On August 27, the Securities and Exchange Commission voted to adopt, largely as proposed in May 2008, changes to its cross-border exemptions to expand and enhance the utility of the exemptions for business combination transactions, tender offers and rights offerings; to encourage offerors and issuers to permit U.S. security holders to participate in the transactions on the same terms as other security holders; and to reduce or eliminate the need for parties to such transactions to seek individual exemptive or no-action relief.
Specifically, the SEC voted to adopt significant changes to the current look-through test for identifying beneficial owners when determining eligibility to rely on cross-border exemptions. The specific recommendations are as follows:
- Changing the timing of and reference date for the eligibility calculation of U.S. ownership so that an acquiror seeking to rely on the cross-border exemptions may calculate U.S. ownership as of any date no more than 60 days before and no more than 30 days after the public announcement of the cross-border transaction.
- Eliminating the current requirement to exclude from the U.S. ownership calculation securities held by persons who hold more than 10 percent of the subject securities; however, securities held by the bidder would continue to be excluded from the calculation.
- Creating an alternate eligibility test where the acquiror is unable to perform above-referenced look-through tests, based in part on a comparison of the average daily trading volume of the subject securities in the United States as compared to the trading volume worldwide. In addition to the comparison of trading volumes for the subject securities, this alternate test would require the acquiror or issuer to take into account U.S. ownership figures reported in filings with the SEC, the home country regulator or in the jurisdiction of the primary trading market for the subject securities, as well as other information about U.S. beneficial ownership that the acquiror or issuer knows or has reason to know from other sources.
Also, the SEC voted to adopt detailed rule changes to the Tier and Tier II exemptions for cross-border transactions, expanding the scope of the exemptions and relaxing a number of rules and restrictions governing such transactions. The recommendations also included allowing certain kinds of foreign institutions to file on Schedule 13G to the same extent as their domestic counterparts and making corresponding changes to beneficial ownership rules under Section 16.
Furthermore, the SEC voted to provide interpretive guidance on a number of issues on which the staff receives frequent inquiries.