Union Calendar No. 10
103D CONGRESS
1ST SESSION
H. R. 617
[Report No. 103–21]
A BILL
To amend the Securities Exchange Act of 1934 to
protect investors in limited partnerships in rollup
transactions, and for other purposes.
FEBRUARY 25, 1993
Reported with an amendment, committed to the Commit-
tee of the Whole House on the State of the Union, and
ordered to be printed
IB
Union Calendar No. 10
103D CONGRESS
1ST SESSION
H. R. 617
[Report No. 103–21]
To amend the Securities Exchange Act of 1934 to protect investors in limited
partnerships in rollup transactions, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 26, 1993
Mr. MARKEY (for himself, Mr. FIELDS of Texas, Mr. DINGELL, Mr. SYNAR,
Mr. WYDEN, Mr. SLATTERY, Mr. COOPER, Mr. MORAN, and Mr. NEAL
of Massachusetts) introduced the following bill; which was referred to the
Committee on Energy and Commerce
FEBRUARY 25, 1993
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on January 26, 1993]
A BILL
To amend the Securities Exchange Act of 1934 to protect
investors in limited partnerships in rollup transactions,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Limited Partnership
Rollup Reform Act of 1993’’.
SEC. 2. REVISION OF PROXY SOLICITATION RULES WITH
RESPECT TO LIMITED PARTNERSHIP ROLLUP
TRANSACTIONS.
(a) AMENDMENT.—Section 14 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78n) is amended by adding
at the end the following new subsection:
‘‘(h) PROXY SOLICITATIONS AND TENDER OFFERS IN
CONNECTION
WITH
LIMITED
PARTNERSHIP
ROLLUP
TRANSACTIONS.—
‘‘(1) PROXY RULES TO CONTAIN SPECIAL PROVI-
SIONS.—It shall be unlawful for any person to solicit
any proxy, consent, or authorization concerning a
limited partnership rollup transaction, or to make
any tender offer in furtherance of a limited partner-
ship rollup transaction, unless such transaction is
conducted in accordance with rules prescribed by the
Commission under subsections (a) and (d) as required
by this subsection. Such rules shall—
‘‘(A) permit any holder of a security that is
the subject of the proposed limited partnership
rollup transaction to engage in preliminary
communications for the purposes of determining
whether to solicit proxies, consents, or authoriza-
‘‘(ii) contingent on the transaction’s
approval, disapproval, or completion;
‘‘(D) set forth disclosure requirements for
soliciting material distributed in connection
with a limited partnership rollup transaction,
including requirements for clear, concise, and
comprehensible disclosure with respect to—
‘‘(i) any changes in the business plan,
voting rights, form of ownership interest or
the general partner’s compensation in the
proposed limited partnership rollup trans-
action from each of the original limited
partnerships;
‘‘(ii) the conflicts of interest, if any, of
the general partner;
‘‘(iii) whether it is expected that there
will be a significant difference between the
exchange values of the limited partnerships
and the trading price of the securities to be
issued in the limited partnership rollup
transaction;
‘‘(iv) the valuation of the limited part-
nerships and the method used to determine
the value of limited partners’ interests to be
exchanged for the securities in the limited
partnership rollup transaction;
‘‘(v) the differing risks and effects of
the transaction for investors in different
limited partnerships proposed to be in-
cluded, and the risks and effects of complet-
ing the transaction with less than all lim-
ited partnerships;
‘‘(vi) a statement by the general part-
ner as to whether the proposed limited part-
nership rollup transaction is fair or unfair
to investors in each limited partnership, a
discussion of the basis for that conclusion,
and the general partner’s evaluation, and a
description of alternatives to the limited
partnership rollup transaction, such as liq-
uidation; and
‘‘(vii) such other matters deemed nec-
essary or appropriate by the Commission.
‘‘(E) provide that such soliciting materials
contain or be accompanied by an opinion on the
fairness of the proposed transaction to holders of
each security which is subject to the proposed
transaction that—
‘‘(i) includes such information, rep-
resentations, and undertakings with respect
to the analysis of the transaction, scope of
review, preparation of the opinion, and
basis for and methods of arriving at conclu-
sions as the Commission may require in
such rules; and
‘‘(ii) is prepared by a person—
‘‘(I) who does not receive any
compensation that is contingent on the
transaction’s approval or completion;
‘‘(II) who meets such additional
standards of independence from the
person or persons proposing the rollup
transaction as shall be required in the
rules prescribed by the Commission;
‘‘(III) who has been given access
by the issuer to its personnel and
premises 
and 
relevant 
books 
and
records; and
‘‘(IV) who has represented to have
undertaken an independent analysis of
the fairness of the proposed rollup
transaction to holders based upon the
information obtained through such ac-
cess and upon other independently ob-
tained information;
‘‘(F) require that the soliciting material in-
clude a clear and concise summary of the limited
partnership rollup transaction (including a sum-
mary of the matters referred to in clauses (i)
through (vi) of subparagraph (D) and a sum-
mary of the matter referred to in subparagraph
(E)), with the risks of the limited partnership
rollup transaction set forth prominently in the
forepart thereof;
‘‘(G) provide that any solicitation or offer-
ing period with respect to any proxy solicitation,
tender offer, or information statement in a lim-
ited partnership rollup transaction shall be for
not less than the lesser of 60 calendar days or the
maximum number of days permitted under ap-
plicable State law; and
‘‘(H) contain such other provisions as the
Commission determines to be necessary or appro-
priate for the protection of investors in limited
partnership rollup transactions.
‘‘(2) EXEMPTIONS.—The Commission may, con-
sistent with the public interest, the protection of in-
vestors, and the purposes of this Act, exempt by rule
or order any security or class of securities, any trans-
action or class of transactions, or any person or class
of persons, in whole or in part, conditionally or un-
conditionally, from the requirements imposed pursu-
ant to paragraph (1) or from the definition contained
in paragraph (4).
‘‘(3) EFFECT
ON
COMMISSION
AUTHORITY.—
Nothing in this subsection limits the authority of the
Commission under subsection (a) or (d) or any other
provision of this title or precludes the Commission
from imposing, under subsection (a) or (d) or any
other provision of this title, a remedy or procedure re-
quired to be imposed under this subsection.
‘‘(4) DEFINITION
OF
LIMITED
PARTNERSHIP
ROLLUP TRANSACTION.—As used in this subsection,
the term ‘limited partnership rollup transaction’
means, except as provided in paragraph (5), a trans-
action involving—
‘‘(A) the combination or reorganization of
limited partnerships, directly or indirectly, in
which some or all investors in the limited part-
nerships receive new securities or securities in
another entity, other than a transaction—
‘‘(i) in which—
‘‘(I) the investors’ limited part-
nership securities are reported under a
transaction reporting plan declared ef-
fective before January 1, 1991, by the
Commission under section 11A; and
‘‘(II) the investors receive new se-
curities or securities in another entity
that are reported under a transaction
reporting plan declared effective before
January 1, 1991, by the Commission
under section 11A;
‘‘(ii) involving only issuers that are
not required to register or report under sec-
tion 12 both before and after the trans-
action;
‘‘(iii) in which the securities to be is-
sued or exchanged are not required to be
and are not registered under the Securities
Act of 1933;
‘‘(iv) which will result in no signifi-
cant adverse change to investors in any of
the limited partnerships with respect to vot-
ing rights, the term of existence of the en-
tity, management compensation, or invest-
ment objectives; or
‘‘(v) where each investor is provided an
option to receive or retain a security under
substantially the same terms and conditions
as the original issue; or
‘‘(B) the reorganization of a single limited
partnership in which some or all investors in the
limited partnership receive new securities or se-
curities in another entity, and—
‘‘(i) transactions in the security issued
are reported under a transaction reporting
plan declared effective before January 1,
1991, by the Commission under section 11A;
‘‘(ii) the investors’ limited partnership
securities are not reported under a trans-
action reporting plan declared effective be-
fore January 1, 1991, by the Commission
under section 11A;
‘‘(iii) the issuer is required to register
or report under section 12, both before and
after the transaction, or the securities to be
issued or exchanged are required to be or
are registered under the Securities Act of
1933;
‘‘(iv) there are significant adverse
changes to security holders in voting rights,
the term of existence of the entity, manage-
ment compensation, or investment objec-
tives; and
‘‘(v) investors are not provided an op-
tion to receive or retain a security under
substantially the same terms and conditions
as the original issue.
‘‘(5) EXCLUSION FROM DEFINITION.—As used in
this subsection, the term ‘limited partnership rollup
transaction’ does not include a transaction that in-
volves only a limited partnership or partnerships
having an operating policy or practice of retaining
cash available for distribution and reinvesting pro-
ceeds from the sale, financing, or refinancing of assets
in accordance with such criteria as the Commission
determines appropriate.
‘‘(6) DEFINITION OF PARTNERSHIP.—The term
‘partnership’ includes such other entity having a sub-
stantially economically equivalent form of ownership
instrument as the Commission determines, by rule
consistent with the purposes of this subsection, to in-
clude within this definition.’’.
(b) SCHEDULE FOR REGULATIONS.—The Securities
and Exchange Commission shall, not later than 12 months
after the date of enactment of this Act, conduct rulemaking
proceedings and prescribe final regulations under the Secu-
rities Act of 1933 and the Securities Exchange Act of 1934
to implement the requirements of section 14(h) of the Secu-
rities Exchange Act of 1934, as amended by subsection (a).
SEC. 3. RULES OF FAIR PRACTICE IN ROLLUP TRANS-
ACTIONS.
(a) REGISTERED SECURITIES ASSOCIATION RULE.—
Section 15A(b) of the Securities Exchange Act of 1934 (15
U.S.C. 78o–3(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(12) The rules of the association to promote just
and equitable principles of trade, as required by
paragraph (6), include rules to prevent members of
the association from participating in any limited
partnership rollup transaction (as such term is de-
fined in paragraphs (4) and (5) of section 14(h)) un-
less such transaction was conducted in accordance
with procedures designed to protect the rights of lim-
ited partners, including—
‘‘(A) the right of dissenting limited partners
to the following: (i) an appraisal and compensa-
tion, or (ii) if the association finds that granting
the rights under clause (i) of this subparagraph
would be infeasible or not in the financial inter-
est of the dissenting limited partners, other com-
parable rights designed to protect dissenting lim-
ited partners, which may include the rights set
forth in subparagraph (B);
‘‘(B) when the association determines it to
be necessary to the protection of such rights, the
use of a committee that is independent, as deter-
mined in accordance with rules prescribed by the
association, of the general partner or sponsor
and that would have the authority to protect the
interest of limited partners, including (but not
limited to) the authority (but not the obligation)
to hire independent advisors to represent all lim-
ited partners at the partnership’s expense, to ne-
gotiate the proposed transaction with the general
partner or sponsor on behalf of the limited part-
ners, and to make a recommendation to the lim-
ited partners with respect to the proposed trans-
action, but not the authority to provide consents
or authorizations to the proposed transaction on
behalf of limited partners;
‘‘(C) the right not to have their voting
power unfairly reduced or abridged;
‘‘(D) the right not to bear an unfair portion
of the costs of a proposed rollup transaction that
is rejected; and
‘‘(E) restrictions on the conversion of con-
tingent interests or fees into non-contingent in-
terests or fees and restrictions on the receipt of
a non-contingent equity interest in exchange for
fees for services which have not yet been pro-
vided.
As used in this paragraph, the term ‘dissenting lim-
ited partner’ means a holder of a beneficial interest
in a limited partnership that is the subject of a lim-
ited partnership rollup transaction who casts a vote
against the transaction and complies with procedures
established by the association, except that for purposes
of an exchange or tender offer, such term means any
person who files an objection in writing under the
rules of the association during the period in which the
offer is outstanding and complies with such other pro-
cedures established by the association.’’.
(b) LISTING STANDARDS OF NATIONAL SECURITIES
EXCHANGES.—Section 6(b) of the Securities Exchange Act
of 1934 (15 U.S.C. 78f(b)) is amended by adding at the
end the following:
‘‘(9) The rules of the exchange prohibit the list-
ing of any security issued in a limited partnership
rollup transaction (as such term is defined in para-
graphs (4) and (5) of section 14(h)), unless such
is defined in section 14(h)(4) of the Securities Exchange
Act of 1934) that is issued on or after the date of enactment
of this Act.
HR 617 RH——2