On June 13, the SEC announced that Revlon, Inc. (“Revlon”) had agreed to pay an $850,000 penalty to settle accusations that it deceived investors in connection with majority-owner Ronald Perelman’s 2009 exchange offer. This settlement serves as a reminder that full and fair disclosure is required in connection in Rule 13e-3 going-private transactions.

An SEC investigation found that during a voluntary exchange offer designed to satisfy a debt to its controlling shareholder, Revlon engaged in tactics that resulted in misleading disclosures to minority shareholders. In 2009, Revlon offered minority shareholders the option to exchange common stock for preferred stock. The trustee administering Revlon's 401(k) plan decided that plan members could tender their shares only if a third-party financial adviser made an adequate consideration determination. When the third-party financial adviser found that the consideration offered in the transaction was inadequate, Revlon amended its trust agreement to ensure that the trustee would not share this adverse determination with plan members or the Revlon board, and directed the trustee to allow plan members to tender their shares without any reference to this adverse determination. Although Revlon’s board represented in its offering documents that the board’s process was full, fair, and complete in determining the fairness of the exchange offer, this adverse determination was not referenced in any public disclosure regarding the exchange offer. The SEC found that Revlon’s conduct violated going private disclosure requirements (Section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3(b)(1)(iii) thereunder). (In the Matter of Revlon, Inc., SEC Release No. 69750 (June 13, 2013))