On November 18, the Division of Corporation Finance of the Securities and Exchange Commission issued seven new Compliance and Disclosure Interpretations (C&DIs): 1) two new C&DIs with respect to the tender offer rules under Section 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 14D; and 2) five new C&DIs with respect to the tender offer rules under Section 14(e) of the Exchange Act and Regulation 14E.

These C&DIs, which are summarized in more detail below, clarify 1) certain disclosure requirements under Schedule 14D-9, which must be filed by an issuer in response to a tender offer and in which such issuer recommends that its shareholders accept, reject or take other action with respect to such tender offer; and 2) the SEC staff’s application of the positions previously expressed in the “Abbreviated Tender or Exchange Offers for Non-Convertible Debt Securities” no-action letter (issued January 23, 2015) (the “No-Action Letter”) and discussed in a Corporate & Financial Weekly Digest article from the February 6, 2015 edition, “SEC Issues New Debt Tender Offer Guidance.

1. C&DI 159.01 clarifies that a financial advisor engaged by an issuer’s board or independent committee for the exclusive purpose of providing financial advice constitutes a person “directly or indirectly employed, retained, or to be compensated to make solicitations or recommendations in connection with” a tender or exchange offer under Item 5 of Schedule 14D-9 and Item 1009(a) of Regulation M-A (an “Item 1009 Covered Person”) if 1) such advisor is providing advice with respect to the tender or exchange offer; and 2) such advisor’s analyses or conclusions are discussed in the issuer’s Schedule 14D-9. That is the case even if the financial advisor’s opinion provides that it is not making a solicitation or recommendation to any of the target company shareholders.

2. C&DI 159.02 sets forth the SEC staff’s expectation that the disclosure of compensation payable to Item 1009 Covered Persons, as required under Item 5 of Schedule 14D-9 and Item 1009(a) of Regulation M-A should generally include:


  • types of fees payable (e.g., independence fees, “success” fees, periodic advisory fees, discretionary fees), and, if multiple types of fees are payable and the issuer does not quantify the fees in its disclosure, a sufficiently detailed narrative regarding the primary financial incentives for the Item 1009 Covered Persons;
  • contingencies, milestones or triggers relating to such compensation; and
  • any other information material to security holders’ assessment of Item 1009 Covered Persons’ analyses or conclusions.Accordingly, disclosure that an Item 1009 Covered Person’s compensation is “customary” would generally be deemed insufficient by the SEC staff.

3. C&DI 162.01 provides that a foreign issuer may satisfy the condition set forth in the No-Action Letter that, if the issuer is an Exchange Act reporting company, the issuer must furnish a press release announcing the abbreviated tender or exchange offer for non-convertible debt (an “Abbreviated Offer”) on a Form 8-K prior to noon Eastern time on the first business day of the abbreviated offer, by instead filing a Form 6-K prior to such deadline.


4. C&DI 162.02 clarifies that an Abbreviated Offer can have minimum tender conditions despite language in the No-Action Letter that states Abbreviated Offers must be made “for any and all” subject debt securities.

5. C&DI 162.03 clarifies a requirement in the No-Action Letter, that Abbreviated Offers for consideration consisting of “Qualified Debt Securities” (as defined therein) may be made to all qualified institutional buyers (QIBs) and non-US persons for a fixed amount of Qualified Debt Securities; provided that a fixed amount of cash consideration is concurrently offered to persons other than QIBs and non-US persons; and, provided, further, as per this new C&DI, that the amount of cash consideration offered to persons other than QIBs and non-US persons may instead be calculated with reference to a fixed spread to a benchmark so long as the calculation is the same as the calculation used in determining the amount of Qualified Debt Securities.

6. C&DI 162.04 makes clear that offers may issue Qualified Debt Securities under Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), rather than pursuant to Section 4(a)(2) of the Securities Act or Rule 144A thereunder, to “Eligible Exchange Offer Participants” (as defined in the No-Action Letter) and still conduct an Abbreviated Offer in reliance on the No-Action Letter.


7. C&DI 162.05 clarifies a requirement in the No-Action Letter, that while an Abbreviated Offer may not be commenced prior to 5:01 p.m. on the 10th business day after the first public announcement of a purchase, sale or transfer of a material business or amount of assets described in the No-Action Letter, such Abbreviated Offer may be announced at any time.

The original text of the C&DIs can be found here.