SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 230 and 240
[Release Nos. 33-7470 and 34-39227; S7-26-96]
INTERNATIONAL SERIES RELEASE NO. 1103
RIN 3235-AG85
Offshore Press Conferences, Meetings with Company Representatives Conducted
Offshore and Press-Related Materials Released Offshore
AGENCY: Securities and Exchange Commission.
ACTION: Final Rules.
SUMMARY: The Commission is adopting two safe harbors designed to
facilitate U.S. press access to offshore press activities. The two safe
harbors will clarify the conditions under which journalists may be provided
access to offshore press conferences, offshore meetings and press materials
released offshore, in which a present or proposed offering of securities or
tender offer is discussed, without violating the provisions of Section 5 of
the Securities Act of 1933, or the procedural requirements of the tender
offer rules promulgated under the Williams Act.
EFFECTIVE DATE: The rule and amendments will become effective [30 days
after publication in the Federal Register].
FOR FURTHER INFORMATION CONTACT: Felicia H. Kung, Office of International
Corporate Finance, Division of Corporation Finance, at (202) 942-2990.
SUPPLEMENTARY INFORMATION: The Commission is adopting a safe harbor with
respect to the registration requirements of the Securities Act of 1933
("Securities Act") <(1)> to permit a foreign private issuer or foreign
government issuer, selling security holder or their representatives to
<(1)> 15 U.S.C. 77a et seq.
provide any journalist, whether foreign or domestic, with access to press
conferences held outside the United States, to meetings with issuer or
selling security holder representatives conducted outside the United
States, or to press-related materials released outside the United States,
at or in which a present or proposed offering of securities is discussed
("Securities Act safe harbor"). The safe harbor would clarify that
providing press access under the safe harbor would not be deemed an "offer"
for the purposes of Section 5 <(2)> of the Securities Act; <(3)>
"directed selling efforts" within the meaning of Regulation S <(4)>
under the Securities Act; or a "general solicitation" within the meaning
of Regulation D <(5)> under the Securities Act. The Commission also
is adopting a safe harbor whereby a bidder for the securities of a foreign
private issuer, as well as the subject company, their representatives, or
any other person specified in Rule 14d-9(d) <(6)> under the Securities
Exchange Act of 1934 ("Exchange Act"), will not be subject to the filing
and procedural requirements of Regulations 14D <(7)> and
14E <(8)> under the Exchange Act by virtue of providing any
journalist, whether foreign or domestic, with access to its press
<(2)> 15 U.S.C. 77e.
<(3)> 17 CFR 230.135e.
<(4)> 17 CFR 230.901 through 17 CFR 230.904 and Preliminary
Notes.
<(5)> 17 CFR 230.501 through 17 CFR 230.508 and Preliminary
Notes.
<(6)> 17 CFR 240.14d-9.
<(7)> 17 CFR 240. 14d-1 through 17 CFR 240.14d-10.
<(8)> 17 CFR 240.14e-1 through 17 CFR 240.14e-2.
======END OF PAGE 2======
conferences held outside the United States, to meetings with its
representatives conducted outside the United States, or to press-related
materials released outside the United States, at or in which a present or
proposed tender offer is discussed ("Tender Offer safe harbor").
I. BACKGROUND
U.S. journalists are being excluded on a regular basis from the
offshore press activities of foreign issuers. <(9)> This practice may
not foster the interests of U.S. investors, since the information is made
available to U.S. press shortly following the release of the information
offshore. Instead, the practice is both anti-competitive and potentially
disadvantageous to U.S. investors by delaying their access to information
made immediately available to investors offshore. The purpose of this
rulemaking is to eliminate this unintended and undesirable consequence of
the Commission's rules governing offering publicity.
The Commission published for comment in October 1996 proposed safe
harbors to facilitate U.S. press access to offshore press activities
conducted by issuers, selling security holders and their representatives
("Proposing Release"). <(10)> The Commission proposed these safe
harbors in recognition of the difficulties faced by journalists for
publications with significant U.S. circulation in gaining direct access to
offshore press activities in which a present or proposed offering of
securities or tender offer is discussed. Many issuers have denied these
journalists access to offshore press conferences, offshore meetings with
company representatives and press materials released offshore that pertain
<(9)> See SEC Rules Not OK, EUROMONEY, July 1997, at 64.
<(10)> Release No. 33-7356 (Oct. 10, 1996)[61 FR 54518].
======END OF PAGE 3======
to a present or proposed securities offering or tender offer out of concern
that this access would result in a violation of the U.S. federal regulatory
requirements for these offerings. Past rulemaking and interpretive
guidance by the Commission and its staff do not appear to have allayed the
concerns of companies conducting offshore press activities, and U.S. press
continue to be denied access to offshore press activities even when no U.S.
offering is contemplated.
The U.S. Congress has also been aware of this exclusion. In the
National Securities Markets Improvement Act of 1996, <(11)> Congress
directed the Commission to conduct rulemaking to clarify the status of
offshore press activities under the Securities Act.
<(11)> Pub. L. No. 104-290, 110 Stat. 3416 (1996) (codified in
scattered sections of the United States Code).
======END OF PAGE 4======
After reviewing the thirteen comment letters received on the proposed
safe harbors and further considering the proposals, <(12)> the
Commission is adopting the safe harbors substantially as proposed with one
significant modification. The Securities Act safe harbor as adopted will
not be available to U.S. issuers. <(13)> Although the Commission
initially had proposed making that safe harbor available to both foreign
and domestic issuers, the Commission has determined that relief is
unnecessary with respect to U.S. issuers and that it may be preferable to
address publicity in connection with offerings by U.S. issuers in a more
comprehensive fashion.
Some foreign jurisdictions, unlike the United States, permit companies
that are offering securities to conduct press conferences, issue press
releases, and meet with members of the press during the offering as a means
of publicizing the offering. Foreign issuers adopting those practices are
unlikely to be doing so for the purpose of circumventing U.S. restrictions
on publicity. On the other hand, extending the safe harbor to U.S. issuers
that have not traditionally employed such practices in the offering of
securities unnecessarily invites that potential for abuse. In addition,
the Commission understands that the difficulty experienced by the U.S.
press in obtaining access to foreign press activities is most significant
<(12)> The comment letters are available for inspection and
copying in the Commission's public reference room.
Refer to file number S7-26-96. Comment letters that
were submitted via electronic mail may be viewed at the
Commission's web site: http://www.sec.gov.
<(13)> In contrast, the Tender Offer safe harbor will be
available to both U.S. and foreign bidders as long as
the target company qualifies as a foreign private
issuer.
======END OF PAGE 5======
with respect to foreign issuers. <(14)> Accordingly, by excluding
U.S. issuers from the Securities Act safe harbor, the Commission is
crafting a narrow approach that addresses the concerns of the U.S. press by
accommodating the anomalies that can result when offshore offering
practices differ from what is permitted in the United States, yet allows
the Commission to consider crafting a regulatory approach with respect to
U.S. issuers in a comprehensive fashion both with respect to offshore and
domestic press activities.
The Commission may reconsider the safe harbor adopted today at a later
date in light of its ongoing reexamination of the Commission's regulation
of securities offerings under the Securities Act and the rules thereunder.
In July 1996, the Commission issued a Securities Act Concept Release
("Concept Release") <(15)> that reviewed the current regulatory
framework for securities offerings, particularly with respect to regulating
publicity in connection with a securities offering. The Concept Release
suggested a number of alternative approaches and solicited comments from
the public. Many commenters recognized that this wide-ranging examination
of the permissible level of publicity in connection with securities
offerings is fundamental to the Commission's administration of the
Securities Act. On the other hand, they urged that the practice of
excluding the U.S. press from foreign press activities itself presents
<(14)> See supra note 9. See also Roberta S. Karmel & Mary S.
Head, Barriers to Foreign Issuer Entry into U.S.
Markets; Symposium on Managing Economic
Interdependence, 24 LAW & POL'Y INT'L BUS. 1207 (1993).
<(15)> Release No. 33-7314 (July 25, 1996)[61 FR 40044].
======END OF PAGE 6======
ongoing significant policy concerns that should and can be addressed in a
narrow and expeditious fashion.
II. SECURITIES ACT SAFE HARBOR
A. General
The Commission is adopting Rule 135e under the Securities Act to
provide a safe harbor for offshore press activities conducted in connection
with an offering by a foreign private issuer or foreign government issuer.
<(16)> Under the Securities Act safe harbor, a foreign private
issuer or foreign government issuer, selling security holder, or their
representatives may provide foreign and U.S. journalists <(17)> with
access to offshore press conferences, meetings with issuer or selling
security holder representatives conducted offshore, or press-related
materials released offshore without being viewed as making an "offer" for
purposes of Section 5 of the Securities Act as long as certain conditions
enumerated below are satisfied. Press activities that are covered by the
Securities Act safe harbor also would not constitute a general solicitation
or general advertising within the meaning of Regulation D, or "directed
selling efforts" within the meaning of Regulation S. The Commission is
<(16)> "Foreign private issuer" is defined in Securities Act
Rule 405 [17 CFR 230.405] and Exchange Act Rule 3b-4(c)
[17 CFR 240.3b-4(c)].
<(17)> Consistent with the recommendation of commenters, the
safe harbor does not provide a definition of
"journalist." In response to questions by commenters,
the Commission notes that it views on-line services and
independent free-lance writers as bona fide
"journalists" under both the Securities Act safe harbor
and Tender Offer safe harbor.
======END OF PAGE 7======
adopting amendments to Rule 502 <(18)> of Regulation D and Rule
902 <(19)> of Regulation S <(20)> to reflect this.
As adopted, the safe harbor will apply to all foreign private issuers
and foreign governments regardless of whether these issuers file periodic
Exchange Act reports with the Commission. In addition, representatives of
the issuer and the selling security holders, such as underwriters and
public relations firms, may rely on the safe harbor, although persons with
no relationship to the issuer are excluded from the safe harbor.
As in the proposal, the safe harbor does not cover paid
advertisements. The Commission also noted in the Proposing Release that
analysts' research reports would not be covered, since Securities Act Rules
138 <(21)> and 139 <(22)> cover those reports. Several
commenters opposed the exclusion of analysts' reports from the Securities
Act safe harbor because these reports are often distributed as part of the
offshore offering process. However, the Commission did not intend that
providing research reports in written press-related materials would cause
any materials included in the press package, including analysts' research
reports, to lose safe harbor protection. To clarify, analysts' research
reports would be covered by the new safe harbor (even if Rules 138 and 139
<(18)> 17 CFR 230.502.
<(19)> 17 CFR 230.902.
<(20)> Preliminary Note 7 of Regulation S is being amended to
clarify the relationship of that general statement to
the Securities Act safe harbor and Tender Offer safe
harbor.
<(21)> 17 CFR 230.138.
<(22)> 17 CFR 230.139.
======END OF PAGE 8======
are not available) to the same extent, and under the same conditions, as
other written materials in the package. <(23)>
The safe harbor only applies to the Section 5 registration
requirements of the Securities Act. The scope of the antifraud or other
provisions of the federal securities laws, including Sections 12(a)(2)
<(24)> and 17(a) <(25)> of the Securities Act, that relate to
both oral and written material misstatements and omissions in the offer and
sale of securities will not be affected by the safe harbor.
<(23)> The application of Section 5 of the Securities Act to
the publication of analysts' reports by analysts
themselves, rather than by an issuer or selling
security holder, will continue to be considered
separately under Rules 138 and 139 under the Securities
Act.
<(24)> 15 U.S.C. 77l(a)(2).
<(25)> 15 U.S.C. 77q(a).
======END OF PAGE 9======
B. Conditions to the Safe Harbor
The Securities Act safe harbor is available only if the conditions
described below are satisfied. These conditions are intended to minimize
the possibility that issuers may use the safe harbor to circumvent
important Securities Act protections.
The safe harbor as adopted is a purely objective test. All of the
nine commenters who addressed the desirability of an objective test
supported that approach. Many of them believed that a subjective test
would result in the continued exclusion of U.S. press from offshore press
activities. In addition, commenters noted that the antifraud and civil
liability provisions of the federal securities laws should provide adequate
protection to investors.
1. Press Activity Must Occur Offshore
The press activities that are covered by the safe harbor must occur
outside of the United States. <(26)> To come under the safe harbor,
a press conference or meeting with issuer or selling security holder
representatives must be conducted outside the United States, and any press-
related materials must be released outside of the United States. Under
this approach, the journalist to whom access is provided must receive any
written press-related materials at a physical location and address that is
offshore. In addition, conference calls in which at least one of the
<(26)> For clarification, a definition of "United States" has
been included in Rule 135e that is the same as the
definition used in Rule 902(p) of Regulation S [17 CFR
230.902(p)]. "United States" is defined to include the
United States of America, its territories and
possessions, as well as the individual states of the
United States and the District of Columbia.
======END OF PAGE 10======
participants is located in the United States would not be covered by the
safe harbor.
Follow-up press contacts in which the journalist (whether foreign or
U.S.) is located in the United States at the time of the follow-up are not
included in the safe harbor. As one of the commenters pointed out, this
should not be a problem in most cases, since journalists who attend
offshore press conferences typically are based offshore. As this commenter
stated in its letter:
We do not believe follow-up conversations [citation omitted] present a
major issue because in most cases we believe journalists based
offshore will be attending the offshore press conferences rather than
U.S. residents travelling to another country. Attempting to cover
follow-up conversations or other communications where one party is in
the United States would pose an unnecessary complication for operation
of the safe harbor. <(27)>
This approach is consistent with the limited goal of accommodating
different offering practices followed in the issuer's home jurisdiction to
avoid exclusion of U.S. press from those activities. This also is
consistent with the general territorial approach used in the application of
the Securities Act registration requirements. <(28)>
<(27)> Comment letter from Dow Jones & Company, Inc. of
12/17/96, at p. 5.
<(28)> See Rule 901 of Regulation S [17 CFR 230.901].
======END OF PAGE 11======
2. Offshore Offering
As a condition to the safe harbor, the offering must not occur solely
within the United States. This condition reflects the Commission's concern
that an issuer not conduct press activities solely to "condition the
market" in the United States for the issuer's securities. There is a far
greater likelihood that offshore publicity with respect to offerings that
are made exclusively in the United States is intended for that purpose.
Some commenters urged the Commission to include U.S.-only offerings in
the Securities Act safe harbor. They noted that these offerings may be
newsworthy events in the home jurisdictions of foreign issuers, and that
certain foreign jurisdictions may even require disclosure of these
offerings. Rules 134, <(29)> 135 <(30)> and 135c <(31)>
under the Securities Act should provide adequate protection for issuers
giving notice of offerings. In addition, even if the new safe harbor and
Rules 134, 135 and 135c do not cover the press activities for U.S.-only
offerings of foreign issuers, this does not necessarily mean that allowing
U.S. press access would cause a Section 5 violation. Instead, that
question would depend on an analysis of all the facts and circumstances.
<(32)>
The condition that at least part of the offering be made offshore does
not impose any requirement that a specific amount be offered offshore. The
<(29)> 17 CFR 230.134.
<(30)> 17 CFR 230.135.
<(31)> 17 CFR 230.135c.
<(32)> Preliminary Note 7 to Regulation S should continue to
provide guidance in that instance.
======END OF PAGE 12======
commenters that addressed this issue strongly supported this approach.
Commenters noted that requiring a specific minimum portion of the offering
to take place offshore would undercut the benefit of the safe harbor.
Because issuers may not know how much of an offering will be made offshore,
this uncertainty could lead them to exclude journalists from offshore press
activities unnecessarily. There must, however, be an intent to make a bona
fide offering offshore; the mere offering of a token amount will not
suffice to bring the transaction within the safe harbor. Should the
Commission become aware of abuses involving offerings that do not appear to
include a bona fide offshore component, it will revisit the rule to
consider imposing a stricter, more objective standard.
3. Access Provided to Both U.S. and Foreign Journalists
Another condition of the safe harbor is that the offshore press
activity must be available to foreign journalists, as well as to U.S.
journalists. The safe harbor would not be available if only U.S.
journalists were permitted to attend the offshore press activity or to
receive the offshore press-related materials. This minimizes the
possibility that the safe harbor would be used to channel publicity
regarding the offering solely into the United States. Foreign journalists
must have the same access to the offshore press activity or materials,
although the safe harbor does not require the issuer to monitor whether
foreign journalists actually attend the offshore press activity or actually
receive the offshore press-related materials for the safe harbor to apply.
The Commission has determined that the actual attendance or receipt of
materials by foreign journalists is beyond the issuer's control, and that a
monitoring requirement would be too burdensome.
======END OF PAGE 13======
In the Proposing Release, the Commission indicated that it would view
"one-on-one" interviews with a U.S. journalist as covered by the safe
harbor. However, if the "one-on-one" meeting was conducted on an
"exclusive" basis with a purely "U.S. publication" and no other "one-on-
one" interviews with other foreign publications were given, the Commission
expressed its concern that the exclusive "one-on-one" presentation might
signal a scheme to channel publicity regarding the offering into the United
States. Nonetheless, the Commission indicated in the Proposing Release
that if an issuer or its representatives conducts a press conference that
complies with the requirements of the safe harbor (e.g., where both U.S.
and foreign journalists are allowed to attend) either before or after the
exclusive "one-on-one" meeting with a purely domestic publication,
<(33)> the Commission would view the exclusive interview as covered
by the safe harbor. A few commenters objected to this interpretation as
unduly restrictive and unnecessary. <(34)> However, the Commission
continues to believe that there is a real basis for concern that the
exclusive "one-on-one" would be used solely to channel publicity into the
United States, absent an offshore press conference or other foreign press
activity conducted in connection with an offering,
<(33)> The Commission does not believe that the press
conference must be conducted within any particular time
frame. In the Commission's view, a press conference
held in connection with the offering would be
sufficient evidence that the exclusive "one-on-one" was
not an attempt to condition the U.S. markets.
<(34)> Some commenters opposed the press conference
requirement for purely domestic publications as
unnecessary for legitimate news coverage. See comment
letter from Bloomberg L.P. of 12/17/96, at p. 8, and
comment letter from Sullivan & Cromwell of 12/20/96, at
p. 13.
======END OF PAGE 14======
4. Written Materials Requirements
Written materials that are released to journalists under the safe
harbor present special concerns, especially if the materials are released
with respect to an offering that is likely to be of significant interest to
U.S. investors. The Commission is concerned that materials may result in
offers of securities in the United States without the protections of the
federal securities laws, or in conditioning the market in the United States
for the securities to be offered. To address these concerns, the
Commission proposed additional procedural safeguards to be imposed on
written materials released to journalists. These safeguards were intended
to alert recipients that such materials should not be considered an offer
of securities for sale in the United States, and that when and if an offer
is made in the United States, the appropriate required disclosure would be
disseminated at that time.
The Commission is adopting the "Written Materials Requirements"
substantially as proposed. <(35)> These requirements must be met
whenever written materials released under the safe harbor discuss an
offering of securities by any foreign private issuer and foreign government
where part of the offering is or will be conducted in the United States.
The requirements apply irrespective of whether the U.S. portion of the
offering is registered or exempt. However, consistent with the Proposing
<(35)> As originally proposed, the "Written Materials
Requirements" were required to be satisfied whenever
the written materials discussed an offering of
securities by a U.S. issuer. Because U.S. issuers will
not be covered by the safe harbor, as initially
contemplated in the Proposing Release, the "Written
Materials Requirements" have been modified to reflect
this.
======END OF PAGE 15======
Release, the "Written Materials Requirements" will not be imposed on
securities offerings of foreign private issuers and foreign governments
that are offered and sold wholly offshore because those offerings would
appear to be of less significant interest to U.S. investors.
The "Written Materials Requirements" are as follows:
1. The materials must include a statement that the materials are not
an offer of securities for sale in the United States; that the
securities may not be offered or sold in the United States unless
they are registered or exempt from registration; and that any
public offering of securities to be made in the United States
will be made by means of a prospectus that will contain detailed
information about the company and management, as well as
financial statements. In addition, if any portion of the
offering will be registered in the United States, the materials
must include a legend stating this intention.
2. The issuer or selling security holder cannot attach to, or
otherwise make a part of, the written materials any form of
purchase order or coupon that could be returned indicating
interest in the offering.
Several commenters objected to certain aspects of the "Written
Materials Requirements," most notably the legending requirements and the
coupon prohibition. They contended that these requirements would make the
safe harbor difficult to apply without improving investor protection.
Nonetheless, the Commission believes that these requirements significantly
reduce the possibility that written materials released to U.S. journalists,
and that may come into the hands of U.S. investors, will be used to offer
securities in the United States without the protections of the U.S.
securities laws. Since the requirements are only imposed when the issuer
is otherwise required to meet U.S. offering regulations because a portion
of the offering is to be made in the United States, the requirements are
not unduly burdensome and the possibility of inadvertent violations is
minimal.
======END OF PAGE 16======
III. TENDER OFFER SAFE HARBOR
A. General
The Commission is adopting the Tender Offer safe harbor as proposed.
The safe harbor is only available with respect to a target company that is
a foreign private issuer, <(36)> and is narrowly crafted to permit
both the bidder and foreign target to conduct their activities in a manner
consistent with local offering practices. Pursuant to Rule 14d-1 under the
Exchange Act, <(37)> as amended, a bidder for the securities of a
foreign private issuer, as well as the foreign target company, the
representatives of either and any other person who may have a filing
obligation under the Williams Act would not be deemed to have triggered the
filing and procedural requirements of the Williams Act <(38)> by
virtue of providing U.S. or foreign journalists with access to offshore
<(36)> Several commenters objected to this limited application
of the safe harbor. They noted, among other things,
that bidders may have difficulty ascertaining whether a
target company qualifies as a foreign private issuer.
However, the Commission has determined that the safe
harbor is easiest to apply if a foreign private issuer
definition is used. A bidder may presume that a target
company qualifies as a "foreign private issuer" if the
target company is a foreign issuer that files
registration statements with the Commission on the
disclosure forms specifically designated for foreign
private issuers (such as Form F-1 or Form 20-F), claims
the exemption from Exchange Act registration pursuant
to Exchange Act Rule 12g3-2(b) [17 CFR 240.12g3-2(b)],
or is not reporting in the United States.
<(37)> 17 CFR 240.14d-1.
<(38)> Offshore press activity during a tender offer would not
trigger the following requirements: Section 14(d)(1)
[15 U.S.C. 78n(d)(1)] through Section 14(d)(7) [15
U.S.C. 78n(d)(7)] of the Exchange Act, Regulation 14D
[17 CFR 240.14d-1 through 17 CFR 240.14d-10), and Rules
14e-1 [17 CFR 240.14e-1] and 14e-2 [17 CFR 240.14e-2].
======END OF PAGE 17======
press conferences, offshore meetings with representatives, and press-
related materials released offshore, at or in which a present or proposed
tender offer of securities is discussed. <(39)> Although the safe
harbor will be available to either a U.S. or a foreign bidder, the safe
harbor will only be applicable if the target company is a foreign private
issuer. The safe harbor will not be available for the securities of a U.S.
target issuer because there appears to be no need to accommodate foreign
offering practices in that instance.
The safe harbor only affects the triggering of the filing and
procedural requirements of the Williams Act, and would not affect the scope
or applicability of the antifraud prohibition of Section 14(e) <(40)>
of the Exchange Act, or the prohibition against trading on material
nonpublic information regarding a tender offer in Rule 14e-3 <(41)>
under the Exchange Act.
The purpose of the Tender Offer safe harbor is to prevent the
application of the U.S. tender offer rules before a bidder is prepared to
proceed with the offer. After an offer has commenced with the filing of
documents with the Commission under Regulation 14D, the safe harbor would
not be available.
B. Conditions
The applicability of the Tender Offer safe harbor is subject to
several conditions that are analogous to the Securities Act safe harbor
<(39)> The Tender Offer safe harbor, however, would not exempt
from the Securities Act registration requirements
exchange offers in which a U.S. bidder is involved.
<(40)> 15 U.S.C. 78n(e).
<(41)> 17 CFR 240.14e-3.
======END OF PAGE 18======
conditions. Both U.S. and foreign journalists must have access to the
offshore press activity, and the written materials that are covered by the
safe harbor must be appropriately legended in circumstances where
significant U.S. investor interest in the tender offer is likely. In
addition, no means to tender securities, or coupons that could be returned
to indicate interest in the tender offer may be provided as part of any
press-related materials.
If the present or proposed tender offer described in the written
materials released under the proposed tender offer safe harbor is for
equity securities registered under Section 12 <(42)> of the Exchange
Act, the materials must comply with certain requirements ("Written
Materials Requirements").<(43)> These requirements are as follows:
1. The materials must include a statement that the materials are not
an extension of the tender offer in the United States for a class
of equity securities of the subject company. In addition, if the
bidder intends to extend the tender offer in the United States at
some future time for a class of equity securities of the subject
company, the materials must include a legend stating this
intention and stating that the procedural and filing requirements
of the Williams Act will be satisfied at that time.
2. No means to tender securities, or coupons that could be returned
to indicate interest in the tender offer may be provided as part
of, or attached to, any press-related materials.
<(42)> 15 U.S.C. 78l.
<(43)> As with the Written Materials Requirements under the
Securities Act safe harbor, some commenters objected to
the legending and coupon conditions of the Tender Offer
safe harbor. The Commission believes that these
conditions reduce the possibility that the Tender Offer
safe harbor will be used to circumvent the protections
provided by the federal securities laws. The Written
Materials Requirements do not apply where those
protections are not applicable, including in the case
of tender offers for a class of equity securities that
is not registered with the Commission, or tender offers
for debt securities.
======END OF PAGE 19======
IV. CERTAIN FINDINGS
Section 23(a) of the Exchange Act <(44)> requires the Commission
to consider the anti-competitive effects of any rules it adopts thereunder,
if any, and the reasons for its determination that any burden on
competition imposed by such rules is necessary or appropriate to further
the purposes of the Exchange Act. Furthermore, Section 2 <(45)> of
the Securities Act and Section 3 <(46)> of the Exchange Act, as
amended by the National Securities Markets Improvement Act of 1996,
<(47)> provide that whenever the Commission is engaged in rulemaking
and is required to consider or determine whether an action is necessary or
appropriate in the public interest, the Commission also shall consider, in
addition to the protection of investors, whether the action will promote
efficiency, competition, and capital formation.
The Commission has considered the rule and amendments discussed in
this release in light of the comments received in response to the Proposing
Release and the standards in Section 23(a) of the Exchange Act. The rule
and amendments are intended to reduce anti-competitive barriers between
U.S. and foreign journalists. As a result of the rule and amendments, U.S.
journalists will have increased access to offshore press activities
conducted by issuers and selling security holders and, in the case of
tender offers, by bidders for foreign private issuers, as well as the
foreign target company itself. Although some of the requirements under the
<(44)> 15 U.S.C. 78w(a).
<(45)> 15 U.S.C. 77b.
<(46)> 15 U.S.C. 78c.
<(47)> Pub. L. No. 104-290, 106, 110 Stat. 3416 (1996).
======END OF PAGE 20======
safe harbors, such as the legending requirements and coupon prohibition,
may place certain burdens on those who wish to rely on the safe harbors,
the overall effect of the safe harbors is to decrease anti-competitive
barriers. Without the safe harbors, U.S. press will continue to be
excluded from the offshore press activities of foreign issuers. This may
harm U.S. investors because they eventually receive the information
disseminated offshore, but on a delayed basis. With the safe harbors, U.S.
investors will have access to information about their investments in a more
timely and efficient manner. The safe harbors adopted today will
facilitate U.S. press access to the offshore press activities, and promote
efficiency, competition and capital formation by removing information
barriers that may inadvertently harm U.S. investors and otherwise
facilitating foreign issuer access to U.S. markets.
V. COST-BENEFIT ANALYSIS
The new rule and amendments will not impose any significant new
burdens on issuers. No new registration, reporting or filing burdens will
be imposed on issuers and selling security holders as a result of the safe
harbors. The purpose of the safe harbors is to increase the access of U.S.
journalists to the offshore press activities of issuers and selling
security holders and, in the case of tender offers, bidders for foreign
private issuers and the target company itself. Currently, U.S. journalists
are excluded from the offshore press activities of foreign issuers.
Instead of protecting U.S. investors, this practice may disadvantage U.S.
investors because their access to information is delayed. The new rule and
amendments will eliminate this unintended consequence of the Securities
Act's regulation of offering publicity.
======END OF PAGE 21======
Although some of the Written Materials Requirements under either safe
harbor marginally may increase burdens for those wishing to rely on the
safe harbors, these requirements are intended to ensure that activities
covered by the safe harbors are not actually offerings of securities or
tender offers in the United States. Because the safe harbors should
eliminate barriers to press access, the overall result of the safe harbors
is to reduce the burdens and costs currently associated with limited and
uneven press access. Moreover, the burdens imposed by the Written
Materials Requirements are negligible. Based on an informal survey taken
by Commission staff of attorneys in private practice whose clients could be
expected to rely on these safe harbors, the Commission has estimated that
the maximum compliance costs of these legending requirements is $500 in
printing costs for each instance that the requirements are triggered.
Under the Securities Act safe harbor, the Written Materials
Requirements are intended to help ensure that press-related materials
distributed under the safe harbor will not result in an offering of
securities to U.S. investors without the protection of the securities laws.
The written materials must include a legend explicitly stating that the
materials are not an offer of securities in the United States, and that no
money or other consideration is being solicited through the materials. The
issuer or selling security holder also must state if it intends to register
any part of the offering in the United States. In addition to these
legending requirements, issuers and selling security holders may not
include a purchase order or coupon with the written materials.
Although some commenters contended that these requirements are
unnecessary and burdensome, the Commission has determined that these
======END OF PAGE 22======
requirements are necessary to safeguard the safe harbor from potential
abuse. The burdens imposed are minimal, and enable the Commission to adopt
an objective approach that should reduce needless barriers to U.S. press
participation in offshore press activities with minimal burden.
The Tender Offer safe harbor contains similar Written Materials
Requirements. Bidders for the securities of foreign private issuers and
the foreign target companies must comply with these requirements when they
release written press-related materials under this safe harbor. The
materials must include a legend stating that the materials should not be
construed as extending a tender offer in the United States, and that no
money or other consideration is being solicited through the materials. If
the bidder intends to extend the tender offer in the United States in the
future, the written materials must include a statement to that effect. In
addition, no coupons or means of tendering securities must be included with
the materials.
The requirements under both safe harbors are intended to protect U.S.
investors from potential use of the safe harbors as a means of
circumventing the protections provided by the federal securities laws. The
Commission does not consider these requirements to be unduly burdensome,
especially in light of the important investor protections they provide and
the benefits provided by the new safe harbors. Moreover, each issuer can
engage in its own cost-benefit analysis to determine whether the burdens
imposed by the legending and coupon conditions preclude reliance on the
safe harbors.
VI. FINAL REGULATORY FLEXIBILITY ANALYSIS
======END OF PAGE 23======
This Final Regulatory Flexibility Analysis ("FRFA") has been prepared
in accordance with 5 U.S.C. 604 regarding the new rule and amendments.
The rule and amendments are intended to provide companies with greater
certainty in determining when journalists, both foreign and domestic, may
have access to offshore press conferences, meetings with company
representatives conducted offshore, or press materials released offshore
without violating the U.S. federal securities laws.
The rule and amendments should eliminate an unintended and potentially
harmful consequence of the Securities Act's regulation of offering
publicity. Currently, these regulations have been interpreted to deny U.S.
journalists access to the offshore press activities of foreign issuers.
This practice may harm U.S. investors because they eventually receive the
same information, but on a delayed basis. The rule and amendments should
remedy this unintended and harmful consequence.
The new rule and amendments will not impose any reporting,
recordkeeping or other compliance burdens other than the Written Materials
Requirements, which only apply to those issuers that choose to rely on the
safe harbors. Although the Written Materials Requirements will impose
certain legending requirements on written materials released offshore for
those wishing to rely on the safe harbors, the Commission does not consider
these requirements to be unduly burdensome on small businesses. A small
issuer will make its own determination of whether the requirements would
impose too much of a burden to make reliance on the safe harbors useful to
it. As a result, the Commission does not consider the rule and amendments
unduly burdensome on small businesses.
======END OF PAGE 24======
The term "small business," as used in reference to an issuer for
purposes of the Regulatory Flexibility Act, is defined by Rule 157
<(48)> under the Securities Act as an issuer that had total assets of
$5 million or less on the last day of its most recent fiscal year, and is
engaged or proposing to engage in small business financing. An issuer is
considered to be engaged in small business financing if it is conducting or
proposes to conduct an offering of securities that does not exceed the
dollar limitation prescribed by Section 3(b) of the Securities Act. When
used in reference to an issuer other than an investment company, the term
also is defined in Rule 0-10 <(49)> of the Exchange Act as an issuer
that had total assets of $5 million or less on the last day of its most
recent fiscal year.
The Commission is aware of approximately 1100 Exchange Act reporting
companies that currently satisfy the definition of "small business" under
Rule 0-10. Because the rule and amendments affect multinational offerings
by foreign issuers in which there would be press interest, it is likely
that most of these issuers would not satisfy the definition of "small
business."
The Commission has considered different alternatives to the rule and
amendments. However, alternatives for providing different means of
compliance for small entities or for exempting small entities from the rule
and amendments would be inconsistent with the Commission's statutory
mandate of investor protection. The new rule and amendments are intended
to facilitate U.S. press access to offshore press activities of all
<(48)> 17 CFR 230.157.
<(49)> 17 CFR 240.0-10.
======END OF PAGE 25======
issuers, regardless of size, such that further distinctions between
companies based on size would not be appropriate.
The Commission requested comment with respect to the Initial
Regulatory Flexibility Analysis ("IRFA") prepared in connection with the
Proposing Release, but did not receive any comments that specifically
addressed the IRFA.
VII. STATUTORY BASIS FOR THE AMENDMENTS
The amendments to the Securities Act rules are being adopted pursuant
to Sections 3, 4, 5 and 19 of the Securities Act as amended, and as
required by Pub. L. No. 104-290, 109, 110 Stat. 3416 (1996). The
amendment to the Exchange Act rule is being adopted pursuant to Sections
14(d), 14(e) and 23(a) of the Exchange Act.
List of Subjects in 17 CFR Parts 230 and 240
Reporting and recordkeeping requirements, Securities.
======END OF PAGE 26======
TEXT OF THE AMENDMENTS
In accordance with the foregoing, Title 17, Chapter II of the Code of
Federal Regulations is amended as follows:
PART 230 -- GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
1. The authority citation for Part 230 continues to read in part as
follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78d,
78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30, and 80a-37,
unless otherwise noted.
* * * * *
2. Section 230.135d is reserved.
3. By adding 230.135e to read as follows:
230.135e. Offshore press conferences, meetings with issuer
representatives conducted offshore, and press-related
materials released offshore.
(a) For the purposes only of Section 5 of the Act [15 U.S.C. 77e], an
issuer that is a foreign private issuer (as defined in 230.405) or a
foreign government issuer, a selling security holder of the securities of
such issuers, or their representatives will not be deemed to offer any
security for sale by virtue of providing any journalist with access to its
press conferences held outside of the United States, to meetings with
issuer or selling security holder representatives conducted outside of the
United States, or to written press-related materials released outside the
United States, at or in which a present or proposed offering of securities
is discussed, if:
(1) The present or proposed offering is not being, or to be,
conducted solely in the United States;
======END OF PAGE 27======
Note to Paragraph (a)(1): An offering will be considered not to be
made solely in the United States under this paragraph (a)(1) only if there
is an intent to make a bona fide offering offshore.
(2) Access is provided to both U.S. and foreign journalists; and
(3) Any written press-related materials pertaining to
transactions in which any of the securities will be or are being offered in
the United States satisfy the requirements of paragraph (b) of this
section.
(b) Any written press-related materials specified in paragraph (a)(3)
of this section must:
(1) State that the written press-related materials are not an
offer of securities for sale in the United States, that securities may not
be offered or sold in the United States absent registration or an exemption
from registration, that any public offering of securities to be made in the
United States will be made by means of a prospectus that may be obtained
from the issuer or the selling security holder and that will contain
detailed information about the company and management, as well as financial
statements;
(2) If the issuer or selling security holder intends to register
any part of the present or proposed offering in the United States, include
a statement regarding this intention; and
(3) Not include any purchase order, or coupon that could be
returned indicating interest in the offering, as part of, or attached to,
the written press-related materials.
======END OF PAGE 28======
(c) For the purposes of this section, "United States" means the
United States of America, its territories and possessions, any State of the
United States, and the District of Columbia.
4. By amending 230.502 to remove the period at the end of paragraph
(c) and to add the following: "; Provided further, that, if the
requirements of 230.135e are satisfied, providing any journalist with
access to press conferences held outside of the United States, to meetings
with issuer or selling security holder representatives conducted outside of
the United States, or to written press-related materials released outside
the United States, at or in which a present or proposed offering of
securities is discussed, will not be deemed to constitute general
solicitation or general advertising for purposes of this section."
* * * * *
5. By amending Preliminary Note 7 following the undesignated heading
"Regulation S" and before 230.901 to add the following after the first
sentence: "Where applicable, issuers and bidders may also look to
230.135e and 240.14d-1(c) of this chapter."
6. By amending 230.902 to add paragraph (b)(8) to read as follows:
230.902 Definition.
* * * * *
(b) Directed Selling Efforts. * * *
(8) Notwithstanding paragraph (b)(1) of this section, providing
any journalist with access to press conferences held outside of the United
States, to meetings with issuer or selling security holder representatives
conducted outside of the United States, or to written press-related
materials released outside the United States, at or in which a present or
======END OF PAGE 29======
proposed offering of securities is discussed, will not be deemed "directed
selling efforts" if the requirements of 230.135e are satisfied.
* * * * *
PART 240 -- GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
7. The authority citation for Part 240 continues to read in part as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1, 78l, 78m, 78n,
78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23,
80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
8. By amending 240.14d-1 by redesignating paragraphs (c) and (d) as
paragraphs (e) and (f), and adding paragraphs (c) and (d) to read as
follows:
240.14d-1 Scope of and definitions applicable to regulations 14D and
14E.
* * * * *
(c) Notwithstanding paragraph (a) of this section, the requirements
imposed by sections 14(d)(1) through 14(d)(7) of the Act [15 U.S.C.
78n(d)(1) through 78n(d)(7)], Regulation 14D promulgated thereunder
(240.14d-1 through 240.14d-10), and 240.14e-1 and 240.14e-2 shall not
apply by virtue of the fact that a bidder for the securities of a foreign
private issuer, as defined in 240.3b-4, the subject company of such a
tender offer, their representatives, or any other person specified in
240.14d-9(d), provides any journalist with access to its press conferences
held outside of the United States, to meetings with its representatives
======END OF PAGE 30======
conducted outside of the United States, or to written press-related
materials released outside the United States, at or in which a present or
proposed tender offer is discussed, if:
(1) Access is provided to both U.S. and foreign journalists; and
(2) With respect to any written press-related materials released
by the bidder or its representatives that discuss a present or proposed
tender offer for equity securities registered under Section 12 of the Act
[15 U.S.C. 78l], the written press-related materials must state that these
written press-related materials are not an extension of a tender offer in
the United States for a class of equity securities of the subject company.
If the bidder intends to extend the tender offer in the United States at
some future time, a statement regarding this intention, and that the
procedural and filing requirements of the Williams Act will be satisfied at
that time, also must be included in these written press-related materials.
No means to tender securities, or coupons that could be returned to
indicate interest in the tender offer, may be provided as part of, or
attached to, these written press-related materials.
(d) For the purpose of 240.14d-1(c), a bidder may presume that a
target company qualifies as a foreign private issuer if the target company
is a foreign issuer and files registration statements or reports on the
disclosure forms specifically designated for foreign private issuers,
claims the exemption from registration under the Act pursuant to 240.12g3-
2(b), or is not reporting in the United States.
* * * * *
By the Commission.
======END OF PAGE 31======
Jonathan G. Katz
Secretary
Dated: October 10, 1997
======END OF PAGE 32======