oversight

Securities and Exchange Commission: Regulation of Takeovers and Security Holder Communications

Published by the Government Accountability Office on 1999-11-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office                                Office of the General Counsel
Washington, DC 20548



          B-284106


          November 19, 1999

          The Honorable Phil Gramm
          Chairman
          The Honorable Paul S. Sarbanes
          Ranking Minority Member
          Committee on Banking, Housing, and Urban Affairs
          United States Senate

          The Honorable Thomas J. Bliley, Jr.
          Chairman
          The Honorable John D. Dingell
          Ranking Minority Member
          Committee on Commerce
          House of Representatives

          Subject: Securities and Exchange Commission: Regulation of Takeovers and Security
                   Holder Communications

          Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a
          major rule promulgated by the Securities and Exchange Commission, entitled
          “Regulation of Takeovers and Security Holder Communications” (RIN: 3235-AG84).
          We received the rule on October 26, 1999. It was published in the Federal Register as
          a final rule on November 10, 1999. 64 Fed. Reg. 61408.

          The final rule revises the regulations applicable to takeover transactions (including
          tender offers, mergers, acquisitions, and similar extraordinary transactions) to
          permit significantly more communications before the time a mandated disclosure
          document must be publicly filed with the SEC. In addition, the rule balances the
          treatment of cash and stock tender offers, simplifies and centralizes current
          disclosure requirements, and eliminates existing regulatory inconsistencies in
          merger and tender offers.

          Enclosed is our assessment of the SEC’s compliance with the procedural steps
          required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.
          Our review indicates that the SEC complied with the applicable requirements.

          If you have any questions about this report, please contact James W. Vickers,
          Assistant General Counsel, at (202) 512-8210. The official responsible for GAO


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evaluation work relating to the subject matter of the rule is Thomas McCool,
Director, Financial Institutions and Markets Issues. Mr. McCool can be reached at
(202) 512-8678.

Sincerely yours,




Robert P. Murphy
General Counsel

Enclosure

cc: Ms. Margaret H. McFarland
    Deputy Secretary, Securities and
     Exchange Commission




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                                                                          ENCLOSURE

        ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
                              ISSUED BY THE
                 SECURITIES AND EXCHANGE COMMISSION
                                 ENTITLED
                    "REGULATION OF TAKEOVERS AND
                  SECURITY HOLDER COMMUNICATIONS"
                             (RIN: 3235-AG84)

(i) Cost-benefit analysis

Although the SEC is not required to prepare a formal cost-benefit analysis, it is
required to consider the effects of the rule on competition under Section 23(a) of the
Exchange Act and whether the rule will promote efficiency, competition, and capital
formation under the National Securities Markets Improvement Act of 1996.

The SEC expects that the cost of compliance with the applicable rules and
regulations will decrease as a result of these amendments since the revisions update
and simplify the rules applicable to these types of transactions and mergers.

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605,
607, and 609

The Notice of Proposed Rulemaking contained the Initial Regulatory Flexibility
Analysis and the preamble to the final rule contains the Final Regulatory Flexibility
Analysis. Both analyses comply with the requirements of the Act by describing the
reasons for the action, the description and number of small entities affected, and the
reporting and recordkeeping requirements.

In discussing the alternatives considered, the SEC notes that since the rule is
deregulatory in nature, if it had waived or eased the rule’s application to small
entities, the burden would have been greater than by applying the final rule to all
entities, regardless of size.

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform
Act of 1995, 2 U.S.C. §§ 1532-1535

As an independent regulatory agency, the SEC is not subject to title II of the
Unfunded Mandates Reform Act of 1995.




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(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

The final rule was issued using the notice and comment procedures contained in
5 U.S.C. 553.

On November 3, 1998, the SEC published in the Federal Register a Notice of
Proposed Rulemaking. 63 Fed. Reg. 67331. In the preamble to the final rule, the SEC
responds to the comments it received.

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520

The final rule contains information collections that are subject to review by the
Office of Management and Budget (OMB) under the Paperwork Reduction Act.

The preamble contains the information required by the Act including the reasons for
the collections and estimates of the annual burden hours imposed. The preamble
contains a chart showing these burden hours which, for the eight collections, total
237,717 hours. The collections have been approved by OMB and the OMB control
numbers are listed in the preamble.

Statutory authorization for the rule

The final rule is promulgated under the authority contained in sections 2(3), 5, 7, 8,
10, 12, 19, and 28 of the Securities Act of 1933, as amended, and sections 3(b), 4(e),
10(b), 13, 14, 18, 23(a), 24, and 36 of the Securities Act of 1934, as amended.

Executive Order No. 12866

As the rule is promulgated by an independent regulatory agency, it is not subject to
the review requirements of Executive Order No. 12866.




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