The Chairman and Chief Discutive Officer of a coxparty which was a major and successful player in a recent multibillion &llar Lequisition contest has embraced the view that "Mayso there's somehung trong vid our system when .... companies line up large amounts of money in order to purchase stock, when it doesn't help build cne re factory, buy ma more piece of equipment, or provide even ane mere job." How, if all, should federal regulation address this widespread frustration? We recognize that a number of these issues are cutside the direct jurisdiction of the Comission. However, it is our understanding that the Advisory Panel being put together by the Comission to study terder offers will be made up of outside professionals, including economists. We believe that the public interest and the Congress would be best served by a broad study of the many issues surrounding tender offers and particularly hostile take-overs, and, therefore, we encourage the Commission panel to be comprehensive in both its approach and charter. Ch July 13, 1979, the Banking Connituse reported the Comission to review 7 specific questions concerning coverage of the Willims Act. The Commission provided its response on February 15, 1930. It would also be helpful if the Advisory Panel could review the questions and answers and provide any updating which the Panel may deen necessary. To assist us in considering this subject, we would appreciate receiving the study and rosenmanded legislation from the Advisory Panel by July 31, 1983. Enclosed is a copy of my letter to Chairman Shad of the Securities and Exchange Commission regarding proposed federal legislation to expressly authorize state regulation of tender offers and control share acquisitions. This is the kind of issue in which legislative action should precede federal regulatory agency rulemaking. We would appreciate an opportunity for testimony by an Attorney General if hearings are scheduled, and I will be glad to coordinate the details. With best personal regards, and Sincerely, С. Леушина бенький C. Raymond Marvin I am writing to you concerning several important policy issues raised in the July 8, 1983 Report of the SEC's Advisory Committee on Tender Offers. The Report recommends express federal preemption of state regulation of tender offers and control share acquisitions as well as speeding up of the tender offer process, especially as to securities tender offers. It also proposes a type of federal corporations law governing matters such as high-vote provisions, advisory votes by shareholders, repurchase of shares, and the necessity to proceed by tender offers for acquisitions above a given threshold. Attorneys General view these issues as fundamental and the Committee's proposals unsound and at variance with vital state interests. At our annual meeting held last month, the National Association of Attorneys General adopted a resolution opposed to the thrust of the Report. The resolution supports federal legislation to empower states specifically to regulate tender offers and control share acquisitions so long as such regulation does not make it impossible to comply with federal regulation. A copy of the resolution, memorandum and draft bill that were before the meeting are enclosed The role of the states in this area is a crucial one. In the February 1 letter to you from members of the Senate Committee on Banking, Housing, and Urban Affairs you were asked, "What should be the involvement of states in regulating corporate takeovers?" This question is important because (1) most corporations law in the United States is state law; (2) until a few years ago, federal regulation under the federal securities statutes and regulation under state law coexisted nicely--state regulation was always valid so long as it did not make it impossible to comply with federal regulation; and (3) it has been state regulation that has provided periods of 50 to 60 days during which tender offers must be open, providing time for developing and disseminating adequate information to average investors and time for management of the target to best develop competitive bids yielding more money for the shareholders of the target. The Report advocates express preemption of state law and shortening the time during which offers would be open. We believe that public policy should promote both competition and shareholder understanding once a hostile tender offer is launched The Report is fundamentally at odds with this view. We have noted that Arthur Goldberg, a former Associate Justice of the United States Supreme Court and a member of the Advisory Committee, filed a long dissent to the Report. He says, "The Report of the Advisory Committee makes no significant reference to protection of the public interest." Justice Goldberg proposes that upon the making of a hostile tender offer, there be a "cooling-off" period (applicable to the offeror and the target) and that such an offer should be subject to votes by the offeror and the target. There were also dissents, all raising basic questions, by three other members of the Advisory Committee. The Report is almost solely "market-oriented', with little or no consideration of broader issues such as the effect of hostile tender offers on productivity, suppliers, workers, and communities. We believe that all of this raises issues of such structural significance that Congress should have an opportunity to fully consider the matter before regulations are attempted. Accordingly, we request that the Commission withhold rulemaking until first obtaining Congressional decisions by legislation on the fundamental issues. We are sending copies of this letter with enclosures to the chairmen and ranking minority members of the appropriate committees and subcommittees with jurisdiction over securities issues, with the request that hearings on the Report and related counterproposals be held as soon as reasonably possible. We would hope that the Securities and Exchange Commission would join in this request. We are also sending copies of this letter with enclosures to the other members of the Securities and Exchange Commission. We know that private citizens who serve on committees such as the "Advisory Committee" often do so at great personal expense, and we therefore especially appreciate the efforts of the Committee to address this important issue. Respectfully and sincerely yours, С. Ааушала Сании C. Raymond Marvin Enclosures December 5, 1983 directed to Richard M. Phillips, CHAIRMAN CHAIRMAN-ELECT VICE-CHAIRMAN Columbus, OH 43215 SECRETARY Richard W Duesenberg 800 North Lindbergh Blvd. St. Louis, MO 63167 BUDGET OFFICER One Market Plaza TO HOUSE OF DELEGATES Prudential Plaza Newark, NJ 07101 LAST RETIRING CHAIRMAN One Boston Place 33rd Floor Boston MA 02108 COUNCIL The Officers, Section Delegate, and David Albenda John A. Barrett Roland E Brandel J. Gordon Cooney Elliott Goldstein James W Grady, Jr Ira Michael Heyman William F Kennedy Donald E Schwartz Linda A Wertheimer LAW STUDENT LIAISON YOUNG LAWYER LIAISON BOARD OF GOVERNORS Calvin H. Udall 1700 First Nati Bk Plaza 100 W Washington St Phoenix, AZ 85003 SECTION DIRECTOR SECTION OF CORPORATION, BANKING AND BUSINESS LAW 1155 EAST 60TH ST, CHICAGO, ILLINOIS 60637 TELEPHONE (312) 947-3879 |