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

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

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

    \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.
---------------------------------------------------------------------------

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

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

    \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

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

    \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.
---------------------------------------------------------------------------

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

    \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\

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

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

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

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

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

     The press release must state the exact percentage to which
the minimum acceptance condition may be reduced (or if it will be
waived, rather than reduced). The bidder must announce its actual
intentions regarding waiver or reduction as soon as required under home
country rules;
     During the five-day period after the announcement of a
possible waiver or reduction, withdrawal rights must be provided;
     The announcement must advise security holders to withdraw
tendered securities immediately if their willingness to tender into the
offer would be affected by the reduction or waiver of the minimum
acceptance condition;
     The procedure for waiving or reducing the minimum
acceptance conditions must be described in the offering materials;
     The offer must remain open for at least five business days
after the waiver or reduction of the minimum acceptance condition;
     All offer conditions are satisfied or waived when
withdrawal rights are terminated; \232\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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

     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

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:
     The initial offering period has been open for at least 20
U.S. business days and all offer conditions have been satisfied;
     The bidder has adequately discussed the possibility and
the impact of the early termination in the original offer materials;
     The bidder provides a subsequent offering period after the
termination of the initial offering period;
     All offer conditions are satisfied as of the time when the
initial offering period ends; and
     The bidder does not terminate the initial offering period
or any extension of that period during any mandatory extension required
under U.S. tender offer rules.\251\
---------------------------------------------------------------------------

    \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;

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

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

    \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

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,

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

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

     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\
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    \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

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

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

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).

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

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

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

     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.
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    \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).
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    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

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.
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    \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.
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    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.
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    \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).
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    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.
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    \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.
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    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\
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    \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.
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    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\
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    \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.
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    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

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\
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    \350\ See generally, 1998 Internet Release, Section III.C. and
Proposing Release, Section II.G.2.
    \351\ See id.
    \352\ Id.
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    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.
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    \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.
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    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.
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    \356\ See, e.g., letter from DPW.
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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