and 241 are 

effective October 9, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Christina Chalk, Senior Special Counsel, 

or Tamara Brightwell, Senior Special 

Counsel, at (202) 551–3440, in the 

Division of Corporation Finance, and 

Elizabeth Sandoe, Branch Chief, and 

David Bloom, Special Counsel, at (202) 

551–5720, in the Division of Trading 

and Markets (regarding Rule 14e–5), 

U.S. Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–3628. 

SUPPLEMENTARY INFORMATION: We are 

amending Rules 162,1 800 2 and 802 3

under the Securities Act of 1933 4 and 

Rule 101 5 of Regulation S–T.6 We also 

are amending Rules 13d–1,7 13e–3,8

13e–4,9 14d–1,10 14d–11,11 14e–5,12 and 

16a–1 13 under the Securities Exchange 

Act of 1934.14 We also are making 

changes to Form S–4,15 Form F–4,16

Form F–X,17 Form CB,18 Schedule 

13G 19 and Schedule TO.20

Table of Contents 

I. Background and Summary 

A. General Overview of the Cross-Border 

Exemptions 

B. Background of Rule Revisions Adopted 

1. Reasons for the Amendments 

2. Summary of the Amendments 

II. Discussion 

A. Revised Eligibility Test for the Revised 

Cross-Border Exemptions 

1. Changes to the Look-Through Analysis 

a. Timing of the Calculation 

b. Exclusion of Large Target Security 

Holders 

c. Under What Circumstances Is the Issuer 

or Acquiror Unable To Conduct the 

Look-Through Analysis To Determine 

Eligibility To Rely on a Cross-Border 

Exemption? 

2. Elements of the Alternate Test 

a. Average daily trading volume test 

b. Information filed by the issuer with the 

Commission or home country regulators 

c. Reason to know 

3. Changes to the Eligibility Test for Rights 

Offerings 

B. Changes to the Tier I Exemptions 

1. Expanded Exemption From Exchange 

Act Rule 13e–3 

2. Technical Changes to Securities Act 

Rule 802 

C. Changes to the Tier II Exemptions 

1. Tier II Relief for Tender Offers Not 

Subject to Rule 13e–4 or Regulation 14D 

2. Tier II Relief for Concurrent U.S. and 

Non-U.S. Offers 

a. Multiple foreign offers in connection 

with a U.S. offer 

b. U.S. offer may include non-U.S. holders 

of ADRs 

c. U.S. holders may be included in foreign 

offer 

3. Termination of Withdrawal Rights While 

Counting Tendered Securities 

4. Subsequent Offering Period Changes 

a. Maximum time limit on subsequent 

offering period eliminated 

b. Prompt payment of securities tendered 

during the subsequent offering period 

c. Payment of interest on securities 

tendered during the subsequent offering 

period 

d. Mix and match offers and the initial and 

subsequent offering periods 

5. Terminating Withdrawal Rights 

Immediately After Reducing or Waiving 

a Minimum Acceptance Condition 

6. Early Termination of an Initial Offering 

Period or a Voluntary Extension of an 

Initial Offering Period 

7. Exceptions From Rule 14e–5 for Tier II 

Cross-Border Tender Offers 

a. Purchases or arrangements to purchase 

pursuant to a foreign tender offer(s) 

b. Purchases or arrangements to purchase 

by an affiliate of the financial advisor 

and an offeror and its affiliates 

D. Expanded Availability of Early 

Commencement 

E. Changes to Schedules and Forms 

1. Form CB 

2. Schedule TO, Form F–4 and Form S–4 

F. Beneficial Ownership Reporting by 

Foreign Institutions 

G. Interpretive Guidance 

1. Foreign Target Security Holders and U.S. 

All-Holders Requirements 

2. Exclusion of U.S. Target Security 

Holders From Cross-Border Tender 

Offers 

3. Vendor Placements 

III. Paperwork Reduction Act 

IV. Cost-Benefit Analysis 

V. Consideration of Impact on Economy, 

Burden on Competition and Promotion 

of Efficiency, Competition and Capital 

Formation 

VI. Final Regulatory Flexibility Act Analysis 

VII. Statutory Basis and Text of Amendments 

I. Background and Summary 

A. General Overview of the Cross-Border 

Exemptions 

The existing cross-border 

exemptions,21 as adopted in 1999, are 

structured as a two-tier system based 

broadly on the level of U.S. interest in 

a transaction, measured by the 

percentage of target securities of a 

foreign private issuer 22 beneficially 

owned by U.S. holders.23 The purpose 

of the exemptions is to address conflicts 


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Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 60051 

24The U.S. anti-fraud and anti-manipulation rules 

and civil liability provisions continue to apply to 

these transactions. See Cross-Border Tender and 

Exchange Offers, Business Combinations and Rights 

Offerings, Release No. 33–7759, 34–42054 (October 

22, 1999) [64 FR 61382] (the ‘‘1999 Cross-Border 

Adopting Release’’), Section I.A. 

25 15 U.S.C. 77e. 

26 17 CFR 230.801. 

27Exchange Act Rules 13e–3(g)(6) [17 CFR 

240.13e–3(g)(6)], 13e–4(h)(8), and 14d–1(c). 

28Exchange Act Rule 14e–2(d) [17 CFR 240.14e– 

2(d)]. 

29Securities Act Rules 801(a)(4)(i) and 802(a)(3)(i) 

[17 CFR 230.801(a)(4)(i) and 230.802(a)(3)(i)], and 

Exchange Act Rules 13e–4(h)(8)(iii) and 14d– 

1(c)(3)(iii) [17 CFR 240.13e–4(h)(8)(iii) and 

240.14d–1(c)(3)(iii)]. 

30 Item 1 of Form CB. 

31Securities Act Rules 801(a)(4)(i) and 802(a)(3)(i) 

and Exchange Act Rules 13e–4(h)(8)(iii) and 14d– 

1(c)(3)(iii). If the bidder is a foreign company, it 

must also file a Form F–X with the Commission 

appointing an agent for service of process in the 

United States. See Securities Act Rules 801(a)(4)(i) 

and 802(a)(3)(i) and Exchange Act Rules 13e– 

4(h)(8)(iii) and 14d–1(c)(3)(iii). 

32 15 U.S.C. 78r. See also, 1999 Cross-Border 

Adopting Release, Section II.A.2. An acquiror or 

other person submitting Form CB is subject to U.S. 

anti-fraud provisions. See footnote 24 above. 

33Exchange Act Rules 14d–1 through 14d–11 [17 

CFR 240.14d–1 through 17 CFR 240.14d–11]. 

34 15 U.S.C. 78n(e). 

35 17 CFR 240.14e–1 through 17 CFR 240.14e–8. 

36See 1999 Cross-Border Adopting Release, 

Section II.A.2. Regulation 14E applies to all tender 

offers, including those not subject to Section 13(e) 

or 14(d) of the Exchange Act. These include tender 

offers for non-equity securities and securities that 

are not registered under Section 12 of the Exchange 

Act [15 U.S.C. 78l], as well as partial offers for less 

than all of the subject class, where the bidder will 

not own more than five percent of the subject class 

of equity securities after the tender offer (based on 

purchases in the tender offer and ownership in the 

target before the offer commences). 

37Securities Act Rules 801(a)(3) and 802(a)(2) [17 

CFR 230.801(a)(3) and 230.802(a)(2)]; Exchange Act 

Rules 13e–4(h)(8)(ii) and (i)(2)(ii) [17 CFR 240.13e– 

4(h)(8)(ii) and 240.13e–4(i)(2)(ii)]; and 14d–1(c)(2) 

and (d)(2)(ii) [17 CFR 240.14d–1(c)(2) and 240.14d– 

1(d)(2)(ii)]. 

38See Revisions to the Cross-Border Tender Offer, 

Exchange Offer, and Business Combination Rules 

and Beneficial Ownership Reporting Rules for 

Certain Foreign Institutions, Release No. 33–8917, 

34–57781 (May 6, 2008) (the ‘‘Proposing Release’’). 

39 ‘‘Business combination’’ is defined in 

Securities Act Rule 800(a) as any ‘‘statutory 

amalgamation, merger, arrangement or 

reorganization requiring the vote of security holders 

of one or more participating companies. It also 

includes a statutory short form merger that does not 

require a vote of security holders.’’ In this release, 

we use the term more broadly to include those 

kinds of transactions, as well as tender and 

exchange offers. See Securities Act Rule 165(f)(1) 

[17 CFR 230.165(f)(1)] (defining the term more 

broadly, to include the types of transactions listed 

in Rule 145(a) [17 CFR 230.145(a)], as well as 

exchange offers). A ‘‘cross-border’’ business 

combination, as that term is used throughout this 

release, refers to a business combination in which 

the target company (or the issuer in a rights 

offering) is a foreign private issuer, as defined in 

Exchange Act Rule 3b–4(c). 

between U.S. and foreign regulation, 

thereby facilitating the inclusion of U.S. 

investors in cross-border transactions. 

While today’s amendments will expand 

the scope of some of the exemptions, we 

retain this basic two-tier structure and 

the threshold U.S. ownership 

percentages. However, we are revising 

the manner in which eligibility to rely 

on the revised exemptions is 

determined. 

Where U.S. holders own no more than 

10 percent of the subject securities, a 

qualifying cross-border transaction will 

be exempt from most U.S. tender offer 

rules 24 pursuant to Tier I and from the 

registration requirements of Section 5 of 

the Securities Act of 1933 25 pursuant to 

Securities Act Rules 801 26 and 802. Tier 

I provides a broad exemption from the 

filing, dissemination and procedural 

requirements of the U.S. tender offer 

rules and the heightened disclosure 

requirements applicable to going private 

transactions as defined in Rule 13e–3.27

An issuer that is the subject of a tender 

offer also is exempt from the obligation 

to express a position, and provide 

reasons for its position, about the tender 

offer to its own security holders under 

Tier I.28 At the same level of U.S. 

ownership, Rules 801 and 802 also 

provide relief from the registration 

requirements of Securities Act Section 5 

for securities issued in rights offerings 

and business combination transactions. 

Where an issuer or acquiror relies on 

Rules 801 or 802 or the Tier I 

exemptions, it must furnish a Form CB 

to the Commission.29 Form CB is a cover 

sheet to which the issuer or acquiror 

attaches an English translation of the 

disclosure document used in the foreign 

home jurisdiction and disseminated to 

U.S. target security holders.30 The due 

date for furnishing Form CB to the 

Commission is the next business day 

after the disclosure document used in 

the foreign home jurisdiction is 

published or otherwise disseminated in 

accordance with home country rules.31

The materials submitted under cover of 

Form CB are not deemed filed with the 

Commission, and the filer is not subject 

to the liability provisions of Section 18 

of the Exchange Act.32

In adopting the cross-border 

exemptions, we did not intend to create 

new filing obligations for issuers and 

acquirors where none existed 

previously. For that reason, a bidder 

relying on the Tier I exemption must 

submit a Form CB only if the tender 

offer would have been subject to Rules 

13e–3 or 13e–4 or Regulation 14D,33 but 

for the Tier I exemption. No filing 

requirement exists for a tender offer 

subject only to Exchange Act Section 

14(e) 34 and Regulation 14E; 35

accordingly, furnishing a Form CB is not 

necessary.36

Tier II provides targeted relief from 

some U.S. tender offer rules for issuers 

and third-party bidders where U.S. 

security holders own more than 10 

percent, but no more than 40 percent, of 

the target class. The Tier II exemptions 

encompass narrowly-tailored relief from 

certain U.S. tender offer rules, such as 

the prompt payment, extension and 

notice of extension requirements in 

Regulation 14E. While they do address 

certain areas of common regulatory 

conflict, the Tier II exemptions do not 

provide relief from the registration 

requirements of Securities Act Section 

5, nor do they include an exemption 

from the additional disclosure 

requirements applicable to going private 

transactions by issuers or affiliates. 

The scope of the Tier I and Tier II 

cross-border exemptions and the 

exemptions from the Securities Act 

registration requirements provided in 

Rules 801 and 802 are based broadly on 

the level of U.S. interest in a given 

transaction, as measured by the 

percentage of shares beneficially owned 

by U.S. holders. In addition to these 

U.S. ownership thresholds, the crossborder exemptions are conditioned on 

other requirements, such as the 

principle that U.S. target security 

holders be permitted to participate in 

the offer on terms at least as favorable 

as those afforded other target holders.37

We retain these basic equal treatment 

principles in our rule revisions. 

B. Background of Rule Revisions 

Adopted 

On May 6, 2008, we proposed 

revisions to the rules governing certain 

cross-border business combination 

transactions, as well as revisions to the 

beneficial ownership reporting rules for 

certain foreign institutions.38 These 

revisions were intended to expand and 

enhance the utility of the exemptions 

available for cross-border business 

combination transactions.39 Many of the 

changes we proposed would codify 

existing interpretive positions and 

exemptive orders, and were intended to 

encourage offerors and issuers in crossborder business combinations to permit 

U.S. security holders to participate in 

these transactions in the same manner 

as other holders. Additionally, we 

provided guidance regarding several 

interpretive issues of concern for U.S. 

and other offerors engaged in crossborder business combinations. We also 

addressed the applicability of the U.S. 

all-holders provisions to foreign target 

security holders in tender offers for 

domestic issuers. In several instances, 

we requested comment about whether 


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60052 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

40Additionally, in several instances in the 

Proposing Release, we solicited comment regarding 

whether various proposed changes should be 

extended to the Multijurisdictional Disclosure 

System (‘‘MJDS’’) with Canada. We are not adopting 

any changes to MJDS at this time. 

41The public comments we received are available 

for inspection in our Public Reference Room at 100 

F Street, NE, Washington, DC 20549 in File No. S7– 

10–08, or may be viewed at http://www.sec.gov/ 

rules/proposed/s71008.shtml. 

42The rule changes that will apply to all tender 

offers, including those for domestic target 

companies: (1) Eliminate the maximum time limit 

on the length of the subsequent offering period and 

(2) provide the ability to commence an exchange 

offer upon the filing of a registration statement and 

before its effectiveness in exchange offers not 

subject to Rule 13e–4 or Regulation 14D. See 

amended Exchange Act Rule 14d–11 and amended 

Securities Act Rule 162. 

43See 1999 Cross-Border Adopting Release. 

44The Commission has undertaken several recent 

rulemaking initiatives that impact foreign private 

issuer reporting and registration requirements. For 

example, we recently revised our rules to make the 

U.S. capital markets more attractive to foreign 

private issuers by allowing the use of financial 

statements prepared in accordance with 

International Financial Reporting Standards 

(‘‘IFRS’’) as issued by the International Accounting 

Standards Board (‘‘IASB’’), without a reconciliation 

to U.S. GAAP. See Acceptance From Foreign 

Private Issuers of Financial Statements Prepared in 

Accordance With International Financial Reporting 

Standards Without Reconciliation to U.S. GAAP, 

Release No. 33–8879 (December 21, 2007) [73 FR 

986]. In addition, we amended the deregistration 

rules for exiting the U.S. regulatory system when 

the level of U.S. interest in a foreign private issuer’s 

securities has decreased, such that continued 

registration is no longer justified. See Termination 

of a Foreign Private Issuer’s Registration of a Class 

of Securities Under Section 12(g) and Duty to File 

Reports Under Section 13(a) or 15(d) of the 

Securities Exchange Act of 1934, Release No. 34– 

55540 (March 27, 2007) [72 FR 16934]. On August 

27, 2008, we adopted changes to the manner of 

determining the availability of the Rule 12g3–2(b) 

exemption from Exchange Act registration. See 

Exemption From Registration Under Section 12(g) 

of the Securities Exchange Act of 1934 for Foreign 

Private Issuers, Release No. 34–58465 (September 5, 

2008) [73 FR 52752]. Further, on August 27, 2008, 

we also adopted rule revisions applicable to foreign 

issuers, intended to improve the accessibility of the 

U.S. public capital markets and enhance the 

information available to investors. These revisions 

were proposed in Foreign Issuer Reporting 

Enhancements, Release No. 33–8900 (February 29, 

2008) [73 FR 13404]. See also, SEC Votes to 

Modernize Disclosure Requirements to Help U.S. 

Investors in Foreign Companies (August 27, 2008) 

(announcing the adoption of three sets of rule 

amendments). 

45 In discussing the changes we are adopting, the 

focus of the discussion is on acquirors in business 

combination transactions because the rules changes 

primarily impact that constituency. However, some 

of those changes, such as those to the eligibility test 

for the cross-border exemptions, also affect 

comparable provisions in the rights offering 

exemption in Securities Act Rule 801. We discuss 

the specific changes relating to the rights offering 

exemption in greater detail in Section II.A.3. below. 

46As discussed in the Proposing Release, the staff 

often provides exemptive or no-action relief by 

letter in the context of individual cross-border 

transactions. Pursuant to Rules 30–1 and 30–3 of 

the SEC’s Rules of General Organization [17 CFR 

200.30–1 and 200.30–3], we have delegated to the 

staff the authority to exempt individual bidders and 

issuers from the application of our rules. No-action 

and exemptive letters issued by the staff in 

connection with cross-border transactions may be 

found on our Web site at http://www.sec.gov/ 

divisions/corpfin/cf-noaction.shtml and http:// 

www.sec.gov/divisions/marketreg/mrnoaction.shtml#rule14e5. 

various rule changes we proposed 

should apply to tender offers for U.S. 

companies.40

In response to our request for 

comment on the Proposing Release, we 

received comments from a variety of 

groups and constituencies, most of 

whom expressed their support for our 

proposed modifications to the current 

rules. While commenters generally 

supported our proposed changes, some 

advocated further modifications to our 

rules.41 After considering the 

comments, we are adopting 

amendments to the cross-border 

exemptions and beneficial ownership 

rules substantially as proposed, but with 

modifications discussed more fully in 

this release. We also are adopting two 

changes to rules applicable to all tender 

offers, including those for U.S. target 

companies, where we believe the rule 

modifications initially proposed in the 

cross-border context will be useful and 

in the public interest if applied to all 

tender offers.42

1. Reasons for the Amendments 

As discussed in the Proposing 

Release, before the cross-border 

exemptions were adopted in 1999,43

cross-border business combination 

transactions or rights offerings often 

excluded U.S. holders of a foreign issuer 

or foreign target company because of 

actual or perceived conflicts between 

U.S. and foreign law. Exclusion of U.S. 

investors deprived them of some or all 

of the benefits of such cross-border 

transactions. The cross-border 

exemptions adopted in 1999 

represented an effort to facilitate the 

inclusion of U.S. security holders in 

foreign transactions in a manner 

consistent with our investor protection 

mandate. 

While we believe the exemptions 

were successful in addressing many 

areas of conflict between U.S. and 

foreign law, we recognize that in some 

instances the exemptions are not 

operating as optimally as intended, or 

do not address recurring conflicts of law 

and practice not anticipated when we 

adopted them. The revisions we adopt 

today address frequently arising issues 

and unintended consequences that have 

detracted from the usefulness of the 

existing cross-border exemptions. The 

revisions represent an expansion and 

refinement of the current exemptions. 

We believe they will encourage more 

offers to be extended into the United 

States. 

The amendments we are adopting 

represent another step in the 

Commission’s efforts to revise its rules 

relating to transactions involving foreign 

private issuers.44 These changes are 

intended to address the realities of the 

modern securities markets and, in 

particular, the increasing globalization 

of those markets. Increasingly, U.S. 

persons seek to diversify their 

investments by purchasing securities of 

foreign companies. Their ability to do 

so, including through direct purchases 

on foreign exchanges, has been 

facilitated greatly by the Internet. While 

the increasing globalization of the 

securities markets has proved beneficial 

to U.S. investors and companies, as well 

as non-U.S. investors and foreign 

private issuers, it also has increased the 

potential for regulatory conflicts in the 

context of cross-border business 

combination transactions. Whether 

foreign private issuers list their 

securities on a U.S. exchange or U.S. 

investors access overseas trading 

markets to purchase their securities, 

cross-border business combination 

transactions frequently present conflicts 

between U.S. and foreign regulatory 

systems. 

The revisions we are adopting today 

are intended to address the most 

frequent areas of conflict or 

inconsistency with foreign regulations 

and practice that acquirors encounter in 

cross-border business combination 

transactions. We believe the revisions 

appropriately balance the need to 

protect U.S. investors through the 

application of protections afforded by 

U.S. law, while facilitating transactions 

that may benefit all security holders, 

including those in the United States. 

The expanded availability of the crossborder exemptions will serve the public 

interest by encouraging bidders to 

include U.S. holders in cross-border 

business combination transactions from 

which they otherwise might be 

excluded, thereby extending the benefits 

of those transactions to U.S. investors.45

We recognize that these revisions will 

not eliminate all conflicts in law or 

practice presented by cross-border 

business combination transactions. The 

staff will continue to address those 

issues not covered by these revisions on 

a case-by-case basis, as is currently the 

practice.46

2. Summary of the Amendments 

The rule amendments we are adopting 

address practical problems that have 

limited the ability of bidders to rely on 

the exemptions. We believe they also 

will alleviate some of the burdens on 


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Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 60053 

47Acquirors in business combinations that are 

unable to accomplish the look-through analysis as 

of a date during that range may calculate U.S. 

ownership as of a date no more than 120 days 

before public announcement. For rights offerings, 

the amended rule would permit calculation as of a 

date within 60 days before or 30 days after the 

record date. See amended Securities Act Rule 

800(h)(1). The proposal included the date range of 

60 days before announcement of a business 

combination only, and did not permit calculation 

as of a date after announcement. 

48This change was not proposed, but the 

Proposing Release solicited comment on it. After 

further consideration and review of commenters’ 

responses, we believe this change is appropriate. 

49Although we did not propose this specific 

change, we did solicit comment generally on 

possible changes to the eligibility criteria. See 

Proposing Release, Section II. For bidders relying 

on the alternate test because they are unable to 

conduct the look-through analysis, the ADTV 

calculation will include a primary trading market 

component. 

50We proposed to allow this change only for 

cross-border tender offers. 

51Separate pro ration pools would be permitted 

only for Tier II tender offers that use the ‘‘mix and 

match’’ offer structure. See Section II.C.4.d. below. 

52 In the Proposing Release, we set forth 

interpretive guidance regarding the ability to 

terminate an initial offering period or voluntary 

extension of that period before a scheduled 

expiration date. We solicited comment on whether 

we should codify the existing interpretive guidance. 

See Proposing Release, Section II.C.6. We are 

codifying this guidance in new Exchange Act Rules 

13e–4(i)(1)(vii) and 14d–1(d)(2)(ix). 

53We proposed to allow this change only for 

cross-border tender offers. 

54The change to Rule 16a–1 [17 CFR 240.16a–1] 

was not proposed, but was requested by 

commenters. We believe this change is consistent 

with the regulatory history of aligning the scope of 

Rule 16a–1(a)(1) with Rule 13d–1(b)(1)(ii). 

bidders who must comply with two or 

more regulatory systems in the context 

of cross-border transactions. Highlights 

of the amendments, which are adopted 

as proposed except where otherwise 

specified, include: 

• Modifications to the manner in 

which the look-through analysis must 

be conducted under our current rules, to 

alleviate timing concerns associated 

with that calculation, including: 

• Changes to the reference date for 

the calculation of U.S. beneficial 

ownership to allow calculation as of any 

date no more than 60 days before and 

no more than 30 days after the public 

announcement of the transaction; 47 and 

• No longer requiring that individual 

holders of more than 10 percent of the 

subject securities be excluded from the 

calculation of U.S. ownership; 48

• An alternate test for determining 

eligibility to rely on the cross-border 

exemptions, based in part on a 

comparison of average daily trading 

volume of the subject securities in the 

United States and worldwide. This 

alternate test will be available for all 

non-negotiated transactions and those 

for which the look-through analysis 

mandated by our rules may not be 

conducted; 49

• Expanded relief under Tier I for 

affiliated transactions subject to Rule 

13e–3 for transaction structures not 

covered under our current cross-border 

exemptions, such as schemes of 

arrangement, cash mergers, or 

compulsory acquisitions for cash; 

• Extension of relief afforded by the 

Tier II provisions to tender offers not 

subject to Sections 13(e) or 14(d) of the 

Exchange Act; 

• Expansion of relief afforded under 

Tier II to eliminate recurrent conflicts 

between U.S. and foreign law and 

practice in several areas, including: 

• Allowing multiple foreign offers in 

conjunction with a concurrent U.S. 

offer; 

• Permitting bidders to include 

foreign holders of ADRs in the U.S. offer 

and, under specified conditions, U.S. 

holders in the foreign offer(s); 

• Allowing bidders to suspend backend withdrawal rights while tendered 

securities are counted; 

• Allowing subsequent offering 

periods in both cross-border and 

domestic offers to extend beyond 20 

U.S. business days; 50

• Allowing securities tendered during 

the subsequent offering period to be 

purchased within 20 business days from 

the date of tender, rather than 14 

business days as originally proposed; 

• Allowing bidders to pay interest on 

securities tendered during a subsequent 

offering period, where required under 

foreign law; 

• Allowing separate offset and 

proration pools for securities tendered 

during the initial and subsequent 

offering periods for certain kinds of 

tender offers; 51

• Permitting bidders to terminate an 

initial offering period or any voluntary 

extension of that period before a 

scheduled expiration date; 52

• Codification of three class 

exemptive letters with respect to the 

application of Rule 14e–5 for Tier II 

tender offers; 

• Expansion of the availability of 

early commencement to offers not 

subject to Section 13(e) or 14(d) of the 

Exchange Act, including offers for 

domestic target companies; 53

• Modification of the cover pages of 

specified tender offer schedules and 

registration statements to identify any 

cross-border exemptions relied upon in 

conducting the relevant transactions; 

• Requiring electronic filing of all 

Forms CB and Forms F–X, filed in 

connection with Form CB; and 

• Permitting foreign institutions to 

report on Schedule 13G to the same 

extent as their U.S. counterparts, subject 

to certain conditions, and expanding the 

definition of beneficial ownership in 

Exchange Act Rule 16a–1(a)(1) to 

include those foreign institutions.54

In addition to these rule amendments, 

we also are reiterating the interpretive 

guidance we provided in the Proposing 

Release, with some modifications. We 

are providing guidance on the following 

issues: 

• The ability of bidders in tender 

offers to waive or reduce the minimum 

tender condition without providing 

withdrawal rights; 

• The application of the all-holders 

provisions of our tender offer rules to 

foreign target security holders in 

transactions subject to U.S. equal 

treatment provisions; 

• The ability of bidders to exclude 

U.S. target security holders in crossborder tender offers; and 

• The availability of the vendor 

placement procedure for exchange 

offers. 

As discussed in further detail below, 

the revised rules we adopt today differ 

in some respects from what we 

proposed. For example, the alternate 

eligibility test is a combination of the 

existing look-through analysis and 

components of the existing test for nonnegotiated transactions. For the revised 

look-through analysis, we are providing 

a longer date range than proposed, 

during which acquirors and issuers can 

calculate U.S. ownership. Where the 

acquiror or issuer is not able to 

accomplish the look-through analysis as 

of the date in 60 days before and 30 

days after public announcement, we 

provide an extended period to 

accommodate those situations. 

The changes we proposed to the 

eligibility test would have applied only 

to business combination transactions; 

however, those we adopt are applicable 

to rights offerings also. Another 

difference between the rule changes we 

proposed and those we adopt is that two 

changes are applicable to all business 

combinations, including those in which 

the target is a U.S. company. Under our 

revised rules, bidders conducting tender 

offers for either U.S. or foreign target 

companies may extend the subsequent 

offering period beyond the current 20- 

business day limit. In addition, offerors 

in exchange offers for both domestic and 

foreign targets may commence those 

offers before the effective date of the 

registration statement, even where the 

exchange offer is not subject to specified 

U.S. tender offer rules. 

The revisions adopted today will be 

effective for transactions that commence 


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55See new Securities Act Rules 800(h)(6) and (7); 

Instructions 2 and 3 to amended Exchange Act 

Rules 13e–4(h)(8) and (i); and Instructions 2 and 3 

to amended Exchange Act Rules 14d–1(c) and (d). 

56When we refer to the ‘‘hostile presumption’’ in 

this release, we mean the existing test used to 

determine eligibility for the cross-border 

exemptions for non-negotiated transactions, i.e., 

those not made pursuant to an agreement between 

the acquiror and the target company. See Securities 

Act Rule 802(c) [17 CFR 230.802(c)] and Instruction 

3 to Exchange Act Rules 14d–1(c) and (d). 

57As used in this release, ‘‘subject securities’’ 

means securities of a target company that are the 

subject of a tender offer or are sought to be acquired 

in another kind of business combination 

transaction. 

58See amended Securities Act Rule 800(h)(3); 

Instruction 2.iii. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 2.iii. to 

amended Exchange Act Rules 14d–1(c) and (d). 

59See amended Securities Act Rule 800(h)(4); 

Instruction 2.iv. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 2.iv. to 

amended Exchange Act Rules 14d–1(c) and (d). 

60See new Securities Act Rule 800(h)(6); 

Instruction 3 to amended Exchange Act Rules 13e– 

4(h)(8) and (i); and Instruction 3 to amended 

Exchange Act Rules 14d–1(c) and (d). 

61See new Securities Act Rule 800(h)(6) and 

Instruction 3 to amended Exchange Act Rules 14d– 

1(c) and (d). 

62See Exchange Act Rule 3b–4(c). For the 

Securities Act Rule 801 exemptions for rights 

offerings, the issuer must be a foreign private issuer 

as defined in that rule. For business combinations 

such as mergers of equals, where both parties to the 

transaction will be replaced by a successor entity 

which issues securities in the amalgamation, U.S. 

holders may hold no more than 10 percent of the 

subject class, as if measured immediately after the 

business combination. See Securities Act Rule 

802(a) [17 CFR 230.802(a)]. 

63The threshold U.S. beneficial ownership 

percentages are 10 percent (for Tier I and Securities 

Act Rules 801 and 802) and 40 percent (for Tier II). 

64As noted in the Proposing Release, our focus 

on U.S. beneficial ownership for business 

combinations and rights offerings differs from the 

approach we have taken recently for foreign private 

issuer deregistration and for purposes of the ability 

of a foreign private issuer to qualify for the 

exemption from registration under Exchange Act 

Rule 12g3–2(b) [17 CFR 240.12g3–2(b)]. See the 

discussion in the Proposing Release, Section I.A.2. 

65As we stated in the Proposing Release, using an 

ADTV test may result in target companies with 

significant U.S. ownership qualifying for the Tier I 

and Securities Act Rules 801 and 802 exemptions. 

Where a bidder, including a U.S. company, is 

eligible to rely on the Tier I cross-border 

exemptions, it may issue securities without 

registration under Securities Act Rule 802. We are 

concerned that use of an ADTV test for eligibility 

to rely on the cross-border exemptions would allow 

bidders, including U.S. bidders, to issue significant 

amounts of bidder securities to U.S. holders, 

without the protections of Securities Act 

registration. 

66See amended Securities Act Rule 800(h); 

Instructions 2 and 3 to amended Exchange Act 

Rules 13e–4(h)(8) and (i); and Instructions 2 and 3 

to amended Exchange Act Rules 14d–1(c) and (d). 

67The existing cross-border exemptions require 

target securities held by holders who individually 

after the effective date of the revised 

rules. To the extent that the parties to 

transactions other than those that 

commence after the effective date wish 

to rely on these rule changes, requests 

for relief will be considered on a caseby-case basis. Transition issues and the 

effective date of the revised rules 

relating to beneficial ownership 

reporting are discussed in Section II.F. 

II. Discussion 

A. Revised Eligibility Test for the 

Revised Cross-Border Exemptions 

We are adopting changes to the 

eligibility test for the cross-border 

exemptions that we believe will 

facilitate the use of the exemptions and 

reduce the burden of determining 

eligibility. For negotiated transactions, 

acquirors must continue to conduct the 

look-through analysis, as amended 

today to provide greater flexibility.55

Where acquirors are unable to conduct 

this analysis, we are adopting an 

alternate test that incorporates elements 

from the current hostile presumption 56

for non-negotiated deals, including an 

element based on average daily trading 

volume of the subject securities 

(‘‘ADTV’’).57

The cross-border exemptions require 

acquirors to query record holders and 

other nominees to determine U.S. 

beneficial ownership. For example, 

acquirors need only ‘‘look through’’ 

nominees located in the United States, 

the subject company’s jurisdiction of 

incorporation and that of each 

participant in the business combination 

transaction, and the jurisdiction that is 

the primary trading market for the 

subject securities, if different from the 

jurisdiction of incorporation.58 In 

addition, acquirors may assume that 

beneficial holders are residents of the 

jurisdiction in which the nominee 

queried has its principal place of 

business, if after reasonable inquiry the 

acquiror is unable to obtain information 

from that nominee.59 These limitations 

on the scope of the required lookthrough analysis assist the acquiror in 

accomplishing the required analysis. We 

are not changing these provisions in our 

revised rules. 

Where acquirors cannot conduct the 

look-through analysis, however, we are 

providing an alternate test similar to the 

hostile presumption for non-negotiated 

transactions.60 Because we recognize 

that acquirors who do not have the 

cooperation of the target company may 

have limited access to information from 

nominees, this alternate test will be 

available for all non-negotiated 

transactions.61 In the discussion that 

follows, we provide guidance on the 

limited circumstances under which the 

alternate test will be available for 

negotiated transactions. 

The existing cross-border exemptions 

and the revised exemptions we adopt 

today continue to be available only 

when the target company is a foreign 

private issuer as defined in our rules.62

As is the case with the existing crossborder exemptions, the revised 

exemptions are available equally to both 

U.S. and foreign acquirors, where the 

company being acquired qualifies as a 

foreign private issuer. 

Under the current rules and the 

revisions we adopt today, the 

percentage of the subject securities held 

beneficially by U.S. persons is an 

important element in determining 

eligibility to rely on the exemptions.63

We continue to believe that U.S. 

beneficial ownership, as determined by 

the revised look-through calculation, 

should be a central element in 

determining eligibility to rely on the 

cross-border exemptions. Beneficial 

ownership is the characteristic of the 

target subject security holder base that 

is, in our view, most closely tied to U.S. 

interest in the subject securities in the 

context of a business combination 

transaction or a rights offering.64 In the 

case of business combination 

transactions, which affect all target 

security holders whether or not they 

choose to participate, we believe the 

percentage of the subject securities that 

is held by U.S. holders is the best 

measure of when U.S. rules should 

apply.65 In addition, because the crossborder exemptions include exemptions 

from the registration requirements of 

Section 5 of the Securities Act that are 

available to both foreign and U.S. 

acquirors, the focus on the percentage of 

target securities held by U.S. holders 

corresponds with the percentage of 

securities that may be issued without 

registration by a U.S. acquiror to U.S. 

target holders. Because securities of U.S. 

acquirors are likely to have their 

primary trading market in the United 

States, it is appropriate to consider the 

magnitude of these issuances and the 

resulting flow back into the United 

States. 

The revised rules do not change the 

threshold percentages of U.S. ownership 

for reliance on the cross-border 

exemptions; however, we are changing 

the manner in which these percentages 

are determined. To address concerns 

raised by commenters about the lookthrough tests for negotiated transactions, 

we have significantly revised the 

manner in which that analysis must be 

performed, including when and under 

what circumstances it is mandated.66

Based on feedback from commenters, 

we also are eliminating the requirement 

to exclude large security holders of the 

target class in calculating the percentage 

of U.S. ownership.67 Commenters 


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own more than 10 percent of the subject class to 

be excluded from both the numerator and the 

denominator in calculating total U.S. ownership. 

The exclusion requirement applies to both U.S. and 

non-U.S. large holders. See Section II.A.1.b. below. 

68See, e.g., letter from Sullivan & Cromwell LLP 

(‘‘S&C’’). 

69 20 of the 22 comment letters we received 

addressed this issue, either directly or indirectly. 

70These include concerns about cost, burden and 

confidentiality. See, e.g., letter from Committee on 

Federal Regulation of Securities, Section of 

Business Law, American Bar Association (‘‘ABA’’). 

71As discussed above, we are not requiring 

acquirors in hostile transactions to conduct the 

look-through analysis under our amended rules. 

This is the same approach as under the existing 

exemptions. See Instruction 3 to Exchange Act 

Rules 14d–1(c) and (d). 

72See new Securities Act Rules 800(h)(6) and (7); 

Instruction 3 to amended Exchange Act Rules 13e– 

4(h)(8) and (i); and Instruction 3 to amended 

Exchange Act Rules 14d–1(c) and (d). 

73See Securities Act Rule 802(c) and Instruction 

3.ii. to Exchange Act Rules 14d–1(c) and (d). The 

thresholds also mirror the maximum percentage 

limits for U.S. beneficial ownership. 

74See new Securities Act Rules 800(h)(6) and (7); 

Instruction 3.ii. and 3.iii. to amended Exchange Act 

Rules 13e–4(h)(8) and (i); and Instruction 3.ii. and 

3.iii. to amended Exchange Act Rules 14d–1(c) and 

(d). 

75See Securities Act Rules 801 and 802. 

76See amended Securities Act Rule 800(h); 

Instruction 1.i. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 2.i. to amended 

Exchange Act Rules 14d–1(c) and (d). As noted 

below, we did not propose but solicited comment 

on similar changes to the timing of the calculation 

for eligibility for Securities Act Rule 801 

(exemption for rights offerings). Today we also are 

adopting changes to Rule 800(h) that will provide 

issuers with greater flexibility to use a date within 

a 60-day range before and a 30-day period after the 

record date for a rights offering. See amended 

Securities Act Rule 800(h) and the discussion 

below. 

77See Securities Act Rule 800(h); Instruction 2.i. 

to Exchange Act Rules 13e–4(h)(8) and (i); and 

Instruction 2.i. to Exchange Act Rules 14d–1(c) and 

(d). 

78See amended Securities Act Rule 800(h)(1); 

Instruction 2 to amended Exchange Act Rules 13e– 

4(h)(8) and (i); and Instruction 2 to amended 

Exchange Act Rules 14d–1(c) and (d). 

79See generally, Instruction 5 to Exchange Act 

Rules 13e–4(c) and 14d–2 [17 CFR 240.13e–4(c) and 

240.14d–2] (defining public announcement for 

purposes of precommencement communications 

about issuer or third-party tender offers). 

80See, e.g., The Forum for U.S. Securities 

Lawyers in London. 

81See, e.g., letter from Linklaters LLP 

(‘‘Linklaters’’). Another commenter suggested that 

for rights offering, the reference date should be 30 

days before the record date, or alternatively, before 

announcement. See letter from S&C. 

82See letter from Shearman and Sterling LLP 

(‘‘Shearman’’). 

83 In some foreign jurisdictions, the acquiror may 

need to conduct the look-through analysis before 

announcement because home country law may 

require detailed information about the transaction, 

including the treatment of U.S. holders, to be 

included in the announcement. 

84Two commenters, Shearman and Davis Polk & 

Wardwell (‘‘DPW’’), advocated a range extending 

Continued 

advised that this change would expand 

the availability of the exemptions 

because of the concentrated ownership 

structures of many foreign private 

issuers.68 We believe the cumulative 

effect of the revisions will facilitate the 

look-through process by providing 

greater flexibility to acquirors, and also 

will allow them to know at an earlier 

stage in the planning process how U.S. 

target holders will be treated. 

No aspect of the Proposing Release 

generated more commentary, and more 

criticism, than this focus on beneficial 

ownership and the manner in which it 

must be calculated under our rules.69

Despite the revisions to the lookthrough analysis adopted today, we 

remain cognizant of the concerns 

expressed by commenters with respect 

to the feasibility of the test under certain 

circumstances.70 While we believe the 

look-through analysis and its focus on 

beneficial ownership should remain the 

starting point for determining eligibility 

to rely on the revised exemptions for 

negotiated transactions, we also 

recognize that circumstances exist in 

which acquirors are unable to conduct 

the look-through analysis.71 Therefore, 

we are adopting an alternate test for 

such circumstances based, in part, on a 

comparison of the average daily trading 

volume of the subject securities in the 

United States as compared to worldwide 

trading over a twelve-month period.72

The trading volume percentages we 

established for the ADTV element of the 

alternate test are the same as those for 

the existing hostile presumption.73 The 

ADTV element of the alternate test is 

supplemented by other factors, such as 

the acquiror’s actual knowledge of the 

U.S. ownership percentage of the 

subject securities, based on reports filed 

by the target company and others, as 

well as information from third parties 

known to the acquiror.74

We believe the changes to the lookthrough test in the cross-border 

exemptions and the alternate test we 

adopt today appropriately balance 

commenters’ concerns with our investor 

protection goals. In our view, these 

revisions will increase the availability of 

the cross-border exemptions, including 

the exemptions from the registration 

requirements of Section 5 of the 

Securities Act,75 which we anticipate 

will promote the inclusion of U.S. target 

holders in more cross-border 

transactions. We will continue to 

monitor the application of the revised 

rules to assess whether additional 

changes are necessary and in the public 

interest to facilitate this goal. 

1. Changes to the Look-through Analysis 

a. Timing of the Calculation 

We are adopting, with some 

modifications, the proposed changes to 

the timing of and reference date for the 

calculation of U.S. ownership for 

determining eligibility to rely on the 

cross-border exemptions for business 

combinations.76 Under existing rules, 

acquirors are required to calculate U.S. 

ownership as of a set date—the 30th day 

before the commencement of a tender 

offer or before the solicitation for a 

business combination other than a 

tender offer.77 The revisions adopted 

change the reference date to the public 

announcement of the business 

combination transaction.78 For these 

purposes, we consider ‘‘public 

announcement’’ to be any oral or 

written communication by the acquiror 

or any party acting on its behalf, which 

is reasonably designed to inform or has 

the effect of informing the public or 

security holders in general about the 

transaction.79 Under our revised rules, 

an acquiror seeking to rely on the crossborder exemptions may calculate U.S. 

ownership as of any date no more than 

60 days before and no more than 30 

days after the public announcement of 

the cross-border transaction. 

The revised rules will allow the 

calculation to be accomplished based on 

a range of dates before public 

announcement of a business 

combination transaction because we 

believe that this will allow the parties 

to a business combination to determine 

and inform the markets of the treatment 

of U.S. target security holders at an 

earlier stage in the planning process. In 

addition, this change allows the 

calculation of U.S. ownership to be 

made before the target security holder 

base is affected by the public 

announcement. Most commenters 

supported the use of announcement as 

the reference point for the calculation.80

Commenters generally also favored the 

use of a 60-day date range before public 

announcement, although one party 

advocated a shorter 30-day range.81

We expanded the rule to permit the 

calculation as of a date no more than 30 

days after announcement to address 

commenters’ concerns about the 

confidentiality of the look-through 

analysis.82 Where that analysis must be 

conducted before announcement, it may 

compromise the confidentiality of the 

transaction. By allowing a range of dates 

both before and after public 

announcement, the rule is designed to 

provide acquirors whose home country 

law permits them to wait to conduct the 

analysis until after public 

announcement with flexibility to 

maintain confidentiality to the greatest 

extent possible.83 This change was 

advocated by several commenters.84


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from the 60th day before through the 30th day after 

announcement. Another commenter, Simpson 

Thacher & Bartlett LLP (‘‘STB’’), suggested a range 

from the 60th day before through the 60th day after 

announcement. 

85See amended Securities Act Rule 800(h)(1); 

Instruction 2.i. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 2.i. to amended 

Exchange Act Rules 14d–1(c) and (d). This 

expanded date range is not available for rights 

offerings. See Section II.A.3. below. 

86 In the Proposing Release, we expressed concern 

about a bidder or issuer intentionally choosing a 

date that presents less than a representative picture 

of the target security holder base. We noted that the 

cross-border exemptions are not available for any 

transaction or series of transactions that technically 

comply with our rules but are in fact part of a 

scheme to evade them. See Proposing Release, 

Section II.A.2.b. 

87See Securities Act Rules 801(a)(2) and 802(a)(1) 

[17 CFR 230.801(a)(2) and 17 CFR 230.802(a)(1)] 

and Exchange Act Rules 13e–4(h)(8)(i) and (i)(1)(ii) 

and 14d–1(c)(1) and (d)(2)(ii) [17 CFR 240.13e– 

4(h)(8)(i), 240.13e–4(i)(1)(ii), and 240.14d–1(c)(1)]. 

88Under the current rules, all securities held by 

persons or entities that individually hold more than 

10 percent of the subject class, whether U.S. or 

foreign, must be excluded from both the numerator 

(U.S. ownership) and denominator (worldwide 

ownership) when calculating U.S. ownership 

percentages. See Securities Act Rule 800(h)(2) [17 

CFR 230.800(h)(2)]; Instruction 2.ii. to Exchange 

Act Rules 13e–4(h)(8) and (i); and Instruction 2.ii. 

to Exchange Act Rules 14d–1(c) and (d). Under the 

amended rules, these securities will be included in 

both the numerator and denominator. 

89See Proposing Release, Section II.A.2.a. See, 

e.g., letters from Committee on Mergers, 

Acquisitions and Corporate Control Contests, 

Association of the Bar of the City of New York 

(‘‘ABCNY’’), DPW, and Linklaters. 

90See, e.g., letters from STB and S&C. 

91See letter from STB. 

92This could be the case where a foreign private 

issuer had a disproportionate number of large U.S. 

security holders of the subject class. 

93See letter from DPW. 

94See amended Securities Act Rule 800(h)(2) and 

Instruction 2.ii. to amended Exchange Act Rules 

14d–1(c) and (d). 

95See letter from ABA. 

96 Id. 

97See, e.g., letters from Cleary Gottlieb Steen & 

Hamilton LLP (‘‘Cleary’’) and DPW. 

This 90-day range should be used in 

most cases. We recognize, however, that 

the 90-day range may not be enough 

time in some foreign jurisdictions, 

depending on the procedures available 

for obtaining beneficial ownership 

information. Therefore, our revised 

rules specify that where the issuer or 

acquiror is unable to complete the lookthrough analysis as of this 90-day 

period, it may use a date within 120 

days before public announcement.85 We 

considered providing every acquiror 

and issuer with the flexibility to look 

through as of a date within the extended 

120-day period before announcement. 

We believe, however, that there should 

be some limits on dates available to 

conduct the analysis, and this extended 

period is warranted only where 

necessary.86 We believe that in most 

cases, this date range will be sufficient 

time to conduct the required lookthrough analysis. Where the acquiror or 

issuer cannot accomplish the lookthrough analysis within this time 

period, it may use the alternate test 

outlined below. 

b. Exclusion of Large Target Security 

Holders 

Our revised rules do not affect the 

percentages of target securities that may 

be beneficially owned by U.S. holders in 

order for a transaction to qualify for the 

exemption. The maximum U.S. 

ownership percentages remain at no 

more than 10 percent for reliance on 

Tier I and Rules 801 and 802 and no 

more than 40 percent for Tier II.87 The 

look-through analysis by which these 

percentages are calculated has changed, 

however. Our revised rules will no 

longer require that individual holders of 

more than 10 percent of the subject 

securities be excluded from the 

calculation of U.S. ownership.88 We 

believe this change will significantly 

expand the number of cross-border 

business combinations eligible for the 

exemptions, while still providing 

appropriate investor protections. 

Although we did not propose this 

change in the Proposing Release, we 

solicited comment on it, and many 

commenters advocated it.89

Commenters noted that requiring the 

exclusion of large target holders 

generally has the effect of skewing 

upward the percentage of U.S. 

ownership of foreign private issuers, 

which in turn decreases the availability 

of the cross-border exemptions.90

Although existing rules require the 

exclusion of both U.S. and foreign 

holders of greater than 10 percent of the 

subject securities, commenters 

suggested that the effect of this 

requirement disproportionately inflates 

U.S. holdings because holders of large 

blocks of foreign stock are more likely 

to be non-U.S. persons.91 We note that 

although this may be the case generally, 

there could be specific fact patterns 

where this rule change would decrease 

the availability of the cross-border 

exemptions because of the particular 

characteristics of the subject security 

holder base.92 We are persuaded by 

commenters, however, that we should 

not treat greater-than-10 percent holders 

as non-market participants for purposes 

of the U.S. ownership calculation 

required by our rules.93 We also believe, 

based on the staff’s own experiences 

with cross-border transactions since 

1999 as well as feedback from the 

commenters, that eliminating this 

exclusion requirement will increase the 

availability of the cross-border 

exemptions without compromising our 

investor protection goals. 

We are retaining the requirement in 

our existing rules that securities held by 

the acquiror be excluded from both the 

numerator and denominator in 

calculating U.S. beneficial ownership.94

We did not propose a change to this 

requirement of our existing rules. In 

assessing what securities should be 

considered for the calculation, it is 

appropriate to exclude those held by the 

acquiror because it will not be 

participating in the acquisition as a 

target holder. In addition, acquirors 

often purchase a minority stake in a 

target company as part of a series of 

transactions which, while they may 

occur in stages over time, are part of the 

same overall acquisition plan; 

eliminating the requirement to exclude 

securities held by the acquiror would 

not reflect the reality that these series of 

transactions are typically part of an 

integrated business combination 

transaction. One commenter noted that 

excluding securities held by the 

acquiror could have the effect of 

inflating the U.S. ownership figures for 

the remaining securities in the subject 

class.95 As noted above, however, this 

will not always be the case; the 

requirement to exclude securities held 

by a U.S. acquiror might have the effect 

of reducing the total U.S. ownership 

percentages. In addition, the commenter 

acknowledged that excluding subject 

securities held by the acquiror does not 

present the same logistical issues as 

requiring an acquiror to exclude 

securities held by third parties, for 

which it might not have accurate and 

complete ownership information.96

Several commenters suggested that 

securities held by greater than 10 

percent holders should continue to be 

excluded from the U.S. ownership 

calculation, where those large holders 

are otherwise affiliated with the target.97

At this time, we are not adopting this 

recommendation because we believe it 

may be too cumbersome to require 

acquirors to determine affiliation. Even 

if we set objective standards by which 

affiliation could be determined for these 

purposes, we believe the approach 

toward large holders, whether exclusion 

as under our existing rules, or inclusion 

under our revised rules, should be 

consistent for all similarly-situated 

holders. For this reason, we are not 

adopting the suggestion of one 

commenter to exclude from the 

calculation of U.S. ownership subject 

securities held by certain U.S. 


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98See letter from Allen & Overy, Ashurst LLP, 

Clifford Chance LLP, Freshfields Bruckhaus 

Deringer, Herbert Smith LLP, Linklaters LLP, and 

Norton Rose LLP. This letter advocates disregarding 

holdings by U.S. institutional investors, such as 

those qualifying as ‘‘QIBs’’ as defined in Rule 144A, 

even where such entities individually hold no more 

than 10 percent of the subject securities. 

99Pub. L. No. 90–439, 82 Stat. 454 (1968). 

100Cf. Securities Act Rule 409 [17 CFR 230.409] 

and Exchange Act Rule 12b–21 [17 CFR 240.12b– 

21] (providing flexibility, under limited 

circumstances, for registrants when they are unable 

to provide information required by the 

Commission’s rules). 

101Under the amended Instructions to the 

exemptions, as discussed above, the acquiror must 

obtain information about U.S. beneficial holders as 

of a date no more than 60 days before and no more 

than 30 days after the public announcement of the 

business combination (as of the record date for a 

rights offering). Where the acquiror cannot obtain 

information within these time frames, it may use a 

date no more than 120 days before public 

announcement. If it cannot conduct the lookthrough as of date within this extended time frame, 

the acquiror or issuer is unable to conduct the lookthrough for purposes of our rules and may rely on 

the alternate test. 

102These are securities for which the issuer or 

other party does not keep a registry of ownership. 

The possession of the stock certificate is the only 

proof of ownership for bearer securities. 

103See Instruction 3 to amended Exchange Act 

Rules 13e–4(h)(8) and (i). This is different from the 

approach in our current rules, where the hostile 

presumption based on factors other than the lookthrough analysis is not available to issuers or 

affiliated bidders. 

104See the Proposing Release, Section II.A.3.a. 

and the 1999 Cross-Border Adopting Release, 

Section II.F.3. 

105See new Securities Act Rule 800(h)(7); 

Instruction 3 to amended Exchange Act Rules 13e– 

4(h) and (i); and Instruction 3 to amended Exchange 

Act Rules 14d–1(c) and (d). 

institutional holders.98 While the 

commenter argued that such 

institutional holders should be excluded 

from the calculation because our focus 

should be on retail holders, if we 

exclude U.S. institutions in determining 

eligibility to rely on the cross-border 

exemptions, our rules will apply less 

frequently to the retail holders who may 

need them the most. In addition, 

sophisticated institutional holders 

benefit from the procedural and other 

protections of our rules under the 

Williams Act.99

c. Under what circumstances is the 

issuer or acquiror unable to conduct the 

look-through analysis to determine 

eligibility to rely on a cross-border 

exemption? 

As discussed above, the look-through 

test—as revised today—will remain the 

primary means of determining eligibility 

to rely on the cross-border exemptions 

for negotiated transactions. We continue 

to believe that extraordinary events in 

the life of a corporation, such as tender 

or exchange offers or other kinds of 

business combination transactions, may 

pose unique opportunities and risks to 

security holders. In a tender or exchange 

offer, where the bidder may present its 

offer directly to target security holders 

even where the target company itself 

does not support the offer, the 

disclosure and procedural protections of 

our rules provide critical safeguards for 

U.S. investors. Unlike capital-raising 

transactions, the interests of all target 

security holders, including U.S. holders, 

are affected by business combinations, 

whether or not they are permitted to 

participate in them. Because U.S. 

beneficial ownership of target securities 

represents aggregate U.S. economic 

interest in the target company, we 

continue to believe that it is the proper 

standard for determining exemption 

status. Nevertheless, commenters have 

pointed out—and the staff’s experience 

has informed us of—some problems that 

arise in requiring the look-through test. 

To address these concerns, today we 

adopt an alternate test, based in part on 

a comparison of average daily trading 

volume, which may be used to 

determine eligibility to rely on the 

cross-border exemptions. In limited 

situations, where an issuer or acquiror 

is unable to conduct the look-through 

analysis mandated in our rules, it may 

use the alternate test described 

below.100

Whether an issuer or an acquiror is 

unable to conduct the look-through 

analysis required by our rules will 

depend on the facts and circumstances 

of the particular analysis. We 

emphasize, however, that the need to 

dedicate time and resources to the lookthrough analysis alone will not support 

a finding that a bidder is unable to 

conduct the analysis. Similarly, 

concerns about the completeness and 

accuracy of the information obtained 

from the analysis will not necessarily 

justify the use of the alternate test. In 

each instance, the bidder must make a 

good faith effort to conduct a reasonable 

inquiry into ascertaining the level of 

U.S. beneficial ownership. Where 

issuers and acquirors have questions 

about the availability of the alternate 

test, whether in the context of 

individual cross-border transactions or 

otherwise, consideration will be given 

to whether additional guidance is 

appropriate. 

Although we are not providing an 

exhaustive list of the situations that 

would justify the use of the alternate 

test, we do recognize specific factual 

scenarios when the alternate test could 

be used. For example, in some foreign 

jurisdictions, security holder lists are 

generated only at fixed intervals during 

the year and are not otherwise available. 

In those circumstances, where the 

published information is as of a date 

outside the range specified in our 

revised rules,101 the alternate test may 

be used unless the acquiror or issuer 

otherwise has access to more current 

information. We believe that U.S. 

ownership information as of a date 

outside of the expanded range we 

provide in our revised rules will be 

outdated and therefore will justify the 

use of the alternate eligibility test. 

We also believe that an acquiror 

generally will be unable to conduct the 

required look-through analysis in the 

manner prescribed by our revised rules 

when the subject securities are in bearer 

form.102 In addition, in certain foreign 

jurisdictions, nominees may be 

prohibited by law from disclosing 

information about the beneficial owners 

on whose behalf they hold. Where this 

prohibition extends to the country of 

residence of the beneficial owners of the 

subject securities, we believe the 

alternate test for determining eligibility 

should be available. Even the issuer 

itself may be unable to conduct the 

required look-through analysis and thus 

may turn to the alternate test under our 

revised rules.103 In addition, where a 

business combination transaction is 

non-negotiated (not conducted pursuant 

to an agreement between the target and 

the acquiror), the acquiror need not 

conduct the look-through analysis under 

our revised rules. This is consistent 

with the existing rules, premised on the 

concept that a third party will generally 

have decreased access to ownership 

information without the cooperation of 

the target.104

2. Elements of the Alternate Test 

Under the revised eligibility test, most 

acquirors will be required to conduct 

the look-through analysis, as modified 

by the rule changes we adopt today and 

discussed above. Only where an 

acquiror is unable to conduct the 

required analysis because of specific 

circumstances may it turn to the other 

means of determining eligibility 

specified in the alternate test.105 As 

noted above, acquirors in nonnegotiated transactions may continue to 

rely on the alternate test, which is 

similar to and replaces the current 

‘‘hostile presumption.’’ 

Under the alternate test, an acquiror 

may rely on the cross-border 

exemptions unless average daily trading 

volume in the United States exceeds the 

limits set forth in our rules, reports filed 

by the target company indicate levels of 

U.S. ownership inconsistent with the 

limits for the applicable exemption, or 

the acquiror knows or has reason to 


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106The comparable prong of the existing hostile 

presumption test compares ‘‘aggregate trading 

volume of the subject securities on all national 

securities exchanges in the United States, on the 

Nasdaq market, or on the OTC market as reported 

to the NASD’’ to the worldwide aggregate trading 

volume. See, e.g., the existing Instruction 3 to 

Exchange Act Rules 14d–1(c) and (d). Although the 

revised instruction we adopt today refers to 

‘‘average daily’’ instead of ‘‘aggregate’’ trading 

volume, and eliminates the references to the NASD 

(or its successor FINRA), we do not view these 

changes as substantive. 107See new Securities Act Rule 800(h)(7)(i); 

Instruction 3.i. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 3.i. to amended 

Exchange Act Rules 14d–1(c) and (d). 108See Securities Act Rule 802(c) and Instruction 

3 to Exchange Act Rules 14d–1(c) and (d). 109See Memorandum from the Office of 

Economic Analysis (June 5, 2008) (available in the 

comment file for the Proposing Release at http:// 

www.sec.gov/rules/proposed/s71008.shtml). 

110See new Securities Act Rule 800(h)(6) and 

Instruction 3 to amended Exchange Act Rules 14d– 

1(c) and (d). 

111See 1999 Cross-Border Adopting Release, 

Section II.F.3. 

112See new Securities Act Rule 800(h)(7)(i); 

Instruction 3.i. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 3.i. to amended 

Exchange Act Rules 14d–1(c) and (d). We proposed 

to modify the instruction in our rules to mandate 

a calculation over a twelve-calendar-month period 

ending no later than 60 days before announcement. 

We did not receive comments specifically 

addressing this point. 

113See Instruction 2 to amended Exchange Act 

Rules 14d–1(c) and (d). 

114See Exchange Act Rule 12h–6(f)(5). 

115We did not propose, but we solicited comment 

on, whether we should adopt a primary trading 

market requirement when using an ADTV measure. 

See Proposing Release, Section II.A.4. The primary 

trading market requirement does not apply to the 

use of the alternate test for non-negotiated 

transactions. 

116Exchange Act Rule 12h–6(f)(5)(i) [17 CFR 

240.12h–6(f)(5)(i)]. Elsewhere in the revised 

exemptions, we continue to use the term ‘‘primary 

trading market’’ more narrowly, to refer to the 

single, principal foreign trading market for the 

subject securities outside the United States. See 

footnote 58 in the Proposing Release. 

117Exchange Act Rule 12h–6(f)(5)(ii) [17 CFR 

240.12h–6(f)(5)(ii)]. 

118See letters from Bredin Prat, De Brauw 

Blackstone Westbroek, Hengeler Mueller, Slaughter 

and May, and Uria Mene ́ndez, STB, and Sompo 

Japan Insurance Inc. 

119See letter from ABA. 

120This is consistent with the manner in which 

the calculation is done for purposes of the 

deregistration rule. See Exchange Act Rule 12h– 

6(a)(4)(i) [17 CFR 240.12h–6(a)(4)(i)]. Worldwide 

average daily trading volume for these purposes 

would include U.S. average daily trading volume. 

know that U.S. ownership exceeds the 

limits for the applicable exemption. We 

discuss each element of this alternate 

test below. 

a. Average Daily Trading Volume Test 

The first prong of our alternate test is 

based on a comparison of ADTV of the 

subject securities in the United States, 

as compared to worldwide ADTV.106 As 

revised, this element of the alternate test 

is satisfied where ADTV for the subject 

securities in the United States over a 

twelve-month period ending no more 

than 60 days before the announcement 

of the transaction is not more than 10 

percent (40 percent for Tier II) of ADTV 

on a worldwide basis.107 As noted 

above, the percentage trading volume 

figures remain unchanged from the 

comparable component of the existing 

test for non-negotiated transactions.108

We considered decreasing these 

percentages for purposes of this ADTV 

element, because our analysis indicates 

that these trading volume levels do not 

correspond with the U.S. beneficial 

ownership levels that remain the focus 

of our revised eligibility test.109

However, these ADTV figures are a 

feature of the comparable ADTV 

element of the existing hostile 

presumption, and we have retained the 

comparable limiting elements focused 

on U.S. beneficial ownership discussed 

below. For these reasons, and because 

the alternate test will be available only 

in limited circumstances outside the 

context of a non-negotiated transaction, 

we have not changed the percentages for 

the ADTV test. 

The revised rules specify that where 

a transaction is not made pursuant to an 

agreement between the acquiror and the 

target company, the acquiror need not 

conduct the look-through analysis.110

This is similar to the existing ‘‘hostile 

presumption’’ for non-negotiated 

transactions. We made that presumption 

available in 1999 when the current 

exemptions were adopted because we 

recognized that where no such 

agreement exists, without the 

cooperation of the target company, the 

acquiror’s ability to obtain information 

about brokers and other nominees may 

be limited.111 We believe this continues 

to be the case today. 

The revised rules provide acquirors 

with a range of dates by which they may 

do the comparison of U.S. and 

worldwide average daily trading 

volume. The comparison must be made 

over a twelve-month period ending no 

more than 60 days before the public 

announcement of the transaction.112

The requirement to perform the 

comparison as of a twelve-month period 

minimizes the potential for 

manipulation of the trading volumes 

both inside and outside the United 

States. For the reasons discussed above, 

we believe that providing a range of 

dates as of which the comparison may 

be accomplished provides appropriate 

flexibility for acquirors. In the context of 

an objective measure such as ADTV, 

there should be no concerns about 

compromising confidentiality by doing 

this calculation before announcement. 

Therefore, for purposes of this prong of 

the alternate test, we are not permitting 

the acquiror to use a range of dates that 

extends beyond announcement, as we 

do for the look-through test discussed 

above.113 Using public announcement 

instead of commencement as the 

reference point for the calculation will 

allow acquirors to determine and inform 

the market and target holders about the 

treatment of U.S. holders at an earlier 

stage in the process. 

The revised rules also require that 

there be a ‘‘primary trading market’’ for 

the subject securities, as that term is 

defined in our rules,114 in order for the 

acquiror in a negotiated transaction to 

rely on the alternate test as a result of 

being unable to conduct the lookthrough analysis.115 ‘‘Primary trading 

market’’ means that at least 55 percent 

of the trading volume in the subject 

securities takes place in a single, or no 

more than two, foreign jurisdictions 

during a recent twelve-month period.116

In addition, if the trading of the subject 

securities occurs in two foreign markets, 

the trading in at least one of the two 

must be larger than the trading in the 

United States for that class.117 In our 

view, the existence of a primary trading 

market is important because it is 

designed to ensure that there is a 

primary foreign regulator with oversight 

over the transaction. Thus, where there 

is no primary trading market for the 

subject securities outside of the United 

States, an acquiror in a negotiated 

transaction may not rely on the alternate 

test. In response to our request for 

comments, several commenters 

supported the adoption of a ‘‘primary 

trading market’’ component if we 

adopted a test based in whole or in part 

on ADTV.118

One commenter stated that requiring 

average daily trading volume in the 

United States to be compared to trading 

in the primary trading market, as 

opposed to the worldwide trading 

market, would be too restrictive.119 The 

revised rules require a comparison of 

U.S. ADTV to worldwide ADTV, thus 

maximizing the size of the denominator 

and potentially limiting the U.S. average 

daily trading volume numbers.120

b. Information Filed by the Issuer With 

the Commission or Home Country 

Regulators 

The second prong of the alternate test 

is that the acquiror must consider 

information about U.S. ownership levels 

that appear in annual reports or other 

annual information filed by the issuer 

with the Commission or with the 

regulator in its home jurisdiction. It may 

be disqualified from relying on the 

cross-border exemption sought if those 


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121See amended Securities Act Rule 800(h)(7)(ii); 

Instruction 3.ii. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 3.ii. to amended 

Exchange Act Rules 14d–1(c) and (d). 

122See Securities Act Rule 802(c)(3) [17 CFR 

230.802(c)(3)] and Instruction 3.iii. to Exchange Act 

Rules 14d–1(c) and (d). 

123 Item 7.A.2. of Form 20–F mandates that 

‘‘[i]nformation shall be provided as to the portion 

of each class of securities held in [the United States] 

and the number of record holders in the [United 

States].’’ Many foreign private issuers filing Form 

20–F provide information about U.S. record 

ownership only, which is not in and of itself the 

measure of U.S. ownership used to determine 

eligibility to rely on the cross-border exemptions. 

124A foreign private issuer must file an annual 

report with the Commission only where the foreign 

private issuer has a class of securities registered 

under Section 12 of the Exchange Act. 

125See Securities Act Rule 802(c)(4) [17 CFR 

230.802(c)(4)] and Instruction 3.iv. to Exchange Act 

Rules 14d–1(c) and (d). 

126See new Securities Act Rule 800(h)(7)(iii); 

Instruction 3.iii. to amended Exchange Act Rules 

13e–4(h)(8) and (i); and Instruction 3.iii. to 

amended Exchange Act Rules 14d–1(c) and (d). 

127See proposed Securities Act Rule 802(c)(4) 

and proposed Instruction 3.iv. to Exchange Act 

Rules 14d–1(c) and (d). 

128 Id. 

129Only ‘‘annual reports’’ or filings of ‘‘annual 

information’’ by the issuer are covered in the 

preceding element of the test. Reports that may be 

covered by the ‘‘reason to know’’ element of the 

revised test include beneficial ownership reports 

filed by third parties reporting ownership in the 

subject class. 

130See, e.g., letter from DPW. 

131See amended Securities Act Rule 

800(h)(7)(iii); Instruction 3.iii. to amended 

Exchange Act Rules 13e–4(h)(8) and (i); and 

Instruction 3.iii. to amended Exchange Act Rules 

14d–1(c) and (d). 

132 Id. 

133One commenter requested that we clarify that 

we are not establishing such a requirement. See 

letter from Cravath, Swaine, & Moore LLP 

(‘‘Cravath’’). 

reports or other filings indicate levels of 

U.S. ownership that exceed applicable 

limits for that exemption.121

This element of the alternate test is 

virtually identical to the comparable 

element of the existing test for nonnegotiated transactions.122 The only 

change from the prior test for nonnegotiated transactions is that the 

revised Instruction specifies that only 

annual reports or other annual 

information filed before the public 

announcement of the transaction must 

be taken into account by the acquiror. 

We believe it is appropriate to set a time 

limit on the information that the 

acquiror must consider, since the 

planning process of the transaction and 

the certainty of the exemption itself may 

be disrupted by a filing that is made late 

in the process. 

The acquiror’s eligibility to rely on a 

cross-border exemption should not be 

affected by filings after that time, 

because the public announcement may 

contain (and in some foreign 

jurisdictions, must contain) detailed 

information about the treatment of U.S. 

target holders. We do not believe that 

the acquiror should lose eligibility 

based on reports filed after 

announcement; conversely, the acquiror 

will not gain eligibility to rely on the 

exemptions based on reports filed after 

announcement indicating a reduction in 

the percentage of U.S. holders. 

The annual report filed with the 

Commission by foreign private issuers 

subject to Exchange Act reporting 

requires disclosure of the percentage of 

the class held by U.S. persons.123 Not all 

foreign private issuers file annual 

reports with the Commission, 

however.124 For those who do not file 

with the Commission, reports filed in 

the home jurisdiction may or may not 

require disclosure of comparable 

information about U.S. ownership. 

However, the acquiror may have reason 

to know U.S. beneficial ownership 

figures for non-reporting issuers, which 

also must be taken into account 

pursuant to the final element of the 

eligibility test. 

c. Reason To Know 

We refer to the final element in the 

new alternate test as the ‘‘reason to 

know’’ element. The existing hostile 

presumption test for non-negotiated 

transactions contains a similar 

element.125 This prong of the alternate 

test provides that an applicable crossborder exemption is not available, even 

where all other elements of the alternate 

test are met, if the acquiror ‘‘knows or 

has reason to know’’ that U.S. beneficial 

ownership levels exceed the limits for 

the applicable exemption.126

We believe the reason to know 

element serves a critical function in 

protecting the interests of U.S. investors 

under the current hostile presumption. 

Each other element of the eligibility test 

has limitations which may translate into 

an inaccurate and incomplete picture of 

the subject security holder base. The 

reason to know element captures 

information that the acquiror may gain 

as a result of its own assessment of the 

target company and the feasibility of the 

transaction. The acquiror should not be 

permitted to ignore such information 

simply because it comes from sources 

other than those captured in the other 

elements of our alternate test. The staff 

has received numerous questions about 

what constitutes ‘‘reason to know’’ 

information about U.S. ownership levels 

that would preclude reliance on the 

exemptions under the current hostile 

presumption. To provide guidance on 

that issue, we proposed changes to this 

element of the current hostile 

presumption test to assist acquirors in 

determining what constitutes ‘‘reason to 

know.’’ 127 The proposed changes, 

which we are adopting today, clarified 

that an offeror is deemed to have reason 

to know information about U.S. 

ownership of the subject class that 

appears in any filing with the 

Commission or any regulatory authority 

in the issuer’s home country or (if 

different) the jurisdiction in which its 

primary trading market is located.128

This change will capture not only filings 

by the issuer, but also filings by other 

parties reporting beneficial ownership 

of the subject securities.129

While commenters supported our 

efforts to provide further specificity on 

‘‘reason to know,’’ many requested 

further guidance on this issue, 

consistent with staff experience that it is 

an area of concern for practitioners 

under the current hostile 

presumption.130 Therefore, as adopted, 

the revised provision contains 

additional references to specific sources 

of information that will be attributed to 

the acquiror.131 This includes 

information about U.S. ownership 

‘‘available from the issuer or obtained or 

readily available from any other source 

that is reasonably reliable.’’ 132 ‘‘Readily 

available’’ for these purposes means 

publicly available from sources 

reasonably accessible to the issuer or 

acquiror at no or limited cost. We do not 

intend this language to mean that an 

issuer or acquiror must take into 

account information publicly available 

from any source, no matter how obscure 

or costly to obtain. If the acquiror and 

the target enter into an agreement 

pursuant to which the acquiror has the 

right to obtain information from the 

target, including information about U.S. 

ownership, it will be deemed to know 

any such information known to the 

target. We believe such an agreement 

will almost always exist in the context 

of a negotiated transaction. 

Other sources of information of which 

the acquiror will be deemed to have 

knowledge under the rule revisions 

adopted today include, but are not 

limited to, third-party information 

providers and other advisors engaged by 

the parties to the transaction that may 

have provided information about U.S. 

ownership. This change to the rule does 

not require that the parties engage such 

third parties in order to qualify for 

eligibility under this element.133 The 

rule simply requires the acquiror to take 

into account information that is 

obtained from a third-party information 

provider, including information that is 

readily available from such providers. 


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134The proposed rules note that the sources listed 

are not intended to be an exclusive list. 

135We do this by inserting the language the words 

‘‘before the public announcement’’ into the first 

sentence of this amended provision. See new 

Securities Act Rule 800(h)(7)(iii); Instruction 3.iii. 

to amended Exchange Act Rules 13e–4(h)(8) and (i); 

and Instruction 3.iii. to amended Exchange Act 

Rules 14d–1(c) and (d). 

136See, e.g., letter from ABCNY. 

137See amended Securities Act Rule 800(h). 

138See amended Securities Act Rule 800(h)(1). 

The expanded date range of up to 120 days if the 

information is not available within the range 

otherwise specified is not available for rights 

offerings. This should not be needed, as it is within 

the issuer’s power to set an appropriate record date. 

139See Proposing Release, Section II.A. This may 

be because issuers generally have access to greater 

information about their own security holders, and 

rights offerings may not be subject to the same time 

pressures as business combination transactions. 

140See letters from Cravath and S&C. 

141See new Securities Act Rule 800(h)(6) and (7). 

This is a change from our existing rules, where the 

hostile presumption based in part on the average 

daily trading volume comparison is available only 

for third-party, unaffiliated acquirors. See, e.g., 

existing Securities Act Rule 802(c), which applies 

only to persons other than the issuer of the subject 

securities and is being replaced by the alternate test. 

142See Instruction to amended Exchange Act Rule 

13e–3(g)(6). 

143See letters from ABA, ABCNY, Cravath, and 

DPW. 

144See letter from ABCNY. 

These examples cited in our revised 

rules are not intended to be exclusive; 

an acquiror may have reason to know 

information from other sources, 

depending on the particular facts and 

circumstances of the transaction.134

We are adopting as proposed the 

limiting language in this revised 

instruction that makes it clear that 

knowledge or reason to know acquired 

after public announcement will not 

disqualify the acquiror from relying on 

the cross-border exemptions.135 For the 

reasons discussed in the preceding 

section, we believe it is appropriate to 

include a timing element here, so that 

the ability to rely on a cross-border 

exemption is not called into question by 

knowledge acquired after 

announcement. Commenters generally 

supported this change.136

3. Changes to Eligibility Test for Rights 

Offerings 

The changes to the eligibility test we 

adopt today also will apply to the 

calculation of U.S. ownership for rights 

offerings. Issuers may now calculate 

U.S. ownership as of a date no more 

than 60 days before and 30 days after 

the record date for the rights offering.137

Thus, issuers will have greater 

flexibility on the timing of the 

calculation of U.S. ownership within a 

range of dates; however, the reference 

point for the calculation will continue 

to be the record date for rights offerings, 

rather than the date of public 

announcement for business 

combinations. This is appropriate 

because the record date for a rights 

offering is more closely tied to the 

specific security holder base that may 

participate in the transaction.138

We solicited comment on, but did not 

propose changes to, the eligibility test 

for rights offerings because we did not 

believe that issuers faced the same 

problems with the look-through analysis 

as third-party acquirors did for business 

combination transactions.139 However, 

several commenters argued that we 

should also adopt similar changes to the 

rights offering exemption.140 It is our 

understanding that many foreign private 

issuers continue to exclude U.S. holders 

from rights offerings available to all 

other security holders. To the extent 

that the revisions we adopt today make 

the exemption for rights offerings more 

readily available and facilitate the 

inclusion of U.S. holders, these changes 

may be useful in promoting our investor 

protection goals. 

Therefore, we are adopting similar 

changes to the method of calculating 

U.S. ownership for purposes of the 

exemption for rights offerings as we 

adopt today for business combination 

transactions. This will allow issuers 

more time to conduct the U.S. 

ownership calculation at an earlier stage 

in the transaction planning process. In 

addition to the changes to the lookthrough analysis mandated under our 

revised rules, the alternate test for 

calculating U.S. ownership also will be 

available for issuers unable to conduct 

the look-through analysis.141

B. Changes to the Tier I Exemptions 

1. Expanded Exemption From Exchange 

Act Rule 13e–3 

We are adopting as proposed revised 

Exchange Act Rule 13e–3(g)(6) expands 

the scope of the exemption from Rule 

13e–3 to cover a broader range of crossborder transactions than otherwise 

would be subject to that Rule. Existing 

Rule 13e–3(g)(6) exempts the parties 

engaged in an affiliated cross-border 

business combination transaction from 

the application of Rule 13e–3 where that 

transaction is structured as an issuer or 

third-party tender offer under the Tier I 

cross-border exemptions, or as a 

securities offering made pursuant to 

Securities Act Rule 802. Transactions 

such as cash mergers, compulsory 

acquisitions for cash, and schemes of 

arrangement not consummated under 

these rules could be subject to Rule 13e– 

3 even where they otherwise would 

have been eligible for the cross-border 

exemption from that rule, if structured 

under Tier I or Securities Act Rule 802. 

We believe that the form of the 

transaction should not govern whether 

Rule 13e–3 applies to a cross-border 

transaction which otherwise would be 

eligible for the Tier I exemption from 

that rule; therefore, we proposed 

eliminating the limits on the kinds of 

cross-border transactions that could be 

covered under the exemption in Rule 

13e–3(g)(6). We are adopting this change 

as proposed. In order to qualify for the 

expanded exemption from Rule 13e–3, a 

party must meet all of the conditions for 

reliance on Rule 802 or Tier I. These 

conditions such as the requirement that 

U.S. security holders be treated at least 

as favorably as foreign security holders, 

will continue to safeguard the interests 

of U.S. holders. In addition, a party 

relying on revised Rule 13–3(g)(6) for 

affiliated transactions not conducted 

pursuant to Securities Act Rule 802 or 

Tier I must submit a Form CB to the 

same extent as would be required in a 

transaction conducted pursuant to those 

provisions. Because the party relying on 

the expanded cross-border exemption 

from Rule 13e–3 would have had an 

obligation to file a Schedule 13E–3, 

absent the expanded exemption, a Form 

CB (and Form F–X where the filer is 

foreign) will be required.142

In the Proposing Release, we solicited 

comment on how we should accomplish 

the proposed expansion of the 

exemption from Rule 13e–3. We asked 

whether we should revise the rule to list 

additional transaction structures that 

would be covered under the expanded 

exemption, or whether we should 

simply eliminate any limits on the types 

of transactions covered, as proposed. 

The four commenters who addressed 

this issue supported the change, 

including our approach of leaving open 

the kinds of cross-border transactions 

that may be covered under the 

expanded exemption, to provide 

maximum flexibility for the parties 

covered by Rule 13e–3.143

One commenter called for us to 

extend the exemption from Rule 13e–3 

to tender offers conducted pursuant to 

Tier II, on the grounds that corporate 

law matters that underpin the enhanced 

investor protection provisions in Rule 

13e–3 are best addressed by home 

country regulation.144 We recognize that 

other jurisdictions may impose equally 

effective but different safeguards to 

address the conflict of interests that may 

exist in a transaction to which Rule 

13e–3 applies. We note, however, that 

Rule 13e–3 is a disclosure provision and 

we do not believe its application is 

unduly burdensome, particularly where 


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145See letter from the ABA. 

146Where we refer in this release to ‘‘relief,’’ we 

mean exemptive or no-action relief provided by 

letter in the context of an individual transaction, 

unless otherwise indicated. See footnote 46 above 

referring to the staff’s delegated authority to provide 

exemptive relief from U.S. rules for specific crossborder transactions. Where we refer to ‘‘interpretive 

guidance,’’ we mean oral positions taken by the 

staff or written interpretations promulgated by the 

Division of Corporation Finance in the Manual of 

Publicly Available Telephone Interpretations 

available on our Web site. We refer to ‘‘Commission 

guidance’’ or ‘‘Commission interpretive guidance’’ 

to mean positions expressed by the Commission in 

releases. 

147See amended Exchange Act Rules 13e–4(i) and 

14d–1(d). 

148 148 See, e.g., letter from Cravath. 

149For example, there is no requirement in 

Regulation 14E to make a tender offer available to 

all target security holders. Therefore, the 

accommodation from the all-holders provisions in 

Exchange Act Rules 13e–4(i)(2)(ii) and 14d– 

1(d)(2)(ii) will not be necessary for an offer subject 

only to Regulation 14E. 

150See, e.g., Alcan, Inc. (October 7, 2003) 

(‘‘Alcan’’); Asia Satellite Telecommunications 

Holdings Limited (May 25, 2007); BCP Crystal 

Acquisition GmbH & Co (February 3, 2004) and 

Mittal Steel Company N.V. (June 22, 2006) 

(‘‘Mittal’’) (providing relief for purchases outside of 

a U.S. offer for a tender offer that included more 

than one offer conducted outside of the United 

States). 

151Letters from ABA, Cravath, and S&C. 

152Amended Exchange Act Rules 13e–4(i)(2)(ii) 

and 14d–1(d)(2)(ii). 

153Two commenters addressed our request for 

comment on whether we should permit the use of 

two separate proration pools in cross-border tender 

offers under Tier II. Both supported the continued 

use of a single proration pool. See letters from 

Cleary and Cravath. 

154See Exchange Act Section 14(d)(6) [15 U.S.C. 

78n(d)(6)] and Exchange Act Rules 13e–4(f)(3) [17 

CFR 240.13e–4(f)(3)] and 14d–8 [17 CFR 240.14d– 

8]. See also the discussion in Section II.C.2.c. of the 

Proposing Release. 

U.S. investors make up more than 10 

percent of a foreign target’s security 

holder base. 

Another commenter called for us to 

exempt from the application of Rule 

13e–3 any transaction subject to a thirdparty fairness hearing and 

determination.145 We decline to expand 

the exemption in this manner. As noted 

above, Rule 13e–3 is a disclosure 

provision and does not regulate the 

substantive fairness of the underlying 

transaction. Thus, the fact that an 

affiliated transaction in a foreign 

jurisdiction has been found to be fair by 

an independent tribunal or other third 

party will be a matter for disclosure 

under the rule, but in our view, should 

not affect its general application. 

2. Technical Changes to Securities Act 

Rule 802 

We are adopting as proposed the 

changes to Rule 802(a)(2) and (3) to 

substitute the word ‘‘offeror’’ for 

‘‘issuer.’’ This is a correction to the 

existing rule rather than a substantive 

change. We did not receive any 

comments on this technical correction. 

C. Changes to the Tier II Exemptions 

We proposed a number of changes to 

Tier II in order to alleviate practical 

difficulties that often result in the need 

for companies to request specific 

exemptive or no-action relief.146 Most 

commenters did not address the specific 

changes we proposed, but generally 

supported our proposed expansion of 

these exemptions. 

1. Tier II Relief for Tender Offers Not 

Subject to Rule 13e–4 or Regulation 14D 

The Tier II exemptions represent 

targeted modifications to U.S. tender 

offer rules intended to accommodate 

differences between U.S. and foreign 

practice in the context of a cross-border 

tender offer. Because the Tier II 

exemptions are contained in Rule 13e– 

4 and Regulation 14D, the staff receives 

questions about whether a bidder may 

rely on these exemptions for a tender 

offer subject to the provisions of 

Regulation 14E only. The staff has taken 

the position that the Tier II exemptions 

are available for tender offers that would 

otherwise qualify for those exemptions, 

but for the fact that the tender offer is 

not subject to Rule 13e–4 or Regulation 

14D. The staff’s position was based on 

the premise that it would be 

inconsistent for bidders in tender offers 

subject only to the more basic tender 

offer provisions in Regulation 14E not to 

be able to take advantage of the Tier II 

exemptions, which technically apply to 

tender offers that are subject to the more 

extensive regulatory protections in Rule 

13e–4 and Regulation 14D. We proposed 

to change the language of the Tier II 

exemptions to specifically make it 

available to offers subject only to 

Regulation 14E. As we stated in the 

Proposing Release, we believe the Tier 

II exemptions should be available for 

such offers if the conditions in our rules 

are satisfied; therefore, we are adopting 

amendments to the rules as proposed to 

clarify that the Tier II exemptions are 

available regardless of whether the 

target securities are subject to Rule 13e– 

4 or Regulation 14D.147

Commenters supported the proposed 

amendments to codify this position.148

Under the revised rules, the Tier II 

exemptions will be available to 

Regulation 14E-only offers only where 

the exemptions would have been 

available if those offers were subject to 

Rule 13e–4 or Regulation 14D. Thus, all 

of the existing conditions applicable to 

the Tier II exemptions will apply. Some 

of the Tier II exemptions may not be 

necessary for tender offers not subject to 

the requirements of Rule 13e–4 or 

Regulation 14D, because Regulation 14E 

may not have a corresponding 

regulatory requirement.149

2. Tier II Relief for Concurrent U.S. and 

Non-U.S. Offers 

a. Multiple Foreign Offers in Connection 

With a U.S. Offer 

The existing Tier II cross-border 

exemptions permit a bidder to conduct 

two separate but concurrent tender 

offers: one made only to U.S. target 

security holders and another open only 

to foreign target holders. In some 

instances, a tender offer may be subject 

to more than one regulatory regime 

outside the United States, particularly 

where the target’s country of 

incorporation is not the location of the 

primary trading market for the target 

securities. In the past, bidders have 

requested and have been granted relief 

to conduct more than one foreign offer 

outside of the United States pursuant to 

the Tier II exemptions.150

Because we believe the use of a 

multiple offer structure may be helpful 

in addressing procedural and technical 

conflicts between tender offer rules and 

practice, as well as procedural 

requirements between different 

jurisdictions, we see no reason to 

prohibit the use of more than one offer 

outside the United States in connection 

with the Tier II exemptions. Three 

commenters addressed this proposed 

change; all supported it.151 For the 

reasons noted above, we are adopting 

the amendments as proposed to permit 

the use of more than one offer outside 

of the United States for tender offers 

conducted under Tier II.152 We believe 

the resulting increased flexibility to 

resolve regulatory conflicts will promote 

our goal of facilitating the inclusion of 

U.S. investors in cross-border tender 

offers subject to multiple regulatory 

regimes outside of the United States. 

As discussed in the Proposing 

Release, the amendments we adopt 

today with respect to the use of a 

multiple offer structure under Tier II are 

not intended to permit the use of 

separate proration pools where such a 

structure is used in the context of a 

partial cross-border tender offer.153

Under the current as well as the revised 

rules, bidders who conduct separate 

foreign and U.S. offers to minimize the 

difficulties of complying with two 

different regulatory regimes applicable 

to the offer must pro rate tendered 

securities on an aggregate basis, where 

required under U.S. rules.154


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155 ‘‘ADRs’’ refer to American Depositary 

Receipts. As in the Proposing Release, we use this 

term synonymously with American Depositary 

Shares, or ADSs. 

156Exchange Act Rules 13e–4(i)(2)(ii) and 14d– 

1(d)(2)(ii). 

157See, e.g., Portugal Telecom, SGPS, S.A. 

(December 19, 2006) (‘‘Portugal Telecom’’) (noting 

that the provisions of the Portuguese Securities 

Code and the rules and regulations of the 

Portuguese Comissa ̃o de Mercado de Valores 

Mobilia ́rios did not apply to the offer for ADSs of 

the target company listed on the New York Stock 

Exchange). 

158See Harmony Gold Mining Company Limited 

(November 19, 2004) (‘‘Harmony Gold 2004’’); 

Discount Investment Corporation Ltd. (June 14, 

2004); Alcan; Serono S.A. (September 12, 2002) 

(‘‘Serono S.A.’’); and Southern Cross (March 5, 

2002). 

159See, e.g., Royal Bank of Scotland plc (July 23, 

2007) (‘‘Royal Bank’’); E.ON Aktiengesellschaft 

(December 6, 2006) (‘‘E.ON’’); Koninklijke Ahold 

N.V. (September 10, 2002) (‘‘Koninklijke’’). 

160See, e.g., ABA. 

161Amended Exchange Act Rules 13e–4(i)(2)(ii) 

and 14d–1(d)(2)(ii). 

162See Exchange Act Rules 13e–4(f) [17 CFR 

240.13e–4(f)] and 14d–10 [17 CFR 240.14d–10]. 

163See amended Exchange Act Rules 13e– 

4(i)(2)(ii) and 14d–1(d)(2)(ii). 

164See, e.g., Gas Natural SDG, S.A. (March 2, 

2006) (‘‘Gas Natural’’). 

165See amended Exchange Act Rules 13e– 

4(i)(2)(ii) and 14d–1(d)(2)(ii). 

166Letter from ABA. 

167See new Exchange Act Rules 13e–4(f)(2)(v) 

and 14d–1(d)(2)(viii). 

168For issuer tender offers subject to Rule 13e– 

4, tendering security holders must be able to 

withdraw tendered securities after the expiration of 

40 business days from the commencement of the 

tender offer. Exchange Act Rule 13e–4(f)(2)(ii) [17 

CFR 240.13e–4(f)(2)(ii)]. For third-party tender 

offers, Section 14(d)(5) of the Exchange Act states 

that withdrawal rights exist ‘‘at any time after sixty 

days from the date of [commencement] of the 

original tender offer * * *.’’ 

169Exchange Act Rule 13e–4(f)(2)(ii) states that 

back-end withdrawal rights arise upon the 41st day 

after commencement of an offer ‘‘if [tendered 

securities are] not yet accepted for payment.’’ We 

interpret the back-end withdrawal rights provisions 

in Section 14(d)(5) of the Exchange Act to terminate 

upon acceptance of tendered securities. 

b. U.S. Offer May Include Non-U.S. 

Holders of ADRs 155

The existing Tier II exemptions 

specify that a U.S. offer conducted in 

connection with a concurrent foreign 

offer under Tier II may be open to U.S. 

persons only.156 This limitation creates 

a problem because bidders frequently 

seek to include all holders of ADRs, not 

only U.S. holders, in the U.S. portion of 

a dual offer. Additionally, in many 

instances, the target’s home country 

regulations do not apply, by their terms, 

to ADRs.157 So, as a practical matter, 

most bidders in cross-border tender 

offers wish to include all holders of 

ADRs in the U.S. portion of a dual offer. 

Companies frequently seek individual 

relief from the staff to address these 

issues.158 The staff often has granted 

relief to permit a U.S. offer in a dual 

offer structure to include all holders of 

ADRs, including foreign holders.159

Commenters generally supported the 

proposal.160 Today we are adopting as 

proposed rule revisions that will allow 

a bidder in a cross-border tender offer 

conducted under Tier II to make the 

U.S. offer available to all holders of 

ADRs, including non-U.S. holders, to 

accommodate this preferred offer 

structure.161 These revisions will 

eliminate the need for companies to 

seek individual relief in such 

circumstances. 

As we noted in the Proposing Release, 

bidders have not requested exemptive or 

no-action relief to permit the inclusion 

of foreign persons who hold shares 

directly in share form in the U.S. offer. 

Two commenters advocated that we 

allow the U.S. offer to be made to 

foreign holders of target shares as well 

as ADRs. We do not believe such a rule 

change is warranted at this time, given 

that this type of relief has not been 

requested frequently. If circumstances 

arise that weigh in favor of permitting 

foreign target holders to be included in 

the U.S. offer in a particular instance, 

requests for relief will be considered on 

a case-by-case basis. Therefore, we are 

not changing our rules to permit foreign 

holders who hold in direct share form 

to participate in the U.S. offer under 

Tier II. 

We emphasize that, as discussed in 

the Proposing Release, this and other 

rule changes to the Tier II exemptions 

are not intended to enable a bidder to 

make an offer open only to ADR 

holders. This would be prohibited 

where the target securities are registered 

under Section 12 of the Exchange Act 

and the all-holders provisions of U.S. 

tender offer rules apply.162

c. U.S. Holders May Be Included in 

Foreign Offer 

We are adopting as proposed 

revisions allowing a bidder to include 

U.S. target security holders in a foreign 

offer conducted under Tier II, under 

specified conditions. Under the revised 

rules, when a bidder conducts 

concurrent U.S. and foreign offers under 

Tier II, the foreign offer may be open to 

U.S. target security holders only where: 

(i) The laws of the foreign target 

company’s home jurisdiction expressly 

prohibit the exclusion of any target 

security holders, including U.S. 

persons; and (ii) the offer materials 

distributed to U.S. persons fully and 

completely describe the risks to U.S. 

holders of participating in the non-U.S. 

offer.163

This rule change reflects the fact that 

takeover rules in some non-U.S. 

jurisdictions do not permit the 

exclusion of any target security holders 

from the foreign offer, even where the 

bidder makes a concurrent U.S. offer 

that is open to U.S. holders. Where such 

rules are present, relief has been granted 

on a case-by-case basis, in order to 

accommodate the requirements of the 

applicable foreign regulatory regime.164

Such relief has been conditioned on the 

same conditions we now codify in the 

revised rule, which we believe strikes 

the appropriate balance between the 

need to respect a foreign regulatory 

requirement in a primarily foreign 

transaction and the need to provide 

adequate protections for U.S. investors 

by fully disclosing the risks of 

participating in a non-U.S. offer not 

subject to U.S. rules.165

Commenters generally supported the 

proposed changes to the Tier II 

exemptions, including this change. One 

commenter stated that permitting U.S. 

persons to be included in a foreign offer 

where mandated by foreign law and 

where U.S. investors have received 

appropriate disclosure concerning the 

risks of participating in the foreign offer 

strikes the appropriate investor 

protection balance.166

We note that the rule change 

permitting U.S. investors to participate 

in a non-U.S. offer conducted under the 

Tier II exemptions does not require 

them to do so. Under our revised rules, 

as was the case before today’s 

amendments, any U.S. holder who 

prefers to tender into the U.S. offer in 

a multiple offer under Tier II is free to 

do so. 

3. Termination of Withdrawal Rights 

While Counting Tendered Securities 

We are adopting as proposed the rule 

revisions permitting a bidder in a crossborder tender offer conducted under 

Tier II to suspend withdrawal rights 

during the counting of tendered 

securities and until those securities are 

accepted for payment.167 Rule 13e– 

4(f)(2)(ii) and Section 14(d)(5) of the 

Exchange Act require bidders to provide 

‘‘back-end’’ withdrawal rights if 

tendered securities have not been 

accepted for payment within a certain 

date after the commencement of a 

tender offer.168 Acceptance of securities 

tendered terminates the back-end 

withdrawal rights mandated by Rule 

13e–4 and the Exchange Act.169

The requirement to provide back-end 

withdrawal rights creates problems in 

cross-border tender offers not generally 

present in U.S. offers. Differences in the 

tender, acceptance and payment 

procedures between U.S. and foreign 

offers necessitate this relief. The manner 


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170For a description of the counting and 

centralization process in several European 

jurisdictions, see Business Objects S.A. (December 

5, 2007) and Vodafone AirTouch PLC (December 22, 

1999). 

171See, e.g., Barclays PLC tender offer for ABN 

AMRO Holding N.V. (August 7, 2007) (‘‘Barclays’’); 

Endesa, S.A. (July 3, 2007); and Portugal Telecom. 

172See Exchange Act Rules 13e–4(i)(2)(iv) and 

14d–1(d)(iv) [17 CFR 240.13e–4(i)(2)(iv) and 

240.14d–1(d)(iv)]. As a result of the differences in 

process between the U.S. and various foreign 

jurisdictions, Tier II currently includes prompt 

payment relief to allow a bidder meeting the 

conditions of that exemption to pay for tendered 

securities in accordance with home country law or 

practice. 

173New Exchange Act Rules 13e–4(f)(2)(v)(A) and 

14d–1(d)(2)(viii)(A). 

174For reasons discussed above, the bidder in a 

cross-border tender offer may not know at the 

expiration of the offer whether the minimum tender 

condition has been satisfied, and the amended rules 

recognize this issue. See new Exchange Act Rules 

13e–4(f)(2)(v)(B) and 14d–1(d)(2)(viii)(B). However, 

because the tenders of securities must occur before 

the expiration, even where the counting process 

occurs after the end of the offer, we view a 

minimum tender condition as being satisfied at or 

before expiration, consistent with our view that all 

non-regulatory conditions must be satisfied or 

waived as of that date. See footnote 151 in the 

Proposing Release. Note that the only conditions 

that may survive the expiration of the initial 

offering period are regulatory approvals necessary 

to consummate the tender offer. 

175New Exchange Act Rules 13e–4(f)(2)(v)(C) and 

14d–1(d)(2)(viii)(C). 

176Exchange Act Rule 14d–1(d)(2)(v) [17 CFR 

240.14d–1(d)(2)(v)]. 

177Exchange Act Rule 14d–11(b) [17 CFR 

240.14d–11(b)]. 

178Letter from ABA. 

179These provisions allow tendering security 

holders to withdraw their tendered securities after 

a certain period of time. Certain regulatory approval 

processes, such as anti-trust approvals, may be 

lengthy and back-end withdrawal rights may 

provide an important safeguard in such cases. See 

generally, ProSiebenSat.1 Media AG (January 30, 

2007)(in granting no-action relief from the prompt 

payment requirements of Exchange Act Rule 14e– 

1(c) where a regulatory condition was expected to 

survive the expiration of a tender offer, the staff 

explicitly noted that tendering target holders would 

have withdrawal rights through the date of receipt 

of such regulatory approvals). Consideration will be 

given to requests for relief under those 

circumstances only where a compelling reason 

exists. 

180Letter from STB. 

181See footnote 174 above and footnote 151 in the 

Proposing Release. 

182Regulation of Takeovers and Security Holder 

Communications, Release No. 33–7760 (October 22, 

1999) [64 FR 61408] (‘‘Regulation M–A Adopting 

Release’’). 

183Exchange Act Rule 14d–11 permits the use of 

a subsequent offering period in an offer for all 

securities of the class that is the subject of the 

tender offer. If the bidder is offering security 

holders a choice of different forms of consideration, 

there may be no ceiling on any form of 

consideration offered. Subsequent offering periods 

are not permitted for issuer tender offers. 

in which securities are tendered and 

centralized for counting in U.S. tender 

offers typically enable bidders to accept 

tendered securities almost immediately 

after the expiration of the initial offering 

period, thereby terminating back-end 

withdrawal rights. However, because of 

differences in the manner in which 

securities are tendered in many nonU.S. jurisdictions, the centralization and 

counting of tendered securities can take 

longer than in the United States.170 This 

makes it more likely that back-end 

withdrawal rights will exist during the 

counting process in a cross-border 

tender offer, thereby complicating the 

counting and payment procedure. 

As a result of these difficulties, 

bidders have sought relief from the 

application of the back-end withdrawal 

rights provided under our rules in 

connection with cross-border tender 

offers.171 We have recognized that the 

mechanics of the tendering and 

counting regimes in other countries 

justifies different treatment under our 

rules,172 and for the same reasons, we 

believe it is appropriate to provide an 

exemption in this area. Under the rule 

revisions we are adopting, back-end 

withdrawal rights may be suspended 

after the expiration of an offer while 

tendered securities are being counted in 

a cross-border tender offer conducted 

under Tier II, so long as: 

• The bidder has provided an offer 

period (including withdrawal rights) of 

at least 20 U.S. business days; 173

• At the time withdrawal rights are 

suspended, all offer conditions other 

than the minimum acceptance condition 

have been satisfied or waived; 174 and 

• Back-end withdrawal rights are 

suspended only until tendered 

securities are counted and are reinstated 

immediately after that process, to the 

extent they are not terminated by the 

acceptance of tendered securities.175

Under the rules before today’s 

amendments, back-end withdrawal 

rights were suspended between the end 

of an initial offering period and the 

commencement of a subsequent offering 

period.176 We believe the rule change 

we adopt today is necessary because not 

every tender offer includes a subsequent 

offering period. For example, 

subsequent offering periods are not 

permitted in issuer tender offers or in 

third-party offers for less than all of the 

securities of the target class.177 A 

subsequent offering period in a thirdparty tender offer for all outstanding 

target securities is at the option of the 

bidder and is not required under U.S. 

rules. The rule change we adopt today 

also operates to suspend back-end 

withdrawal rights that may exist after 

the expiration of a subsequent offering 

period, to the extent the bidder meets 

the conditions outlined in our rules. 

The rule changes we adopt today are 

not intended to eliminate back-end 

withdrawal rights where a regulatory 

condition remains outstanding after the 

expiration of the offer period. Where a 

lengthy regulatory review process 

survives the expiration of a tender offer, 

the back-end withdrawal rights 

provided under our rules provide an 

important safeguard for tendering 

security holders. 

Commenters generally supported the 

proposed changes to Tier II, including 

this one. One commenter noted that this 

relief is helpful even where no 

subsequent offering period is provided, 

and agreed that the requirement that all 

offer conditions must be satisfied at the 

time withdrawal rights are suspended is 

in the best interests of security 

holders.178 Otherwise, security holders 

could face a prolonged period during 

which they could not withdraw and 

would not have received payment for 

tendered securities.179 One commenter 

suggested that we also permit 

suspension of back-end withdrawal 

rights while a financing condition 

remains outstanding at the time 

withdrawal rights are suspended.180 The 

commenter noted that the financing for 

an offer may be contingent on the 

satisfaction or waiver of the minimum 

acceptance condition. At this time, we 

are not extending the rule to permit the 

suspension of back-end withdrawal 

rights while an offer condition, other 

than a minimum acceptance condition, 

remains outstanding. As noted above, in 

our view, only conditions for regulatory 

approvals necessary to the 

consummation of the offer may survive 

its expiration.181

4. Subsequent Offering Period Changes 

a. Maximum Time Limit on Subsequent 

Offering Period Eliminated 

Based on our experience with foreign 

rules permitting the use of a subsequent 

offering period, we revised our rules in 

1999 to permit the use of this offer 

structure in domestic tender offers.182

Current rules permit a third-party 

bidder in a tender offer for all of the 

subject class of securities to include a 

subsequent offering period during 

which securities may be tendered and 

purchased on a rolling or ‘‘as tendered’’ 

basis if certain conditions are met.183

We adopted the subsequent offering 

period because we believe it benefits 

target security holders who may want to 

tender into an offer once the offer is 

unconditional and will be 

consummated; once an offer for all 

outstanding securities is certain to be 

consummated successfully because all 

offer conditions have been satisfied or 

waived, the opportunity to tender into 


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60064 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

184See Regulation M–A Adopting Release, 

Section II.G.1. 

185 Id. 

186Another source of conflict is the minimum 

extension periods set forth in Exchange Act Rules 

13e–4(e)(3) and 14d–4(d)(2) [17 CFR 240.13e–4(e)(3) 

and 240.14d–4(d)(2)]. These rules require an offer 

to remain open from the date that material changes 

to the offer materials are disseminated to security 

holders, as follows: (i) five business days for a 

prospectus supplement containing a material 

change other than price or share levels; (ii) 10 

business days for a prospectus supplement 

containing a change in price, the amount of 

securities sought, the dealer’s soliciting fee, or other 

similarly significant change; (iii) 10 business days 

for a prospectus supplement included as part of a 

post-effective amendment; and (iv) 20 business days 

for a revised prospectus when the initial prospectus 

was materially deficient. 

187See RWE Aktiengesellschaft (March 22, 2002) 

(‘‘RWE ’’) (noting that subsequent offering periods 

lasting significantly longer than 20 business days 

are the custom in Great Britain and are permitted 

under The City Code on Takeovers); Serono S.A. 

(noting that French law does not set a maximum for 

the number of days in a subsequent offering and 

requesting relief for a 30 trading day subsequent 

offering period, with immediate acceptance of 

tendered shares on an ‘‘as tendered’’ basis); Rio 

Tinto plc (July 24, 2007) (‘‘Rio Tinto’’) (noting that 

Canadian law sets no maximum period for 

subsequent offering periods); STATs ChipPAC Ltd. 

(March 15, 2007) (‘‘STATs ChipPAC’’) (relief for a 

subsequent offering period of up to four months 

from the commencement date); and Harmony Gold 

2004 (requesting relief for a subsequent offering of 

longer than 20 U.S. business days, as permitted 

under South African law and as is customary 

market practice in that jurisdiction). 

188See amended Exchange Act Rule 14d–11. 

189See Exchange Act Rule 14d–11(e) [17 CFR 

240.14d–11(e)] and amended Exchange Act Rule 

14d–1(d)(2)(iv). 

190See letters from ABA, Cleary, Cravath, 

Linklaters, and S&C. 

191See letters from ABA, Cleary, and Cravath. 

192Letter from ABA and Exchange Act Rule 14d– 

11. 

193Exchange Act Rule 14d–11. 

194See amended Exchange Act Rule 14d– 

1(d)(2)(iv). 

195See Exchange Act Rule 14d–11(e) [17 CFR 

240.14d–11(e)]. 

196See amended Exchange Act Rule 14d– 

1(d)(2)(iv). By not defining business day in 

accordance with the U.S. calendar, we believe this 

rule modification will be more useful because U.S. 

and non-U.S. holidays will vary. 

197A subsequent offering period may commence 

only when all offer conditions have been satisfied 

or waived. See Exchange Act Rule 14d–11(c) [17 

CFR 240.14d–11(c)]. 

198This is the practice in the Netherlands and 

France, for example. See Barclays and Aventis (June 

10, 2004). 

199For example, under Canadian law, tendered 

securities must be taken up and paid for within ten 

calendar days of tender. 

200See Barclays (relief granted to permit payment 

for securities tendered in the subsequent offering 

period within five Dutch trading days after the end 

of that period); Rio Tinto (shares tendered during 

a subsequent offering period may be taken up and 

paid for within ten calendar days of the date of 

tender, in accordance with Canadian law); and 

Aventis (relief granted to permit payment for 

securities tendered into a French offer to be made 

within 12–18 French trading days after the 

expiration of that period). 

a subsequent offering period and to be 

paid quickly allows remaining target 

security holders to be paid before a 

back-end merger or other second-step 

transaction.184 The subsequent offering 

period also may facilitate a bidder’s 

efforts to reach the thresholds necessary 

to effect a short-form or ‘‘squeeze-out’’ 

merger at the levels set by the laws of 

the relevant jurisdiction.185

In practice, however, U.S. rules on 

subsequent offering periods have been a 

source of conflict with foreign 

regulations in the context of crossborder tender offers. A conflict often 

arises because Rule 14d–11 imposes a 

maximum time limit of 20 U.S. business 

days on the length of subsequent 

offering period.186 Subsequent offering 

periods of significantly longer duration 

are common under law or practice in 

many foreign jurisdictions.187 To 

address the conflict, today we are 

eliminating the maximum time limit on 

the length of a subsequent offering 

period in both foreign and domestic 

tender offers. 

As proposed, this rule change would 

have applied only to Tier II cross-border 

tender offers. We also solicited 

comment on whether we should 

eliminate the 20-business day time limit 

as to domestic offers. Because we 

believe the flexibility to conduct a 

longer subsequent offering period will 

be beneficial to bidders and target 

security holders in U.S. offers as well, 

we are making this change to our tender 

offer rules generally.188 We believe that 

as a practical matter, eliminating the 

limit on the time period for a 

subsequent offering period will benefit 

target security holders who choose not 

to tender into an initial offering period. 

The elimination of the 20-business day 

time limit will allow security holders 

more time to tender during the 

subsequent offering period. Tendering 

holders will be paid more quickly, 

thereby avoiding the lengthy process 

that may be associated with a squeezeout process. We do not believe that the 

elimination of this limit will have any 

negative effects on security holders. 

Security holders tendering during a 

subsequent offering period will 

continue to be protected by the prompt 

payment provisions, as modified today 

in the case of Tier II offers, in the event 

that a subsequent offering is conducted 

over an extended period of time.189

Five commenters specifically 

supported our proposal to eliminate the 

time limit on the length of the 

subsequent offering period.190 Three 

supported making corresponding 

changes to the rules applicable to 

domestic tender offers, as we are doing 

today.191 One commenter advocated the 

elimination of the 20-business day limit 

on the length of the subsequent offering 

period but expressed support for 

retaining the minimum three-business 

day period in our current rules.192 We 

did not propose to eliminate the 

requirement that the subsequent offering 

period be at least three business days 

long, and we are not doing so today.193

We believe the minimum time period is 

necessary to give remaining target 

security holders a meaningful 

opportunity to exercise the right to 

tender during this period. 

b. Prompt Payment of Securities 

Tendered During the Subsequent 

Offering Period 

We are adopting a modification of the 

proposed changes to the payment 

process for securities tendered during 

the subsequent offering period in a Tier 

II cross-border tender offer.194 U.S. rules 

mandate that securities tendered during 

a subsequent offering period must be 

paid for as soon as they are tendered, on 

a ‘‘rolling’’ basis.195 Our revised rules 

will allow a bidder in a cross-border 

tender offer conducted pursuant to the 

Tier II exemptions to ‘‘bundle’’ and pay 

for securities tendered in the subsequent 

offering period within 20 business days 

of the date of tender. For purposes of 

this rule provision only, a business day 

will be determined by reference to the 

relevant foreign jurisdiction; this will 

provide greater flexibility for bidders, 

because foreign and U.S. holidays may 

vary.196

The requirement to pay for securities 

tendered during the subsequent offering 

period on a rolling basis exists because 

security holders cannot withdraw 

securities tendered in that period. 

Therefore, because the tender offer is no 

longer subject to any conditions,197 it is 

appropriate for tendering security 

holders to be paid immediately upon 

tender. 

In a cross-border tender offer, foreign 

rules or practice often dictate payment 

practices during the subsequent offering 

period that conflict with U.S. rules. For 

example, foreign law may require 

securities tendered during the 

subsequent offering period to be paid for 

within a certain number of days after 

the expiration of the subsequent offering 

period 198 or may require ‘‘bundling’’ of 

securities and payment on specified 

periodic take-up dates.199 In the past, 

bidders have been granted relief to 

accommodate conflicts between U.S. 

rules and non-U.S. law or practice with 

respect to payment practices during the 

subsequent offering period.200

This revised rule we adopt today is 

slightly modified from the proposal in 


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201See Proposing Release, Section II.C.4.a. 

202See letter from Linklaters. 

203See letters from ABA, Shearman, and S&C. 

204See note to Exchange Act Rule 14d–11. 

205The language of amended Exchange Act Rule 

14d–1(d)(2)(iv) states ‘‘[w]here payment may not be 

made on a more expedited basis under home 

jurisdiction law or practice * * *.’’ 

206See Exchange Act Rule 14d–1(d)(2) [17 CFR 

240.14d–1(d)(2)] and Section II.C.4.a. of this release. 

207New Exchange Act Rule 14d–1(d)(2)(vi). 

208 Germany and Brazil are two such foreign 

jurisdictions. For example, in Brazil, bidders must 

pay interest at a statutory rate on securities ‘‘put’’ 

to the bidder after the termination of a successful 

voluntary offer. We consider such a put right to be 

a tender offer or to constitute the subsequent 

offering period in a voluntary offer. See the 

description of this feature of Brazilian law in 

Embratel Participacoes S.A. (December 6, 2006) 

(‘‘Embratel’’) and Telemar Participacoes S.A. 

(October 9, 2007) (‘‘Telemar’’). See also, Bayer AG 

(September 26, 2006) (‘‘Bayer’’) (describing a 

similar requirement under German law). 

209 Id. 

210Exchange Act Rules 14d–10 and 14d–11(f) [17 

CFR 240.14d–11(f)]. 

211See, e.g., Telemar; Embratel; and Blackstone 

Entities (December 16, 2004). 

212One commenter argued that voluntary interest 

payments should be permitted. See letter from 

ABA. However, we believe that the general 

purposes for which we permit the use of a 

subsequent offering period are not consistent with 

the payment of offer consideration different than 

that provided during the initial offering period, 

unless specifically required by home country law. 

213See letter from ABA. 

214See letter from Cravath. 

215To our knowledge, the staff has never been 

asked to provide no-action or exemptive relief to 

permit the payment of interest on securities 

tendered during an initial offering period. This may 

be, as one commenter posited, because tendering 

security holders often have withdrawal rights 

during an initial offering period, so they may not 

be deemed to have sold their shares until those 

rights terminate at the end of the initial offering 

period. See letter from ABA. 

order to provide expanded flexibility to 

avoid conflicts between U.S. and nonU.S. law and practice and to address 

concerns raised by commenters that the 

proposal did not go far enough in this 

regard. We initially proposed to require 

payment for securities tendered during 

the subsequent offering period to be 

made within 14 business days, but 

solicited comment on whether a shorter 

or longer period would be 

appropriate.201 As adopted, we are 

allowing bidders 20 business days to 

effect payment. The change to 20 

business days was requested by one 

commenter.202 We believe that allowing 

20 business days to effect payment 

should be sufficient in most 

jurisdictions, and increasing the 

payment period to 20 business days, 

rather than 14 business days as 

proposed, will not be detrimental to 

investors. 

Several other commenters expressed 

support for allowing bidders to pay for 

securities tendered during the 

subsequent offering period in 

accordance with the target’s home 

country law or practice, rather than 

fixing a set payment date, as 

proposed.203 We are not adopting this 

change. Because we are eliminating the 

maximum time period for the 

subsequent offering period, we believe 

that maintaining a time limit for 

payment is appropriate and in the best 

interests of U.S. investors. Without a 

time limit for payment, investors 

tendering securities in the subsequent 

offering period may face an indefinite 

waiting period for payment of their 

tendered securities. Maintaining a time 

limit is particularly important because 

target security holders who tender 

during the subsequent offering period 

do not have withdrawal rights.204

The rule change we adopt is intended 

to set a minimum standard for payment 

for securities tendered during a 

subsequent offering period. Where local 

law mandates and local practice permits 

payment on a more expedited basis, 

payment must be made more quickly 

than 20 business days from the date of 

tender to satisfy U.S. prompt payment 

requirements.205

Although, as noted in the previous 

section, we are eliminating the limits on 

the length of the subsequent offering 

period for domestic as well as crossborder tender offers, we are not 

adopting corresponding changes to 

permitted payment practice during the 

subsequent offering period for domestic 

offers.206 The changes in permitted 

payment practice for Tier II cross-border 

tender offers are necessitated by direct 

conflicts between U.S. and foreign law 

and practice; no such conflicts exist for 

U.S. offers. Moreover, because 

withdrawal rights are not provided 

during a subsequent offering period, we 

believe that in domestic offers where 

there is no impediment to doing so, it 

is appropriate to continue to require 

payment to be made on an as tendered 

basis. 

c. Payment of Interest on Securities 

Tendered During the Subsequent 

Offering Period 

We are adopting as proposed a rule 

change permitting bidders in Tier II 

cross-border tender offers to pay interest 

on securities tendered during a 

subsequent offering period, where 

required under foreign law.207 In some 

foreign jurisdictions, bidders are legally 

obligated to pay interest on securities 

tendered during a subsequent offering 

period at a rate set by law.208 Sometimes 

interest accrues from the actual date of 

tender; in other jurisdictions, interest 

accrues from a date certain unrelated to 

the date of tender.209

Without the rule change we adopt 

today, paying interest on securities 

tendered during a subsequent offering 

period would violate U.S. rules, which 

mandate that security holders who 

tender into a subsequent offering period 

must receive the same consideration as 

those that tender during the initial 

offering period.210 Because of this 

prohibition, bidders have requested and 

received exemptive relief to address the 

direct conflict of law presented, where 

foreign law in the relevant jurisdiction 

requires the payment of interest on 

securities tendered but U.S. law 

prohibits it.211 The rule changes we 

adopt today codify this relief for Tier II 

tender offers. 

We note that the rule change we adopt 

today applies only where the payment 

of interest is mandated by the law of the 

relevant foreign jurisdiction applicable 

to the offer. It is not intended to allow 

bidders to pay more in the subsequent 

offering period simply as an inducement 

to tendering.212 We believe the general 

requirement that bidders make the same 

amount and form of consideration in the 

initial and subsequent offering periods 

serves an important function to 

eliminate any coercion of target security 

holders, and should be maintained 

unless it is inconsistent with an express 

requirement of applicable foreign law. 

We have not limited the amount of 

interest that may be paid on securities 

tendered during the subsequent offering 

period. In our experience, the rate of 

interest set by foreign law generally 

results in a de minimis payment, but we 

have not conditioned the application of 

the revised exemption on the amount of 

the interest payment. Only one 

commenter responded to our question 

regarding whether we should limit the 

amount of interest that may be paid on 

securities tendered during the 

subsequent offering period. That 

commenter supported our approach of 

not setting a limit, on the grounds that 

interest payments would not have a 

coercive effect under the circumstances 

where they are permitted by our revised 

rules.213

Our rule change does not permit the 

payment of interest on securities 

tendered during the initial offering 

period. The only commenter who 

addressed this question indicated that 

we should permit interest payments on 

securities tendered during an initial 

offering period, where such interest 

payments are required under home 

country law.214 However, this is not an 

area where relief is frequently 

requested, so we do not believe a rule 

change is appropriate at this time.215


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216For a discussion of the mechanics of a mix and 

match cross-border tender offer, see, e.g., Barclays 

and Alcan. 217Exchange Act Rule 14d–11(f). 218Exchange Act Rule 14d–11(b). 219See Barclays and SERENA Software Inc. (April 

13, 2004)(setting a cap on the number of bidder 

shares and cash that would be issued in a mix and 

match election, with elections for more cash or 

shares being offset against one another). 220New Exchange Act Rule 14d–1(d)(2)(viii). 

221See Exchange Act Rule 14d–11(f). 

222See, e.g., Germany and the United Kingdom. 

223See letters from ABA and Cleary. 

224Exchange Act Rules 13e–4(e)(3) and 14d–4(d). 

The Commission has expressed the position that the 

minimum extension periods set forth in those rules 

apply as general guidelines applicable to all tender 

offers, including those that are not subject to Rule 

13e–4 or Regulation 14D. See footnote 186 above 

and the discussion in Regulation M–A Adopting 

Release, Section II.E.2. See also Exchange Act Rule 

14e–1(b) [17 CFR 240.14e–1(b)], which states that 

a tender offer must remain open for a minimum of 

10 business days after a change in the consideration 

offered, the amount of securities sought, or the 

dealer’s soliciting fee. 

225A bidder must announce that it may reduce or 

waive the minimum condition at least five business 

days before it reduces or waives it. See footnote 186 

and the 1999 Cross-Border Adopting Release, 

Section II.B. 

226See 1998 Cross-Border Proposing Release, 

Section II.C.2.f. 

227For example, Netherlands law and practice 

allows a bidder to reduce or waive a minimum 

acceptance condition at or after the end of the 

initial offering period without providing tendering 

holders with the ability to withdraw their securities 

after the reduction or waiver. See, e.g., Barclays. 

Consideration will be given to requests 

for relief in connection with individual 

cross-border transactions, if local law 

requires the payment of interest on 

securities tendered during an initial 

offering period. 

d. Mix and Match Offers and the Initial 

and Subsequent Offering Periods 

We proposed changes to our rules, 

which we adopt as proposed, to 

facilitate so-called ‘‘mix and match’’ 

cross-border tender offers. We view 

these changes as necessary and 

appropriate to facilitate the prompt 

payment for securities tendered during 

these offer periods, and to permit the 

use of the mix and match offer structure 

generally. In a mix and match offer, 

bidders offer a set mix of cash and 

securities in exchange for each target 

security, but permit tendering holders to 

request a different proportion of cash or 

securities. These elections by tendering 

holders are satisfied to the extent that 

other tendering security holders make 

offsetting elections for the opposite 

proportion of cash and securities, 

subject to a maximum amount of cash 

or securities that the bidder is willing to 

issue.216

U.S. rules prohibit several features 

characteristic of mix and match offers. 

Under U.S. subsequent offering period 

rules, a bidder must offer the same form 

and amount of consideration to security 

holders who tender into both the initial 

and subsequent offering periods.217

Further, a bidder may not impose a 

ceiling on any form of alternate 

consideration offered during the 

subsequent offering period.218

Because of the prompt payment and 

other requirements of U.S. rules and the 

requirements of foreign law or practice 

in cross-border offers, bidders in mix 

and match offers often request relief to 

use two different proration and offset 

pools in their offers: one for securities 

tendered during the initial offering 

period and another for those tendered in 

the subsequent offering period.219 The 

rule revisions we adopt today expressly 

permit the use of separate offset ‘‘pools’’ 

for securities tendered during the initial 

and subsequent offering periods for 

cross-border tender offers conducted 

under Tier II.220 This rule change is 

necessary because of the U.S. 

prohibition on the payment of different 

consideration in the initial and 

subsequent offering periods.221 New 

Rule 14d–1(d)(2)(viii) also eliminates 

the prohibition on a ceiling for the form 

of consideration in a mix and match 

cross-border offer under Tier II, where 

target security holders are able to elect 

to receive alternate forms of 

consideration in the offer. Applicable 

foreign rules generally require the 

bidder to promptly take up and pay for 

securities tendered during the initial 

offering period at the end of that 

period.222 In a mix and match offer 

where the bidder allows tendering 

security holders to make offsetting 

elections of cash and bidder securities, 

the bidder must set the offset or 

proration ‘‘pool’’ at the end of the initial 

offering period for the securities 

tendered during that period, in order to 

begin the payment process for those 

securities. Similarly, the bidder must 

count and offset against each other all 

securities tendered during the 

subsequent offering period. 

We solicited comment about whether 

these changes should be extended to 

tender offers for U.S. target companies. 

Two commenters argued that these 

changes should apply to all tender 

offers, including offers for domestic 

targets, on the grounds that an acquiror 

for a U.S. target can accomplish the 

same result by entering into a merger 

agreement that provides target security 

holders with the same elections.223 We 

are not extending these rule changes to 

tender offers for domestic issuers at this 

time. U.S. law already permits acquirors 

to structure business combination 

transactions in a manner that achieves 

the same result as the mix and match 

tender offer structure through the use of 

the merger structure. We have not 

received requests for relief in this area 

in connection with tender offers for U.S. 

targets; therefore, at this time, we do not 

believe there is a compelling reason to 

change our rules to provide this 

accommodation for U.S. offers. 

5. Terminating Withdrawal Rights 

Immediately After Reducing or Waiving 

a Minimum Acceptance Condition 

We are reaffirming the interpretive 

position we expressed in the Proposing 

Release, with some further 

modifications, with respect to a bidder’s 

ability in a cross-border tender offer 

conducted under Tier II to waive or 

reduce a minimum acceptance 

condition without providing withdrawal 

rights. Under U.S. tender offer rules, 

bidders must ensure that a tender offer 

remains open and includes withdrawal 

rights for a prescribed period after a 

material change in the terms of the 

offer.224 Generally, waiving or reducing 

the minimum acceptance condition is 

considered a material change in the 

terms of the offer that triggers this 

requirement. A statement in the initial 

offer materials advising target security 

holders that the minimum acceptance 

condition may be reduced or waived is 

not sufficient to avoid the obligation to 

inform target security holders of this 

development if it actually occurs. Such 

a statement also is not sufficient to 

avoid the obligation to extend the 

offering period where required to satisfy 

the minimum time periods set forth in 

our rules.225

The requirement to provide 

withdrawal rights after a reduction in, 

or waiver of, a minimum acceptance 

condition under U.S. rules conflicts 

with law or practice in certain foreign 

jurisdictions. The conflicts with U.K. 

law and practice were the primary basis 

for the adoption of our original 

interpretive position when the crossborder exemptions were adopted in 

1999.226 Since that time, we have 

encountered other foreign jurisdictions 

with conflicting law or practice 

regarding the need or the ability of a 

bidder to provide withdrawal rights 

after reducing or waiving a minimum 

acceptance condition in a tender 

offer.227 Because of these conflicts, we 

believe the basic premise for our 

interpretive position of permitting 

flexibility for bidders in Tier II crossborder tender offers to waive or reduce 

a minimum tender condition without 

providing withdrawal rights remains 

valid. As noted in the Proposing 

Release, however, additional conditions 


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Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 60067 

228See Proposing Release, Section II.C.5. 229Our position on reduction or waiver was never 

intended to allow a bidder to terminate withdrawal 

rights required under a mandatory extension of the 

offer period, i.e., an extension required under Rule 

14e–1. See 1999 Cross-Border Adopting Release, 

Section II.B. We maintain this limitation today in 

modifying the position. 230As noted above, a statement in the initial 

offering materials will not satisfy this condition. 231This announcement should be filed on 

EDGAR, as is generally the practice today. 232See Section II.A. Question 1 in the Third 

Supplement to the Division of Corporation 

Finance’s Manual of Publicly Available Telephone 

Interpretations (July 2001) at http://www.sec.gov/ 

interps/telephone/phonesupplement3.htm. 

233The staff has conditioned a bidder’s ability to 

waive or reduce the minimum acceptance condition 

without providing withdrawal rights on adequately 

describing the potential impact of that action in the 

initial offer materials or in a supplement. See, e.g., 

Royal Bank. 

234We consider a ‘‘majority’’ for these purposes 

to be any number greater than 50 percent of the 

outstanding securities of the subject class. 

235See Proposing Release, Section II.C.5. 

236See letter from ABA. 

237We have been advised that Germany is one 

such foreign jurisdiction. Under German law, 75 

percent of a target’s security holders must approve 

a ‘‘domination agreement’’ between the target and 

the bidder in order for the bidder to effectively 

exercise control of the target company after a tender 

offer. Therefore, unless the bidder can obtain at 

least 75 percent of the target’s securities in the 

tender offer, it cannot be assured of the ability to 

fully integrate the target company. See, e.g., Bayer 

and Blackstone. 

238See Item 5 of Forms S–4 and F–4 and Rule 11– 

02(b)(8) of Regulation S–X [17 CFR 210.11– 

02(b)(8)]. Rule 11–02(b)(8) mandates that where a 

transaction is structured in such a way that 

significantly different results may occur, additional 

pro forma presentation must be provided which 

give effect to the range of possible results. 

239See Proposing Release, Section II.C.5. 

240See letters from ABA and Cravath. 

241Cf. Commission Guidance on the Use of 

Company Web Sites, Release No. 34–58288 (August 

1, 2008). 

242See letter from ABA. 

are necessary to assure that the guidance 

is used for the purposes for which it was 

originally granted.228

We will not object if a bidder in a 

cross-border tender offer satisfying the 

requirements of Tier II waives or 

reduces the minimum acceptance 

condition in the offer without providing 

withdrawal rights after the reduction or 

waiver (except where an extension is 

required under Exchange Act Rule 

14e–1),229 under the following 

conditions: 

• The bidder must announce that it 

may waive or reduce the minimum 

acceptance condition at least five 

business days before the actual waiver 

or reduction; 230

• The bidder must disseminate the 

announcement through a press release 

and other methods reasonably 

calculated to inform U.S. holders of the 

possibility of a waiver or reduction, 

which may include placing an 

advertisement in a newspaper of 

national circulation in the United 

States; 231

• The press release must state the 

exact percentage to which the minimum 

acceptance condition may be reduced 

(or if it will be waived, rather than 

reduced). The bidder must announce its 

actual intentions regarding waiver or 

reduction as soon as required under 

home country rules; 

• During the five-day period after the 

announcement of a possible waiver or 

reduction, withdrawal rights must be 

provided; 

• The announcement must advise 

security holders to withdraw tendered 

securities immediately if their 

willingness to tender into the offer 

would be affected by the reduction or 

waiver of the minimum acceptance 

condition; 

• The procedure for waiving or 

reducing the minimum acceptance 

conditions must be described in the 

offering materials; 

• The offer must remain open for at 

least five business days after the waiver 

or reduction of the minimum 

acceptance condition; 

• All offer conditions are satisfied or 

waived when withdrawal rights are 

terminated; 232

• The potential impact of the waiver 

or reduction of the minimum 

acceptance condition is fully discussed 

in the initial offering materials or any 

supplemental materials; 233 and 

• The bidder may not waive or reduce 

the minimum acceptance condition 

below the percentage required for the 

bidder to control the target company 

after the tender offer under applicable 

foreign law, and in any case, may not 

reduce or waive the minimum 

acceptance condition below a 

majority 234 of the outstanding securities 

of the subject class. 

With respect to the last bullet point 

above, we initially limited the guidance 

to apply only where the bidder would 

not waive or reduce the minimum 

acceptance condition below a simple 

majority.235 We solicited comment on 

what should be considered a ‘‘majority’’ 

for these purposes. Consistent with the 

feedback from one commenter,236 we 

have further modified the guidance to 

address foreign jurisdictions in which 

some percentage greater than a simple 

majority may be required to control the 

target company after the offer. As we 

modify the guidance today, it may not 

be relied upon unless the bidder 

undertakes not to waive below a simple 

majority, or the percentage threshold 

required to control the target company 

under applicable foreign law, if it is 

greater. We are aware of at least one 

foreign jurisdiction where a percentage 

greater than a simple majority is 

required to control the management and 

corporate governance of a target 

company.237 As discussed in the 

Proposing Release, in addition to the 

potential need to provide alternate sets 

of pro forma financial statements under 

our existing disclosure rules,238 we 

believe reducing the minimum 

acceptance condition significantly 

below the level at which it is initially 

set may fundamentally change the 

nature of the transaction and the 

relationship between the offeror and the 

target company going forward. In 

particular, where the minimum 

acceptance condition changes below a 

majority of the subject class or that 

greater percentage needed to control the 

target company, security holders should 

be afforded withdrawal rights after the 

change, as the nature of their investment 

decision may have changed 

fundamentally.239

Several commenters argued that 

placing a newspaper advertisement in a 

newspaper of national circulation in the 

United States is unnecessary in the 

Internet age and unduly burdensome.240

While the use of a newspaper 

advertisement is not required under all 

circumstances, we believe in the tender 

offer context, newsprint media remain 

an important means of communicating 

with security holders, and in particular, 

‘‘back office’’ personnel at many 

financial institutions. Although we 

continue to believe that in most 

instances today, a newspaper 

advertisement is an appropriate method 

of dissemination reasonably calculated 

to inform U.S. holders, we recognize 

that as practice changes, and Internet 

and other means of communication 

evolve, a newspaper advertisement may 

in the future become unnecessary.241

One of the commenters advocated 

eliminating the requirement to provide 

five days notice of a possible waiver or 

reduction.242 We believe that advance 

notice of a possible waiver or reduction 

serves an important function in warning 

target security holders who may wish to 

withdraw their tendered securities 

immediately if their tender decision 

would be impacted by a change in the 

minimum acceptance condition. 

Therefore, we are retaining this 

condition. Another commenter 

advocated expanding the ability to 

waive or reduce a minimum acceptance 

condition without providing withdrawal 

rights to the waiver of a financing 

condition, arguing that this renders the 

successful completion of the offer more 


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243See letter from STB. 

244See Proposing Release, Section II.C.5. 

245As noted above in footnotes 186 and 224, 

Exchange Act Rules 13e–4(e)(3) and 14d–4(d)(2) 

establish minimum time periods during which an 

offer must remain open after notice of a material 

change in its terms is communicated to target 

holders. Although by their terms these periods 

apply only to early commencement exchange offers, 

we have stated that we view the time periods set 

forth in these rules as generally applicable to all 

tender offers, including those not subject to Rule 

13e–4 or Regulation 14D. See Regulation M–A 

Adopting Release, Section II.E.2. See also, Exchange 

Act Rule 14e–1(b), which establishes comparable 

minimum time periods for certain kinds of material 

changes, such as an increase or decrease in the offer 

consideration or the amount of securities sought in 

the offer, and a change in the soliciting dealer’s 

fees. 

246We are advised that some of these 

jurisdictions include the United Kingdom, South 

Africa, Singapore and China (Hong Kong). See, e.g., 

RWE (U.K. practice); Harmony Gold Mining Ltd. 

(March 10, 2005) (‘‘Harmony Gold 2005’’) (South 

Africa); STATs ChipPAC (Singapore); and Jilin 

Chemical Industrial Company Ltd. (December 21, 

2005) (Hong Kong Code). 

247 Id. 

248See AstraZeneca PLC (May 23, 2006); 

Harmony Gold 2005; and In the Matter of Central 

and South West Corp. (September 27, 1995). 

249See letters from ABA and Linklaters. 

250Letter from Linklaters. 

251A mandatory extension is one required 

because of a change in the offer consideration, the 

number of securities sought by the bidder in the 

tender offer, or in the dealer’s soliciting fees. See 

footnotes 224 and 245 above. See also Exchange Act 

Rules 13e–4(e)(3), 14d–4(d)(2), and 14e–1(b). 

252See Proposing Release, footnote 216. 

253See Exchange Act Rules 13e–4(e)(3) and 14d– 

4(d)(2)(i) [17 CFR 240.14d–4(d)(2)(i)]. 

254 In our experience, foreign rules in certain 

jurisdictions may limit the number of offer 

conditions a bidder may impose and may also 

restrict a bidder’s ability to waive those conditions. 

Therefore, waivers of material offer conditions may 

occur less frequently in cross-border offers. See, 

e.g., Gas Natural. 

likely and therefore benefits holders.243

While we do not disagree that some 

changes in the terms of an offer may be 

viewed beneficially by target holders, 

we continue to believe that the 

provisions of U.S. rules that require 

extension of an offer period when its 

terms materially change are appropriate 

in most instances and should be relaxed 

only where conflicts between U.S. and 

foreign law or practice so necessitate. In 

our experience, bidders have not sought 

relief to waive a financing condition 

without providing withdrawal rights in 

cross-border tender offers. In addition, 

we believe that in some circumstances, 

the waiver of a financing condition may 

present risks to target holders, including 

those who have already tendered into 

the offer, because a bidder may waive 

the financing condition, thinking that 

financing is secure, when this may not 

turn out to be the case. 

We reiterate that the ability to rely on 

our position, as modified above, to 

terminate withdrawal rights 

immediately after waiving or reducing a 

minimum acceptance condition is 

limited to offers that otherwise satisfy 

the requirements of the Tier II crossborder exemptions.244 In addition, it 

may be relied upon only where law or 

practice in the applicable foreign 

jurisdiction does not permit the bidder 

to provide withdrawal rights after the 

reduction or waiver, as required under 

U.S. law. We do not believe a bidder in 

a cross-border offer should be permitted 

to rely on this position where it is not 

needed under the requirements of 

foreign law or practice. 

6. Early Termination of an Initial 

Offering Period or a Voluntary 

Extension of an Initial Offering Period 

Where the expiration date of a tender 

offer has been set by the bidder, whether 

in the original offer materials or in 

supplemental materials announcing an 

extension of the offer, changing that 

expiration date requires notice to target 

security holders before the initial 

offering period closes and withdrawal 

rights terminate.245 This extension 

requirement in U.S. rules conflicts with 

the law or practice in some foreign 

jurisdictions, which mandate that once 

all offer conditions have been satisfied 

or waived, the initial offering period 

and withdrawal rights must terminate so 

that the bidder may begin the payment 

process.246 Generally in these foreign 

jurisdictions, a subsequent offering 

period provides a means by which 

remaining target holders may participate 

in the offer, so they are not 

disadvantaged by its early 

termination.247

Both before and after the adoption of 

the cross-border exemptions, bidders in 

cross-border tender offers frequently 

have sought additional relief from the 

staff to terminate the initial offering 

period before its scheduled expiration, 

thereby terminating withdrawal rights, 

upon the satisfaction of all offer 

conditions.248 We solicited comment on 

whether we should codify existing staff 

no-action guidance that permits a bidder 

in a cross-border tender offer conducted 

under the Tier II exemptions to 

terminate the initial offering period (or 

a voluntary extension of that period) if 

all offer conditions are satisfied, subject 

to the conditions discussed below. We 

received two comment letters 

supporting such a codification, and no 

objecting comments.249 As one 

commenter noted, codifying this 

position will facilitate cross-border 

tender offers because it would be 

consistent with law and practice in 

certain jurisdictions, and transaction 

participants would not be required to 

seek individual relief from the staff as 

is currently the case.250 Therefore, we 

are amending Exchange Act Rules 

13e–4 and 14d–1(d) to codify the 

guidelines set forth in existing staff 

guidance to permit early termination, 

subject to the conditions set forth below, 

which will be specified in the rules. 

Under new Rule 14d–1(d)(2)(ix), 

bidders in cross-border tender offers 

conducted under Tier II may terminate 

an initial offering period, including a 

voluntary extension of that period, if at 

the time the initial offering period and 

withdrawal rights end: 

• The initial offering period has been 

open for at least 20 U.S. business days 

and all offer conditions have been 

satisfied; 

• The bidder has adequately 

discussed the possibility and the impact 

of the early termination in the original 

offer materials; 

• The bidder provides a subsequent 

offering period after the termination of 

the initial offering period; 

• All offer conditions are satisfied as 

of the time when the initial offering 

period ends; and 

• The bidder does not terminate the 

initial offering period or any extension 

of that period during any mandatory 

extension required under U.S. tender 

offer rules.251

We also are amending Rule 13e–4 to 

add a new provision, Rule 13e– 

4(i)(2)(vii), to allow issuers or affiliates 

in a Tier II issuer tender offer to early 

terminate the initial offering period, or 

voluntary extension of that period, 

under the same circumstances discussed 

above. 

As discussed in the Proposing 

Release, the position we codify today 

does not permit early termination upon 

the waiver of an offer condition.252

When a bidder waives an offer 

condition, the terms of the offer may be 

fundamentally altered, such that it may 

influence the investment decisions of 

both target holders who have tendered 

and those who have not yet tendered. 

Our rules mandate that a tender offer 

remain open for specified time periods 

after a material change in the terms of 

an offer, which would include the 

waiver of a material offer condition.253

By contrast, when an offer condition is 

satisfied, we believe the change is less 

fundamental in nature, because target 

security holders know from the outset 

that the successful consummation of the 

offer is contingent on the occurrence or 

non-occurrence of the relevant event.254

For this reason, a bidder may not take 

advantage of the rules adopted here 

upon the waiver of an offer condition; 


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255See Mittal; Cash Tender Offer by Sulzer AG for 

the Ordinary Shares of Bodycote International plc 

(March 2, 2007) (‘‘Sulzer’’); and Rule 14e–5 Relief 

for Certain Trading Activities of Financial Advisors 

(April 4, 2007) (‘‘Financial Advisors’’). 

256 1999 Cross-Border Adopting Release, Section 

II.C.1. 

257Regulation M–A Adopting Release, Section 

II.G.5. 

258See letters from ABA, ABCNY, Cleary, 

Cravath, DPW, Osler Hoskin Harcourt LLP 

(‘‘Osler’’), S&C. 

259See, e.g., letters from Cleary, Cravath, and 

S&C. 

260See Proposing Release, Section II.C.7. 

261New Exchange Act Rule 14e–5(b)(11)(i) 

through (v). 

262Letters from Cleary, Cravath, S&C, and Osler. 

263Letter from Cleary. 

264See Proposing Release, Section II.C.7. 

265New Exchange Act Rule 14e–5(b)(12). 

266Letter from Cleary. 

the offer (including withdrawal rights) 

must be extended upon a waiver. To the 

extent that foreign law in a particular 

jurisdiction mandates that a bidder 

terminate an initial offering period and 

withdrawal rights upon the waiver of all 

or some offer conditions, requests for 

relief will be considered on a case-bycase basis. 

7. Exceptions From Rule 14e–5 for Tier 

II Cross-Border Tender Offers 

We are adopting the proposed 

amendments to Exchange Act Rule 14e– 

5, with some minor clarification and 

one revision. The amendments to the 

application of Rule 14e–5 for Tier II 

tender offers that we adopt today seek 

to modernize and enhance the utility of 

the rule by codifying three class 

exemptive letters in the cross-border 

tender offer context.255 In our view, the 

codification of Rule 14e–5 exemptive 

class letters 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. 

Rule 14e–5 safeguards the interests of 

persons who sell their securities in 

response to a tender offer. The rule 

protects investors by prohibiting 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.256 The rule prohibits the 

disparate treatment of security holders, 

prohibits the avoidance of proration 

requirements, and guards against the 

dangers posed by a bidder’s purchases 

outside an offer that may involve fraud, 

deception and manipulation.257

Specifically, the rule prohibits 

purchasing or arranging to purchase any 

subject securities or any related 

securities except as part of the tender 

offer. The rule’s prohibitions apply from 

the time of public announcement of the 

tender offer until the offer expires. 

As amended, new Rules 14e–5(b)(11) 

and (b)(12) would codify class 

exemptive letters in three areas: 

purchases and arrangements to purchase 

securities of a foreign private issuer (1) 

pursuant to the non-U.S. tender offer for 

a cross-border tender offer where there 

are separate U.S. and non-U.S. offers; (2) 

by offerors and their affiliates outside of 

a tender offer; and (3) by financial 

advisor’s affiliates outside of a tender 

offer. 

We received seven comment letters 

that specifically address the proposed 

amendments to Rule 14e–5.258 In 

general, commenters expressed support 

for the proposed codification of the 

three class letters. The majority of 

comments relate to Rule 14e–5(b)(12), 

the second of the two proposed rule 

amendments. Consequently, we are 

adopting proposed Rule 14e–5(b)(11) 

without modification. As discussed 

below, we are adopting proposed Rule 

14e–5(b)(12), with one revision and 

minor clarification, in response to 

comments received and upon further 

analysis. 

a. Purchases or Arrangements To 

Purchase Pursuant to a Foreign Tender 

Offer(s) 

As previously noted, we are adopting 

proposed Rule 14e–5(b)(11) without 

modification. Commenters expressed 

general support for the proposal to 

permit purchases or arrangements to 

purchase pursuant to a foreign offer(s) 

during the Rule 14e–5 prohibited period 

if certain conditions are satisfied.259

There were no comments opposing this 

proposed amendment to Rule 14e–5. 

The exception is conditioned on the 

existence of specified safeguards to help 

protect U.S. security holders.260 The 

exception permits purchases in a foreign 

offer(s) made concurrently or 

substantially concurrently with a U.S. 

offer if each of the conditions of the 

exception are met.261

b. Purchases or Arrangements To 

Purchase by an Affiliate of the Financial 

Advisor and an Offeror and its Affiliates 

We are adopting, with one revision, 

proposed Rule 14e–5(b)(12), which 

would permit purchases or 

arrangements to purchase outside of a 

Tier II tender offer by an affiliate of the 

financial advisor and an offeror and its 

affiliates if certain conditions are 

satisfied, including that the subject 

company must be a foreign private 

issuer, and the covered person must 

reasonably expect that the tender offer 

qualifies as Tier II. Four commenters 

expressed support for the proposal.262

No commenters opposed codification of 

the Sulzer and Financial Advisors class 

exemptive letters. Some commenters 

suggested revision or clarification, as 

discussed below. 

We proposed to exclude risk arbitrage 

trading from the exception applicable to 

purchasing activity by an affiliate of a 

financial advisor. We received only one 

comment letter in response to the 

request for comment in the proposal to 

provide information concerning other 

activity in addition to risk arbitrage that 

should be excluded from the exception 

as well as definitions related to risk 

arbitrage activity. The commenter 

proposed that we delete proposed 

paragraph (b)(12)(ii), which would 

exclude risk arbitrage trading by an 

affiliate of a financial advisor from the 

relief afforded to other trading activities 

that meet the provisions of paragraph 

(b)(12)(i).263 We have determined not to 

adopt an exclusion limited to one 

particular type of activity and, thus, we 

are removing paragraph (b)(12)(ii). The 

condition that purchases or 

arrangements to purchase cannot be 

made to facilitate the tender offer 

should continue to address abusive 

purchasing activity that the rule is 

designed to prevent. Any purchasing 

activity by an affiliate of a financial 

advisor, including risk arbitrage, made 

to facilitate the tender offer would not 

be eligible for the exception. 

Accordingly, the exception as adopted 

contains no risk arbitrage exclusion. 

The exception is conditioned on the 

existence of specified safeguards to help 

protect U.S. security holders.264 As 

adopted, Rule 14e–5(b)(12) excepts 

purchases or arrangements to purchase 

outside of a Tier II tender offer by an 

affiliate of the financial advisor and an 

offeror and its affiliates if the conditions 

in the adopted rule are met.265

One commenter requested 

clarification with respect to language 

contained in the proposing release 

concerning purchases by financial 

advisor affiliates outside of a tender 

offer.266 Adopted Rule 14e–5(b)(12) is 

premised on the financial advisor’s 

affiliate carrying out its normal business 

activity when purchasing outside a 

tender offer, and would not permit 

purchases or arrangements to purchase 

to be made to facilitate the tender offer. 

In order to comply with the adopted 

exception, the financial advisor’s 

purchasing activities must be 

‘‘consistent with the [f]inancial 

[a]dvisor’s [a]ffiliates’ normal and usual 

business practices, and * * * not 


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267Letter from Cleary (citing Condition 4 in the 

Financial Advisor letter). 

268Letters from ABA, ABCNY, DPW, and S&C. 

269See letters from ABA and S&C. 

270Letter from ABCNY. 

271Letter from Cleary. 

272Letter from Cravath. 

273 Id. 

274See, e.g., letter from S&C (stating that financial 

advisor’s affiliates should also be exempted from 

Regulation M since there are also several class 

letters for Regulation M that have provided 

exemptions but have not yet been codified). See 

also, letter from ABCNY. 

275See proposed Securities Act Rule 162(a) and 

proposed Exchange Act Rules 13e–4(i)(2)(vi) and 

14d–1(d)(2)(x). 

276Securities Act Rule 162(a) [17 CFR 230.162(a)]. 

277See Proposing Release, Section II.D., proposed 

Securities Act Rule 162(a) and proposed Exchange 

Act Rules 13e–4(i)(2)(vi) and 14d–1(d)(2)(x). 

Because foreign law may provide that a tender offer 

for one class of securities will trigger an obligation 

to make a contemporaneous offer for a related class, 

this rule change could enhance the ability of such 

exchange offers to commence early, and therefore 

could enhance the speed with which such offers 

may be effected. 

278See letters from ABA, Cleary, and STB. 

279 Id. 

conducted for the purpose of promoting 

or otherwise facilitating the offer, or for 

the purpose of creating actual, or 

apparent, active trading in, or 

maintaining or affecting the price of, the 

securities of the subject company.’’ 267

The commenter noted a statement in the 

Proposing Release that purchasing 

activity effected in reliance on the 

proposed exception be consistent with 

the affiliate’s prior levels of activity is 

more restrictive than previous relief 

granted to financial advisors. The 

contention is that we previously have 

focused on the nature of the activity, 

rather than the level of the activity. 

We acknowledge that the barometer 

for what constitutes the level of normal 

business activity may fluctuate once 

there is an announcement of a tender 

offer. However, if the level of 

purchasing activity far exceeds the 

usual or expected level of purchasing 

activity following the announcement of 

a tender offer, this could certainly be a 

red flag of improper facilitation. 

Four commenters opposed the 

condition in proposed Rule 14e– 

5(b)(12)(i)(G)(2) that financial advisors 

have an affiliate that is registered as a 

broker or dealer under Section 15(a) of 

the Exchange Act in order for such an 

affiliate to make purchases or 

arrangements to purchase outside of a 

tender offer in the Tier II context.268 In 

general, the commenters stated that the 

requirement that an affiliate of a 

financial advisor seeking Rule 14e–5 

protection be a U.S. registered broker or 

dealer provides disincentives to foreign 

acquirors to include U.S. investors in 

deals. Two commenters stated that the 

condition favors financial institutions 

with U.S. affiliates over international 

institutions.269 One commenter stated 

that if the necessary information barriers 

are in place, there would be adequate 

protection to U.S. investors despite the 

absence of a U.S. broker or dealer 

affiliate.270

While we appreciate that the U.S. 

broker or dealer affiliate requirement for 

financial advisors may potentially lead 

to the exclusion of U.S. investors from 

certain transactions, we continue to 

believe this is a fundamental provision 

to safeguard the interests of U.S. 

investors. We believe that this 

requirement strikes the proper balance 

among the investor protection goals of 

Rule 14e–5 and the interest of U.S. 

investors in being included in tender 

offers. 

We received a comment requesting 

clarification of Rule 14e–5(b)(12)(i)(C) 

that, ‘‘No purchases or arrangements to 

purchase otherwise than pursuant to the 

tender offer are made in the United 

States.’’ 271 We note that, 

notwithstanding this condition, in 

certain circumstances covered persons 

may engage in such purchases or 

arrangements to purchase if relying on 

other existing exceptions from this 

condition or through attaining no-action 

relief or exemptive order from the 

Commission. For example, reliance on 

the adopted (b)(12) exception would not 

necessarily preclude reliance on an 

existing exception, such as the 

exception in Rule 14e–5(b)(7) for 

purchases pursuant to contractual 

obligations. 

We received one comment relating to 

the condition in Rule 14e–5(b)(12)(i)(D) 

concerning the term ‘‘offering 

materials.’’ The term ‘‘offering 

materials’’ refers to definitive offer 

materials and not earlier 

announcements in relation to the tender 

offer.272

We received one comment concerning 

the condition in proposed Rule 14e– 

5(b)(12)(i)(F) that for purchases or 

arrangements to purchase by an offeror 

and its affiliates the following condition 

be satisfied: tender offer prices will be 

increased to match any consideration 

paid outside of the tender offer that is 

greater than the tender offer price.273

The condition to increase the offer 

consideration to match any higher 

consideration paid outside the tender 

offer is satisfied if the laws of the 

relevant home jurisdiction or the terms 

of the tender offer provide for matching 

the higher consideration and the offeror 

complies with such provision. 

Other commenters requested 

codification of additional Rule 14e–5 or 

Regulation M relief that was not 

proposed, including Rule 14e–5 relief 

for financial institutions.274 Individual 

requests for relief will continue to be 

considered on a case-by-case basis for 

activity that does not fall within the 

exceptions adopted today or other 

existing exceptions. 

In our view, today’s adoption 

codifying the three Rule 14e–5 

exemptive class letters concerning 

cross-border tender offers 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. 

D. Expanded Availability of Early 

Commencement 

We proposed rule changes expanding 

the ability of a bidder to commence an 

exchange offer before effectiveness of 

the registration statement filed to 

register the bidder’s securities.275 Under 

existing rules, the ability to ‘‘early 

commence’’ an exchange offer is 

available only when an exchange offer 

is subject to Rule 13e–4 or Regulation 

14D.276 Specifically, we proposed to 

allow issuers and third-party bidders in 

cross-border exchange offers conducted 

under Tier II to commence the exchange 

offer immediately upon the filing of the 

registration statement filed to register 

the bidder’s securities, even if they were 

not subject to those rules.277

In the Proposing Release, we solicited 

comment on whether we should 

similarly expand the availability of early 

commencement to exchange offers for 

domestic companies. Three commenters 

supported our proposal to make early 

commencement available for Tier II 

exchange offers subject only to 

Regulation 14E.278 All three also 

advocated making this change as to all 

exchange offers, including those 

conducted for U.S. target companies.279

We agree that this option should be 

available in exchange offers for both 

domestic and foreign target companies. 

When we adopted rule revisions 

permitting early commencement for 

exchange offers subject to Rule 13e–4 or 

Regulation 14D, we did so to address a 

disparity in the regulatory process for 

cash tender offers and exchange offers. 

Extending the early commencement 

option to domestic and foreign exchange 

offers not subject to Rule 13e–4 or 

Regulation 14D will further our goal of 

reducing the regulatory disparity. 

Therefore, we are amending our rules to 

allow all exchange offers, including 

those for domestic target companies not 

subject to Rule 13e–4 or Regulation 14D, 


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280See amended Securities Act Rule 162(a) and 

(b). 

281This includes back-end withdrawal rights as 

well as withdrawal rights during an offer. 

282 In addition, see below for a discussion of 

prospectus delivery requirements. 

283See discussion in footnotes 186, 225, and 245. 

284The offer materials disseminated to security 

holders should provide information about 

withdrawal rights and include the dates before and 

after which security holders may withdraw 

securities tendered in the offer. 

285See new Exchange Act Rules 13e–4(i)(2)(vii) 

and 14d–1(d)(2)(ix) (allowing bidders to terminate 

an initial offering period immediately upon 

satisfaction of all offer conditions). See also new 

Exchange Act Rules 13e–4(i)(2)(v) and 14d– 

1(d)(2)(vii) (permitting suspension of back-end 

withdrawal rights while securities are being 

counted). 

286See Section II.C.5 above. 

287See, e.g., Exchange Act Rule 14d–1(d)(2)(v) 

(providing that a bidder need not extend 

withdrawal rights after the close of the initial 

offering period and before the beginning of the 

subsequent offering period, notwithstanding the 

provisions of Section 14(d)(5) of the Exchange Act). 

288See Regulation M–A Adopting Release, 

Section II.E. The proposing release for Regulation 

M–A solicited comment on whether automatic 

effectiveness would be appropriate. Regulation of 

Takeovers and Security Holder Communications, 

Release No. 33–7607 (November 3, 1998) [63 FR 

67331]. 

289This is because of the requirement that 

securities tendered into an exchange offer that 

commences early may not be purchased before the 

registration statement registering the bidder’s 

securities is declared effective. Therefore, although 

an exchange offer may commence upon the filing 

of the registration statement, the bidder cannot 

close the offer and purchase tendered securities 

until the Commission, through its staff, pursuant to 

delegated authority, takes the affirmative step of 

declaring the registration statement effective. Id. 

290See Exchange Act Rules 13e–4(e)(2) and 14d– 

4(b) [17 CFR 240.13e–4(e)(2) and 240.14d–4(b)]. 

291See the Instruction to amended Securities Act 

Rule 162. 

292See amended Securities Act Rule 162(b). 

to commence upon the filing of the 

registration statement registering the 

offer, under the conditions proposed.280

Amended Securities Act Rule 162(a) 

will allow early commencement for a 

‘‘Regulation 14E-only’’ exchange offer 

only under the following conditions: 

• The bidder provides withdrawal 

rights to the same extent as would be 

required under Rule 13e–4 and 

Regulation 14D; 281 and 

• If there is a material change in the 

information provided to target security 

holders, the bidder must disseminate 

revised materials as required under 

Exchange Act Rules 13e–4(e)(3) and 

14d–4(d) and must hold the offer open 

with withdrawal rights for the minimum 

time periods specified in those rules.282

As is currently the case with exchange 

offers subject to Rules 13e–4 and 

Regulation 14D, early commencement 

will be available for ‘‘Regulation 14E– 

only’’ offers so long as no securities are 

purchased until the registration 

statement is declared effective. The 

requirement to provide withdrawal 

rights generally, including after 

information about a material change is 

published, sent or given to target 

security holders, is a critical safeguard 

where an exchange offer may commence 

before effectiveness of the underlying 

registration statement. Without the 

ability to withdraw tendered securities, 

the prohibition on purchasing tendered 

securities before the effectiveness of the 

underlying registration statement would 

be rendered ineffective because the 

tender decision would be irrevocable 

and security holders would be ‘‘locked 

in’’ to the offer. The minimum time 

periods after which an offer must 

remain open from the time that revised 

information is disseminated to security 

holders set forth in Exchange Act Rules 

13e–4(e) and 14d–4(d) are important 

because they allow time for security 

holders to consider new information.283

Our revised rules require offerors to 

provide withdrawal rights in early 

commencement offers not subject to 

Exchange Act Rule 13e–4 or Regulation 

14D, to the same extent as would be 

required if the offer were subject to 

those provisions.284 We note that today 

we adopt a number of rule revisions that 

limit the need to provide withdrawal 

rights for Tier II cross-border tender 

offers, under the circumstances outlined 

in our revised rules.285 Offerors not 

subject to the provisions of Rule 13e–4 

or Regulation 14D because, for example, 

the subject securities are not registered 

under Section 12 of the Exchange Act, 

will be able to rely on the revised 

exemptions available for Tier II crossborder tender offers, to the same extent 

they would be able to do so were the 

offer subject to Rule 13e–4 or Regulation 

14D. Similarly, bidders may rely on the 

modified interpretive position we issue 

today concerning the ability to waive or 

reduce a minimum acceptance 

condition without providing withdrawal 

rights after the waiver or reduction 

occurs.286 Some of the existing crossborder exemptions also limit the need to 

provide withdrawal rights in certain 

circumstances; 287 we do not believe 

that bidders in cross-border tender 

offers not subject to Rule 13e–4 or 

Regulation 14D should be precluded 

from relying on these exemptions when 

they use early commencement. 

Concerns about the complex nature of 

the disclosure and accounting issues 

that may arise in business combination 

transactions and the need for adequate 

time for staff review caused us to reject 

automatic effectiveness of exchange 

offer registration statements when we 

initially made early commencement 

available in 1999.288 When we adopted 

early commencement in 1999, we 

recognized that early commencement 

alone would not be helpful in reaching 

our stated goal of equalizing the 

regulatory treatment of cash versus 

stock tender offers if the staff review 

process significantly delayed the ability 

of the exchange offer to close.289 For 

that reason, we committed to expediting 

the staff review process for exchange 

offers so that they can compete more 

effectively with cash offers. 

The rule changes we adopt today will 

significantly expand the universe of 

exchange offers that may commence 

early. This could result in an increased 

burden on the staff to complete the 

review process for such offers on an 

expedited basis. While the staff intends 

to continue to afford expedited 

treatment for these filings, the review 

process may be somewhat longer in 

cases involving novel or unusually 

complex issues, such as exchange offers 

where the bidder is registering its initial 

public offering. 

Current rules do not permit early 

commencement for specific types of 

exchange offers. Early commencement is 

not available for roll-ups and goingprivate transactions subject to Exchange 

Act Rules 13e–4 or Regulation 14D, 

which are subject to heightened scrutiny 

under our rules.290 We retain this 

limitation in our revised rule. Although 

our revised rules expand the types of 

exchange offers that may commence 

before the effectiveness of a registration 

statement, we do not extend early 

commencement to offers that are rollups or going-private transactions.291

Today we also amend Securities Act 

Rule 162(b) to make it clear that the 

prospectus delivery requirements, 

including the requirement to deliver 

revised prospectuses and prospectus 

supplements contained in that 

provision, also will extend to offers not 

subject to Rule 13e–4 or Regulation 

14D.292 Under our revised rules as 

discussed above, offers not subject to 

Rule 13e–4 or Regulation 14D, such as 

those where the subject securities are 

not registered under Section 12 of the 

Exchange Act, may now commence 

before the filing of a registration 

statement, but only under the same 

conditions as would offers subject to 

Exchange Act Rule 13e–4 or Regulation 

14D. The prospectus delivery 

requirements set forth in Securities Act 

Rule 162(b) and the dissemination 

requirements set forth in Exchange Act 

Rules 13e–4(e) and 14d–4(b) are 

important safeguards that are designed 

to ensure that target security holders 

receive adequate information and 

adequate time to consider it before their 


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293See Rules 101(a)(1)(vi) and (vii) of Regulation 

S–T [17 CFR 230.101(a)(1)(vi) and 17 CFR 

230.101(a)(1)(vii)]. 

294See Rules 101(b)(7) and (8)(i) of Regulation S– 

T [17 CFR 230.101(b)(7) and 17 CFR 

230.101(b)(8)(i)]. 

295Form F–X must be filed by all foreign 

companies that furnish a Form CB to the 

Commission and in other circumstances. 

296Letter from ABA. 

297Letter from S&C. 

298 In order to file electronically, an offeror or 

issuer that is not already doing so will need to 

obtain filing codes required to file on EDGAR. An 

offeror or issuer that does not already have EDGAR 

filing codes, and to which the Commission has not 

previously assigned a user identification number, 

which we call a ‘‘Central Index Key (CIK)’’ code, 

will obtain the codes by filing electronically a Form 

ID at https://www/ 

filermanagement.edgarfiling.sec.gov and 

submitting, in paper, by fax, within two business 

days before or after filing the Form ID, a notarized 

authenticating document. The authenticating 

document would need to be manually signed by the 

applicant over the applicant’s typed signature, 

include the information contained in the Form ID, 

and confirm the authenticity of the Form ID. 

299We note that in situations in which the 

electronic submission poses a significant burden, a 

hardship exemption is available. See Rules 201 and 

202 of Regulation S–T [17 CFR 232.201 and 

230.202]. 

300 15 U.S.C. 78r. 

301Letter from ABA. 

302Letters from ABA and STB. 

303 Id. 

304 15 U.S.C. 78m(d). 

305 15 U.S.C. 78m(g). 

306Regulation 13D Exchange Act Rule 13d–1 et 

seq. [17 CFR 240.13d–1 et seq.]. 

investment decision becomes final. 

Therefore, offers such as those for 

unregistered securities that may now 

commence early under our revised rules 

must provide those safeguards, 

including the prospectus delivery 

requirements in amended Securities Act 

Rule 162(b). 

E. Changes to Schedules and Forms 

1. Form CB 

An offeror or issuer relying on the 

Tier I cross-border exemption in 

connection with a cross-border business 

combination transaction or rights offer 

may be required to furnish to the 

Commission a Form CB, including an 

English translation of the offering 

materials. Under existing rules, only 

persons already filing reports with the 

Commission under Section 13(a) or 

15(d) of the Exchange Act are required 

to submit Form CB electronically via the 

Commission’s Electronic Data 

Gathering, Analysis and Retrieval 

(EDGAR) system.293 If the person 

furnishing the Form CB is not an 

Exchange Act reporting entity, the Form 

CB may be submitted in paper; a nonreporting person may submit a Form CB 

electronically but is not required to do 

so.294

We proposed to amend Rule 101(a) of 

Regulation S–T to require that all Form 

CBs be submitted electronically. We 

also proposed to require the electronic 

filing of Form F–X for appointment of 

an agent in the United States for service 

of process when that Form is filed in 

connection with a Form CB.295 One 

commenter supported the proposed 

changes, but voiced concern regarding 

the potential deterrent effect of 

mandating electronic filing of these 

forms.296 This commenter expressed 

concern that requiring electronic 

submission of Form CB could present a 

significant hardship for some nonreporting entities that could tip the 

balance in favor of complete exclusion 

of U.S. target holders even where the 

Tier I cross-border exemption is 

available. The same commenter noted 

that the international perceptions of 

U.S. litigation risk could be 

compounded by the requirement to file 

a Form CB on EDGAR. Another 

commenter did not support the proposal 

due to the costs and practical issues 

involved with timely filing of Forms CB 

and F–X electronically, which the 

commenter suggested might deter 

bidders from including U.S. target 

holders in business combinations.297

We understand that requiring 

electronic submission of these forms 

may result in additional costs and 

timing concerns for foreign companies 

that are not otherwise required to file 

Exchange Act reports electronically 

with the Commission.298 While we 

understand the commenters’ concerns, 

we do not believe that requiring the 

electronic submission of Form CB and 

the accompanying Form F–X will be a 

significant burden compared with other 

considerations that enter into the 

decision to include or exclude U.S. 

target holders, and that it will be a 

benefit to U.S. security holders to have 

electronic access to this information.299

Additionally, the Form CB is furnished, 

not filed, and therefore not subject to 

the liabilities of Section 18 of the 

Exchange Act.300 With regard to the 

concern about widespread availability 

on EDGAR, investors currently can see 

that a paper Form CB has been 

submitted when they view a company’s 

filings on EDGAR, although they cannot 

view the actual document. They can 

request a copy of the submission from 

the public reference room. Therefore, 

we do not believe that requiring 

electronic submission of the forms will 

increase potential liability. 

We also solicited comment on 

whether the cover page of Form CB 

should be modified so that the person 

submitting the form would be required 

to specify the level of U.S. ownership 

supporting reliance on the cross-border 

exemptions claimed. We are not 

adopting this change, based on 

commenters’ concerns described in the 

next section. 

2. Schedule TO, Form F–4 and Form S– 

4 

As proposed, we are adopting changes 

to Schedule TO and Forms F–4 and S– 

4 to include boxes on the cover page of 

the forms that a filing person will be 

required to check to indicate reliance on 

one or more applicable cross-border 

exemptions. The only commenter that 

addressed this proposal supported it.301

We believe the inclusion of this 

information on the cover page of a 

tender offer statement or registration 

statement, filed in connection with a 

cross-border transaction in which the 

filer is seeking to rely on an applicable 

cross-border exemption, will enable the 

staff to perform the review process more 

efficiently. The availability of this 

information will eliminate staff 

comments that may be based on 

misperceptions about which exemption 

the filer is seeking and which U.S. rules 

apply to the transaction, thereby 

reducing the time and cost involved for 

the filer in responding to staff 

comments. In addition, the availability 

of this information may expedite staff 

review, which ultimately will benefit 

both investors and offerors. 

We also solicited comment on 

whether we should require filers to 

specify on the cover page of the 

schedule and forms the percentage of 

U.S. ownership permitting reliance on 

the cross-border exemption(s) claimed 

in connection with the transaction. This 

information would be available to the 

filer, because it must be calculated to 

determine eligibility to rely on the 

exemptions. Commenters did not 

support making such a change to the 

schedule and forms.302 They expressed 

concerns that such a requirement might 

subject the filer to litigation risks, given 

the uncertainties associated with 

determining U.S. target ownership 

levels.303 We are mindful of these 

concerns and do not believe this 

information is critical for investors at 

this time. Therefore, we are not 

adopting this requirement. 

F. Beneficial Ownership Reporting by 

Foreign Institutions 

The beneficial ownership reporting 

requirements in Sections 13(d) 304 and 

13(g) 305 of the Exchange Act and 

corresponding regulations 306 provide 

investors and the issuer with 

information about accumulations of 


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307 15 U.S.C. 78o(b). 

308 15 U.S.C. 78c(a)(6). 

309 15 U.S.C. 78c(a)(9). 

310 15 U.S.C. 80a–8. 

311 15 U.S.C. 80b–3. 

312Codified principally in 29 U.S.C. 1001–1461. 

313See, e.g., Canada Pension Plan Investment 

Board (May 5, 2006) (granting relief for the Canada 

Pension Plan (CPP) Investment Board to file on 

Schedule 13G where the Board represented that the 

Canadian Pension Plan was the functional 

equivalent of a U.S. private pension fund and the 

regulatory regime governing the CPP Investment 

Board was substantially similar to the regulations 

applicable to U.S. pension funds under the 

Employee Retirement Income Security Act of 1974) 

and Citigroup Inc. (May 27, 2004) (granting relief for 

certain qualifying subsidiaries of Citigroup 

organized under the laws of England and Wales; the 

subsidiaries conducted investment banking 

business, including market-making, through trading 

in their own accounts and for their customers and 

represented that they were subject to regulation in 

the United Kingdom that was comparable to U.S. 

regulations). 

314Letter from Ontario Teachers’ Pension Plan 

Board (‘‘Teachers’’). 

315Letter from Cleary. 

316Letter from ABA, Cleary, and Teachers. 

317We are revising the references in the group 

provision to include the new subsection (J). 

Additionally, we are revising the references in 

subsection (G) to include the new subsection (J). 

318 In the Proposing Release, we stated ‘‘we 

propose to amend Rule 13d–1(b)(1)(ii) to include 

foreign institutions that are substantially 

comparable to the U.S. institutions listed in 

subparagraphs (A)–(J) of the current rule.’’ 

(emphasis added) The proposed rule text and 

certification inadvertently omitted the word 

‘‘substantially.’’ 

319See, e.g, Nataxis S.A., Banque Federale des 

Banques Populaires and Caisse National des 

Caisses d’Epargne (October 9, 2007). 

securities that may have the potential to 

change or influence control of the 

issuer. The statutory and regulatory 

framework establishes a comprehensive 

reporting system for gathering and 

disseminating information about the 

ownership of equity securities. 

As discussed in the Proposing 

Release, the beneficial ownership 

reporting provisions require, subject to 

exceptions, that any person who 

acquires more than five percent of a 

class of equity securities registered 

under Section 12 of the Exchange Act 

and other specified equity securities 

report the acquisition on Schedule 13D 

within ten days. Persons holding more 

than five percent of a class of such 

securities at the end of the calendar 

year, but not required to report on 

Schedule 13D, must file a short-form 

Schedule 13G within 45 days after 

December 31. These Schedule 13G filers 

include persons exempt from the 

requirements of Section 13(d), as well as 

specified institutional investors holding 

securities in the ordinary course of 

business and not with a control 

purpose. As specified in Rule 13d– 

1(b)(1)(ii) before the changes adopted 

today, the types of institutional 

investors that may file on Schedule 13G 

under that rule include a broker or 

dealer registered under Section 15(a) of 

the Exchange Act,307 a bank as defined 

in Section 3(a)(6) of the Exchange 

Act,308 an insurance company as 

defined in Section 3(a)(9) of the 

Exchange Act,309 an investment 

company registered under Section 8 of 

the Investment Company Act of 1940,310

an investment adviser registered under 

Section 203 of the Investment Advisers 

Act of 1940,311 an employee benefit 

plan or pension fund that is subject to 

the provisions of the Employee 

Retirement Income Security Act,312 and 

related holding companies and groups. 

Under the rules before today’s 

amendment, the list of institutional 

investors in Rule 13d–1(b)(1)(ii) did not 

include non-domestic institutions 

generally, and was limited to 

institutions such as brokers, dealers, 

investment advisers and companies 

registered with the Commission, or 

regulated banks or insurance 

companies. Historically, foreign 

institutions that sought to use Schedule 

13G as qualified institutions under Rule 

13d–1(b)(1)(ii) needed to obtain an 

exemptive order from the Commission 

or, under the current practice, a noaction position from the Division of 

Corporation Finance. Relief was based 

upon the requester’s undertaking to 

grant the Commission or the staff access 

to information that would otherwise be 

disclosed in a Schedule 13D and the 

comparability of the foreign regulatory 

scheme applicable to the particular 

category of institutional investor.313

In the Proposing Release, we 

proposed to amend Rule 13d–1(b)(1)(ii) 

to include foreign institutions that are 

subject to a foreign regulatory scheme 

substantially comparable to the regime 

applicable to the U.S. institutions listed 

in subparagraphs (A)–(J) of the current 

rule. As proposed, to be eligible to file 

on Schedule 13G, the foreign institution 

would be required to determine, and 

certify on Schedule 13G, that it is 

subject to a regulatory scheme 

substantially comparable to the 

regulatory scheme applicable to its U.S. 

counterparts. In addition to the 

certification on Schedule 13G, the 

foreign institution would be required to 

undertake to furnish to the Commission 

staff, upon request, the information it 

otherwise would be required to provide 

in a Schedule 13D. 

The comment letters that addressed 

this proposal generally supported the 

amendment. One commenter requested 

that the Commission clarify that a 

foreign institution that previously had 

received a no-action letter regarding the 

ability to file on Schedule 13G qualifies 

as a substantially comparable regulated 

institution for purposes of the amended 

rule.314 Another commenter requested 

clarification that if an institutional 

investor previously received no-action 

relief on the basis that a particular 

regulatory scheme was substantially 

comparable to the applicable regulatory 

scheme in the U.S., that the regulatory 

schemes will be deemed substantially 

comparable.315 Several commenters 

suggested that we not adopt the 

requirement that foreign institutional 

investors undertake to provide the 

Commission or staff with the 

information that would be required in a 

Schedule 13D upon request.316

We are adopting the rule revision 

substantially as proposed, although we 

are moving the text to Rule 13d– 

1(b)(1)(ii)(J) and moving the current 

provision for groups to new subsection 

(b)(1)(ii)(K).317 We are also making a 

minor modification to the text of new 

Rule 13d–1(b)(1)(ii)(J) and the 

certification on Schedule 13G. The 

modification adds the word 

‘‘substantially’’ before ‘‘comparable’’ in 

the rule text and certification, consistent 

with our discussion of the standard here 

and in the Proposing Release.318

We do not believe that the requested 

clarification and elimination of the 

undertaking are appropriate. Our 

proposal to extend the ability to file on 

Schedule 13G to foreign institutional 

investors was intended to codify the noaction relief granted to certain 

institutions. The no-action letters issued 

by the staff are dependent upon the facts 

presented in each request, including the 

institution’s assessment and 

determination that the foreign law that 

governs the institution is substantially 

comparable to the law applicable to its 

U.S. institutional counterparts and that 

it undertake to provide the information 

otherwise required by Schedule 13D 

upon request. Specifically, the letters 

state: 

[t]he foregoing no-action position taken 

under Rule 13d–1(b)(1)(ii) is based solely 

upon the facts described and the 

representations made in your letter. In 

particular, we note your representations 

regarding the comparability of the relevant 

foreign laws that govern [the requesting 

parties and subsidiaries] and the U.S. laws 

governing entities of the type listed in Rule 

13d–1(b)(1)(ii). We also note your 

undertaking to furnish upon request the 

information that would be required by 

Schedule 13D.319

Therefore, an institution’s continued 

reliance upon a no-action letter it 

received from the staff would be 

appropriate to the extent that the facts 


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320See letters from Teachers and ABA. 

321Letter from ABA. 

322See Exchange Act Rule 13d–1(b)(1)(i) [17 CFR 

240.13d–1(b)(1)(i)]. 

323See letters from ABA and S&C. 

324See new Exchange Act Rule 16a–1(a)(1)(x). 

Existing Rule 16a–1(a)(1)(x) and (xi) contain 

redundant provisions regarding groups. Today’s 

rule amendment replaces the text of subsection (x) 

with a new provision for foreign institutions. 

Accordingly, we are revising the references in 

subsection (xi) to include subsections (i) through 

(x). We also are revising the reference in subsection 

(a)(1)(vii) to include new subsection (x). 

325See Amendments to Beneficial Ownership 

Reporting Requirements, Release 34–39538 (January 

12, 1998). 

326See Ownership Reports and Trading By 

Officers, Directors and Principal Security Holders, 

Release No. 34–28869 (February 8, 1991). In 

proposing that Rule 16a–1(a)(1) rely on the Section 

13(d) definitions for determining who is a ten 

percent holder, we stated: ‘‘Congress, in applying 

Section 16 to ten percent holders, intended to reach 

those persons who could be presumed to have 

access to inside information because of their 

interest in the issuer’s securities. Thus, in 

determining beneficial ownership for purposes of 

ascertaining who is a ten percent holder, the 

analysis properly should turn on the person’s 

potential for control.’’ See Ownership Reports and 

Trading By Officers, Directors and Principal 

Stockholders, Release No. 34–26333 (December 2, 

1988). 

327CS Holding (January 16, 1992). 

presented in the letter did not differ 

materially in the future. A foreign 

institutional investor relying upon a 

prior letter received from the staff 

would be responsible for assessing 

whether or not a subsequent filing of a 

Schedule 13G was in compliance with 

the applicable regulations and no-action 

letter. Nevertheless, when these 

institutions otherwise will be required 

to file an amendment to the Schedule 

13G, they must provide the certification 

required under our revised rules in 

order to continue to file on that 

Schedule. We do not believe that the 

amendment, which we are adopting as 

proposed, changes the obligations of a 

foreign institutional investor that 

previously relied upon a no-action letter 

issued to it by the staff. We believe that 

this amendment reduces the burden 

upon investor by eliminating the need 

to submit a no-action request to the staff 

and providing more certainty to the 

investor as to the availability of 

Schedule 13G. 

We also do not believe that the 

undertaking to furnish Schedule 13D 

information is contrary to the Section 

13(d) and 13(g) reporting structure or 

inconsistent with the underlying policy, 

as asserted by two commenters.320 We 

believe that permitting certain foreign 

institutions to file on Schedule 13G in 

the same manner as their domestic 

counterparts is a significant benefit to 

those foreign institutions, due to the 

relaxed filing requirements for filing 

under Rule 13d–1(b)(1)(ii) as compared 

to Rule 13d–1(a), or even as a passive 

investor under Rule 13d–1(c). Therefore, 

we are retaining the undertaking in the 

certification. 

We also solicited comment regarding 

whether the use of Schedule 13G by 

foreign institutions relying on the rule 

should be limited to institutions from 

jurisdictions that have a bilateral 

enforcement memorandum with the 

SEC or institutions that are signatories 

to the IOSCO Multilateral Memorandum 

of Understanding concerning 

consultation, cooperation, and the 

exchange of information. Only one 

commenter responded to this question, 

and stated that it would not object if 

such a limitation were imposed.321 At 

this time, we are not so limiting the use 

of the new rule. We are concerned that 

such a requirement could unduly 

restrict foreign institutions’ ability to 

rely on the new rule, and we believe 

that that the certification requirement 

provides a sufficient safeguard against 

the abuse of the amended rule. 

The extension of Schedule 13G filing 

eligibility pursuant to Rule 13d– 

1(b)(1)(ii) to foreign institutions will be 

available only to institutions that 

acquire and hold the equity securities in 

the ordinary course of business and not 

with the purpose or effect of influencing 

or changing control of the issuer, nor in 

connection with or as a participant in 

any transaction that has such a purpose 

or effect, including any transaction 

subject to Rule 13d–3(b).322 Similar to a 

domestic institution, a foreign 

institution will need to determine 

whether it is qualified to use the shortform Schedule 13G at the time it 

exceeds the beneficial ownership 

threshold. This initial determination as 

to form eligibility will require a foreign 

institution to determine, at the time it 

exceeds the beneficial ownership 

threshold, whether it is subject to a 

foreign regulatory scheme substantially 

comparable to the regulatory scheme 

applicable to the corresponding category 

of U.S. institutional investor. 

If the foreign institution made such a 

determination, it would be eligible to 

file on Schedule 13G as a qualified 

institutional investor, as long as it could 

provide the certification required by 

Schedule 13G. If at any time before 

filing a Schedule 13G pursuant to new 

Rule 13d–1(b)(1)(ii)(J) the foreign 

institution determined that it was no 

longer able to rely on the provision, it 

would be required to file a Schedule 

13D in accordance with the rules. 

Similarly, a foreign institution filing a 

Schedule 13G would be required to file 

a Schedule 13D (or a Schedule 13G if it 

met the requirement for filing as a 

passive investor) in the event that 

circumstances change and it determines 

that it is no longer eligible to rely on 

new Rule 13d–1(b)(1)(ii)(J). As is the 

case now, a foreign institution also may 

rely on the passive investor provision in 

Rule 13d–1(c) to the extent it meets the 

conditions to do so and file a Schedule 

13G rather than a Schedule 13D. 

In response to commenters’ 

suggestions,323 we also are adopting a 

corresponding change to Exchange Act 

Rule 16a–1(a)(1) to include the foreign 

institutions eligible to rely on Rule 13d– 

1(b)(1)(ii)(J).324 While we did not 

propose this change, it is consistent 

with our past practice in this area. 

When we adopted changes to expand 

the list of qualified institutional 

investors under Rule 13d–1(b)(1)(ii) to 

state and local government employee 

benefit plans, savings associations, and 

church plans, we also adopted 

corresponding amendments to Rule 

16a–1(a)(1) to include those institutions 

in the list of persons that are not 

deemed to be the beneficial owners of 

securities held for the benefit of third 

parties.325

Rule 16a–1(a) sets forth the definition 

of beneficial ownership for purposes of 

determining who is a more than 10 

percent beneficial owner for purposes of 

Exchange Act Section 16. Rule 16a– 

1(a)(1) allows the institutions identified 

in the rule to exclude from beneficial 

ownership calculations the shares they 

hold for the benefit of third parties or in 

customer or fiduciary accounts in the 

ordinary course of business, without the 

purpose or effect of changing control of 

the issuer, nor in connection with or as 

a participant in any transaction that has 

such a purpose or effect, including any 

transaction subject to Rule 13d–3(b). 

Therefore, these institutions typically 

will not be 10 percent owners subject to 

Section 16(a) reporting, Section 16(b) 

short-swing profit recovery and Section 

16(c) restrictions on short sales; 

however, the public will still be 

provided with information about their 

holdings through the Schedule 13G that 

they file. 

When adopting Rule 16a–1(a)(1), the 

Commission noted that the rule was 

modeled after Rule 13d–1(b)(1)(ii).326

We note that this change also codifies a 

staff interpretive position stating that a 

foreign institution permitted to file on 

Schedule 13G rather than Schedule 13D 

pursuant to a no-action letter is not 

deemed, for purposes of Section 16, the 

beneficial owner of securities held for 

the benefit of third parties or in 

customer or fiduciary accounts.327


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328See Section II.G.2. below. 

329See Exchange Act Rules 13e–4(f) and 14d–10. 

Some tender offers are not subject to U.S. allholders requirements, such as offers subject only to 

Regulation 14E because the target securities are not 

registered under Section 12 of the Exchange Act. 

330See All-Holders and Best-Price Adopting 

Release, Section III.A.2., which stated ‘‘While a 

tender offer subject to Sections 13(e) and 14(d) of 

the Williams Act must be held open to all holders 

of the subject class of securities, including foreign 

persons, Rules 14d–10(b)(1) and 13e–4(f)(9)(i) make 

clear that the all-holders requirement does not 

affect the required dissemination of tender offers. 

* * * The Commission has not interpreted these 

provisions as requiring dissemination of tender 

offer materials outside of the United States, and the 

adoption of the all-holders requirement is not 

intended to impose any additional requirements in 

this regard.’’ (emphasis added; footnotes omitted). 

331The equal treatment provision of Rules 13e– 

4(f) and 14d–10 does not prohibit tender offers for 

less than all outstanding securities of a subject 

class, but it does require that all security holders 

be able to accept the tender offer if they choose. 

332Pursuant to Exchange Act Rules 13e–4(f) and 

14d–10, a bidder may not restrict the offer to target 

holders as of a particular record date only. See 

footnote 35 in All-Holders and Best Price Adopting 

Release. While as a practical matter, the bidder will 

look to beneficial holders as of a recent date in 

distributing the offer materials, the offer must be 

open to all target security holders, including those 

who purchase after the tender offer commences. See 

In the Matter of Application of WHX Corp., 

Exchange Act Release No. 47980 (June 4, 2003), 

vacated on other grounds, WHX Corp. v. SEC, 362 

F.3d 854 (D.C. Cir. 2004). 

333See Amendments to Tender Offer Rules: AllHolders and Best-Price, Release No. 34–23421 (July 

11, 1986) [51 FR 25873] (‘‘All-Holders and BestPrice Adopting Release’’), Section III.A.2. Based on 

the guidance provided here, a statement that a 

tender offer is not being made into a particular 

jurisdiction is permissible where it means that 

tender offer materials are not being distributed into 

that jurisdiction. As discussed here, however, it 

may not mean that tenders from foreign target 

holders resident there will not be accepted, where 

an offer is subject to U.S. all-holders requirements. 

Statements that tenders from target security holders 

in certain jurisdictions will not be accepted are 

impermissible, for the reasons discussed above. 

334See letter from DPW. 

335See Hallwood Energy Partners, LP (May 1, 

1990) and Freeport-McMoran Energy Partners Ltd. 

(June 19, 1989). 

336See The Korea Fund (July 1, 2005) (permitting 

cash alternative for security holders in Japan, where 

a redemption offer by a fund featured in-kind 

distribution of the fund’s securities, which would 

require registration in Japan for each issuer of the 

underlying securities). 

337Four of the commenters suggested allowing 

bidders in domestic tender offers to exclude foreign 

holders under various circumstances. See letters 

from ABA, ABCNY, Cleary, and Linklaters. Three 

commenters proposed a de minimis exception to 

the all-holders rules for both cash and non-cash 

offers. See letters from ABA, ABCNY, and DPW. 

With respect to transitional matters, 

foreign institutions comparable to those 

listed in current Rule 13d–1(b) that are 

currently filing on Schedule 13G under 

a no-action letter from the staff may 

continue to do so, to the extent they 

continue to meet the conditions upon 

which the no-action relief was granted; 

however, as noted above, when these 

institutions otherwise would be 

required to file an amendment to the 

Schedule 13G, they must provide the 

certification required under our revised 

rules in order to continue to file on that 

Schedule. Foreign institutions that do 

not have no-action letters eligible to rely 

on the revised rule to file on Schedule 

13G may do so, to the extent that the 

filing deadline for the Schedule 13D 

they would otherwise be required to file 

falls after the effective date of these 

revised rules. 

G. Interpretive Guidance 

1. Foreign Target Security Holders and 

U.S. All-Holders Requirements 

Most of this release deals with crossborder business combination 

transactions where the target is a foreign 

private issuer. In this section, however, 

we address an issue involving the 

treatment of foreign target security 

holders in tender offers generally, 

including those for U.S. target 

companies. The issue of bidders’ ability 

to exclude foreign target security 

holders is addressed here because it 

closely relates to the issue of the 

exclusion of U.S. target security holders 

in cross-border tender offers, which we 

discuss in the next section.328 As we 

continue to encourage our fellow 

international securities and takeover 

regulators to minimize the ability of 

bidders to exclude U.S. holders from 

business combination transactions, we 

recognize the need to take similar steps 

with regard to the ability of bidders to 

exclude non-U.S. holders pursuant to 

our rules. 

In the Proposing Release, we provided 

guidance on the ability of bidders in 

tender offers for U.S. target companies 

to exclude foreign target holders in 

tender offers subject to U.S. all-holders 

provisions.329 As we stated previously, 

the all-holders provisions in Rules 13e– 

4(f) and 14d–10 apply equally to U.S. as 

well as non-U.S. target holders.330

Tender offers subject to those 

requirements must be open to all target 

security holders, and all target holders 

must be treated equally.331 The 

guidance expressed here and in the 

comparable section of the Proposing 

Release does not represent new thinking 

or a change in the Commission’s 

interpretation of existing all-holders 

rules. Rather, it is simply an effort to 

remind bidders and others of the 

position expressed by the Commission 

when the all-holders rules were adopted 

in 1986: 

• Tender offers subject to the 

provisions of Section 13(e) or 14(d) of 

the Exchange Act must be open to all 

target security holders, including 

foreign persons; 332 and 

• Although foreign target holders may 

not be excluded from U.S. tender offers 

under these provisions, our rules do not 

require dissemination of offer materials 

outside the United States.333

Because this is not a new position, 

and generally bidders have not 

expressed concerns about U.S. allholders requirements and the ability to 

exclude foreign target holders, it is not 

apparent that rule revisions are needed 

at this time. We note that this may be 

a function of the jurisdictional predicate 

for the application of foreign rules to 

tender offers for U.S. companies. 

Although U.S. tender offer rules are 

triggered by making a tender offer using 

U.S. jurisdictional means, foreign tender 

offer rules may apply under more 

limited circumstances, based on the 

target’s country of incorporation or the 

location of a trading market for its 

securities.334 Thus, particularly for cash 

tender offers, it is not clear that allowing 

foreign target holders to participate in a 

U.S. offer generally would present 

significant burdens or risks for bidders, 

where no offer materials are distributed 

outside the United States. 

For these reasons, we are not adopting 

a de minimis or other exception to U.S. 

all-holders provisions at this time. In 

special circumstances, however, 

requests for relief will be considered on 

a case-by-case basis, particularly where 

a bidder can demonstrate unusual facts 

warranting an accommodation from the 

all-holders provisions of Rules 13e–4(f) 

and 14d–10. For example, relief has 

been granted in situations where 

restrictions exist on the levels of 

securities of a company that may be 

held by non-U.S. persons.335 In an 

exchange offer where unusual facts 

require relaxation of U.S. all-holders 

principles, this may include allowing 

the bidder to provide a cash alternative 

to foreign target holders in a jurisdiction 

in which securities may not be 

issued.336 However, we believe such 

relief will rarely be warranted. We 

generally believe it is in the interests of 

U.S. investors to enforce U.S. equal 

treatment principles for the benefit of 

non-U.S. target security holders, 

particularly in light of the fact that 

comparable foreign all-holders 

requirements often protect U.S. 

investors by preventing their exclusion 

from cross-border offers. 

In the Proposing Release, we solicited 

comment on whether any amendments 

to the U.S. equal treatment provisions 

were necessary or advisable to allow 

certain target security holders to be 

excluded from the offer. Commenters’ 

reactions were mixed.337 For the reasons 


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338See Proposing Release, Section II.G.2. 

339See 1999 Cross-Border Adopting Release, 

Section II.G. 

340See Statement of the Commission regarding 

use of Internet Web sites to offer securities, solicit 

securities transactions or advertise investment 

services offshore, Release No. 33–7516 (March 23, 

1998) [63 FR 14806] (‘‘1998 Internet Release’’). 

341As noted in footnote 23, the term ‘‘U.S. 

holder’’ is defined as ‘‘any security holder resident 

in the United States.’’ See amended Securities Act 

Rule 800(h) (although we amended other aspects of 

this provision, the definition of U.S. holder remains 

unchanged from the definition in the existing rule). 

342By ‘‘exclusionary offer,’’ we mean a tender 

offer, including an exchange offer, that excludes 

U.S. holders of the subject class of securities for 

which the offer is made. 

343See 1998 Internet Release, Section III.B. 

344See 1999 Cross-Border Adopting Release, 

Section II.G.2. As noted in the Proposing Release, 

bidders should not avoid payments to U.S. target 

holders in business combinations other than tender 

offers, where the target company is being merged 

out of existence, because in these kinds of 

transactions, unlike in tender offers, all target 

securities will be acquired in a single transaction. 

345 Id. 

346 Id. 

347 Id. 

348 Id. 

349See Proposing Release, Section II.G.3. We 

understand that in many foreign jurisdictions that 

have such all-holders rules, foreign regulators may 

grant exemptions to permit exclusion of U.S. and 

other foreign holders under certain circumstances, 

such as when U.S. holders make up only a small 

percentage of the total target security holder base. 

We are troubled when a bidder announces to the 

marketplace that it will exclude U.S. target holders 

before it receives the required approvals from 

foreign regulatory authorities to do so, and where 

the announcement itself causes U.S. holders to sell 

into the marketplace, thereby reducing their 

numbers to the point at which an exemption to 

allow exclusion of U.S. holders is acceptable to the 

foreign regulator. 

discussed above, at this time, we do not 

believe it is necessary to amend Rules 

13e–4(f) and 14d–10 to permit exclusion 

of foreign target holders from U.S. 

tender offers. We will monitor this issue 

with respect to future tender offers to 

determine whether further Commission 

action is needed. 

Further, as we noted in the Proposing 

Release, it is inappropriate for bidders 

to shift the burden of assuring 

compliance with the relevant 

jurisdiction’s laws to target security 

holders by requiring them to certify that 

tendering their securities complies with 

local laws or that an exemption applies 

that allows such tenders without further 

action by the bidder to register or 

qualify its offer. Target security holders 

may not be in possession of relevant 

facts regarding the bidder’s action and 

the provisions of local law in their home 

jurisdiction necessary to make such a 

determination. 

2. Exclusion of U.S. Target Security 

Holders From Cross-Border Tender 

Offers 

In the Proposing Release, we provided 

guidance on the circumstances in which 

bidders in cross-border tender offers 

may avoid triggering U.S. tender offer 

and registration rules.338 The 

Commission previously issued 

interpretive guidance on this subject 

when the cross-border exemptions were 

adopted in 1999,339 and addressed 

issues raised by the use of the Internet 

in 1998.340 The guidance expressed here 

supplements the guidance previously 

issued in those releases. Several 

principles have guided the Commission 

when considering this issue. First, we 

seek to encourage bidders in crossborder business combination 

transactions to include U.S. holders 341

in those transactions. The amendments 

we adopt today expand the scope of the 

cross-border exemptions adopted in 

1999. Therefore, we believe these 

amendments will further limit the 

circumstances under which bidders will 

exclude U.S. target holders because of 

conflicts between U.S. and foreign law 

or practice. In addition, we believe that 

when a bidder knowingly permits U.S. 

holders to participate in a cross-border 

offer, it must do so in compliance with 

U.S. rules. 

While we encourage bidders to extend 

cross-border offers to U.S. holders, we 

recognize that bidders will not always 

do so and may have legitimate reasons 

for excluding U.S. holders, particularly 

where the percentage of target securities 

they hold is small. Where the subject 

class of securities is registered under 

Section 12 of the Exchange Act, and 

particularly where the subject securities 

trade on a U.S. exchange, we believe 

bidders should make every effort to 

include U.S. holders on the same terms 

as all other target holders. Exclusionary 

offers 342 for securities of foreign private 

issuers that trade on a U.S. exchange 

will be viewed with skepticism where 

the participation of those U.S. holders is 

necessary to meet the minimum 

acceptance condition in the tender offer. 

When purportedly exclusionary offers 

are made under those circumstances, we 

will look closely to determine whether 

bidders are taking reasonable measures 

to keep the offer out of the United 

States. 

Where a bidder makes an 

exclusionary offer, we believe it must 

take appropriate measures to avoid the 

application of U.S. jurisdictional means. 

We identified some precautionary 

measures bidders may take to avoid 

triggering U.S. rules in prior releases. 

The offer materials (and the Web site 

where they are posted, if any) should 

clearly state that it is not available to 

U.S. holders.343 In addition, we noted 

that bidders in offshore tender and 

exchange offers can put in place 

measures to ensure that tenders are not 

accepted from, nor securities issued (in 

the case of an exchange offer) to, U.S. 

holders.344 These may include, in 

responding to inquiries and processing 

letters of transmittal, obtaining adequate 

information to identify U.S. holders.345

Bidders also could obtain 

representations from tendering holders, 

or persons tendering on others’ behalf, 

that the investor(s) tendering the 

securities are not U.S. holders.346

Similarly, in disseminating the cash or 

securities consideration to tendering 

holders, special care should be taken to 

avoid mailing into the United States.347

A legend or disclaimer stating that the 

offer is not being made into the United 

States, or that the offer materials may 

not be distributed there, is not likely to 

be sufficient in itself because, if the 

bidder wants to support a claim that the 

offer has no jurisdictional connection to 

the United States, it also will need to 

take special precautions to prevent sales 

to or tenders from U.S. target holders.348

In some foreign jurisdictions, local 

law may prohibit the exclusion of any 

target security holders in a tender offer 

for all outstanding securities of a subject 

class. Such foreign all-holders 

requirements, like similar U.S. rules, 

may not require that offer materials be 

disseminated into another jurisdiction; 

however, they generally provide that a 

bidder in a tender offer for all target 

securities may not reject tenders from 

security holders from any jurisdiction, 

including the United States, should 

those holders learn of and tender into 

the offer on their own initiative. 

Regulators in these jurisdictions may 

not permit contrary statements about the 

exclusion of U.S. target security holders 

in the offer materials. Where a foreign 

all-holders requirement does not permit 

a bidder to reject tenders from U.S. 

holders and does not permit statements 

that the offer may not be accepted by 

U.S. holders, it may not be possible for 

the bidder to take adequate 

precautionary measures to avoid U.S. 

jurisdictional means.349

We recognize that bidders may 

conduct offshore exclusionary offers 

that are not open to U.S. target holders. 

However, a bidder may implicate U.S. 

jurisdictional means if it fails to take 

adequate measures (whether by choice 

or because it is unable to do so under 

applicable foreign law) to prevent 

tenders by U.S. target holders while 

purporting to exclude them. Conversely, 

where tenders are made by nominees on 

behalf of U.S. holders, and those 

nominees or holders misrepresent their 


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350See generally, 1998 Internet Release, Section 

III.C. and Proposing Release, Section II.G.2. 

351See id. 

352 Id. 

353See, e.g., letter from ABA. 

354We recognize that some tender offers, such as 

those where the target class of securities is not 

registered under Section 12, are not subject to the 

all-holders rule. 

355See 1999 Cross-Border Adopting Release at 

footnote 91. 

356See, e.g., letter from DPW. 

357We are advised that some foreign regulators 

object to the use of the vendor placement procedure 

on equal treatment and other grounds. Where a 

vendor placement structure is used in a crossborder exchange offer, it should comply with the 

laws of the applicable foreign jurisdiction. We do 

not intend to imply by the discussion here or in the 

Proposing Release that the use of this structure is 

required under U.S. law. 

358See Proposing Release, Section II.G.3. 

359See Exchange Act Rules 13e–4(h)(8)(ii)(C) [17 

CFR 240.13e–4(h)(8)(ii)(C)] and 14d–1(c)(2)(iii) [17 

CFR 240.14d–1(c)(2)(iii)]. U.S. holders who receive 

cash pursuant to these rules may under specified 

circumstances request from the bidder an opinion 

of an independent expert stating that the 

consideration offered them is substantially 

equivalent to the non-cash consideration offered to 

foreign holders. See id. 

status as U.S. persons in order to 

participate in exclusionary offers, the 

bidder will not be viewed as having 

targeted the United States.350 However, 

this position is premised on the bidder 

having taken adequate measures 

reasonably intended to prevent sales to 

and tenders from U.S. holders.351

Indicia that would put the bidder on 

notice that the tendering holder is a U.S. 

holder would include receipt of 

payment drawn on a U.S. bank, 

provision of a U.S. taxpayer 

identification number or statements by 

the tendering holder that 

notwithstanding a foreign address, the 

tendering holder is a U.S. investor. We 

have explicitly noted that if, after 

implementing measures intended to 

safeguard against tenders by U.S. 

persons, the bidder discovers it has 

purchased securities from U.S. holders, 

it should consider other measures that 

may avoid this lapse in the future.352

Where a bidder knowingly permits 

U.S. holders to tender into offers made 

offshore, whether directly or through 

foreign intermediaries, we believe it 

may be difficult to avoid the use of U.S. 

jurisdictional means. This is especially 

true where foreign all-holders principles 

preclude the bidder from preventing 

tenders from U.S. holders. Several 

commenters argue that we should 

expressly permit U.S. institutional 

holders to participate in offshore 

exclusionary offers, without triggering 

U.S. tender offer rules.353 For exchange 

offers, they advocate that the provisions 

of Regulation S would allow such 

institutional holders to participate in 

offshore offers without the need for 

registration under Section 5 of the 

Securities Act. While this may be true 

with respect to the registration 

requirements of the Securities Act, we 

believe that business combinations are 

fundamentally different from capitalraising transactions outside the context 

of a business combination. In the latter 

case, the U.S. federal securities laws do 

not establish a right of any person to 

participate in a securities offering; the 

issuer sets the terms of its offer and 

determines who may participate, 

whether through a private placement or 

otherwise. U.S. tender offer rules, by 

contrast, establish an all-holders 

requirement for certain kinds of 

business combinations, whereby all 

target holders have a right to participate 

in an offer on the same terms as all other 

holders.354 We noted in a prior release 

that permitting U.S. institutional 

holders to participate in an offshore 

offer pursuant to a private placement or 

under Regulation S while excluding 

other U.S. holders is inconsistent with 

all-holders provisions in our tender 

offer rules.355 In the face of these 

requirements, we view the ability of 

institutional holders to participate in an 

offshore offer very differently under the 

Williams Act than we do under the 

provisions that may apply to allow their 

participation in offshore securities 

offerings under Regulation S. We 

continue to believe this fundamental 

difference warrants different treatment 

with respect to offshore offers under the 

Williams Act. 

With the expansion of the crossborder exemptions adopted today, we 

believe there will be fewer 

circumstances warranting exclusionary 

offers because it will be easier for 

bidders to balance the regulatory 

requirements of foreign and U.S. rules. 

We note that many bidders do not 

exclude U.S. target holders from crossborder business combinations, where 

those offers are eligible for the Tier I or 

Rule 802 exemptions. In addition, 

several commenters stated that there is 

no valid reason to prohibit participation 

by U.S. holders in cash tender offers, 

where there is no registration 

requirement.356 We agree that the 

burden on bidders to include U.S. 

holders in cash cross-border tender 

offers is not significant and whatever 

litigation risk would be associated with 

inclusion is not greater than is present 

under Tier I and Rule 802. 

3. Vendor Placements 

In the Proposing Release, we included 

an interpretive section discussing 

existing staff no-action precedent 

involving the use of a vendor placement 

structure. A vendor placement in a 

cross-border exchange offer occurs 

when a bidder offers securities to 

foreign target holders in an offer, but 

establishes an arrangement whereby 

securities that would be issued to 

tendering U.S. target holders are sold 

offshore by third parties. The bidder (or 

the third party) remits the proceeds of 

the sale (minus expenses) to tendering 

U.S. target holders. In a vendor 

placement, U.S. holders are not 

excluded from participating in the offer, 

but they participate on terms different 

from those afforded other target security 

holders.357 Where permissible, the 

vendor placement procedure allows a 

bidder in a cross-border exchange offer 

to extend the offer into the United States 

without registering the issuance of the 

securities offered under Section 5 of the 

Securities Act. 

We included a discussion of existing 

vendor placement no-action letters in 

the Proposing Release because the staff 

continues to receive frequent inquiries 

on the use of this mechanism for crossborder exchange offers.358 When the 

existing cross-border exemptions were 

adopted in 1999, they codified the 

ability of bidders in exchange offers 

conducted under Tier I to offer cash to 

U.S. holders in lieu of cash and stock or 

stock only offered to foreign holders. 

This ability was conditioned on the 

bidder having a reasonable basis to 

believe that the cash offered is 

substantially equivalent in value to the 

non-cash consideration offered to 

foreign target holders.359 When U.S. 

holders receive a cash alternative as 

permitted under the Tier I exemption, 

the process is different than in a vendor 

placement because the bidder issues a 

fixed amount of cash directly to U.S. 

holders. In a vendor placement, by 

contrast, the bidder technically issues 

securities, which are then sold abroad 

on behalf of U.S. persons, who receive 

the cash proceeds from that sale. The 

amount of the proceeds a U.S. person 

receives will depend on the market 

price of the securities sold. 

Since 1999, Tier I has afforded a 

method by which bidders in crossborder exchange offers may issue cash 

to U.S. target holders. Therefore, the 

staff no longer intends to issue vendor 

placement no-action letters regarding 

the registration requirements of Section 

5. Bidders should employ the vendor 

placement procedure only to the extent 

that such procedure does not result in 

an offer or sale of securities for which 

registration under Section 5 would be 

required. 


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360See, e.g., Singapore Telecommunications Ltd. 

(May 15, 2001); Oldcastle, Inc. (July 3, 1986); 

Electrocomponents PLC (September 23, 1982); 

Equitable Life Mortgage and Realty Investors 

(December 23, 1982); Getty Oil (Canadian 

Operations) Ltd. (May 19, 1983); and Hudson Bay 

Mining and Smelting Co. Ltd. (June 19, 1985). 

361One commenter requested that we expand the 

availability of the vendor placement procedure by 

making this procedure available whenever the 

target securities that are the subject of the tender 

offer are not registered under Section 12 of the 

Exchange Act. See letter from Cravath. We believe 

the factors we articulate here, rather than the 

unregistered status of the target securities, are the 

appropriate measure of when the vendor placement 

procedure should be available. 

362As we stated in the Proposing Release, offerors 

should be particularly cognizant of this factor. See 

Proposing Release, Section II.G.3. 

363We assume that the sales will be effected 

pursuant to the procedure under Category 1 of 

Regulation S [17 CFR 230.903(b)(1)]. 

364Early vendor placement letters featured a fixed 

price guaranteed by the bidder. However, most 

letters, including all of the more recent ones, do not 

include a floor on the cash value to be received by 

U.S. holders. Rather, they receive whatever 

proceeds are generated from the sale of the bidder’s 

securities in an overseas market. 

365See Exchange Act Rules 13e–4(f)(8) [17 CFR 

240.13e–4(f)(8)] and 14d–10 [17 CFR 240.14d–10]. 

366See Proposing Release, Section II.G.3 and 

footnote 91 in the 1999 Cross-Border Adopting 

Release. 

367See Proposing Release, Section II.G.3. 

368See footnote 360 above. But see TABCORP 

Holdings Ltd. (August 20, 1999) (‘‘TABCORP’’). 

369One commenter requested clarification on the 

circumstances under which the Commission will 

grant relief from the equal treatment provisions of 

U.S. tender offer rules where a vendor placement 

procedure is used. See letter from Cleary. The staff 

no-action letters in this area provide some guidance 

on the limited circumstances under which the staff 

has done so in the past. See TABCORP. While each 

transaction presents unique facts and 

circumstances, in our view, such relief is not 

always appropriate, even where a vendor placement 

procedure otherwise could be used to avoid the 

registration requirements of Section 5 of the 

Securities Act. 

370 44 U.S.C. 3501 et seq. 

371 44 U.S.C. 3507(d); 5 CFR 1320.11. 

The guidance we provide here, which 

reiterates the guidance set forth in the 

Proposing Release and previous 

relief,360 is intended to provide clarity 

about the factors that bidders should 

consider when contemplating the use of 

the vendor placement procedure. It is 

not intended to expand the 

circumstances under which we believe 

this procedure should be available.361

The factors include: 

• The level of U.S. ownership in the 

target company; 362

• The number of bidder securities to 

be issued in the business combination 

transaction as a whole as compared to 

the amount of bidder securities 

outstanding before the offer; 

• The amount of bidder securities to 

be issued to tendering U.S. holders and 

subject to the vendor placement, as 

compared to the amount of bidder 

securities outstanding before the offer; 

• The liquidity and general trading 

market for the bidder’s securities; 

• The likelihood that the vendor 

placement can be effected within a very 

short period of time after the 

termination of the offer and the bidder’s 

acceptance of shares tendered in the 

offer; 

• The likelihood that the bidder plans 

to disclose material information around 

the time of the vendor placement sales; 

and 

• The process used to effect the 

vendor placement sales.363

We believe the liquidity of the market 

for the bidder’s securities is relevant to 

whether registration under Section 5 

should be required. Unless the market 

for the bidder’s securities to be sold 

through the vendor placement process is 

highly liquid and robust and the 

number of bidder securities to be issued 

for the benefit of U.S. target holders 

relatively small compared to the total 

number of bidder securities outstanding, 

a vendor placement arrangement in a 

cross-border exchange offer would in 

our view be subject to Securities Act 

registration under Section 5. 

In addition to the factors listed above, 

we believe it is relevant whether sales 

of a bidder’s securities in the vendor 

placement process are accomplished 

within a few business days of the close 

of the offer and whether the bidder 

announces material information, such as 

earning results, forecasts or other 

financial or operating information, 

before the sales process is complete. In 

addition, whether the vendor placement 

involves special selling efforts by 

brokers or others acting on behalf of the 

bidder is relevant. These factors are 

important because they indicate 

whether the market price which U.S. 

investors will receive when the bidder’s 

securities are sold on their behalf is 

representative. The factors also are 

designed to ensure that U.S. investors 

are not effectively making an investment 

decision with respect to a purchase of 

securities (which would require 

registration under the Securities Act), 

but rather, are making a decision to 

tender their target securities in exchange 

for an amount of cash that, although it 

is not for a fixed sum,364 can be readily 

determined and estimated based on 

historic trading prices. 

Bidders may continue to use the 

vendor placement procedure in 

accordance with the guidance set forth 

here. The vendor placement process, 

where appropriately used, avoids the 

need for registration of the bidder 

securities sold on behalf of U.S. holders 

under Section 5 of the Securities Act. 

Where the tender offer also is subject to 

the equal treatment provisions of U.S. 

tender offer rules,365 bidders also must 

seek an exemption from those rules in 

order to offer U.S. security holders a 

different form of consideration than 

what is provided to foreign target 

holders. In offers subject to the equal 

treatment provisions of the U.S. tender 

offer rules, it is not permissible under 

those rules to exclude most U.S. target 

holders and include only the U.S. 

holders (such as large institutional 

investors) for whom an exemption from 

Section 5 of the Securities Act is 

available.366 For the same reasons, 

issuing securities to some U.S. holders, 

such as U.S. institutions, while 

providing cash to all others pursuant to 

a vendor placement arrangement is 

inconsistent with the equal treatment 

requirements of U.S. tender offer 

rules.367

Most of the vendor placement noaction letters issued by the staff 

involved tender offers that were not 

subject to U.S. equal treatment 

provisions.368 In the future, the staff 

will consider whether requests for relief 

from the equal treatment provisions of 

U.S. tender offer rules where a vendor 

placement procedure is used are 

appropriate and in the best interests of 

U.S. security holders.369 We generally 

believe that cross-border tender offers 

eligible to be conducted under the Tier 

I exemption represent the appropriate 

circumstances under which bidders may 

provide cash to U.S. target holders 

while offering securities to foreign target 

holders. 

III. Paperwork Reduction Act 

Some provisions of the rule 

amendments adopted today constitute a 

‘‘collection of information’’ within the 

meaning of the Paperwork Reduction 

Act of 1995 (the ‘‘PRA’’).370 We have 

submitted the revisions to the Office of 

Management and Budget (‘‘OMB’’) for 

review in accordance with the PRA.371

The hours and costs associated with 

preparing and filing the disclosure, 

filing the forms and schedules and 

retaining records required by this 

regulation constitute reporting and cost 

burdens imposed by each collection of 

information. 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 OMB control number. 

The titles for the collection of 

information are: 

(1) ‘‘Form S–4’’ (OMB Control No. 

3235–0065); 

(2) ‘‘Form F–4’’ (OMB Control No. 

3235–0325); 


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372These figures assume 9,500 respondents file 

Schedule 13G with the Commission annually. We 

estimate that 25 percent of the burden of 

preparation is carried by the company internally 

and that 75 percent of the burden of preparation is 

carried by outside professionals retained by the 

issuer. These figures estimate an average cost of 

$400 per hour for the services of outside 

professionals, based on our consultations with 

several registrants and law firms and other persons 

who regularly assist registrants in preparing and 

filing with the Commission. 

(3) ‘‘Form ID’’ (OMB Control No. 

3235–0328); 

(4) ‘‘Form CB’’ (OMB Control No. 

3235–0518); 

(5) ‘‘Form F–X’’ (OMB Control No. 

3235–0379); 

(6) ‘‘Schedule TO’’ (OMB Control No. 

3235–0515); 

(7) ‘‘Securities Ownership— 

Regulation 13D (Commission Rules 

13d–1 through 13d–7 and Schedules 

13D and 13G)’’ (OMB Control No. 3235– 

0145); 

(8) ‘‘Form 3’’ (OMB Control No. 3235– 

0104); and 

(9) ‘‘Form 4’’ (OMB Control No. 3235– 

0287). 

A. Summary of the Amendments 

1. Amendments to the Tier I Exemption 

and Form CB 

The rule amendments add to the types 

of affiliated transactions that may be 

effected in reliance on the Tier I 

exemption from Exchange Act Rule 

13e–3(g)(6). A Form CB will be required 

when an issuer or acquiror relies on the 

expanded Tier I exemption from Rule 

13e–3(g)(6) and publishes or otherwise 

disseminates an informational 

document to holders of the subject 

securities. Because more transactions 

will be eligible to rely on the exemption 

from Rule 13e–3 for cross-border 

transactions, this rule change may result 

in additional submissions of Form CB. 

If the exemption were not expanded, 

however, the issuer or affiliate would be 

required to comply with the more 

burdensome filing requirements of 

Schedule 13E–3 if the issuer or affiliate 

sought to include U.S. security holders 

in the transaction. We believe the 

amended rule and reduced filing 

requirement will encourage issuers or 

affiliates to include U.S. security 

holders in transactions that otherwise 

may have excluded them to avoid 

complying with Rule 13e–3 and the 

corresponding Schedule 13E–3 filing 

requirements. Domestic or foreign 

entities or persons engaged in crossborder business combination 

transactions will likely be the 

respondents to the collection of 

information requirements. 

Unlike Schedule 13E–3, Form CB is a 

notice filing that is little more than a 

cover sheet that incorporates offer 

documents sent to security holders 

pursuant to applicable foreign rules in 

the issuer’s or target’s home country. 

The party furnishing the form must 

attach an English translation of the offer 

materials disseminated abroad. Form CB 

must be submitted by the next U.S. 

business day after that document is 

disseminated under home country rules. 

For purposes of the PRA, we estimate 

that the additional burden cost resulting 

from the amendment will be zero. 

2. Amendments to Form CB, Forms 

S–4 and F–4, and Schedule TO 

We are adopting amendments to 

require that all Forms CB, and 

accompanying Forms F–X, be filed 

electronically. A person that is not 

already filing reports electronically with 

the Commission will be required to 

obtain access codes to permit the filing 

of documents on EDGAR. Registrants, 

individuals, transfer agents, third-party 

filers or their agents must file a Form ID 

to request the assignment of access 

codes that permit the filing of securities 

documents on EDGAR. This form 

enables the Commission to assign an 

identification number (CIK), 

confirmation code, password and 

password modification authorization 

code to each EDGAR filer, each of which 

is designed to protect the security of the 

EDGAR system. While we do not expect 

that the amendments will affect the 

overall collection of information burden 

of Forms CB and F–X, we do expect that 

it will cause additional respondents to 

file a Form ID each year and, as a result, 

will increase the annual collection of 

information burden for that form. We 

estimated that 65,700 respondents file 

Form ID each year at an estimated 

burden of .15 hours per response, all of 

which is borne internally by the 

respondent for a total annual burden of 

9,855 hours. For fiscal year 2007, a total 

of 189 Form CBs were filed with the 

Commission. Of those 189 Form CBs, 

100 were filed in paper. We expect the 

amendments will cause an additional 

100 respondents to file a Form ID each 

year and, as a result, cause an additional 

annual burden of 15 hours (100 × .15). 

For purposes of the PRA, we estimated 

that the additional burden cost resulting 

from the proposed amendments will be 

zero. 

We are adopting amendments to the 

cover page of Forms S–4 and F–4 and 

Schedule TO that will require the filer 

to check a box specifying the applicable 

cross-border exemption being relied 

upon in connection with the 

transaction. Domestic and foreign 

persons or entities filing these 

documents will be the respondents to 

the collection of information 

requirement. This change will not affect 

the substantive obligation to file the 

forms or schedule. This additional 

information will allow the staff to better 

process such filings and monitor the 

application of the cross-border 

exemptions. The amount of information 

required to be included in each 

Schedule TO and Forms S–4 and F–4 

will change minimally with the addition 

of a check box. Accordingly, for 

purposes of the PRA, our estimate is 

that the amount of time necessary to 

prepare each schedule or form, and 

hence, the total amount of burden 

hours, will not change. 

3. Amendments to Schedule 13G 

Exchange Act Schedule 13G is a 

short-form filing for persons to report 

ownership of more than five percent of 

a class of equity securities registered 

under Section 12 of the Exchange Act. 

Generally, the filer must certify that the 

securities have not been acquired and 

are not held for the purpose of, or with 

the effect of, changing or influencing the 

control of the issuer of the securities. 

For purposes of the PRA, we estimate 

that compliance with the Schedule 13G 

requirements under Regulation 13D 

requires 98,800 burden hours in 

aggregate each year, broken down into 

24,700 hours (or 2.6 hours per 

respondent) of respondent personnel 

time and costs of $29,640,000 (or $3,120 

per respondent) for the services of 

outside professionals.372

The amendment to Exchange Act Rule 

13d–1 will expand the availability of 

Schedule 13G to foreign institutions 

governed by a regulatory system 

substantially comparable to the U.S. 

regulatory system for domestic 

institutions. The amendment will allow 

specified foreign institutions to report 

beneficial ownership of more than five 

percent of a subject class of securities on 

Schedule 13G instead of Schedule 13D. 

Foreign institutions of the type specified 

in amended Rule 13d–1(b) will be the 

likely respondents to the collection of 

information requirements. If the 

amendment was not adopted, these 

institutions either would have to file on 

Schedule 13D or would be required to 

seek no-action letters from the staff to 

permit them to file on Schedule 13G to 

the same extent as their domestic 

counterparts, so long as they satisfy 

certain conditions. Amending the rule 

will enable foreign institutions meeting 

the conditions in the rule to file the 

Schedule 13G without seeking a noaction letter. Therefore, the amended 


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373Based on the number of no-action requests in 

this area in recent years, we believe that 

approximately three filers per year will benefit from 

this proposed change and will avoid the time and 

expense of submitting a no-action request to the 

staff. In addition, foreign institutions currently 

filing on Schedule 13D who have not sought noaction relief to file on Schedule 13G will also 

benefit by becoming eligible to use the shorter 

Schedule 13G. See discussion above. 

374We currently estimate the burden for 

preparing a Schedule 13G filing to be 10.4 hours, 

resulting in a total of 98,800 burden hours in 

aggregate each year. If each additional filer incurred 

an additional two hours, the resulting burden 

would be 117,800 total burden hours ((10.4 hours 

+ two hours) × 9500 respondents). 

375Three additional filers × .50 hours of 

respondent personnel time = 1.50 aggregate burden 

hours. 

376Three additional filers × $600 = $1,800. 

377We calculate this figure in the following 

manner: $4,350—($3,120 + $600) = $630. The total 

cost burden of Schedule 13G is estimated currently 

at an aggregate burden of $29,640,000 or $3,120 per 

respondent ($29,640,000/9,500 respondents = 

$3,120). 

378We calculate this figure in the following 

manner: 14,500 hours/29,000 filers = .5 hours 

reporting burden per filer. 

379We calculate this figure in the following 

manner: 112,500 hours/225,000 filings annually = 

.5 hours reporting burden per filing. Our estimates 

account for one Form 4 filing per year per filer. 

rule may result in only a slight increase 

in the number of Schedule 13G filers.373

For purposes of the PRA, we estimate 

that the amendments to Schedule 13G 

will create an incremental burden of 

two hours per response, which we will 

add to the existing Schedule 13G 

burden resulting in a total burden of 

117,800 hours.374 We note that the 

burden associated with the amendments 

to Schedule 13G initially will be higher 

with an estimated burden of five hours. 

Over time, however, we believe that on 

average the burden will lessen and 

therefore estimate an incremental 

burden of two hours per response. Each 

additional filer will incur a burden of 

approximately .50 hours of respondent 

personnel time (25 percent of the total 

burden) and costs of $600 for the 

services of outside professionals (75 

percent of the total burden). In sum, we 

estimate that the amendments to 

Schedule 13G will increase the annual 

paperwork burden by approximately 

1.50 hours of respondent personnel 

time 375 and a cost of approximately 

$1,800 for the services of outside 

professionals.376

We previously have estimated that 

Schedule 13D has a total burden of 

approximately 14.5 hours per response 

to prepare and is filed by 3,000 

respondents annually. For purposes of 

the PRA, we have estimated that 

compliance with the Schedule 13D 

requirements under Regulation 13D 

requires 43,500 burden hours in 

aggregate each year, broken down into 

10,875 hours (or 3.6 hours per 

respondent) of respondent personnel 

time and costs of $13,050,000 (or $4,350 

per respondent) for the services of 

outside professionals. 

Based upon these estimates, a foreign 

institution currently filing a Schedule 

13D that will be eligible to file a 

Schedule 13G pursuant to the amended 

rule will benefit from a cost reduction 

of $630 per respondent.377 As noted 

above, however, for a number of years, 

the staff has provided no-action relief to 

foreign institutions seeking to file a 

Schedule 13G rather than a Schedule 

13D. For those institutions that are 

already filing a Schedule 13G pursuant 

to no-action relief, the amended rules 

will likely only increase the cost 

associated with providing the required 

certification in Schedule 13G and will 

not significantly impact the cost of 

complying with the requirements of 

Regulation 13D. 

For purposes of PRA, we estimate that 

the amendments to Exchange Act Rule 

16a–1 will reduce the number of Form 

3 filers by three respondents, which will 

reduce the incremental burden by .5 

hours per filer, or 1.5 total hours.378 The 

reduction in three respondents 

corresponds with the estimated increase 

in respondents for Schedule 13G relying 

on the new provision for foreign 

institutions. In addition, we estimate 

that the amendments will reduce the 

number of Form 4 filings by 3 filings, 

which will reduce the incremental 

burden by .5 hours per filing, or a total 

of 1.5 total hours.379 For purposes of the 

PRA, we estimate that the burden cost 

resulting from the amendments will be 

zero. 

IV. Cost-Benefit Analysis 

We are adopting amendments to our 

rules that are expected to reduce the 

overall cost for issuers and acquirors 

engaged in cross-border business 

combination transactions. We also 

provide interpretive guidance regarding 

the application of certain rules. Under 

the rule amendments adopted today, 

much of the no-action and exemptive 

relief sought in the past will be available 

without the need for no-action or 

exemptive letters. As a result, issuers 

and acquirors will benefit from an 

increase in regulatory certainty about 

the U.S. rules governing cross-border 

business combination transactions and a 

substantial savings in the cost of 

preparing letters requesting relief. 

Decreasing the burden on acquirors of 

complying with U.S. rules governing 

business combination transactions is 

designed to encourage them to extend 

more transactions to U.S. target holders; 

therefore, we believe the rule revisions 

are in the interests of U.S. investors, 

while continuing to provide appropriate 

protections. We did not receive any 

comments regarding the cost of 

preparing such letters and the amount of 

time spent working through concerns 

raised during the review of such letters. 

In analyzing the costs and benefits of 

the revised rules, we compared 

estimated future cross-border 

transaction activity that will likely 

occur under the revised rules with what 

will likely occur in a benchmark case 

without the rules. 

A. Changes to the Eligibility Test for 

Determining Eligibility To Rely on the 

Cross-Border Exemptions 

1. Amendments 

a. Adoption of the Alternate Test and 

Revision To Test for Non-Negotiated 

Transactions 

The changes we proposed to the test 

for determining eligibility to rely on the 

cross-border exemptions for business 

combination transactions were limited 

in nature and scope, as are the changes 

we are adopting today. The changes are 

intended to address specific problems 

acquirors have faced in determining 

whether they can rely on the crossborder exemptions. We are adopting 

many of the changes as proposed, but 

we also are adopting an alternate test for 

situations in which an acquiror is 

unable to conduct the look-through 

analysis in a negotiated transaction. The 

alternative test uses ADTV as one of 

three elements that must be satisfied. 

The alternate test we are adopting will 

replace the hostile presumption. We do 

not believe the amendments we are 

adopting will materially affect the cost 

of undertaking such transactions 

because an acquiror will continue to be 

required to conduct the look-through 

analysis in a negotiated transaction, as 

it is required to do today. The alternate 

test will aid acquirors that are unable to 

conduct the look-through analysis by 

permitting them to use readily available 

average daily trading volume numbers 

to determine eligibility. 

We also proposed limited changes to 

the manner in which U.S. ownership 

may be calculated for cross-border 

tender offers accomplished on a nonnegotiated or hostile basis. These 

changes are intended to clarify certain 

elements of the former ‘‘hostile 

presumption’’ test, which are now 

incorporated into the alternate test, that 

have created uncertainty for acquirors in 

the past. As discussed above, the 

alternate test uses public announcement 

as the reference date when determining 


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Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 60081 

380This analysis was based on U.S. beneficial 

ownership figures that were reported in no-action 

requests submitted to the staff. In those no-action 

requests, however, the calculation would have 

excluded large target security holders, consistent 

with the Commission’s rules at the time. The 

memorandum outlining the analysis appears in the 

comment file for the Proposing Release, on our Web 

site at http://www.sec.gov/comments/s7–10–08/ 

s71008–8.pdf. 

eligibility to use the exemptions. 

Finally, in this release and the amended 

rules, we provide some guidance on the 

‘‘reason to know’’ element of the 

alternate test, which we hope will make 

the application of the test simpler and 

more certain for acquirors. 

i. Benefits 

The alternate test we are adopting is 

expected to reduce costs involved in 

certain cross-border transactions. As 

discussed above, a bidder will be able 

to take advantage of the alternate test in 

situations where it is unable to conduct 

the look-through analysis. This may 

allow an acquiror to avail itself of an 

exemption that it otherwise would not 

have been able to use due to its inability 

to conduct the look-through analysis. 

The relative easing of the burden on 

potential acquirors is expected to 

translate to monetary benefits to U.S. 

investors. When an acquiror is unable to 

conduct the look-through inquiry but is 

able to satisfy the alternate test, U.S. 

investors who own securities of the 

target company may benefit from being 

included in the tender offer and being 

eligible to receive tender offer 

premiums. 

ii. Costs 

Although the new alternate test is not 

designed to increase the cost of enacting 

cross-border transactions, there may be 

economic costs that arise from the low 

correlation between ADTV and the level 

of U.S. beneficial ownership. There may 

be an economic cost to U.S. investors 

owning securities in a target company if 

these U.S. investors no longer receive 

the Williams Act protection based on 

the acquiror’s reliance on the alternate 

test. We believe these costs are balanced 

by the benefit of facilitating U.S. 

participation in the offer as a result of 

the availability of the alternate test. 

The staff conducted an empirical 

analysis on the relationship between 

U.S. beneficial ownership and ADTV 

and found their correlation to be low.380

Based on the transactions considered, 

the analysis suggests that the level of 

trading activity of certain securities in 

the United States may not accurately 

reflect the level of U.S. beneficial 

ownership of those securities. In turn, 

we may have situations in which U.S. 

beneficial ownership of a security is 

high but its trading activity is low, and 

vice versa. 

b. Revised Calculation Date and 

Inclusion of More Than 10 Percent 

Holders 

Acquirors will now be permitted to 

calculate the required U.S. beneficial 

ownership figure within a range of dates 

that is no more than 60 days before 

announcement of the transaction and no 

more than 30 days after the 

announcement. Before today’s 

amendments, the calculation was 

required to be done as of the 30th day 

before commencement of a cross-border 

business combination transaction. The 

revision to allow a range of dates is 

expected to provide acquirors with 

additional flexibility in structuring 

transactions and availing themselves of 

the cross-border exemptions. 

Additionally, under the amended 

rules, the calculation of U.S. beneficial 

ownership for the look-through analysis 

will include the securities held by 

security holders who own more than 10 

percent of the target securities. Because 

we are changing the manner in which 

the ratio must be calculated, the 

amendment will result in a change in 

the transactions that will qualify for the 

exemption. In most cases, as noted 

above, this amendment will increase the 

availability of the exemptions. It is 

possible, however, that under the 

amended rules transactions that may 

have qualified for an exemption 

previously may no longer qualify. 

Specifically, the amendment eliminates 

any possibility of relying on the Tier I 

exemption in cases where there is at 

least one U.S. security holder who owns 

more than 10 percent of the target 

securities. A similar situation could 

arise in which transactions that 

previously would have qualified for the 

Tier II exemptions no longer qualify, if 

there were an unusually large 

proportion of large U.S. target security 

holders. Nevertheless, based on our 

experience and the comment letters 

received, we believe that the practical 

effect is to increase the number of 

transactions that will qualify for 

exemption. 

i. Benefits 

We anticipate that the enhanced 

flexibility to choose a date within a 

range may make it easier for acquirors 

to accomplish the required calculation 

as specified under our rules, thereby 

promoting use of the exemptions and 

the inclusion of U.S. holders while 

reducing the acquirors’ burden of 

seeking no-action or exemptive letters in 

this area. Allowing the calculation of 

U.S. ownership to be conducted within 

60 days before public announcement of 

the transaction will enable acquirors to 

perform the calculation as of a date 

when the target’s security holder base 

may be unaffected (or less affected, if 

there are some changes in response to 

rumors in the market) by the 

announcement of the transaction, which 

is expected to provide a more accurate 

picture of the security holder base. This 

change also will allow acquirors more 

flexibility in planning cross-border 

business combination transactions, and 

therefore we expect bidders will be 

encouraged to engage in these 

transactions. Additionally, extending 

the range for calculation of U.S. 

ownership to no more than 30 days after 

public announcement is expected to 

benefit acquirors who, for 

confidentiality reasons, wish to 

announce a business combination 

transaction prior to conducting a 

calculation of U.S. ownership. It is 

unclear whether using public 

announcement as the reference point for 

the calculation will have the effect of 

increasing or reducing U.S. ownership 

in the target company. 

To the extent that inclusion of large 

target security holders in the calculation 

of U.S. beneficial ownership will allow 

for a number of new foreign private 

issuers to qualify for exemption, the 

amended rules provide an economic 

benefit both to U.S. investors and 

potential acquirors. In particular, 

primary benefits will accrue to U.S. 

shareholders of target securities in 

which U.S. investors hold a relatively 

large fraction of the securities held by 

small security holders but a relatively 

small fraction of securities held by large 

security holders. In such cases, the 

securities may not have been eligible for 

exemption under the prior rules, but 

will now be eligible. Because all shares 

held by U.S. investors represent U.S. 

aggregate economic interest, this 

extension of the exemption is a benefit 

to U.S. investors because it may 

encourage bidders to include U.S. 

security holders in their offers that 

otherwise would not have done so. 

Even cases where transactions that 

previously would have qualified for an 

exemption no longer qualify for it could 

offer an economic benefit to U.S. 

investors. The presence of a U.S. 

investor who is a large target security 

holder indicates that U.S. investors 

collectively own a significant portion of 

the securities. Therefore, it is in the 

potential bidder’s interest to include 

them in the transaction despite the cost 

of complying with the Williams Act 

rules. In this case, U.S. investors will 

gain from additional disclosure of 

information from the bidder. This 


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381See discussion in the Proposing Release, 

Section V.B.1.a. 

expected benefit will dissipate, 

however, if the bidder chooses to 

exclude U.S. holders from the offer. 

ii. Costs 

The amendments also will impose 

additional costs, but these costs are 

expected to be borne mainly by 

potential bidders. As explained above, 

when large U.S. holders own a 

sufficiently large proportion of the target 

securities, the transaction may no longer 

qualify for the previously available 

exemption. For the reasons discussed 

above, we believe that where there are 

significant U.S. holdings, potential 

bidders are likely to continue to include 

U.S. shareholders in their transactions 

in order to gain control of the majority 

of securities. It is possible, however, 

that in some cases there would be a cost 

to U.S. investors, if the bidder excluded 

them from the transaction. 

Under the amendments, U.S. 

investors may lose certain protections 

under the U.S. rules governing crossborder business combination 

transactions if the foreign private issuer 

in which they own securities becomes 

the subject of such a transaction and the 

acquiror relies on the cross-border 

exemptions. To the extent that the 

applicable cross-border exemptions will 

exempt the acquiror from compliance 

with U.S. registration, filing and 

disclosure requirements, U.S. investors 

will lose these protections. In such 

circumstances, however, we believe that 

the benefit to U.S. investors of being 

included in the transaction rather than 

being excluded justifies the cost of 

reduced protections under U.S. law. 

Otherwise, we do not believe that U.S. 

investors will be harmed by the 

flexibility in calculation of U.S. 

ownership. 

B. Changes to the Tier I Exemption 

1. Expansion of the Tier I Exemption 

From Exchange Act Rule 13e–3 

We are expanding the set of crossborder business combination 

transactions that are exempt from the 

requirements of Rule 13e–3. Before 

these amendments, the cross-border 

exemption from Rule 13e–3 applied 

only to tender or exchange offers or 

business combinations conducted under 

Tier I. We are amending the exemption 

to encompass any kind of affiliated 

transaction that otherwise meets the 

conditions of the Tier I exemption, 

including schemes of arrangement, cash 

mergers, compulsory acquisitions for 

cash, and other types of transactions. 

a. Benefits 

The expansion of the Tier I exemption 

from Rule 13e–3 will likely result in 

fewer filings of Schedule 13E–3, thus 

reducing the costs for issuers and 

affiliates in cross-border transactions 

that would otherwise be subject to those 

rules. As we noted in the Proposing 

Release, under the rules before today’s 

amendments, the burden of complying 

with Rule 13e–3 and Schedule 13E–3 

may be greater for foreign filers than 

domestic filers.381 Foreign filers may 

not have a counterpart to these rule 

provisions in their home jurisdiction 

and may not be subject to the same 

fiduciary duty standards that form the 

basis for this heightened disclosure 

system for affiliated transactions. 

Before the amendment we are 

adopting today, some entities engaged 

in affiliated cross-border business 

combination transactions would have 

been subject to Rule 13e–3 unless they 

requested individual exemptive relief. 

These requests have routinely been 

granted. To the extent that these kinds 

of requests will no longer be necessary 

as a result of the rule revision we adopt 

today, the revision will result in 

reduced costs for these entities. Issuers 

and affiliates may have excluded U.S. 

holders from transactions where they 

would have been required to file a 

Schedule 13E–3. We have been told that 

entities may have avoided making an 

offer to U.S. holders to avoid 

application of these rules, although it is 

difficult to isolate the effect of this 

provision on the number of entities that 

chose not to include U.S. holders. 

During 2007, approximately 110 

Schedules 13E–3 were filed, 10 of 

which were filed by foreign private 

issuers. During that same period, no 

requests for relief on this issue were 

granted. Therefore, we expect the 

overall effect would not be significant, 

although the number of transactions that 

may have been structured to avoid U.S. 

jurisdictional means would not be 

reflected by filings on Schedule 13E–3. 

We believe the rule amendment will 

result in a cost reduction because it will 

lower the costs and burdens associated 

with extending these kinds of 

transactions into the United States. This 

amendment will be in the interests of 

U.S. investors to the extent that the 

expanded exemption from Rule 13e–3 

motivates an acquiror to include U.S. 

investors in the transaction. Because the 

exemption applies only where U.S. 

security holders make up no more than 

10 percent of the subject security holder 

base, and because the heightened 

disclosure requirements of Schedule 

13E–3 may be onerous for foreign filers, 

we believe this exemption may result in 

more cross-border transactions being 

extended to U.S. investors. 

b. Costs 

U.S. investors of foreign private issuer 

targets in cross-border business 

combination transactions that would 

have been subject to Rule 13e–3 but for 

our rule amendment will lose the 

benefits of the disclosure in Schedule 

13E–3, to the extent that such disclosure 

is not required under applicable foreign 

law. This cost is mitigated by the fact 

that, without the exemption, U.S. 

holders may be excluded from the 

transaction. 

We sought data regarding the number 

of Schedules 13E–3 filed with respect to 

the securities of foreign private issuers, 

the number of entities or persons that 

the proposed rule amendment would 

affect, and the increases or decreases in 

cost that are likely to result, so we could 

attempt to estimate the costs and 

benefits associated with any possible 

reduction of Schedule 13E–3 filings. We 

did not receive any data from 

commenters in response to our request. 

Based on the number of Schedules 13E– 

3 filed by foreign private issuers in 

2007, we do not expect the overall 

impact to be significant, although the 

number of transactions that may have 

been structured to avoid U.S. 

jurisdictional means would not be 

reflected by filings on Schedule 13E–3. 

2. Technical Change to Rule 802 of 

Regulation C 

We are adopting technical changes to 

the language of Rule 802. These changes 

are not intended to substantively change 

the filing obligations under the current 

rule, and we do not believe they will 

have any impact on the way that rule 

currently functions, except to clarify 

how it may be used. Therefore, the 

change will minimally affect costs and 

benefits. 

C. Changes to the Tier II Cross-Border 

Exemptions 

The rule changes we adopt today 

represent an expansion of the crossborder exemptions available to tender 

offers that meet the conditions outlined 

in the rules. The Tier II exemptions 

previously applied to tender offers 

conducted by third parties, issuers or 

affiliates, where those tender offers are 

subject to Rule 13e–4 or Regulation 14D. 

Today’s amendments will expand the 

relief provided in the Tier II exemptions 

to address areas of frequent conflict 

between U.S. and foreign law or practice 


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382See the discussion above regarding the 

changes to the threshold eligibility determination 

relating to the calculation of U.S. ownership. 

for which individual relief is frequently 

requested, and will clarify that the Tier 

II exemptions also may be used for 

cross-border tender offers subject only 

to Regulation 14E of the Exchange Act. 

We also are expanding Tier II relief for 

dual offers by allowing offerors to make 

more than one concurrent non-U.S. 

offer, and to allow certain U.S. offers to 

include non-U.S. persons and certain 

foreign offers to include U.S. persons. 

Additionally, we are adopting changes 

to Rule 14e–5 to codify recent 

exemptive relief for Tier II-eligible 

tender offers. 

1. Benefits 

These changes to the Tier II crossborder exemptions will expand the 

relief provided for eligible cross-border 

tender offers.382 The rule changes will 

reduce the need for bidders to seek 

individual no-action or exemptive relief 

from the staff. Since they represent areas 

in which relief is most frequently 

requested and granted for these kinds of 

transactions, the changes will reduce 

the associated costs and burdens of 

applying for relief. Where we already 

have reduced the associated costs and 

burdens of requesting and granting relief 

through Rule 14e–5 class exemptive 

letters, the codification of that relief in 

rule text benefits market participants by 

modernizing the rule and enhancing its 

utility by providing one readilyaccessible location for exempted 

activities. Because the rule changes will 

make it easier to make purchases 

outside of a U.S. tender offer in a 

manner consistent with relief frequently 

granted in this area, we believe the 

changes also will have the effect of 

encouraging acquirors and bidders to 

extend cross-border tender offers to U.S. 

target holders on the same terms as all 

other target security holders. 

To the extent that some of the relief 

codified in today’s rule changes was not 

contemplated in the 1999 Cross-Border 

Adopting Release and came about only 

as a result of the staff’s issuance of noaction and exemptive letters, we have 

analyzed the benefits and costs of the 

proposed revisions against the rules 

adopted in 1999 rather than against the 

perceived state of the rules as created by 

the issuance of no-action relief. When 

the Tier II exemption was adopted in 

1999, by its terms it only applied to 

tender offers subject to Rule 13e–4 or 

Regulation 14D. We are expanding the 

Tier II exemption to apply equally to 

cross-border tender offers governed by 

Regulation 14E only. By expanding the 

Tier II exemption to cover such offers, 

the changes we are adopting today will 

allow more acquirors to take advantage 

of the exemption and thus allow more 

U.S. investors to benefit from being 

included in the offer. Expanding the 

category of offers for which Tier II relief 

is granted also will allow more 

flexibility in structuring offers and 

encourage more acquirors to take 

advantage of the exemption. Similarly, 

the changes to the Tier II relief for dual 

offers and the changes to Rule 14e–5 are 

intended to address certain foreign 

regulatory conflicts that were not fully 

appreciated when the Tier II exemption 

was adopted in 1999. By revising our 

rules to address these conflicts, we 

expect to enhance the applicability of 

the Tier II exemptions and the 

exemptions to Rule 14e–5 and therefore 

encourage more acquirors to take 

advantage of the exemptions and 

include U.S. holders in cross-border 

transactions. 

2. Costs 

As with transactions governed by 

Regulation 14D and Rule 13e–4, the cost 

of reducing the protections of the 

Williams Act may include reduced 

procedural and informational safeguards 

for U.S. investors; however, the 

exemptions have been designed to 

reduce such a possibility. We are not 

aware of any other cost that will be 

incurred by expanding Tier II relief to 

tender offers governed by Regulation 

14E only. In addition, because these 

amendments will not change the filing 

obligations of acquirors, investors 

would not lose the benefits of any 

required disclosure. The amendments 

we are making to Tier II do not affect the 

registration requirements of Section 5 of 

the Securities Act, which are not 

covered by these exemptions. 

The codification of Rule 14e–5 class 

exemptive letters into rule text is not 

expected to increase costs to market 

participants, as the substance of the 

relief is not being altered. Instead, the 

mechanism for the relief is being 

changed from class exemptive letters to 

rule exemptions. While permitting 

purchases outside of a tender offer 

might negatively impact U.S. investors 

by weakening the equal treatment and 

proration protections of our rules, we 

believe that the conditions imposed on 

the ability to purchase outside of a Tier 

II tender offer under the revised rules 

will help to safeguard the interests of 

U.S. security holders. 

D. Expanded Availability of Early 

Commencement 

1. Amendment to Securities Act Rule 

162 

The amendments we adopt today will 

expand the ability to commence an 

exchange offer before the registration 

statement filed with respect to the 

securities offered is declared effective 

by the Commission. Our previous rules 

permitted ‘‘early commencement’’ only 

where an exchange offer was subject to 

Rule 13e–4 or Regulation 14D. For 

tender offers conducted under Tier II, 

we proposed to extend the option to all 

exchange offers, so long as withdrawal 

rights and other protections were 

provided to the same extent as would be 

required under Rule 13e–4 or 

Regulation 14D. We solicited comment 

regarding whether the ability to early 

commence should be extended to 

domestic offers as well. Commenters 

supported the proposed extension of 

early commencement to all exchange 

offers conducted under Tier II. They 

also supported extending early 

commencement to domestic offers. As 

adopted, the rules will permit early 

commencement for both cross-border 

and domestic exchange offers. 

a. Benefits 

We believe the rule amendments will 

further harmonize the treatment of 

exchange offers and cash tender offers 

by eliminating the timing disparity 

between the commencement of cash 

tender offers and stock tender offers. 

Domestic and foreign bidders that may 

have used a cash tender offer for a 

transaction due to timing concerns may 

benefit from elimination of the timing 

disparity. The amendments will not 

impact the filing and disclosure 

obligations of the acquiror under the 

Securities Act, or the requirement to 

comply with the tender offer rules in 

Regulation 14E. Because foreign law 

may provide that a tender offer for one 

class of securities will trigger an 

obligation to make a contemporaneous 

offer for a related class, this rule change 

could enhance the ability of such 

exchange offers to commence early, and 

therefore may enhance the speed with 

which such offers may be effected. The 

amendment to Tier II also may allow 

combined offers to compete with cash 

bids. 

When used, the rule will provide the 

benefit to investors of receiving 

withdrawal rights when they otherwise 

would not have been required under 

U.S. rules. The rule amendment also 

may cause offerors to extend an 

exchange offer to U.S. target security 

holders, where concerns about delays 


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60084 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

383The cover page of Form CB already requires 

disclosure of this information. However, Form CB 

needs to be filed only for some cross-border 

transactions, and only for those conducted under 

Tier I or Securities Act Rules 801 or 802. 

384Letter from S&C. 

385Letter from ABA. 

arising from the U.S. registration 

process might otherwise have caused 

them to exclude U.S. investors. 

b. Costs 

As discussed above, allowing an early 

commencement option for an exchange 

offer may result in additional 

informational costs in some 

circumstances. To the extent that an 

offeror commences early and 

disseminates offer materials upon the 

filing of the underlying registration 

statement, it may receive staff comments 

after dissemination. This may present 

increased costs for offerors who must 

recirculate in circumstances where they 

have elected to commence their offer 

early, before the staff comment process 

(where applicable) is complete. 

E. Changes to Forms and Schedules 

We are adopting changes to the 

manner in which several forms and 

schedules are filed. We are requiring 

that all Form CBs, and Form F–Xs filed 

in connection with a Form CB, be filed 

electronically. A Form F–X filed in 

connection with a Form CB must be 

filed electronically under the same 

circumstances. 

In addition, we proposed to add a box 

to the cover page of Schedule TO and 

Forms S–4 and F–4 where the filing 

person would specify the applicable 

cross-border exemption or exemptions 

being relied upon to conduct the 

applicable transaction.383 We are 

adopting the amendments to those 

forms as proposed. Under the revised 

rules, filers relying on the Tier II crossborder exemptions and filing a Schedule 

TO will be required to indicate which, 

if any, cross-border exemption they are 

relying on in conducting their tender 

offer. 

Similarly, filers of Form S–4 or F–4 

that are conducting a cross-border 

transaction under the Tier II exemptions 

will be required to specify the crossborder exemption claimed on the cover 

page of those forms. In some cases, they 

also may be filing a Schedule TO, where 

the exchange offer is subject to Rule 

13e–4 or Regulation 14D. In some 

instances, such as where an exchange 

offer commences early, a Form S–4 or 

F–4 may be filed before Schedule TO. It 

would be helpful for the staff to have 

this information at the earliest possible 

time in the offering process; therefore, 

we are adopting the requirement for 

Forms S–4 and F–4 as well. The changes 

we are making to Schedule TO and 

Forms S–4 and F–4 will have no impact 

on the obligation of an offeror to file 

those forms. 

1. Benefits 

Requiring electronic filing of all Form 

CBs will benefit investors because these 

Forms will be more easily accessible. 

Form CBs currently submitted in paper 

form may be accessed through our 

public reference room. Electronic filing 

will make Form CB accessible to 

investors more easily and more quickly. 

As to the information sought in Form 

S–4 or F–4 or Schedule TO, we believe 

this information will serve an important 

function for purposes of the staff review 

process and also will benefit filers. 

Currently, the staff may not be aware 

when reviewing a registration statement 

or tender offer statement that the filer is 

relying upon an applicable cross-border 

exemption to modify the terms of its 

offer. Consequently, the staff may not 

know whether non-compliance with all 

the rules that would govern a particular 

transaction is a matter that the staff 

should pursue through the comment 

process. Providing this information 

when the Form S–4 or F–4 or Schedule 

TO is initially filed will eliminate the 

need for the staff to issue, and the 

bidder to respond to, unnecessary 

comments based on a lack of knowledge 

about reliance on a cross-border 

exemption. 

2. Costs 

We believe the costs associated with 

the changes to Schedule TO and Forms 

S–4 and F–4 will be minimal. As 

discussed above, these changes will not 

impact the obligation to file the 

schedule or form, nor will they change 

the substantive disclosure required. 

Filers will already know whether, and if 

so, what cross-border exemption they 

will rely upon in conducting their 

transaction. The change will require 

them only to specify that information 

for the benefit of the staff and others 

viewing the filings. 

We received two comments in 

response to the proposal to require efiling of Form CB. One commenter 

argued against requiring electronic filing 

due to the ‘‘costs and practical 

issues.’’ 384 Another commenter 

cautiously supported the proposed 

changes but expressed concern with the 

possible deterrent effects of such 

requirements, such as potential 

hardships and liability arising from 

widespread availability of the filings on 

EDGAR.385 While we understand the 

commenters’ concerns, we do not 

believe that requiring the electronic 

submission of Form CB and the 

accompanying Form F–X will be a 

significant burden and therefore we are 

adopting the revisions as proposed. We 

note that in situations in which the 

electronic submission poses a 

significant burden, a hardship 

exemption is available. Additionally, 

the Form CB is furnished, not filed, and 

therefore not subject to Section 18 

liability. With regard to the concern 

about widespread availability on 

EDGAR, investors can see that a Form 

CB has been filed when they view a 

company’s filings on EDGAR, although 

they cannot view the actual document. 

They can request a copy of the 

submission from the public reference 

room. Therefore, we do not believe that 

requiring electronic submission of the 

forms should increase the potential 

liability issues. We do not expect these 

amendments to materially affect the cost 

burden of these forms. 

F. Changes to the Beneficial Ownership 

Reporting Rules 

We are amending the beneficial 

ownership rules to allow foreign 

institutions of the same type as the 

domestic institutions listed in Exchange 

Act Rule 13d–1(b)(1)(ii) to file on 

Schedule 13G instead of Schedule 13D. 

The revised rule will permit specified 

types of institutions to file on Schedule 

13G, where those institutions have 

acquired securities in the ordinary 

course of their business and not with 

the purpose or effect of changing or 

influencing control of the issuer of the 

subject securities. In order to use 

Schedule 13G to the same extent as their 

U.S. counterparts, these foreign 

‘‘qualified institutional’’ filers also will 

have to meet the conditions specified in 

the revised rule and Schedule 13G. The 

conditions set forth in the rule and the 

certification now included in Schedule 

13G codify the conditions previously 

contained in the staff’s no-action letters. 

One such condition is the requirement 

to certify that the regulatory scheme 

applicable to that type of institution in 

its home country is substantially 

comparable to the regulatory system 

applicable to its U.S. counterpart. 

Another such condition is an 

undertaking to provide to the 

Commission staff, upon request, the 

information that would have been 

required under Schedule 13D. 

1. Benefits 

The staff commonly grants no-action 

requests from foreign institutions 

comparable to the types of institutions 

listed in Rule 13d–1(b)(1)(ii) to file on 

Schedule 13G if they meet the 


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Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 60085 

386See Amendments to Beneficial Ownership 

Reporting Requirements, Release No. 34–39538 

(January 12, 1998) [63 FR 2854]. 387See letters from ABA and S&C. 

388 15 U.S.C. 77b(b) 

389 15 U.S.C. 78c(f). 

390 15 U.S.C. 78w(a)(2). 

conditions outlined in the no-action 

letters. The release adopting 

amendments to the beneficial 

ownership rules in 1998 discussed the 

fact that in the past, foreign institutional 

investors requested exemptive and noaction letters.386 The release also stated 

that foreign institutions that wanted to 

use Schedule 13G as a qualified 

institutional investor should continue to 

request no-action relief from the staff. 

Because the staff’s issuance of no-action 

letters was contemplated at the time of 

the 1998 amendments to the beneficial 

ownership rules, we only consider the 

costs and benefits of the proposed rule 

relevant to the staff’s current practice of 

issuing no-action letters. From this 

perspective, the rule change would 

eliminate the costs and burdens on 

foreign institutions of seeking such 

relief individually. For foreign 

institutions that would otherwise have 

been eligible to file on Schedule 13G as 

passive investors under the current 

rules, filing under Rule 13d–1(b) 

reduces the burden on those filers 

because the initial filing obligation is 

less onerous for qualified institutional 

filers. For example, qualified 

institutions filing under Rule 13d–1(b) 

are required to file a Schedule 13G 

within 45 days after the end of the 

calendar year in which they own over 

five percent of the subject class as of the 

last day of that year. By contrast, passive 

investors reporting on Schedule 13G 

pursuant to Rule 13d–1(c) must file 

their initial report within ten days of the 

acquisition of more than five percent of 

the class. Unlike qualified institutional 

filers, passive investors may not file on 

Schedule 13G when their ownership 

equals or exceeds 20 percent of the 

subject class. No such limit exists for 

qualified institutional filers. 

2. Costs 

Schedule 13D requires more extensive 

disclosure than Schedule 13G. 

Therefore, to the extent that a filer 

taking advantage of the rule revisions 

otherwise would be required to file a 

Schedule 13D (or a Schedule 13G as a 

passive investor), there may be some 

information cost to U.S. investors by 

permitting the filer to use Schedule 13G. 

For instance, Schedule 13D requires 

information about the purpose of the 

beneficial owner’s transaction in the 

securities, investment intent, and 

sources of funding. To the extent that 

such information may be of value to 

investors in making informed 

investment decisions, there will be a 

cost in permitting these institutions to 

file on Schedule 13G. We sought 

comment on the usefulness to investors 

of requiring these foreign institutions to 

file on Schedule 13D; however, we did 

not receive any comments in response 

to our request. We believe that investors 

will be able to obtain useful information 

from Schedules 13G filed by foreign 

institutions that acquire securities in the 

ordinary course of business and not 

with the purpose or effect of influencing 

control of the issuer. We do not believe 

the reduction of the amount of 

information filed by these institutions 

will be detrimental to investors because 

such institutions will not have the 

purpose or effect of influencing control 

of the issuers in which they hold 

securities. Thus, some of the additional 

information that would be required by 

Schedule 13D would be inapplicable. 

Foreign institutions wishing to take 

advantage of the rule change will incur 

certain costs to satisfy the conditions for 

filing on Schedule 13G. In particular, 

foreign institutions will need to assess 

whether their home country regulatory 

scheme is substantially comparable to 

the regulatory scheme applicable to 

their U.S. counterparts. This might 

involve seeking the advice of home 

country or U.S. legal counsel. However, 

we believe the incremental costs of 

complying with the revised rule will be 

minimal because foreign institutions are 

commonly granted no-action relief to 

file on Schedule 13G under the same 

circumstances as permitted under the 

new rule. 

We also are adopting a corresponding 

change to Exchange Act Rule 16a– 

1(a)(1) to include the foreign institutions 

eligible to rely on Rule 13d–1(b)(1)(ii)(J) 

in response to two commenters who 

requested it; 387 such a change would be 

consistent with the agency’s regulatory 

history of aligning the scope of these 

two rules. Rule 16a–1(a) includes the 

definition of beneficial ownership for 

purposes of determining who is a more 

than 10 percent beneficial owner for 

purposes of Exchange Act Section 16. 

Rule 16a–1(a)(1) allows the institutions 

identified in the rule to exclude from 10 

percent ownership calculations the 

shares they hold for the benefit of third 

parties or in customer or fiduciary 

accounts in the ordinary course of 

business, without the purpose or effect 

of changing control of the issuer, nor in 

connection with or as a participant in 

any transaction that has such a purpose 

or effect, including any transaction 

subject to Rule 13d–3(b). Similar to the 

change to Rule 13d–1(b)(1)(ii)(J), the 

change we are adopting to Rule 16a– 

1(a)(1) may have an information cost to 

U.S. investors because it will exempt 

certain foreign institutions from Section 

16(a) reporting. We do not believe the 

reduction of the amount of information 

filed by these institutions will be 

detrimental to investors because 

investors will have access to the 

information provided by these 

institutions in Schedule 13G. 

V. Consideration of Impact on 

Economy, Burden on Competition and 

Promotion of Efficiency, Competition 

and Capital Formation 

Section 2(b) of the Securities Act 388

and Section 3(f) of the Exchange Act 389

require us, when engaged in 

rulemaking, to consider or determine 

whether an action is necessary or 

appropriate in the public interest, and to 

consider, in addition to the protection of 

investors, whether the action will 

promote efficiency, competition, and 

capital formation. When adopting rules 

under the Exchange Act, Section 

23(a)(2) of the Exchange Act 390 requires 

us to consider the impact that any new 

rule would have on competition. In 

addition, Section 23(a)(2) prohibits us 

from adopting any rule that would 

impose a burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Exchange Act. 

The amendments generally are 

expected to enhance efficiency in 

conducting cross-border tender offers 

and business combination transactions 

by streamlining the application of U.S. 

and foreign rules that may apply to 

those transactions. We expect that they 

will promote capital formation by 

facilitating cross-border business 

combination transactions conducted 

under multiple, and possibly 

conflicting, regulatory systems. Some of 

the rule revisions, such as the changes 

that broaden the availability of early 

commencement for exchange offers and 

the applicability of the Tier II 

exemptions for tender offers not subject 

to Exchange Act Rule 13e–4 or 

Regulation 14D, may be viewed as 

enhancing competition between 

competing offers for the same target 

securities, because they will make these 

provisions available to different kinds of 

offers. Furthermore, the rule changes are 

expected to reduce the regulatory 

burden on entities engaging in crossborder business combination 

transactions generally, which may 

promote competition by encouraging 

additional entities to engage in these 

types of transactions. 


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60086 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

391 5 U.S.C. 601. 

392Based on an analysis of the language and 

legislative history of the Regulatory Flexibility Act, 

Congress does not appear to have intended the Act 

to apply to foreign issuers. Therefore, we are 

analyzing the impact on small U.S. entities only. 

393 5 U.S.C. 601(6). 

394Securities Act Rule 157 [17 CFR 230.157] and 

Exchange Act Rule 0–10 [17 CFR 240.0–10] contain 

the applicable definitions. 

395The estimated number of reporting small 

entities is based on 2007 data, including the 

The changes to the test for 

determining eligibility to rely on the 

Tier I and Tier II cross-border 

exemptions and Securities Act Rule 802 

under Regulation C are intended to 

facilitate the application of those 

exemptions. When the exemptions were 

adopted in 1999, we determined that the 

cross-border exemptions would serve to 

promote the inclusion of U.S. investors 

in transactions required to be conducted 

in accordance with a foreign regulatory 

system. The amendments we adopt 

today enhance the utility of the 

exemptions by addressing recurring 

conflicts between U.S. law and foreign 

law and practice. 

The purpose of the amendment to 

Exchange Act Rule 13e–3(g)(6) is to 

expand the exemption from Rule 13e–3 

for cross-border transactions meeting 

the conditions of Tier I. This 

amendment is expected to reduce 

regulatory compliance burdens for 

issuers and affiliates engaged in 

affiliated cross-border transactions that 

would otherwise be subject to Rule 13e– 

3. The ability to avoid the application of 

Rule 13e–3 for certain cross-border 

transactions is expected to benefit U.S. 

investors, because an issuer or affiliate 

may choose to exclude them if that is 

the only means to avoid the heightened 

disclosure burdens of Rule 13e–3. This 

amendment may increase efficiency for 

issuers and affiliates engaged in crossborder transactions because they will be 

able to use transaction structures that 

are common abroad but that were not 

permitted under the exemption before 

these amendments. 

The purpose of the changes to the Tier 

II tender offer exemptions in Exchange 

Act Rules 13e–4(i), 14d–1(d) and 14e–5 

is to expand those exemptions to better 

address areas of recurring regulatory 

conflict. By codifying relief previously 

granted for individual transactions, the 

changes are expected to reduce 

compliance burdens on issuers and 

bidders who no longer need to seek 

such relief for each individual 

transaction. By enhancing the flexibility 

of U.S. tender offer rules in cross-border 

transactions, where those rules conflict 

with common elements of foreign law or 

practice, we believe the changes will 

increase the likelihood that bidders will 

include U.S. investors in these 

transactions. 

We do not anticipate that the changes 

to Rule 14e–5 will have a significant 

impact, if any, on the economy because 

they codify the current scope of 

activities exempted from that rule’s 

prohibitions through existing class 

exemptive letters. We believe that the 

changes to Rule 14e–5 likely will not 

place any burden on competition, as the 

rule changes apply equally to all market 

participants covered by the rule. We 

believe that the Rule 14e–5 class 

exemptive letters concerning Tier II 

cross-border transactions have promoted 

efficiency and capital formation by 

eliminating the time and cost burdens 

associated with individual grants of 

relief. We believe that the codification 

of those letters similarly will foster 

efficiency and cross-border capital 

formation. 

The amendment to Securities Act 

Rule 162(a), expanding the ability of 

offerors to commence an exchange offer 

early where a tender offer is not subject 

to Regulation 14D or Rule 13e–4, is 

expected to further equalize the 

regulatory burden between cash tender 

offers and exchange offers, thereby 

promoting competition. Because foreign 

rules often contain a mandatory offer 

requirement, obligating an offeror to 

make a tender offer for a given class of 

securities, these rule changes likely will 

place mandatory offers for unregistered 

classes of securities on an equal footing 

with offers for registered equity 

securities. The ability of offerors to 

commence an exchange offer early is 

being extended to domestic offers as 

well. This change likely will equalize 

the regulatory burden between cash 

tender offers and exchange offers in the 

United States. 

The changes to Schedule TO and 

Forms S–4 and F–4 will likely improve 

efficiency because disclosure of the 

exemptions being relied upon by the 

bidder will aid the staff in its review of 

these documents and likely eliminate 

staff comments based upon assumptions 

as to the exemption being relied upon 

by the bidder. 

VI. Final Regulatory Flexibility Act 

Analysis 

This Final Regulatory Flexibility Act 

Analysis has been prepared in 

accordance with the Regulatory 

Flexibility Act.391 It relates to revisions 

to the rules and forms that we are 

adopting today.392 An Initial Regulatory 

Flexibility Act Analysis was prepared in 

accordance with the Regulatory 

Flexibility Act and included in the 

Proposing Release. 

A. Need for the Amendments 

These amendments are necessary to 

facilitate the inclusion of U.S. target 

security holders in cross-border 

business combination transactions. The 

rule changes are expected to result in 

further reductions in the cost and 

burdens associated with including U.S. 

target holders in those transactions. U.S. 

target holders previously excluded from 

such transactions will benefit by having 

additional transactions extended to 

them. 

The rule changes are incremental in 

nature and are not a significant 

departure from the previous crossborder exemptions. The changes further 

harmonize U.S. and foreign law and 

practice, and facilitate greater inclusion 

of U.S. target holders in cross-border 

transactions. In many instances, the 

changes codify existing interpretations 

and exemptive relief. We do not believe 

any less restrictive alternative to the 

rule amendments exists that would 

serve the purpose of the tender offer and 

registration requirements of the federal 

securities laws. We did not identify 

alternatives to the rule amendments that 

are consistent with their objectives and 

our statutory authority. The amended 

rules do not duplicate or conflict with 

any existing federal rule provisions. 

B. Significant Issues Raised by Public 

Comments 

An Initial Regulatory Flexibility 

Analysis was prepared in accordance 

with the Regulatory Flexibility Act in 

connection with the Proposing Release, 

and we solicited comments on any 

impact the proposed changes might 

have on small entities. We did not 

receive any public comments that 

responded directly to the IRFA or that 

dealt directly with the proposal’s impact 

on small entities. 

C. Small Entities Subject to the Final 

Amendments 

The Regulatory Flexibility Act defines 

‘‘small entity’’ to mean ‘‘small 

business,’’ ‘‘small organization,’’ or 

‘‘small governmental jurisdiction.’’ 393

The Commission’s rules define ‘‘small 

business’’ and ‘‘small organization’’ for 

purposes of the Regulatory Flexibility 

Act for each of the types of entities 

regulated by the Commission.394 A 

‘‘small business’’ and ‘‘small 

organization,’’ when used with 

reference to an issuer other than an 

investment company, generally means 

an issuer with total assets of $5 million 

or less on the last day of its most recent 

fiscal year. We estimate that there are 

approximately 1,100 issuers that may be 

considered reporting small entities.395


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Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 60087 

Commission’s EDGAR database and Thomson 

Financial’s Worldscope database. 

The revised rules may affect each of the 

approximately 1,100 issuers that may be 

considered reporting small entities. The 

number of reporting or non-reporting 

small businesses that actually rely on 

the revised rules, or may otherwise be 

impacted by the rule revisions, will 

depend on many factors. Acquirors 

relying on the exemptions may or may 

not have reporting obligations under the 

Exchange Act before engaging in a crossborder business combination 

transaction. An acquiror’s ability to rely 

on the exemptions is not determined by 

the acquiror’s size or market 

capitalization; however, we believe that 

small businesses are not typically 

acquirors in cross-border transactions. 

We believe that the amendments likely 

will result in savings to entities (both 

small and large) that qualify for the 

exemptions. 

D. Reporting, Recordkeeping and Other 

Compliance Requirements 

The amended rules do not impose any 

new reporting, recordkeeping or other 

compliance requirements on small 

entities. 

E. Agency Action To Minimize Effect on 

Small Entities 

The Regulatory Flexibility Act directs 

the Commission to consider significant 

alternatives that would accomplish the 

stated objective, while minimizing any 

significant adverse impact on small 

entities. In connection with the 

amendments adopted today, the 

Commission considered the following 

alternatives: (i) The establishment of 

differing compliance or reporting 

requirements or timetables that take into 

account the resources of small entities; 

(ii) the clarification, consolidation or 

simplification of compliance and 

reporting requirements under the rule 

for small entities; (iii) the use of 

performance rather than design 

standards; and (iv) an exemption from 

coverage from the amendments, or any 

part thereof, for small entities. Our 

objective in adopting the amendments is 

to facilitate the inclusion of U.S. holders 

in cross-border business combinations. 

While we considered the above 

alternatives to accomplish our stated 

objective, we believe that different 

compliance or reporting requirements 

are not necessary because the 

amendments do not establish any new 

reporting, recordkeeping, or compliance 

requirements for small entities. 

Establishing a different standard for 

small business entities would impose a 

greater compliance burden on small 

entities and would be inconsistent with 

the benefits provided for all entities that 

are able to avail themselves of the 

exemptions. 

VII. Statutory Basis and Text of 

Amendments 

We are amending the forms and rules 

under the authority set forth in Sections 

3(b), 7, 8, 9, 10, 19 and 28 of the 

Securities Act, and Sections 12, 13, 14, 

23, 35A, and 36 of the Exchange Act. 

List of Subjects in 17 CFR Parts 230, 

231, 232, 239, 240, 241, and 249 

Reporting and recordkeeping 

requirements, Securities. 

Text of Amendments 

■ For the reasons set out in the 

preamble, we are amending Title 17, 

Chapter II of the Code of Federal 

Regulations as follows: 

PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

■ 1. The authority citation for part 230 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 

77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d, 

78j, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d), 

78mm, 80a–8, 80a–24, 80a–28, 80a29, 80a– 

30, and 80a–37, unless otherwise noted. 

* * * * * 

■ 2. Revise § 230.162 to read as follows: 

§ 230.162 Submission of tenders in 

registered exchange offers. 

(a) Notwithstanding section 5(a) of the 

Act (15 U.S.C. 77e(a)), an offeror may 

solicit tenders of securities in an 

exchange offer before a registration 

statement is effective as to the security 

offered, so long as no securities are 

purchased until the registration 

statement is effective and the tender 

offer has expired in accordance with the 

tender offer rules, and either: 

(1) The exchange offer is subject to 

§ 240.13e–4 or §§ 240.14d–1 through 

14d–11 of this chapter; or 

(2) The offeror provides withdrawal 

rights to the same extent as would be 

required if the exchange offer were 

subject to the requirements of 

§ 240.13e–4 or §§ 240.14d–1 through 

14d–11 of this chapter; and if a material 

change occurs in the information 

published, sent or given to security 

holders, the offeror complies with the 

provisions of § 240.13e–4(e)(3) or 

§ 240.14d–4(b) and (d) of this chapter in 

disseminating information about the 

material change to security holders, and 

including the minimum periods during 

which the offer must remain open (with 

withdrawal rights) after notice of the 

change is provided to security holders. 

(b) Notwithstanding Section 5(b)(2) of 

the Act (15 U.S.C. 77e(b)(2)), a 

prospectus that meets the requirements 

of Section 10(a) of the Act (15 U.S.C. 

77j(a)) need not be delivered to security 

holders in an exchange offer that 

commences before the effectiveness of a 

registration statement in accordance 

with the provisions of § 230.162(a) of 

this section, so long as a preliminary 

prospectus, prospectus supplements 

and revised prospectuses are delivered 

to security holders in accordance with 

§ 240.13e–4(e)(2) or § 240.14d–4(b) of 

this chapter. This applies not only to 

exchange offers subject to those 

provisions, but also to exchange offers 

not subject to those provisions that meet 

the conditions in § 230.162(a)(2) of this 

section. 

Instruction to § 230.162 of this 

section: Notwithstanding the provisions 

of § 230.162 of this section above, for 

going-private transactions (as defined by 

§ 240.13e–3) and roll-up transactions (as 

described by Item 901 of Regulation S– 

K (§ 229.901 of this chapter)), a 

registration statement registering the 

securities to be offered must have 

become effective and only a prospectus 

that meets the requirements of Section 

10(a) of the Securities Act may be 

delivered to security holders on the date 

of commencement. 

■ 3. Amend § 230.800 by revising 

paragraph (h)(1) and(h)(2) and adding 

paragraphs (h)(6) and (h)(7) to read as 

follows: 

§ 230.800 Definitions for §§ 230.800, 

230.801 and 230.802. 

* * * * * 

(h) * * * 

(1) Calculate the percentage of 

outstanding securities held by U.S. 

holders as of a date no more than 60 

days before or 30 days after the public 

announcement of a business 

combination conducted under § 230.802 

under the Act or of the record date in 

a rights offering conducted under 

§ 230.801 under the Act. For a business 

combination conducted under 

§ 230.802, if you are unable to calculate 

as of a date within these time frames, 

the calculation may be made as of the 

most recent practicable date before 

public announcement, but in no event 

earlier than 120 days before public 

announcement. 

(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 calculation other types of 

securities that are convertible or 


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60088 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

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 the 

acquiror in an exchange offer or 

business combination; 

* * * * * 

(6) For exchange offers conducted 

pursuant to § 230.802 under the Act by 

persons other than the issuer of the 

subject securities or its affiliates that are 

not made pursuant to an agreement with 

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 of the 

outstanding subject securities, unless 

paragraphs (h)(7)(i), (ii) or (iii) of this 

section indicate otherwise. 

(7) For rights offerings and business 

combinations, including exchange offers 

conducted pursuant to § 230.802 under 

the Act, where the offeror is unable to 

conduct the analysis of U.S. ownership 

set forth in paragraph (h)(3) of this 

section, 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 

so long as there is a primary trading 

market for the subject securities outside 

the United States, as defined in 

§ 240.12h–6(f)(5) of this chapter, unless: 

(i) Average daily trading volume of 

the subject securities in the United 

States for a recent twelve-month period 

ending on a date no more than 60 days 

before the public announcement of the 

business combination or of the record 

date for a rights offering exceeds 10 

percent of the average daily trading 

volume of that class of securities on a 

worldwide basis for the same period; or 

(ii) 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 or any jurisdiction in 

which the subject securities trade before 

the public announcement of the offer 

indicates that U.S. holders hold more 

than 10 percent of the outstanding 

subject class of securities; or 

(iii) The acquiror or issuer knows or 

has reason to know, before the public 

announcement of the offer, that the level 

of U.S. ownership exceeds 10 percent of 

such securities. As an example, an 

acquiror or issuer is deemed to know 

information about U.S. ownership of the 

subject class of securities that is 

publicly available and that appears in 

any filing with the Commission or any 

regulatory body in the issuer’s 

jurisdiction of incorporation or (if 

different) the non-U.S. jurisdiction in 

which the primary trading market for 

the subject securities is located. The 

acquiror in a business combination is 

deemed to know information about U.S. 

ownership available from the issuer. 

The acquiror or issuer is deemed to 

know information obtained or readily 

available from any other source that is 

reasonably reliable, including from 

persons it has retained to advise it about 

the transaction, as well as from thirdparty information providers. These 

examples are not intended to be 

exclusive. 

* * * * * 

■ 4. Amend § 230.802 by revising 

paragraphs (a)(2) and (a)(3) and 

removing paragraph (c). 

The revisions read as follows: 

§ 230.802 Exemption for offerings in 

connection with an exchange offer or 

business combination for the securities of 

foreign private issuers. 

* * * * * 

(a) * * * 

(2) Equal treatment. The offeror 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 offeror, however, need 

not extend the offer to security holders 

in those states or jurisdictions that 

require registration or qualification, 

except that the offeror 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 

offeror publishes or otherwise 

disseminates an informational 

document to the holders of the subject 

securities in connection with the 

exchange offer or business combination, 

the offeror must furnish that 

informational document, including any 

amendments thereto, in English, to the 

Commission on Form CB (§ 239.800 of 

this chapter) by the first business day 

after publication or dissemination. If the 

offeror is a foreign company, it must 

also file a Form F–X (§ 239.42 of this 

chapter) with the Commission at the 

same time as the submission of the 

Form CB to appoint an agent for service 

of process in the United States. 

(ii) The offeror 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 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. 

* * * * * 

PART 231—INTERPRETATIVE 

RELEASES RELATING TO THE 

SECURITIES ACT OF 1933 AND 

GENERAL RULES AND REGULATIONS 

THEREUNDER 

■ 5. Part 231 is amended by adding 

Release No. 33–8957 and the release 

date of September 19, 2008, to the list 

of interpretative releases. 

* * * * * 

PART 232—REGULATION S–T— 

GENERAL RULES AND REGULATIONS 

FOR ELECTRONIC FILINGS 

■ 6. The authority citation for part 232 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 

77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 

78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 

80a–30, 80a–37, and 7201 et seq.; and 18 

U.S.C. 1350. 

* * * * * 

■ 7. Amend § 232.101 by: 

■ a. Revising paragraphs (a)(1)(vi) and 

(a)(1)(vii); 

■ b. Removing and reserving paragraph 

(b)(7); and 

■ c. Revising paragraph (b)(8). 

The revisions read as follows: 

§ 232.101 Mandated electronic 

submissions and exceptions. 

(a) * * * 

(1) * * * 

(vi) Form CB (§§ 239.800 and 249.480 

of this chapter) filed or submitted under 

§ 230.801 or 230.802 of this chapter or 

§ 240.13e–4(h)(8), 240.14d–1(c), or 

240.14e–2(d) of this chapter; 

(vii) Form F–X (§ 239.42 of this 

chapter) when filed in connection with 

a Form CB (§§ 239.800 and 249.480 of 

this chapter); 

* * * * * 

(b) * * * 

(8) Form F–X (§ 232.42 of this 

chapter) if filed by a Canadian issuer 

when qualifying an offering statement 

pursuant to the provisions of Regulation 

A (§§ 230.251 230.263 of this chapter); 

and 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

■ 8. 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, 77z–3, 77sss, 78c, 78l, 78m, 78n, 

78o(d), 78u–5, 78w(a), 78ll, 78mm, 80a–2(a), 

80a–3, 80a–8, 80a–9, 80a–10, 80a–13, 80a– 

24, 80a–26, 80a–29, 80a–30, and 80a–37, 

unless otherwise noted. 


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■ 9. Form S–4 (referenced in § 239.25) is 

amended by adding a statement 

regarding reliance on the cross-border 

exemptions and check boxes on the 

cover page immediately before the 

‘‘Calculation of Registration Fee’’ table 

to read as follows: 

Note— The text of Form S–4 does not and 

this amendment will not appear in the Code 

of Federal Regulations. 

FORM S–4 

REGISTRATION STATEMENT UNDER 

THE SECURITIES ACT OF 1933 

* * * * * 

If applicable, place an X in the box to 

designate the appropriate rule provision 

relied upon in conducting this 

transaction: 

Exchange Act Rule 13e–4(i) (CrossBorder Issuer Tender Offer) b 

Exchange Act Rule 14d–1(d) (CrossBorder Third-Party Tender Offer) b 

* * * * * 

■ 10. Amend Form F–4 (referenced in 

§ 239.34) by adding a statement 

regarding reliance on the cross-border 

exemptions and check boxes on the 

cover page immediately before the 

‘‘Calculation of Registration Fee’’ table 

to read as follows: 

Note— The text of Form F–4 does not and 

this amendment will not appear in the Code 

of Federal Regulations. 

FORM F–4 

REGISTRATION STATEMENT UNDER 

THE SECURITIES ACT OF 1933 

* * * * * 

If applicable, place an X in the box to 

designate the appropriate rule provision 

relied upon in conducting this 

transaction: 

Exchange Act Rule 13e–4(i) (CrossBorder Issuer Tender Offer) b 

Exchange Act Rule 14d–1(d) (CrossBorder Third-Party Tender Offer) b 

* * * * * 

■ 11. Amend Form F–X (referenced in 

§ 239.42) by revising the Note to General 

Instruction II.B.(2) to read as follows: 

Note— The text of Form F–X does not and 

this amendment will not appear in the Code 

of Federal Regulations. 

FORM F–X 

APPOINTMENT OF AGENT FOR 

SERVICE OF PROCESS AND 

UNDERTAKING 

GENERAL INSTRUCTIONS 

* * * * * 

II. * * * 

B. * * * 

(2) * * * 

Note: Regulation S–T Rule 101(b)(8) only 

permits the filing of the Form F–X in paper 

if filed by a Canadian issuer when qualifying 

an offering statement pursuant to the 

provisions of Regulation A (§§ 230.251– 

230.263 of this chapter). 

* * * * * 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 12. 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, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– 

20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 

80b–11, and 7201 et seq.; and 18 U.S.C. 1350, 

unless otherwise noted. 

* * * * * 

■ 13. Amend § 240.13d–1 by: 

■ a. Revising paragraph (b)(1)(ii)(G) and 

(J); 

■ b. Removing ‘‘and’’ from the end of 

paragraph (b)(1)(ii)(I); 

■ c. Adding paragraph (b)(1)(ii)(K); and 

■ d. Removing the authority citation 

following the section. 

The revisions and addition reads as 

follows: 

§ 240.13d–1. Filing of Schedules 13D and 

13G. 

* * * * * 

(b)(1) * * * 

(ii) * * * 

(G) A parent holding company or 

control person, provided the aggregate 

amount held directly by the parent or 

control person, and directly and 

indirectly by their subsidiaries or 

affiliates that are not persons specified 

in § 240.13d–1(b)(1)(ii)(A) through (J), 

does not exceed one percent of the 

securities of the subject class; 

* * * * * 

(J) A non-U.S. institution that is the 

functional equivalent of any of the 

institutions listed in § 240.13d–1 

(b)(1)(ii)(A) through (I), so long as the 

non-U.S. institution is subject to a 

regulatory scheme that is substantially 

comparable to the regulatory scheme 

applicable to the equivalent U.S. 

institution; and 

(K) A group, provided that all the 

members are persons specified in 

§ 240.13d–1(b)(1)(ii)(A) through (J). 

* * * * * 

■ 14. Amend § 240.13d–102 by: 

■ a. Revising Instruction 12 to the 

Instruction for the Cover Page before the 

Notes; 

■ b. In Item 3 removing the period at the 

end of paragraphs (a), (b), (c), and (d) 

and in each place adding a semicolon; 

■ c. In Item 3 revising paragraph (j) and 

adding paragraph (k); and 

■ d. In Item 10 redesignating paragraph 

(b) as paragraph (c) and adding new 

paragraph (b). 

The revision and additions read as 

follows: 

§ 240.13d–102 Schedule 13G—Information 

to be included in statements filed pursuant 

to § 240.13d–1(b), (c), and (d) and 

amendments thereto filed pursuant to 

§ 240.13d–2. 

* * * * * 

Instructions for Cover Page: 

* * * * * 

(12) Type of Reporting Person—Please 

classify each ‘‘reporting person’’ 

according to the following breakdown 

(see Item 3 of Schedule 13G) and place 

the appropriate Symbol on the form: 

Category Symbol 

Broker Dealer ............................... BD 

Bank .............................................. BK 

Insurance Company ..................... IC 

Investment Company .................... IV 

Investment Adviser ....................... IA 

Employee Benefit Plan or Endowment Fund ................................. EP 

Parent Holding Company/Control 

Person ....................................... HC 

Savings Association ..................... SA 

Church Plan .................................. CP 

Corporation ................................... CO 

Partnership ................................... PN 

Individual ....................................... IN 

Non-U.S. Institution ...................... FI 

Other ............................................. OO 

* * * * * 

Item 3. * * * 

(j) [ ] A non-U.S. institution in 

accordance with § 240.13d–1(b)(1)(ii)(J); 

(k) [ ] Group, in accordance with 

§ 240.13d–1(b)(1)(ii)(K). If filing as a 

non-U.S. institution in accordance with 

§ 240.13d–1(b)(1)(ii)(J), please specify 

the type of institution: llll 

* * * * * 

Item 10. Certification 

* * * * * 

(b) The following certification shall be 

included if the statement is filed 

pursuant to § 240.13d–1(b)(1)(ii)(J), or if 

the statement is filed pursuant to 

§ 240.13d–1(b)(1)(ii)(K) and a member of 

the group is a non-U.S. institution 

eligible to file pursuant to 

§ 240.13d–1(b)(1)(ii)(J): 

By signing below I certify that, to the 

best of my knowledge and belief, the 

foreign regulatory scheme applicable to 

[insert particular category of 

institutional investor] is substantially 

comparable to the regulatory scheme 


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applicable to the functionally equivalent 

U.S. institution(s). I also undertake to 

furnish to the Commission staff, upon 

request, information that would 

otherwise be disclosed in a Schedule 

13D. 

* * * * * 

■ 15. Amend § 240.13e–3 by revising 

paragraph (g)(6) to read as follows: 

§ 240.13e–3 Going private transactions by 

certain issuers or their affiliates. 

* * * * * 

(g) * * * 

(6) Any tender offer or business 

combination made in compliance with 

§ 230.802 of this chapter, 

§ 240.13e–4(h)(8) or § 240.14d–1(c) or 

any other kind of transaction that 

otherwise meets the conditions for 

reliance on the cross-border exemptions 

set forth in § 240.13e–4(h)(8), 240.14d– 

1(c) or 230.802 of this chapter except for 

the fact that it is not technically subject 

to those rules. 

Instruction to § 240.13e–3(g)(6): To 

the extent applicable, the acquiror must 

comply with the conditions set forth in 

§ 230.802 of this chapter, and 

§§ 240.13e–4(h)(8) and 14d–1(c). If the 

acquiror publishes or otherwise 

disseminates an informational 

document to the holders of the subject 

securities in connection with the 

transaction, the acquiror must furnish 

an English translation of that 

informational document, including any 

amendments thereto, to the Commission 

under cover of Form CB (§ 239.800 of 

this chapter) by the first business day 

after publication or dissemination. If the 

acquiror is a foreign entity, it must also 

file a Form F–X (§ 239.42 of this 

chapter) with the Commission at the 

same time as the submission of the 

Form CB to appoint an agent for service 

in the United States. 

■ 16. Amend § 240.13e–4 by: 

■ a. Revising paragraph (h)(8)(i); 

■ b. Revising the introductory text of 

paragraph (i); 

■ c. Revising paragraph (i)(1)(ii); 

■ d. Revising paragraph (i)(2)(ii); 

■ e. Adding paragraphs (i)(2)(v) and (vi); 

■ f. Revising paragraphs 2.i. and ii. to 

the Instructions to paragraph (h)(8) and 

(i); 

■ g. Redesignating Instructions 3 and 4 

to paragraphs (h)(8) and (i) as 

Instructions 4 and 5 respectively; 

■ h. Adding a new Instruction 3 to 

paragraphs (h)(8) and (i); and 

■ i. Revising the newly redesignated 

Instructions 4 and 5 to paragraphs (h)(8) 

and (i). 

The revisions and additions read as 

follows: 

§ 240.13e–4 Tender offers by issuers. 

(h) * * * 

(8) * * * 

(i) Except in the case of an issuer 

tender offer that is commenced during 

the pendency of a tender offer made by 

a third party in reliance on 

§ 240.14d–1(c), U.S. holders do not hold 

more than 10 percent of the subject class 

sought in the offer (as determined under 

Instructions 2 or 3 to paragraph (h)(8) 

and paragraph (i) of this section); 

* * * * * 

(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. In addition, any issuer 

tender offer (including any exchange 

offer) subject only to the requirements of 

section 14(e) of the Act and Regulation 

14E (§§ 240.14e–1 through 240.14e–8) 

thereunder that meets the conditions in 

paragraph (i)(1) of this section also shall 

be entitled to the exemptive relief 

specified in paragraph (i)(2) of this 

section, to the extent needed under the 

requirements of Regulation 14E, so long 

as the tender offer complies with all 

requirements of Regulation 14E other 

than those for which an exemption has 

been specifically provided in paragraph 

(i)(2) of this section: 

* * * * * 

(1) * * * 

(ii) Except in the case of an issuer 

tender offer commenced during the 

pendency of a tender offer made by a 

third party in reliance on 

§ 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 in accordance with 

Instructions 2 or 3 to paragraphs (h)(8) 

and (i) of this section). 

(2) * * * 

(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 

multiple offers: one offer made to U.S. 

holders, which also may include all 

holders of American Depositary Shares 

representing interests in the subject 

securities, and one or more offers made 

to non-U.S. holders. The U.S. offer 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. U.S. holders 

may be included in the foreign offer(s) 

only where the laws of the jurisdiction 

governing such foreign offer(s) expressly 

preclude the exclusion of U.S. holders 

from the foreign offer(s) and where the 

offer materials distributed to U.S. 

holders fully and adequately disclose 

the risks of participating in the foreign 

offer(s). 

* * * * * 

(v) Suspension of withdrawal rights 

during counting of tendered securities. 

The issuer or affiliate may suspend 

withdrawal rights required under 

paragraph (f)(2) of this section at the end 

of the offer and during the period that 

securities tendered into the offer are 

being counted, provided that: 

(A) The issuer or affiliate has 

provided an offer period, including 

withdrawal rights, for a period of at 

least 20 U.S. business days; 

(B) At the time withdrawal rights are 

suspended, all offer conditions have 

been satisfied or waived, except to the 

extent that the issuer or affiliate is in the 

process of determining whether a 

minimum acceptance condition 

included in the terms of the offer has 

been satisfied by counting tendered 

securities; and 

(C) Withdrawal rights are suspended 

only during the counting process and 

are reinstated immediately thereafter, 

except to the extent that they are 

terminated through the acceptance of 

tendered securities. 

(vi) Early termination of an initial 

offering period. An issuer or affiliate 

conducting an issuer tender offer may 

terminate an initial offering period, 

including a voluntary extension of that 

period, if at the time the initial offering 

period and withdrawal rights terminate, 

the following conditions are met: 

(A) The initial offering period has 

been open for at least 20 U.S. business 

days; 

(B) The issuer or affiliate has 

adequately discussed the possibility of 

and the impact of the early termination 

in the original offer materials; 

(C) The issuer or affiliate provides a 

subsequent offering period after the 

termination of the initial offering 

period; 

(D) All offer conditions are satisfied as 

of the time when the initial offering 

period ends; and 

(E) The issuer or affiliate does not 

terminate the initial offering period or 

any extension of that period during any 

mandatory extension required under 

U.S. tender offer rules. 

Instructions to paragraph (h)(8) and 

(i) of this section: 

* * * * * 


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2. * * * 

i. Calculate the U.S. ownership as of 

a date no more than 60 days before and 

no more than 30 days after the public 

announcement of the tender offer. If you 

are unable to calculate as of a date 

within these time frames, the 

calculation may be made as of the most 

recent practicable date before public 

announcement, but in no event earlier 

than 120 days before announcement; 

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; 

* * * * * 

3. If you are unable to conduct the 

analysis of U.S. ownership set forth in 

Instruction 2 above, U.S. holders will be 

presumed to hold 10 percent or less of 

the outstanding subject securities (40 

percent for Tier II) so long as there is a 

primary trading market outside the 

United States, as defined in 

§ 240.12h–6(f)(5) of this chapter, unless: 

i. Average daily trading volume of the 

subject securities in the United States 

for a recent twelve-month period ending 

on a date no more than 60 days before 

the public announcement of the tender 

offer exceeds 10 percent (or 40 percent) 

of the average daily trading volume of 

that class of securities on a worldwide 

basis for the same period; or 

ii. 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 or any jurisdiction in 

which the subject securities trade before 

the public announcement of the offer 

indicates that U.S. holders hold more 

than 10 percent (or 40 percent) of the 

outstanding subject class of securities; 

or 

iii. You know or have reason to know, 

before the public announcement of the 

offer, that the level of U.S. ownership of 

the subject securities exceeds 10 percent 

(or 40 percent) of such securities. As an 

example, you are deemed to know 

information about U.S. ownership of the 

subject class of securities that is 

publicly available and that appears in 

any filing with the Commission or any 

regulatory body in the home jurisdiction 

and, if different, the non-U.S. 

jurisdiction in which the primary 

trading market for the subject class of 

securities is located. You are also 

deemed to know information obtained 

or readily available from any other 

source that is reasonably reliable, 

including from persons you have 

retained to advise you about the 

transaction, as well as from third-party 

information providers. These examples 

are not intended to be exclusive. 

4. 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 (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) and (i) of this section but are part 

of a plan or scheme to evade the 

provisions of this section. 

* * * * * 

■ 17. Amend § 240.14d–1 by: 

■ a. Revising paragraph (a); 

■ b. Revising paragraph (c)(1); 

■ c. Revising the introductory text of 

paragraph (d), paragraphs (d)(1)(ii), 

(d)(2)(ii) and (d)(2)(iv); 

■ d. Adding paragraphs (d)(2)(vi), 

(d)(2)(vii), (d)(2)(viii), and (d)(2)(ix); and 

■ e. Revising Instructions 2.i., 2.ii., 3. 

introductory text, 3.i., 3.ii., and 3.iii. to 

the Instructions to paragraphs (c) and 

(d). 

The revisions and additions read as 

follows: 

§ 240.14d–1 Scope of and definitions 

applicable to Regulations 14D and 14E. 

(a) Scope. Regulation 14D 

(§§ 240.14d–1 through 240.14d–101) 

shall apply to any tender offer that is 

subject to section 14(d)(1) of the Act (15 

U.S.C. 78n(d)(1)), including, but not 

limited to, any tender offer for securities 

of a class described in that section that 

is made by an affiliate of the issuer of 

such class. Regulation 14E 

(§§ 240.14e–1 through 240.14e–8) shall 

apply to any tender offer for securities 

(other than exempted securities) unless 

otherwise noted therein. 

* * * * * 

(c) * * * 

(1) U.S. ownership limitation. Except 

in the case of a tender offer that is 

commenced during the pendency of a 

tender offer made by a prior bidder in 

reliance on this paragraph or 

§ 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 Instructions 2 or 3 to 

paragraphs (c) and (d) of this section). 

* * * * * 

(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. In addition, a person 

conducting a tender offer subject only to 

the requirements of section 14(e) of the 

Act (15 U.S.C. 78n(e)) and Regulation 

14E thereunder (§§ 240.14e–1 through 

240.14e–8) that meets the conditions in 

paragraph (d)(1) of the section also shall 

be entitled to the exemptive relief 

specified in paragraph (d)(2) of this 

section, to the extent needed under the 

requirements of Regulation 14E, so long 

as the tender offer complies with all 

requirements of Regulation 14E other 

than those for which an exemption has 

been specifically provided in paragraph 

(d)(2) of this section: 

(1) * * * 

(ii) Except in the case of a tender offer 

that is commenced during the pendency 

of a tender offer made by a prior bidder 

in reliance on this paragraph or 

§ 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 Instructions 2 or 3 to 

paragraphs (c) and (d) of this section); 

and 

(2) * * * 

(ii) Equal treatment—separate U.S. 

and foreign offers. Notwithstanding the 

provisions of § 240.14d–10, a bidder 

conducting a tender offer meeting the 

conditions of paragraph (d)(1) of this 

section may separate the offer into 

multiple offers: One offer made to U.S. 

holders, which also may include all 

holders of American Depositary Shares 

representing interests in the subject 

securities, and one or more offers made 

to non-U.S. holders. The U.S. offer 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. U.S. holders 

may be included in the foreign offer(s) 

only where the laws of the jurisdiction 

governing such foreign offer(s) expressly 

preclude the exclusion of U.S. holders 

from the foreign offer(s) and where the 

offer materials distributed to U.S. 

holders fully and adequately disclose 

the risks of participating in the foreign 

offer(s). 

* * * * * 

(iv) Prompt payment. Payment made 

in accordance with the requirements of 

the home jurisdiction law or practice 

will satisfy the requirements of 

§ 240.14e–1(c). Where payment may not 

be made on a more expedited basis 


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60092 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

under home jurisdiction law or practice, 

payment for securities tendered during 

any subsequent offering period within 

20 business days of the date of tender 

will satisfy the prompt payment 

requirements of § 240.14d–11(e). For 

purposes of this paragraph (d), a 

business day is determined with 

reference to the target’s home 

jurisdiction. 

* * * * * 

(vi) Payment of interest on securities 

tendered during subsequent offering 

period. Notwithstanding the 

requirements of § 240.14d–11(f), the 

bidder may pay interest on securities 

tendered during a subsequent offering 

period, if required under applicable 

foreign law. Paying interest on securities 

tendered during a subsequent offering 

period in accordance with this section 

will not be deemed to violate § 240.14d– 

10(a)(2). 

(vii) Suspension of withdrawal rights 

during counting of tendered securities. 

The bidder may suspend withdrawal 

rights required under section 14(d)(5) of 

the Act (15 U.S.C. 78n(d)(5)) at the end 

of the offer and during the period that 

securities tendered into the offer are 

being counted, provided that: 

(A) The bidder has provided an offer 

period including withdrawal rights for a 

period of at least 20 U.S. business days; 

(B) At the time withdrawal rights are 

suspended, all offer conditions have 

been satisfied or waived, except to the 

extent that the bidder is in the process 

of determining whether a minimum 

acceptance condition included in the 

terms of the offer has been satisfied by 

counting tendered securities; and 

(C) Withdrawal rights are suspended 

only during the counting process and 

are reinstated immediately thereafter, 

except to the extent that they are 

terminated through the acceptance of 

tendered securities. 

(viii) Mix and match elections and the 

subsequent offering period. 

Notwithstanding the requirements of 

§ 240.14d–11(b), where the bidder offers 

target security holders a choice between 

different forms of consideration, it may 

establish a ceiling on one or more forms 

of consideration offered. 

Notwithstanding the requirements of 

§ 240.14d–11(f), a bidder that 

establishes a ceiling on one or more 

forms of consideration offered pursuant 

to this subsection may offset elections of 

tendering security holders against one 

another, subject to proration, so that 

elections are satisfied to the greatest 

extent possible and prorated to the 

extent that they cannot be satisfied in 

full. Such a bidder also may separately 

offset and prorate securities tendered 

during the initial offering period and 

those tendered during any subsequent 

offering period, notwithstanding the 

requirements of § 240.14d–10(c). 

(ix) Early termination of an initial 

offering period. A bidder may terminate 

an initial offering period, including a 

voluntary extension of that period, if at 

the time the initial offering period and 

withdrawal rights terminate, the 

following conditions are met: 

(A) The initial offering period has 

been open for at least 20 U.S. business 

days; 

(B) The bidder has adequately 

discussed the possibility of and the 

impact of the early termination in the 

original offer materials; 

(C) The bidder provides a subsequent 

offering period after the termination of 

the initial offering period; 

(D) All offer conditions are satisfied as 

of the time when the initial offering 

period ends; and 

(E) The bidder does not terminate the 

initial offering period or any extension 

of that period during any mandatory 

extension required under U.S. tender 

offer rules. 

Instructions to paragraphs (c) and (d): 

* * * * * 

2. * * * 

i. Calculate the U.S. ownership as of 

a date no more than 60 before and no 

more than 30 days after public 

announcement of the tender offer. If you 

are unable to calculate as of a date 

within these time frames, the 

calculation may be made as of the most 

recent practicable date before public 

announcement, but in no event earlier 

than 120 days before announcement; 

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 the 

bidder; 

* * * * * 

3. In a tender offer by a bidder other 

than an affiliate of the issuer of the 

subject securities that is not made 

pursuant to an agreement with 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 less than 10 percent (40 percent in 

the case of paragraph (d) of this section) 

of such outstanding securities, unless 

paragraphs 3.i., ii., or iii. of the 

instructions to paragraphs (c) and (d) of 

this section indicate otherwise. In 

addition, where the bidder is unable to 

conduct the analysis of U.S. ownership 

set forth in Instruction 2 to paragraphs 

(c) and (d) of this section, the bidder 

may presume that the percentage of 

securities held by U.S. holders is less 

than 10 percent (40 percent in the case 

of paragraph (d) of this section) of the 

outstanding securities so long as there is 

a primary trading market for the subject 

securities outside the U.S., as defined in 

§ 240.12h–6(f)(5) of this chapter, unless: 

i. Average daily trading volume of the 

subject securities in the United States 

for a recent twelve-month period ending 

on a date no more than 60 days before 

the public announcement of the offer 

exceeds 10 percent (40 percent in the 

case of paragraph (d) of this section) of 

the average daily trading volume of that 

class of securities on a worldwide basis 

for the same period; or 

ii. 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 or any jurisdiction in 

which the subject securities trade before 

the public announcement of the offer 

indicates that U.S. holders hold more 

than 10 percent (40 percent in the case 

of paragraph (d) of this section) of the 

outstanding subject class of securities; 

or 

iii. The bidder knows or has reason to 

know, before the public announcement 

of the offer, that the level of U.S. 

ownership exceeds 10 percent (40 

percent in the case of paragraph (d) of 

this section) of such securities. As an 

example, a bidder is deemed to know 

information about U.S. ownership of the 

subject class of securities that is 

publicly available and that appears in 

any filing with the Commission or any 

regulatory body in the issuer’s 

jurisdiction of incorporation or (if 

different) the non-U.S. jurisdiction in 

which the primary trading market for 

the subject securities is located. The 

bidder is deemed to know information 

about U.S. ownership available from the 

issuer or obtained or readily available 

from any other source that is reasonably 

reliable, including from persons it has 

retained to advise it about the 

transaction, as well as from third-party 

information providers. These examples 

are not intended to be exclusive. 

* * * * * 

■ 18. Amend § 240.14d–11 by revising 

the introductory text to read as follows: 


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Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 60093 

§ 240.14d–11. Subsequent offering period. 

A bidder may elect to provide a 

subsequent offering period of at least 

three business days during which 

tenders will be accepted if: 

* * * * * 

■ 19. Amend § 240.14d–100 by adding a 

statement regarding reliance on the 

cross-border exemptions and check 

boxes on the cover page immediately 

before the General Instructions to read 

as follows: 

§ 240.14d–100 Schedule TO. Tender offer 

statement under section 14(d)(1) or 13(e)(1) 

of the Securities Exchange Act of 1934. 

* * * * * 

If applicable, check the appropriate 

box(es) below to designate the 

appropriate rule provision(s) relied 

upon: 

[ ] Rule 13e–4(i) (Cross-Border Issuer 

Tender Offer) 

[ ] Rule 14d–1(d) (Cross-Border ThirdParty Tender Offer) 

* * * * * 

■ 20. Amend § 240.14e–5 by: 

■ a. Removing ‘‘and’’ at the end of 

paragraphs (b)(9)(v) and (c)(6); 

■ b. Removing the period at the end of 

paragraphs (b)(10)(v) and (c)(7) and 

adding in its place ‘‘; and’’; and 

■ c. Adding paragraphs (b)(11), (b)(12), 

(c)(8), and (c)(9). 

The additions read as follows: 

§ 240.14e–5. Prohibiting purchases 

outside of a tender offer. 

* * * * * 

(b) * * * 

(11) Purchases or arrangements to 

purchase pursuant to a foreign tender 

offer(s). Purchases or arrangements to 

purchase pursuant to a foreign offer(s) 

where the offeror seeks to acquire 

subject securities through a U.S. tender 

offer and a concurrent or substantially 

concurrent foreign offer(s), if the 

following conditions are satisfied: 

(i) The U.S. and foreign tender offer(s) 

meet the conditions for reliance on the 

Tier II cross-border exemptions set forth 

in § 240.14d–1(d); 

(ii) The economic terms and 

consideration in the U.S. tender offer 

and foreign tender offer(s) are the same, 

provided that any cash consideration to 

be paid to U.S. security holders may be 

converted from the currency to be paid 

in the foreign tender offer(s) to U.S. 

dollars at an exchange rate disclosed in 

the U.S. offering documents; 

(iii) The procedural terms of the U.S. 

tender offer are at least as favorable as 

the terms of the foreign tender offer(s); 

(iv) The intention of the offeror to 

make purchases pursuant to the foreign 

tender offer(s) is disclosed in the U.S. 

offering documents; and 

(v) Purchases by the offeror in the 

foreign tender offer(s) are made solely 

pursuant to the foreign tender offer(s) 

and not pursuant to an open market 

transaction(s), a private transaction(s), 

or other transaction(s); and 

(12) Purchases or arrangements to 

purchase by an affiliate of the financial 

advisor and an offeror and its affiliates. 

(i) Purchases or arrangements to 

purchase by an affiliate of a financial 

advisor and an offeror and its affiliates 

that are permissible under and will be 

conducted in accordance with the 

applicable laws of the subject 

company’s home jurisdiction, if the 

following conditions are satisfied: 

(A) The subject company is a foreign 

private issuer as defined in § 240.3b– 

4(c); 

(B) The covered person reasonably 

expects that the tender offer meets the 

conditions for reliance on the Tier II 

cross-border exemptions set forth in 

§ 240.14d–1(d); 

(C) No purchases or arrangements to 

purchase otherwise than pursuant to the 

tender offer are made in the United 

States; 

(D) The United States offering 

materials disclose prominently the 

possibility of, or the intention to make, 

purchases or arrangements to purchase 

subject securities or related securities 

outside of the tender offer, and if there 

will be public disclosure of purchases of 

subject or related securities, the manner 

in which information regarding such 

purchases will be disseminated; 

(E) There is public disclosure in the 

United States, to the extent that such 

information is made public in the 

subject company’s home jurisdiction, of 

information regarding all purchases of 

subject securities and related securities 

otherwise than pursuant to the tender 

offer from the time of public 

announcement of the tender offer until 

the tender offer expires; 

(F) Purchases or arrangements to 

purchase by an offeror and its affiliates 

must satisfy the following additional 

condition: the tender offer price will be 

increased to match any consideration 

paid outside of the tender offer that is 

greater than the tender offer price; and 

(G) Purchases or arrangements to 

purchase by an affiliate of a financial 

advisor must satisfy the following 

additional conditions: 

(1) The financial advisor and the 

affiliate maintain and enforce written 

policies and procedures reasonably 

designed to prevent the transfer of 

information among the financial advisor 

and affiliate that might result in a 

violation of U.S. federal securities laws 

and regulations through the 

establishment of information barriers; 

(2) The financial advisor has an 

affiliate that is registered as a broker or 

dealer under section 15(a) of the Act (15 

U.S.C. 78o(a)); 

(3) The affiliate has no officers (or 

persons performing similar functions) or 

employees (other than clerical, 

ministerial, or support personnel) in 

common with the financial advisor that 

direct, effect, or recommend 

transactions in the subject securities or 

related securities who also will be 

involved in providing the offeror or 

subject company with financial advisory 

services or dealer-manager services; and 

(4) The purchases or arrangements to 

purchase are not made to facilitate the 

tender offer. 

(ii) Reserved. 

(c) * * * 

(8) Subject company has the same 

meaning as in § 229.1000 of this 

chapter; and 

(9) Home jurisdiction has the same 

meaning as in the Instructions to 

paragraphs (c) and (d) of § 240.14d–1. 

* * * * * 

■ 21. Amend § 240.16a–1 by: 

■ a. Revising paragraph (a)(1)(vii); 

■ b. Removing ‘‘and’’ from the end of 

paragraph (a)(1)(ix); and 

■ c. Revising paragraphs (a)(1)(x) and 

(xi). 

The revisions read as follows: 

§ 240.16a–1 Definition of terms. 

* * * * * 

(a) * * * 

(1) * * * 

(vii) A parent holding company or 

control person, provided the aggregate 

amount held directly by the parent or 

control person, and directly and 

indirectly by their subsidiaries or 

affiliates that are not persons specified 

in § 240.16a–1 (a)(1)(i) through (x), does 

not exceed one percent of the securities 

of the subject class; 

* * * * * 

(x) A non-U.S. institution that is the 

functional equivalent of any of the 

institutions listed in paragraphs (a)(1)(i) 

through (ix) of this section, so long as 

the non-U.S. institution is subject to a 

regulatory scheme that is substantially 

comparable to the regulatory scheme 

applicable to the equivalent U.S. 

institution and the non-U.S. institution 

is eligible to file a Schedule 13G 

pursuant to § 240.13d–1(b)(1)(ii)(J); and 

(xi) A group, provided that all the 

members are persons specified in 

§ 240.16a–1 (a)(1)(i) through (x). 

* * * * * 


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60094 Federal Register / Vol. 73, No. 197 / Thursday, October 9, 2008 / Rules and Regulations 

PART 241—INTERPRETATIVE 

RELEASES RELATING TO THE 

SECURITIES EXCHANGE ACT OF 1934 

AND GENERAL RULES AND 

REGULATIONS THEREUNDER 

■ 22. Part 241 is amended by adding 

Release No. 34–58597 and the release 

date of September 19, 2008, to the list 

of interpretative releases. 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 23. The authority citation for part 249 

continues to read in part as follows: 

Authority: 15 U.S.C. 78a et seq., 7202, 

7233, 7241, 7262, 7264, and 7265; and 18 

U.S.C. 1350, unless otherwise noted. 

* * * * * 

■ 24. Amend Form CB (referenced in 

§ 239.800 and § 249.480) by: 

■ a. Revising General Instruction 

II.A.(1); and 

■ b. Revising General Instruction 

II.A.(4). 

Note: The text of Form CB does not and 

this amendment will not appear in the Code 

of Federal Regulations. 

Form CB 

TENDER OFFER/RIGHTS OFFERING 

NOTIFICATION FORM 

(AMENDMENT NO. llll) 

* * * * * 

GENERAL INSTRUCTIONS 

* * * * * 

II. Instructions for Submitting Form 

A. (1) Regulation S–T Rule 

101(a)(1)(vi) (17 CFR 232.101(a)(1)(vi)) 

requires a party to submit the Form CB 

in electronic format via the 

Commission’s Electronic Data Gathering 

and Retrieval system (EDGAR) in 

accordance with the EDGAR rules set 

forth in Regulation S–T (17 CFR Part 

232). For assistance with technical 

questions about EDGAR or to request an 

access code, call the EDGAR Filer 

Support Office at (202) 551–8900. 

* * * * * 

(4) If filing the Form CB in paper in 

accordance with a hardship exemption, 

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. You must bind, staple or 

otherwise compile each copy in one or 

more parts without stiff covers. You 

must make the binding on the side or 

stitching margin in a manner that leaves 

the reading matter legible. 

* * * * * 

By the Commission. 

Dated: September 19, 2008. 

J. Lynn Taylor, 

Assistant Secretary. 

[FR Doc. E8–22515 Filed 10–8–08; 8:45 am] 

BILLING CODE 8011–01–P 


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