Tender Offer Disclosure and Fairness Act of 1987

(Reported to Senate from the Committee on Banking, Housing, and Urban Affairs with amendment, S. Rept. 100-265)

Tender Offer Disclosure and Fairness Act of 1987 - Amends the Securities Exchange Act of 1934 to reduce from ten days to five days the time in which required public disclosures must be filed with the Securities and Exchange Commission (Commission) by a person who acquires more than five percent of the securities of a corporation.

Requires such disclosure to include: (1) the identity of any person with whom the filing person had communications regarding such acquisition (other than a broker or dealer) within 30 days preceding the acquisition and who also filed a disclosure with respect to such securities or who agreed to acquire any such securities; (2) the sources of financing used for such acquisition; (3) a statement by the filing person as to whether the acquisition is for the purpose of investment or for the purpose of taking control of such corporation; and (4) an itemized statement of all fees and other expenses paid or incurred in connection with the acquisition. Prohibits any person required to file such disclosure statements from acquiring any additional securities until the required disclosures have been filed with the Commission and an announcement has been publicly disseminated.

Provides that regulations promulgated by the Commission concerning tender offers shall require appropriate disclosures by officers or directors of the issuer of all expenses incurred or estimated to be incurred in connection with the tender offer.

Requires that any material changes in facts relating to a filing must be made by the end of the next business day following such change. (Present law requires such a change to be made promptly.)

Includes within the definition of those required to file such disclosures any group of two or more persons acting together pursuant to an express or implied agreement or understanding for the purpose of acquiring, holding, or disposing of securities of an issuer or influencing the management or policies of an issuer. (Present law requires disclosure only from groups of persons acting as a partnership, limited partnership, syndicate, or other group.)

Prohibits anyone who has disclosed that the purpose of the acquisition is investment from making any tender offer for additional shares of securities until 60 days after filing an amended disclosure statement indicating that the purpose is to obtain control of the corporation.

Makes unlawful: (1) the making of any false statements of material fact or the omission of any material fact regarding any required disclosure statement; and (2) engaging in any fraudulent, deceptive, or manipulative act or practice in connection with any required disclosure statement.

Provides that such public disclosures of the acquisition of securities or any material changes in such disclosures shall also be disseminated to one or more nationally recognized financial news services, or otherwise as the Commission may prescribe. Specifies that in addition to present requirements such public disclosures shall also contain: (1) the identity of the person making such announcement; (2) whether the purpose of the acquisition is for investment or for taking control of the corporation; and (3) the number of shares of such security which are owned by the disclosing person and the nature of such ownership.

Applies the revised definition of "group" to the required statement of security ownership to be made to an issuer of securities by a person who acquires more than five percent of the securities of such issuer.

Authorizes the Commission to bring a civil action for civil penalties or equitable relief for violations, or the aiding and abetting of a violation, of disclosure requirements, proxy solicitation requirements, and tender offer requirements.

Requires any person making a tender offer for shares of securities of a corporation to keep such offer open for a minimum of at least 35 business days. Extends such 35 business day period to 95 business days in cases where a qualified employee stock ownership plan notifies the offeror, the issuer, or the Commission, of the plan's intent to acquire additional securities of the issuer on terms which are substantially equivalent to other offers.

Prohibits any person from acquiring more than 25 percent of any of the shares of any class of securities in a corporation unless such acquisition is made pursuant to a tender offer.

Provides that any profit realized directly or indirectly in the sale of securities to the issuer of those securities (Greenmail) shall be recoverable by such issuer if the seller was the beneficial owner of more than three percent of the securities of the issuer and held any or all of the shares for less than one year prior to such sale. Allows an exception for transactions approved by a majority of the issuer's outstanding voting securities or pursuant to an offer made on equal terms with all shareholders. Provides that any action to recover such profits may be brought by the issuer or by the owner of any security of the issuer if the issuer fails or refuses to bring such action within 60 days after such request or fails to diligently prosecute such action.

Prohibits any person from acting as a tender offer arbitrageur unless registered with the Commission. Defines a "tender offer aritrageur" as any person who regularly buys and sells registered securities for its own account or for the account of others in response to, or in anticipation of, a merger, tender offer, recapitalization, restructuring, or other similar transaction.

Amends the Employee Retirement Income Security Act (ERISA) to exempt from liability for breach of fiduciary duties any fiduciary of an employee benefit plan who takes into consideration the long-term as well as the short-term interests of the participants and beneficiaries of the plan in decisions relating to voting on a merger, combination, or sale of substantially all the assets of, or in tendering or refraining from tendering securities in a tender offer for, a publicly owned business the securities of which constitute assets of the plan.

Prohibits the use of any part of the residual assets of an employee benefit plan to finance, directly or indirectly, any acquisition of the securities of the employer pursuant to a tender offer or self-tender offer including the repayment, redemption, or refinancing of any indebtedness incurred by such person in connection with any such acquisition.

Requires the inclusion in an issuer's proxy statement a description or statement with respect to any issue to be presented for a shareholder vote (including the election of directors) when such descriptions or statements have been submitted by the owners of at least ten percent of the issuer's voting securities. Specifies that such descriptions or statements shall receive equal space, coverage, and treatment as that of the board of directors or management of such issuer.

Prohibits any broker or dealer from effecting any transaction in contravention of such rules and regulations as the Commission prescribes as necessary or appropriate to control the dissemination, or prevent the misuse, of material, nonpublic information by such broker or dealer or any person associated with such broker or dealer.

Reduces to five days the time in which owners of ten percent or more of the securities of a corporation must file a public disclosure statement after a change in ownership. Specifies that such statement just indicate the change, prior ownership, and resulting ownership.

Increases the insider trading criminal penalties to a maximum of ten years imprisonment and/or a $1,000,000 fine (currently, a maximum of five years imprisonment and/or a $100,000 fine). Requires a minimum criminal penalty of one year imprisonment for perjury or obstruction of justice in connection with an insider trading investigation.

Requires the Comptroller General, in consultation with the Commission and the North American Securities Administrators Association, to conduct a study of State laws which regulate tender offers and other changes of corporate control.

Requires the Commission to conduct a study and report to specified congressional committees concerning: (1) the proxy voting process; and (2) leveraged buyouts and other private transactions in which securities of an issuer are being purchased by corporate management.

Requires the Commission to review the rules, stated policies, practices, or interpretations of national securities exchanges and national securities associations relating to shareholder voting rights. Requires the Commission to report to the Congress on the results of such review.