[Federal Register Volume 73, Number 197 (Thursday, October 9, 2008)]
[Rules and Regulations]
[Pages 60050-60094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22515]



[[Page 60049]]

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Part V





Securities and Exchange Commission





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17 CFR Parts 230, 231, 232, et al.



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; 
Final Rule

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

[[Page 60050]]


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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.

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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\
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    \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.
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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

[[Page 60051]]

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.
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    \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)].
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    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.
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    \24\ The 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.
    \27\ Exchange Act Rules 13e-3(g)(6) [17 CFR 240.13e-3(g)(6)], 
13e-4(h)(8), and 14d-1(c).
    \28\ Exchange Act Rule 14e-2(d) [17 CFR 240.14e-2(d)].
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    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\
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    \29\ Securities 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.
    \31\ 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). 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.
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    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\
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    \33\ Exchange 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.
    \36\ See 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).
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    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 cross-border 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.
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    \37\ Securities 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)].
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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 cross-border 
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 cross-border 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

[[Page 60052]]

various rule changes we proposed should apply to tender offers for U.S. 
companies.\40\
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    \38\ See 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).
    \40\ Additionally, 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.
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    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\
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    \41\ The 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.
    \42\ The 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.
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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.
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    \43\ See 1999 Cross-Border Adopting Release.
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    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.
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    \44\ The 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).
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    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 cross-border 
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\
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    \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.
    \46\ As 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/mr-noaction.shtml#rule14e5.
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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

[[Page 60053]]

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:
    <bullet> 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:
    <bullet> 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
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    \47\ Acquirors 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.
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    <bullet> 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\
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    \48\ This 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.
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    <bullet> 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\
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    \49\ Although 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.
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    <bullet> 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;
    <bullet> 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;
    <bullet> Expansion of relief afforded under Tier II to eliminate 
recurrent conflicts between U.S. and foreign law and practice in 
several areas, including:
    <bullet> Allowing multiple foreign offers in conjunction with a 
concurrent U.S. offer;
    <bullet> 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);
    <bullet> Allowing bidders to suspend back-end withdrawal rights 
while tendered securities are counted;
    <bullet> Allowing subsequent offering periods in both cross-border 
and domestic offers to extend beyond 20 U.S. business days; \50\
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    \50\ We proposed to allow this change only for cross-border 
tender offers.
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    <bullet> 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;
    <bullet> Allowing bidders to pay interest on securities tendered 
during a subsequent offering period, where required under foreign law;
    <bullet> Allowing separate offset and proration pools for 
securities tendered during the initial and subsequent offering periods 
for certain kinds of tender offers; \51\
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    \51\ Separate 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.
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    <bullet> Permitting bidders to terminate an initial offering period 
or any voluntary extension of that period before a scheduled expiration 
date; \52\
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    \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).
---------------------------------------------------------------------------

    <bullet> Codification of three class exemptive letters with respect 
to the application of Rule 14e-5 for Tier II tender offers;
    <bullet> 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\
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    \53\ We proposed to allow this change only for cross-border 
tender offers.
---------------------------------------------------------------------------

    <bullet> 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;
    <bullet> Requiring electronic filing of all Forms CB and Forms F-X, 
filed in connection with Form CB; and
    <bullet> 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\
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    \54\ The 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).
---------------------------------------------------------------------------

    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:
    <bullet> The ability of bidders in tender offers to waive or reduce 
the minimum tender condition without providing withdrawal rights;
    <bullet> 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;
    <bullet> The ability of bidders to exclude U.S. target security 
holders in cross-border tender offers; and
    <bullet> 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 non-negotiated 
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

[[Page 60054]]

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 case-by-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\
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    \55\ See 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).
    \56\ When 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).
    \57\ As 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.
---------------------------------------------------------------------------

    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 look-through analysis assist the acquiror in 
accomplishing the required analysis. We are not changing these 
provisions in our revised rules.
---------------------------------------------------------------------------

    \58\ See 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).
    \59\ See 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \60\ See 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).
    \61\ See new Securities Act Rule 800(h)(6) and Instruction 3 to 
amended Exchange Act Rules 14d-1(c) and (d).
---------------------------------------------------------------------------

    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 cross-border 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.
---------------------------------------------------------------------------

    \62\ See 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)].
---------------------------------------------------------------------------

    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 cross-border 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.
---------------------------------------------------------------------------

    \63\ The 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).
    \64\ As 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.
    \65\ As 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.
---------------------------------------------------------------------------

    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 look-through 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

[[Page 60055]]

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.
---------------------------------------------------------------------------

    \66\ See 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).
    \67\ The existing cross-border exemptions require target 
securities held by holders who individually 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.
    \68\ See, e.g., letter from Sullivan & Cromwell LLP (``S&C'').
---------------------------------------------------------------------------

    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 look-through 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\
---------------------------------------------------------------------------

    \69\ 20 of the 22 comment letters we received addressed this 
issue, either directly or indirectly.
    \70\ These 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'').
    \71\ As 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).
    \72\ See 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).
    \73\ See 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.
    \74\ See 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).
---------------------------------------------------------------------------

    We believe the changes to the look-through 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.
---------------------------------------------------------------------------

    \75\ See Securities Act Rules 801 and 802.
---------------------------------------------------------------------------

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 cross-border 
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.
---------------------------------------------------------------------------

    \76\ See 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.
    \77\ See 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).
    \78\ See 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).
    \79\ See 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \80\ See, e.g., The Forum for U.S. Securities Lawyers in London.
    \81\ See, 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \82\ See 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.
    \84\ Two commenters, Shearman and Davis Polk & Wardwell 
(``DPW''), advocated a range extending 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.

---------------------------------------------------------------------------

[[Page 60056]]

    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 look-
through 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 look-through analysis. Where 
the acquiror or issuer cannot accomplish the look-through analysis 
within this time period, it may use the alternate test outlined below.
---------------------------------------------------------------------------

    \85\ See 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \87\ See 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)].
    \88\ Under 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \89\ See 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.
    \90\ See, e.g., letters from STB and S&C.
    \91\ See letter from STB.
    \92\ This could be the case where a foreign private issuer had a 
disproportionate number of large U.S. security holders of the 
subject class.
    \93\ See letter from DPW.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \94\ See amended Securities Act Rule 800(h)(2) and Instruction 
2.ii. to amended Exchange Act Rules 14d-1(c) and (d).
    \95\ See letter from ABA.
    \96\ Id.
---------------------------------------------------------------------------

    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.

[[Page 60057]]

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\
---------------------------------------------------------------------------

    \97\ See, e.g., letters from Cleary Gottlieb Steen & Hamilton 
LLP (``Cleary'') and DPW.
    \98\ See 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.
    \99\ Pub. L. No. 90-439, 82 Stat. 454 (1968).
---------------------------------------------------------------------------

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\
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    \100\ Cf. 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).
---------------------------------------------------------------------------

    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 look-through 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.
---------------------------------------------------------------------------

    \101\ Under 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 look-through as of date within this extended time 
frame, the acquiror or issuer is unable to conduct the look-through 
for purposes of our rules and may rely on the alternate 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\
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    \102\ These 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.
    \103\ See 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 
look-through analysis is not available to issuers or affiliated 
bidders.
    \104\ See the Proposing Release, Section II.A.3.a. and the 1999 
Cross-Border Adopting Release, Section II.F.3.
---------------------------------------------------------------------------

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 non-negotiated 
transactions may continue to rely on the alternate test, which is 
similar to and replaces the current ``hostile presumption.''
---------------------------------------------------------------------------

    \105\ See 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).
---------------------------------------------------------------------------

    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

[[Page 60058]]

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.
---------------------------------------------------------------------------

    \106\ The 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.
    \107\ See 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).
    \108\ See Securities Act Rule 802(c) and Instruction 3 to 
Exchange Act Rules 14d-1(c) and (d).
    \109\ See 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \110\ See new Securities Act Rule 800(h)(6) and Instruction 3 to 
amended Exchange Act Rules 14d-1(c) and (d).
    \111\ See 1999 Cross-Border Adopting Release, Section II.F.3.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \112\ See 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.
    \113\ See Instruction 2 to amended Exchange Act Rules 14d-1(c) 
and (d).
---------------------------------------------------------------------------

    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 
look-through 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\
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    \114\ See Exchange Act Rule 12h-6(f)(5).
    \115\ We 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.
    \116\ Exchange 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.
    \117\ Exchange Act Rule 12h-6(f)(5)(ii) [17 CFR 240.12h-
6(f)(5)(ii)].
    \118\ See letters from Bredin Prat, De Brauw Blackstone 
Westbroek, Hengeler Mueller, Slaughter and May, and Uria Menendez, 
STB, and Sompo Japan Insurance Inc.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \119\ See letter from ABA.
    \120\ This 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.
---------------------------------------------------------------------------

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

[[Page 60059]]

reports or other filings indicate levels of U.S. ownership that exceed 
applicable limits for that exemption.\121\
---------------------------------------------------------------------------

    \121\ See 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).
---------------------------------------------------------------------------

    This element of the alternate test is virtually identical to the 
comparable element of the existing test for non-negotiated 
transactions.\122\ The only change from the prior test for non-
negotiated 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.
---------------------------------------------------------------------------

    \122\ See 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
    \124\ A 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.
---------------------------------------------------------------------------

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 cross-border 
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\
---------------------------------------------------------------------------

    \125\ See 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).
    \126\ 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \127\ See proposed Securities Act Rule 802(c)(4) and proposed 
Instruction 3.iv. to Exchange Act Rules 14d-1(c) and (d).
    \128\ Id.
    \129\ Only ``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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \130\ See, e.g., letter from DPW.
    \131\ See 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.
---------------------------------------------------------------------------

    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.

[[Page 60060]]

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\
---------------------------------------------------------------------------

    \133\ One commenter requested that we clarify that we are not 
establishing such a requirement. See letter from Cravath, Swaine, & 
Moore LLP (``Cravath'').
    \134\ The proposed rules note that the sources listed are not 
intended to be an exclusive list.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \135\ We 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).
    \136\ See, e.g., letter from ABCNY.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \137\ See amended Securities Act Rule 800(h).
    \138\ See 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \139\ See 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.
    \140\ See letters from Cravath and S&C.
---------------------------------------------------------------------------

    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 look-through 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\
---------------------------------------------------------------------------

    \141\ See 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.
---------------------------------------------------------------------------

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 cross-border 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\
---------------------------------------------------------------------------

    \142\ See Instruction to amended Exchange Act Rule 13e-3(g)(6).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \143\ See letters from ABA, ABCNY, Cravath, and DPW.
---------------------------------------------------------------------------

    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

[[Page 60061]]

U.S. investors make up more than 10 percent of a foreign target's 
security holder base.
---------------------------------------------------------------------------

    \144\ See letter from ABCNY.
---------------------------------------------------------------------------

    Another commenter called for us to exempt from the application of 
Rule 13e-3 any transaction subject to a third-party 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.
---------------------------------------------------------------------------

    \145\ See letter from the ABA.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \146\ Where 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 cross-border 
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.
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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\
---------------------------------------------------------------------------

    \147\ See amended Exchange Act Rules 13e-4(i) and 14d-1(d).
---------------------------------------------------------------------------

    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\
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    \148\ 148 See, e.g., letter from Cravath.
    \149\ For 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.
---------------------------------------------------------------------------

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\
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    \150\ See, 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).
---------------------------------------------------------------------------

    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.
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    \151\ Letters from ABA, Cravath, and S&C.
    \152\ Amended Exchange Act Rules 13e-4(i)(2)(ii) and 14d-
1(d)(2)(ii).
---------------------------------------------------------------------------

    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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    \153\ Two 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.
    \154\ See 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.

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[[Page 60062]]

b. U.S. Offer May Include Non-U.S. Holders of ADRs \155\
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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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \156\ Exchange Act Rules 13e-4(i)(2)(ii) and 14d-1(d)(2)(ii).
    \157\ See, 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 Comiss[atilde]o de Mercado de Valores Mobili[aacute]rios 
did not apply to the offer for ADSs of the target company listed on 
the New York Stock Exchange).
    \158\ See 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).
    \159\ See, 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'').
    \160\ See, e.g., ABA.
    \161\ Amended Exchange Act Rules 13e-4(i)(2)(ii) and 14d-
1(d)(2)(ii).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \162\ See Exchange Act Rules 13e-4(f) [17 CFR 240.13e-4(f)] and 
14d-10 [17 CFR 240.14d-10].
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \163\ See amended Exchange Act Rules 13e-4(i)(2)(ii) and 14d-
1(d)(2)(ii).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \164\ See, e.g., Gas Natural SDG, S.A. (March 2, 2006) (``Gas 
Natural'').
    \165\ See amended Exchange Act Rules 13e-4(i)(2)(ii) and 14d-
1(d)(2)(ii).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \166\ Letter from ABA.
---------------------------------------------------------------------------

    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 cross-border 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\
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    \167\ See new Exchange Act Rules 13e-4(f)(2)(v) and 14d-
1(d)(2)(viii).
    \168\ For 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 * * *.''
    \169\ Exchange 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.
---------------------------------------------------------------------------

    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

[[Page 60063]]

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 non-
U.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.
---------------------------------------------------------------------------

    \170\ For 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).
---------------------------------------------------------------------------

    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:
---------------------------------------------------------------------------

    \171\ See, 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.
    \172\ See 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.
---------------------------------------------------------------------------

    <bullet> The bidder has provided an offer period (including 
withdrawal rights) of at least 20 U.S. business days; \173\
---------------------------------------------------------------------------

    \173\ New Exchange Act Rules 13e-4(f)(2)(v)(A) and 14d-
1(d)(2)(viii)(A).
---------------------------------------------------------------------------

    <bullet> At the time withdrawal rights are suspended, all offer 
conditions other than the minimum acceptance condition have been 
satisfied or waived; \174\ and
---------------------------------------------------------------------------

    \174\ For 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.
---------------------------------------------------------------------------

    <bullet> 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\
---------------------------------------------------------------------------

    \175\ New Exchange Act Rules 13e-4(f)(2)(v)(C) and 14d-
1(d)(2)(viii)(C).
---------------------------------------------------------------------------

    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 third-party 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.
---------------------------------------------------------------------------

    \176\ Exchange Act Rule 14d-1(d)(2)(v) [17 CFR 240.14d-
1(d)(2)(v)].
    \177\ Exchange Act Rule 14d-11(b) [17 CFR 240.14d-11(b)].
---------------------------------------------------------------------------

    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\
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    \178\ Letter from ABA.
    \179\ These 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.
    \180\ Letter from STB.
    \181\ See footnote 174 above and footnote 151 in the Proposing 
Release.
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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

[[Page 60064]]

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\
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    \182\ Regulation of Takeovers and Security Holder 
Communications, Release No. 33-7760 (October 22, 1999) [64 FR 61408] 
(``Regulation M-A Adopting Release'').
    \183\ Exchange 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.
    \184\ See Regulation M-A Adopting Release, Section II.G.1.
    \185\ Id.
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    In practice, however, U.S. rules on subsequent offering periods 
have been a source of conflict with foreign regulations in the context 
of cross-border 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.
---------------------------------------------------------------------------

    \186\ Another 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.
    \187\ See 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).
---------------------------------------------------------------------------

    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 squeeze-out 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\
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    \188\ See amended Exchange Act Rule 14d-11.
    \189\ See Exchange Act Rule 14d-11(e) [17 CFR 240.14d-11(e)] and 
amended Exchange Act Rule 14d-1(d)(2)(iv).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \190\ See letters from ABA, Cleary, Cravath, Linklaters, and 
S&C.
    \191\ See letters from ABA, Cleary, and Cravath.
    \192\ Letter from ABA and Exchange Act Rule 14d-11.
    \193\ Exchange Act Rule 14d-11.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \194\ See amended Exchange Act Rule 14d-1(d)(2)(iv).
    \195\ See Exchange Act Rule 14d-11(e) [17 CFR 240.14d-11(e)].
    \196\ See 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \197\ A 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)].
---------------------------------------------------------------------------

    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\
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    \198\ This is the practice in the Netherlands and France, for 
example. See Barclays and Aventis (June 10, 2004).
    \199\ For example, under Canadian law, tendered securities must 
be taken up and paid for within ten calendar days of tender.
    \200\ See 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).
---------------------------------------------------------------------------

    This revised rule we adopt today is slightly modified from the 
proposal in

[[Page 60065]]

order to provide expanded flexibility to avoid conflicts between U.S. 
and non-U.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.
---------------------------------------------------------------------------

    \201\ See Proposing Release, Section II.C.4.a.
    \202\ See letter from Linklaters.
---------------------------------------------------------------------------

    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\
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    \203\ See letters from ABA, Shearman, and S&C.
    \204\ See note to Exchange Act Rule 14d-11.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \205\ The 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 * * *.''
---------------------------------------------------------------------------

    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 cross-border 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.
---------------------------------------------------------------------------

    \206\ See Exchange Act Rule 14d-1(d)(2) [17 CFR 240.14d-1(d)(2)] 
and Section II.C.4.a. of this release.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \207\ New 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.
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    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.
---------------------------------------------------------------------------

    \210\ Exchange Act Rules 14d-10 and 14d-11(f) [17 CFR 240.14d-
11(f)].
    \211\ See, e.g., Telemar; Embratel; and Blackstone Entities 
(December 16, 2004).
---------------------------------------------------------------------------

    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.
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    \212\ One 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \213\ See letter from ABA.
---------------------------------------------------------------------------

    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\

[[Page 60066]]

 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.
---------------------------------------------------------------------------

    \214\ See letter from Cravath.
    \215\ To 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.
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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\
---------------------------------------------------------------------------

    \216\ For a discussion of the mechanics of a mix and match 
cross-border tender offer, see, e.g., Barclays and Alcan.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \217\ Exchange Act Rule 14d-11(f).
    \218\ Exchange Act Rule 14d-11(b).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \219\ See 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).
    \220\ New Exchange Act Rule 14d-1(d)(2)(viii).
    \221\ See Exchange Act Rule 14d-11(f).
    \222\ See, e.g., Germany and the United Kingdom.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \223\ See letters from ABA and Cleary.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \224\ Exchange 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.
    \225\ A 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.
---------------------------------------------------------------------------

    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 cross-border 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 cross-border 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

[[Page 60067]]

are necessary to assure that the guidance is used for the purposes for 
which it was originally granted.\228\
---------------------------------------------------------------------------

    \226\ See 1998 Cross-Border Proposing Release, Section II.C.2.f.
    \227\ For 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.
    \228\ See Proposing Release, Section II.C.5.
---------------------------------------------------------------------------

    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:
---------------------------------------------------------------------------

    \229\ Our 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.
---------------------------------------------------------------------------

    <bullet> 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\
---------------------------------------------------------------------------

    \230\ As noted above, a statement in the initial offering 
materials will not satisfy this condition.
---------------------------------------------------------------------------

    <bullet> 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\
---------------------------------------------------------------------------

    \231\ This announcement should be filed on EDGAR, as is 
generally the practice today.
---------------------------------------------------------------------------

    <bullet> 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;
    <bullet> During the five-day period after the announcement of a 
possible waiver or reduction, withdrawal rights must be provided;
    <bullet> 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;
    <bullet> The procedure for waiving or reducing the minimum 
acceptance conditions must be described in the offering materials;
    <bullet> The offer must remain open for at least five business days 
after the waiver or reduction of the minimum acceptance condition;
    <bullet> All offer conditions are satisfied or waived when 
withdrawal rights are terminated; \232\
---------------------------------------------------------------------------

    \232\ See 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.
---------------------------------------------------------------------------

    <bullet> 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
---------------------------------------------------------------------------

    \233\ The 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.
---------------------------------------------------------------------------

    <bullet> 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.
---------------------------------------------------------------------------

    \234\ We consider a ``majority'' for these purposes to be any 
number greater than 50 percent 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\
---------------------------------------------------------------------------

    \235\ See Proposing Release, Section II.C.5.
    \236\ See letter from ABA.
    \237\ We 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.
    \238\ See 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.
    \239\ See Proposing Release, Section II.C.5.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \240\ See letters from ABA and Cravath.
    \241\ Cf. Commission Guidance on the Use of Company Web Sites, 
Release No. 34-58288 (August 1, 2008).
---------------------------------------------------------------------------

    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

[[Page 60068]]

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.
---------------------------------------------------------------------------

    \242\ See letter from ABA.
    \243\ See letter from STB.
---------------------------------------------------------------------------

    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 cross-border 
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.
---------------------------------------------------------------------------

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

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\
---------------------------------------------------------------------------

    \245\ As 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.
    \246\ We 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \248\ See AstraZeneca PLC (May 23, 2006); Harmony Gold 2005; and 
In the Matter of Central and South West Corp. (September 27, 1995).
    \249\ See letters from ABA and Linklaters.
    \250\ Letter from Linklaters.
---------------------------------------------------------------------------

    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:
    <bullet> The initial offering period has been open for at least 20 
U.S. business days and all offer conditions have been satisfied;
    <bullet> The bidder has adequately discussed the possibility and 
the impact of the early termination in the original offer materials;
    <bullet> The bidder provides a subsequent offering period after the 
termination of the initial offering period;
    <bullet> All offer conditions are satisfied as of the time when the 
initial offering period ends; and
    <bullet> 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\
---------------------------------------------------------------------------

    \251\ A 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).
---------------------------------------------------------------------------

    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;

[[Page 60069]]

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-by-case basis.
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    \252\ See Proposing Release, footnote 216.
    \253\ See 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \255\ See 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'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \256\ 1999 Cross-Border Adopting Release, Section II.C.1.
    \257\ Regulation M-A Adopting Release, Section II.G.5.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \258\ See letters from ABA, ABCNY, Cleary, Cravath, DPW, Osler 
Hoskin Harcourt LLP (``Osler''), S&C.
---------------------------------------------------------------------------

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\
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    \259\ See, e.g., letters from Cleary, Cravath, and S&C.
    \260\ See Proposing Release, Section II.C.7.
    \261\ New Exchange Act Rule 14e-5(b)(11)(i) through (v).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

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

    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.
---------------------------------------------------------------------------

    \263\ Letter from Cleary.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \264\ See Proposing Release, Section II.C.7.
    \265\ New Exchange Act Rule 14e-5(b)(12).
---------------------------------------------------------------------------

    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

[[Page 60070]]

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.
---------------------------------------------------------------------------

    \266\ Letter from Cleary.
    \267\ Letter from Cleary (citing Condition 4 in the Financial 
Advisor letter).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \268\ Letters from ABA, ABCNY, DPW, and S&C.
    \269\ See letters from ABA and S&C.
    \270\ Letter from ABCNY.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \271\ Letter from Cleary.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \272\ Letter from Cravath.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \273\ Id.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \274\ See, 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \275\ See proposed Securities Act Rule 162(a) and proposed 
Exchange Act Rules 13e-4(i)(2)(vi) and 14d-1(d)(2)(x).
    \276\ Securities Act Rule 162(a) [17 CFR 230.162(a)].
    \277\ See 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.
---------------------------------------------------------------------------

    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,

[[Page 60071]]

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:
---------------------------------------------------------------------------

    \278\ See letters from ABA, Cleary, and STB.
    \279\ Id.
    \280\ See amended Securities Act Rule 162(a) and (b).
---------------------------------------------------------------------------

    <bullet> The bidder provides withdrawal rights to the same extent 
as would be required under Rule 13e-4 and Regulation 14D; \281\ and
---------------------------------------------------------------------------

    \281\ This includes back-end withdrawal rights as well as 
withdrawal rights during an offer.
---------------------------------------------------------------------------

    <bullet> 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\
---------------------------------------------------------------------------

    \282\ In addition, see below for a discussion of prospectus 
delivery requirements.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

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

    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 cross-border 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 cross-border 
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.
---------------------------------------------------------------------------

    \284\ The 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.
    \285\ See 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).
    \286\ See Section II.C.5 above.
    \287\ See, 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \288\ See 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].
    \289\ This 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.
---------------------------------------------------------------------------

    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 going-private 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 roll-ups or going-private 
transactions.\291\
---------------------------------------------------------------------------

    \290\ See Exchange Act Rules 13e-4(e)(2) and 14d-4(b) [17 CFR 
240.13e-4(e)(2) and 240.14d-4(b)].
    \291\ See the Instruction to amended Securities Act Rule 162.
---------------------------------------------------------------------------

    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

[[Page 60072]]

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).
---------------------------------------------------------------------------

    \292\ See 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 non-reporting person may submit a Form CB 
electronically but is not required to do so.\294\
---------------------------------------------------------------------------

    \293\ See 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)].
    \294\ See 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)].
---------------------------------------------------------------------------

    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 non-reporting 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\
---------------------------------------------------------------------------

    \295\ Form F-X must be filed by all foreign companies that 
furnish a Form CB to the Commission and in other circumstances.
    \296\ Letter from ABA.
    \297\ Letter from S&C.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
    \299\ We 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \301\ Letter from ABA.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \302\ Letters from ABA and STB.
    \303\ Id.
---------------------------------------------------------------------------

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

[[Page 60073]]

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.
---------------------------------------------------------------------------

    \304\ 15 U.S.C. 78m(d).
    \305\ 15 U.S.C. 78m(g).
    \306\ Regulation 13D Exchange Act Rule 13d-1 et seq. [17 CFR 
240.13d-1 et seq.].
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
    \312\ Codified principally in 29 U.S.C. 1001-1461.
---------------------------------------------------------------------------

    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 no-action 
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\
---------------------------------------------------------------------------

    \313\ See, 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \314\ Letter from Ontario Teachers' Pension Plan Board 
(``Teachers'').
    \315\ Letter from Cleary.
    \316\ Letter from ABA, Cleary, and Teachers.
---------------------------------------------------------------------------

    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 no-action 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:

    \317\ We 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.''
---------------------------------------------------------------------------

    [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\
---------------------------------------------------------------------------

    \319\ See, e.g, Nataxis S.A., Banque Federale des Banques 
Populaires and Caisse National des Caisses d'Epargne (October 9, 
2007).

    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

[[Page 60074]]

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.
---------------------------------------------------------------------------

    \320\ See letters from Teachers and ABA.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \321\ Letter from ABA.
---------------------------------------------------------------------------

    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 short-form 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.
---------------------------------------------------------------------------

    \322\ See Exchange Act Rule 13d-1(b)(1)(i) [17 CFR 240.13d-
1(b)(1)(i)].
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \323\ See letters from ABA and S&C.
    \324\ See 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).
    \325\ See Amendments to Beneficial Ownership Reporting 
Requirements, Release 34-39538 (January 12, 1998).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \326\ See 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).
    \327\ CS Holding (January 16, 1992).

---------------------------------------------------------------------------

[[Page 60075]]

    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 cross-border 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.
---------------------------------------------------------------------------

    \328\ See Section II.G.2. below.
---------------------------------------------------------------------------

    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:
---------------------------------------------------------------------------

    \329\ See Exchange Act Rules 13e-4(f) and 14d-10. Some tender 
offers are not subject to U.S. all-holders requirements, such as 
offers subject only to Regulation 14E because the target securities 
are not registered under Section 12 of the Exchange Act.
    \330\ See 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).
    \331\ The 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.
---------------------------------------------------------------------------

    <bullet> 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
---------------------------------------------------------------------------

    \332\ Pursuant 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).
---------------------------------------------------------------------------

    <bullet> 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\
---------------------------------------------------------------------------

    \333\ See Amendments to Tender Offer Rules: All-Holders and 
Best-Price, Release No. 34-23421 (July 11, 1986) [51 FR 25873] 
(``All-Holders and Best-Price 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.
---------------------------------------------------------------------------

    Because this is not a new position, and generally bidders have not 
expressed concerns about U.S. all-holders 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.
---------------------------------------------------------------------------

    \334\ See letter from DPW.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \335\ See Hallwood Energy Partners, LP (May 1, 1990) and 
Freeport-McMoran Energy Partners Ltd. (June 19, 1989).
    \336\ See 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).
---------------------------------------------------------------------------

    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

[[Page 60076]]

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.
---------------------------------------------------------------------------

    \337\ Four 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.
---------------------------------------------------------------------------

    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 cross-border 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.
---------------------------------------------------------------------------

    \338\ See Proposing Release, Section II.G.2.
    \339\ See 1999 Cross-Border Adopting Release, Section II.G.
    \340\ See 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'').
    \341\ As 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \342\ By ``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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \343\ See 1998 Internet Release, Section III.B.
    \344\ See 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \349\ See 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.
---------------------------------------------------------------------------

    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

[[Page 60077]]

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\
---------------------------------------------------------------------------

    \350\ See generally, 1998 Internet Release, Section III.C. and 
Proposing Release, Section II.G.2.
    \351\ See id.
    \352\ Id.
---------------------------------------------------------------------------

    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 capital-raising 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.
---------------------------------------------------------------------------

    \353\ See, e.g., letter from ABA.
    \354\ We 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.
    \355\ See 1999 Cross-Border Adopting Release at footnote 91.
---------------------------------------------------------------------------

    With the expansion of the cross-border 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 cross-border 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.
---------------------------------------------------------------------------

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

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.
---------------------------------------------------------------------------

    \357\ We 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 cross-
border 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.
---------------------------------------------------------------------------

    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 cross-border 
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.
---------------------------------------------------------------------------

    \358\ See Proposing Release, Section II.G.3.
    \359\ See 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.
---------------------------------------------------------------------------

    Since 1999, Tier I has afforded a method by which bidders in cross-
border 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.

[[Page 60078]]

    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:
---------------------------------------------------------------------------

    \360\ See, 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).
    \361\ One 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.
---------------------------------------------------------------------------

    <bullet> The level of U.S. ownership in the target company; \362\
---------------------------------------------------------------------------

    \362\ As we stated in the Proposing Release, offerors should be 
particularly cognizant of this factor. See Proposing Release, 
Section II.G.3.
---------------------------------------------------------------------------

    <bullet> 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;
    <bullet> 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;
    <bullet> The liquidity and general trading market for the bidder's 
securities;
    <bullet> 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;
    <bullet> The likelihood that the bidder plans to disclose material 
information around the time of the vendor placement sales; and
    <bullet> The process used to effect the vendor placement 
sales.\363\
---------------------------------------------------------------------------

    \363\ We assume that the sales will be effected pursuant to the 
procedure under Category 1 of Regulation S [17 CFR 230.903(b)(1)].
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \364\ Early 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \365\ See Exchange Act Rules 13e-4(f)(8) [17 CFR 240.13e-
4(f)(8)] and 14d-10 [17 CFR 240.14d-10].
    \366\ See Proposing Release, Section II.G.3 and footnote 91 in 
the 1999 Cross-Border Adopting Release.
    \367\ See Proposing Release, Section II.G.3.
---------------------------------------------------------------------------

    Most of the vendor placement no-action 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.
---------------------------------------------------------------------------

    \368\ See footnote 360 above. But see TABCORP Holdings Ltd. 
(August 20, 1999) (``TABCORP'').
    \369\ One 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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \370\ 44 U.S.C. 3501 et seq.
    \371\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
---------------------------------------------------------------------------

    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);

[[Page 60079]]

    (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 cross-border 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 x .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\
---------------------------------------------------------------------------

    \372\ These 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.
---------------------------------------------------------------------------

    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 no-action letter. Therefore, the 
amended

[[Page 60080]]

rule may result in only a slight increase in the number of Schedule 13G 
filers.\373\
---------------------------------------------------------------------------

    \373\ Based 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 no-action relief to file on Schedule 13G will also benefit by 
becoming eligible to use the shorter Schedule 13G. See discussion 
above.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \374\ We 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) x 9500 respondents).
    \375\ Three additional filers x .50 hours of respondent 
personnel time = 1.50 aggregate burden hours.
    \376\ Three additional filers x $600 = $1,800.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \377\ We 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \378\ We calculate this figure in the following manner: 14,500 
hours/29,000 filers = .5 hours reporting burden per filer.
    \379\ We 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.
---------------------------------------------------------------------------

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 cross-border 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 non-negotiated 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

[[Page 60081]]

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.
---------------------------------------------------------------------------

    \380\ This 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.
---------------------------------------------------------------------------

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

[[Page 60082]]

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 cross-border 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 cross-border 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.
---------------------------------------------------------------------------

    \381\ See discussion in the Proposing Release, Section V.B.1.a.
---------------------------------------------------------------------------

    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 
cross-border 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

[[Page 60083]]

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 cross-border 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 readily-accessible 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.
---------------------------------------------------------------------------

    \382\ See the discussion above regarding the changes to the 
threshold eligibility determination relating to the calculation of 
U.S. ownership.
---------------------------------------------------------------------------

    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 no-action 
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

[[Page 60084]]

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 cross-border 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.
---------------------------------------------------------------------------

    \383\ The 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.
---------------------------------------------------------------------------

    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 cross-border 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 e-
filing 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.
---------------------------------------------------------------------------

    \384\ Letter from S&C.
    \385\ Letter from ABA.
---------------------------------------------------------------------------

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

[[Page 60085]]

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 no-action 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.
---------------------------------------------------------------------------

    \386\ See Amendments to Beneficial Ownership Reporting 
Requirements, Release No. 34-39538 (January 12, 1998) [63 FR 2854].
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \387\ See letters from ABA and S&C.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \388\ 15 U.S.C. 77b(b)
    \389\ 15 U.S.C. 78c(f).
    \390\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    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 cross-border 
business combination transactions generally, which may promote 
competition by encouraging additional entities to engage in these types 
of transactions.

[[Page 60086]]

    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 cross-border 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.
---------------------------------------------------------------------------

    \391\ 5 U.S.C. 601.
    \392\ Based 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.
---------------------------------------------------------------------------

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 cross-border 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\

[[Page 60087]]

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 cross-border 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.
---------------------------------------------------------------------------

    \393\ 5 U.S.C. 601(6).
    \394\ Securities Act Rule 157 [17 CFR 230.157] and Exchange Act 
Rule 0-10 [17 CFR 240.0-10] contain the applicable definitions.
    \395\ The estimated number of reporting small entities is based 
on 2007 data, including the Commission's EDGAR database and Thomson 
Financial's Worldscope database.
---------------------------------------------------------------------------

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

0
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

0
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.
* * * * *

0
2. Revise Sec.  230.162 to read as follows:


Sec.  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 Sec.  240.13e-4 or Sec. Sec.  
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 Sec.  240.13e-4 or Sec. Sec.  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 Sec.  240.13e-4(e)(3) or Sec.  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 Sec.  
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 Sec.  240.13e-4(e)(2) or Sec.  
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 Sec.  230.162(a)(2) of 
this section.
    Instruction to Sec.  230.162 of this section: Notwithstanding the 
provisions of Sec.  230.162 of this section above, for going-private 
transactions (as defined by Sec.  240.13e-3) and roll-up transactions 
(as described by Item 901 of Regulation S-K (Sec.  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.

0
3. Amend Sec.  230.800 by revising paragraph (h)(1) and(h)(2) and 
adding paragraphs (h)(6) and (h)(7) to read as follows:


Sec.  230.800  Definitions for Sec. Sec.  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 Sec.  
230.802 under the Act or of the record date in a rights offering 
conducted under Sec.  230.801 under the Act. For a business combination 
conducted under Sec.  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

[[Page 60088]]

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 Sec.  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 Sec.  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 Sec.  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 third-party information providers. These examples are not 
intended to be exclusive.
* * * * *

0
4. Amend Sec.  230.802 by revising paragraphs (a)(2) and (a)(3) and 
removing paragraph (c).
    The revisions read as follows:


Sec.  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 (Sec.  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 (Sec.  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

0
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

0
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.
* * * * *

0
7. Amend Sec.  232.101 by:
0
a. Revising paragraphs (a)(1)(vi) and (a)(1)(vii);
0
b. Removing and reserving paragraph (b)(7); and
0
c. Revising paragraph (b)(8).
    The revisions read as follows:


Sec.  232.101  Mandated electronic submissions and exceptions.

    (a) * * *
    (1) * * *
    (vi) Form CB (Sec. Sec.  239.800 and 249.480 of this chapter) filed 
or submitted under Sec.  230.801 or 230.802 of this chapter or Sec.  
240.13e-4(h)(8), 240.14d-1(c), or 240.14e-2(d) of this chapter;
    (vii) Form F-X (Sec.  239.42 of this chapter) when filed in 
connection with a Form CB (Sec. Sec.  239.800 and 249.480 of this 
chapter);
* * * * *
    (b) * * *
    (8) Form F-X (Sec.  232.42 of this chapter) if filed by a Canadian 
issuer when qualifying an offering statement pursuant to the provisions 
of Regulation A (Sec. Sec.  230.251 230.263 of this chapter); and

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
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.

[[Page 60089]]


0
9. Form S-4 (referenced in Sec.  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) (Cross-Border Issuer Tender Offer) [ballot]
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) 
[ballot]
* * * * *

0
10. Amend Form F-4 (referenced in Sec.  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) (Cross-Border Issuer Tender Offer) [ballot]
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) 
[ballot]
* * * * *

0
11. Amend Form F-X (referenced in Sec.  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 
(Sec. Sec.  230.251-230.263 of this chapter).

* * * * *

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

0
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.
* * * * *

0
13. Amend Sec.  240.13d-1 by:
0
a. Revising paragraph (b)(1)(ii)(G) and (J);
0
b. Removing ``and'' from the end of paragraph (b)(1)(ii)(I);
0
c. Adding paragraph (b)(1)(ii)(K); and
0
d. Removing the authority citation following the section.
    The revisions and addition reads as follows:


Sec.  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 Sec.  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 Sec.  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 
Sec.  240.13d-1(b)(1)(ii)(A) through (J).
* * * * *

0
14. Amend Sec.  240.13d-102 by:
0
a. Revising Instruction 12 to the Instruction for the Cover Page before 
the Notes;
0
b. In Item 3 removing the period at the end of paragraphs (a), (b), 
(c), and (d) and in each place adding a semicolon;
0
c. In Item 3 revising paragraph (j) and adding paragraph (k); and
0
d. In Item 10 redesignating paragraph (b) as paragraph (c) and adding 
new paragraph (b).
    The revision and additions read as follows:


Sec.  240.13d-102  Schedule 13G--Information to be included in 
statements filed pursuant to Sec.  240.13d-1(b), (c), and (d) and 
amendments thereto filed pursuant to Sec.  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 Sec.  240.13d-
1(b)(1)(ii)(J);
    (k) [ ] Group, in accordance with Sec.  240.13d-1(b)(1)(ii)(K). If 
filing as a non-U.S. institution in accordance with Sec.  240.13d-
1(b)(1)(ii)(J), please specify the type of institution: --------
* * * * *

Item 10. Certification

* * * * *
    (b) The following certification shall be included if the statement 
is filed pursuant to Sec.  240.13d-1(b)(1)(ii)(J), or if the statement 
is filed pursuant to Sec.  240.13d-1(b)(1)(ii)(K) and a member of the 
group is a non-U.S. institution eligible to file pursuant to Sec.  
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

[[Page 60090]]

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.
* * * * *

0
15. Amend Sec.  240.13e-3 by revising paragraph (g)(6) to read as 
follows:


Sec.  240.13e-3  Going private transactions by certain issuers or their 
affiliates.

* * * * *
    (g) * * *
    (6) Any tender offer or business combination made in compliance 
with Sec.  230.802 of this chapter, Sec.  240.13e-4(h)(8) or Sec.  
240.14d-1(c) or any other kind of transaction that otherwise meets the 
conditions for reliance on the cross-border exemptions set forth in 
Sec.  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 Sec.  240.13e-3(g)(6): To the extent applicable, the 
acquiror must comply with the conditions set forth in Sec.  230.802 of 
this chapter, and Sec. Sec.  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 (Sec.  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 (Sec.  
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.

0
16. Amend Sec.  240.13e-4 by:
0
a. Revising paragraph (h)(8)(i);
0
b. Revising the introductory text of paragraph (i);
0
c. Revising paragraph (i)(1)(ii);
0
d. Revising paragraph (i)(2)(ii);
0
e. Adding paragraphs (i)(2)(v) and (vi);
0
f. Revising paragraphs 2.i. and ii. to the Instructions to paragraph 
(h)(8) and (i);
0
g. Redesignating Instructions 3 and 4 to paragraphs (h)(8) and (i) as 
Instructions 4 and 5 respectively;
0
h. Adding a new Instruction 3 to paragraphs (h)(8) and (i); and
0
i. Revising the newly redesignated Instructions 4 and 5 to paragraphs 
(h)(8) and (i).
    The revisions and additions read as follows:


Sec.  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 Sec.  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 (Sec. Sec.  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 
Sec.  240.14d-1(d), U.S. holders do not hold more than 40 percent of 
the class of securities sought in the offer (as determined 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:
* * * * *

[[Page 60091]]

    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 Sec.  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.
* * * * *

0
17. Amend Sec.  240.14d-1 by:
0
a. Revising paragraph (a);
0
b. Revising paragraph (c)(1);
0
c. Revising the introductory text of paragraph (d), paragraphs 
(d)(1)(ii), (d)(2)(ii) and (d)(2)(iv);
0
d. Adding paragraphs (d)(2)(vi), (d)(2)(vii), (d)(2)(viii), and 
(d)(2)(ix); and
0
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:


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

    (a) Scope. Regulation 14D (Sec. Sec.  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 (Sec. Sec.  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 Sec.  240.13e-4(h)(8), U.S. 
holders do not hold more than 10 percent of the class of securities 
sought in the offer (as determined under 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 (Sec. Sec.  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 Sec.  240.13e-4(i), U.S. holders do not hold more 
than 40 percent of the class of securities sought in the offer (as 
determined under 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 Sec.  240.14d-10, a bidder conducting 
a tender offer meeting the conditions of paragraph (d)(1) of this 
section may separate the offer into 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 Sec.  240.14e-1(c). Where payment may not be made on a 
more expedited basis

[[Page 60092]]

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 
Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  
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 
Sec.  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 Sec.  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.
* * * * *

0
18. Amend Sec.  240.14d-11 by revising the introductory text to read as 
follows:

[[Page 60093]]

Sec.  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:
* * * * *

0
19. Amend Sec.  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:


Sec.  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 Third-Party Tender Offer)
* * * * *

0
20. Amend Sec.  240.14e-5 by:
0
a. Removing ``and'' at the end of paragraphs (b)(9)(v) and (c)(6);
0
b. Removing the period at the end of paragraphs (b)(10)(v) and (c)(7) 
and adding in its place ``; and''; and
0
c. Adding paragraphs (b)(11), (b)(12), (c)(8), and (c)(9).
    The additions read as follows:


Sec.  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 Sec.  
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 
Sec.  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 Sec.  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 Sec.  229.1000 of 
this chapter; and
    (9) Home jurisdiction has the same meaning as in the Instructions 
to paragraphs (c) and (d) of Sec.  240.14d-1.
* * * * *

0
21. Amend Sec.  240.16a-1 by:
0
a. Revising paragraph (a)(1)(vii);
0
b. Removing ``and'' from the end of paragraph (a)(1)(ix); and
0
c. Revising paragraphs (a)(1)(x) and (xi).
    The revisions read as follows:


Sec.  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 Sec.  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 Sec.  
240.13d-1(b)(1)(ii)(J); and
    (xi) A group, provided that all the members are persons specified 
in Sec.  240.16a-1 (a)(1)(i) through (x).
* * * * *

[[Page 60094]]

PART 241--INTERPRETATIVE RELEASES RELATING TO THE SECURITIES 
EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER

0
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

0
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.
* * * * *

0
24. Amend Form CB (referenced in Sec.  239.800 and Sec.  249.480) by:
0
a. Revising General Instruction II.A.(1); and
0
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. --------)

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GENERAL INSTRUCTIONS

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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.
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    (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.
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    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