[Federal Register Volume 59, Number 173 (Thursday, September 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-22124]


[[Page Unknown]]

[Federal Register: September 8, 1994]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 239 and 240

[Release Nos. 33-7090; 34-34628; File No. S7-26-94]
RIN 3235-AG09

 

Limited Partnership Roll-up Transactions

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
publishing for comment proposed amendments to its rules regarding 
limited partnership roll-up transactions to implement provisions of the 
Limited Partnership Rollup Reform Act of 1993 (``Act''), which added, 
among other matters, new Section 14(h) of the Securities Exchange Act 
of 1934. The proposals would, among other things, amend the current 
Commission definition of ``roll-up transaction'' to conform more 
closely to the definition of that term in the Act.

DATES: Comments must be submitted on or before November 1, 1994.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G. 
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, 
N.W., Washington, D.C. 20549. Comment letters should refer to File No. 
S7-26-94. All comments received will be available for public inspection 
and copying in the Commission's Public Reference Room, 450 Fifth 
Street, N.W., Washington, D.C. 20549.

FOR FURTHER INFORMATION CONTACT: Robert B. Toomey, Office of Disclosure 
Policy, Division of Corporation Finance, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Mail Stop 3-12, Washington D.C. 
20549, at (202) 942-2910.

SUPPLEMENTARY INFORMATION: The Commission is proposing to amend the 
definition of limited partnership roll-up transaction contained in Item 
901(c) of Regulation S-K\1\ to conform more closely to the definition 
in the Act,\2\ which added new provisions regarding roll-up 
transactions to the Securities Exchange Act of 1934 (``Exchange 
Act'').\3\ The Commission, consistent with the Act, also is proposing 
to amend Exchange Act Rules 14a-2,\4\ Rule 14a-6,\5\ and 14a-7,\6\ as 
well as to add new Exchange Act Rules 3b-11, 14a-15 and 14e-7, and a 
new notice of Exempt Preliminary Roll-up Communication. Finally, 
revisions to Item 911 of Regulation S-K\7\ and Forms S-1,\8\ S-4,\9\ S-
11,\10\ F-1,\11\ and F-4\12\ under the Securities Act of 1933 
(``Securities Act'')\13\ are proposed.
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    \1\17 CFR 229.901(c).
    \2\Government Securities Act Amendments of 1993, Pub. L. 103-
202, Title III, 107 Stat 2344 (1993).
    \3\15 U.S.C. 78a et seq.
    \4\17 CFR 240.14a-2.
    \5\17 CFR 240.14a-6.
    \6\17 CFR 240.14a-7.
    \7\17 CFR 229.911.
    \8\17 CFR 239.11.
    \9\17 CFR 239.25.
    \10\17 CFR 239.18.
    \11\17 CFR 239.31.
    \12\17 CFR 239.34.
    \13\15 U.S.C. 77a et seq.
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I. Discussion of Proposals

A. Regulatory and Legislative Background

    In response to investor complaints and serious concerns raised in 
Congressional hearings about limited partnership roll-up transactions, 
the Commission adopted rules designed to enhance the quality of 
information provided to investors in connection with these 
transactions, and established a minimum solicitation period for 
them.\14\ Among other things, the Commission adopted subpart 900 of 
Regulation S-K to enhance the disclosure submitted to investors in 
connection with roll-up transactions (``roll-up rules'').\15\ The roll-
up rules require disclosure with respect to the fundamental changes and 
potential adverse effects arising from roll-up transactions and the 
conflicts of interest, reasons for, alternatives to and fairness of 
such transactions. These rules also require that investors be provided 
with individual partnership prospectus supplements with respect to 
their own partnerships highlighting, among other things, the effects of 
the roll-up transaction on investors in the particular partnership.\16\ 
In addition to the new disclosure rules, the Commission adopted 
amendments to its proxy and tender offer rules\17\ establishing a 60-
day minimum solicitation period for roll-up transactions, or, if 
shorter, the maximum period permitted under state law.
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    \14\Release No. 33-6922 (October 30, 1991) [57 FR 57247]. In 
June 1991, the Commission issued a release providing interpretive 
guidance of the existing disclosure requirements applicable to roll-
up transactions. See Release No. 33-6900 (June 17, 1991) [56 FR 
28979].
    \15\Items 901-915 of Regulation S-K [17 CFR 229.901-915]. As 
there is no analogue to subpart 900 in Regulation S-B [17 CFR 228.10 
et seq.], small business issuers, as defined in Rule 405 of 
Regulation C [17 CFR 230.405], engaged in roll-up transactions on 
Form S-4 must furnish the information required by subpart 900 of 
Regulation S-K as well as the other requirements of that form. See 
General Instruction D.3 to Form S-4. An additional sentence is 
proposed to be added to General Instruction I.1 to Form S-4 to refer 
specifically to the applicability of subpart 900 of Regulation S-K 
to small business roll-up transactions.
    \16\The disclosure requirements apply to registration statements 
on Form S-4 or Form F-4, the forms generally used in connection with 
business combinations or reorganizations. If securities to be issued 
in a roll-up transaction are registered on another form, but would 
be authorized to be registered on Form S-4 or Form F-4, the roll-up 
rules apply in that context. See n. 15 to Release No. 33-6922. 
Instructions are proposed to be added to Forms S-1, F-1 and S-11 to 
such effect.
    \17\Exchange Act Rules 14a-6 [17 CFR 240.14a-6], 14c-2 [17 CFR 
240.14c-2], and 14e-1 [17 CFR 240.14e-1].
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    The Commission acted again in the area of roll-ups in 1992, when, 
as part of its proxy reform, it provided rights to security holders to 
obtain a list of security holders in connection with a roll-up related 
proxy solicitation involving Section 12 registered securities. The 
requesting security holder has the option of receiving the list of 
security holders or having the issuer mail his or her material.\18\
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    \18\Exchange Act Rule 14a-7(b) [17 CFR 240.14a-7(b)].
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    In 1993, the Exchange Act was amended specifically to address roll-
up abuses. The legislation added Section 14(h) to the Exchange Act,\19\ 
which imposes certain disclosure and other requirements for roll-up 
transactions, as discussed below. While many aspects of the Act 
parallel the protections of the Commission's current roll-up rules, the 
Act does require some revisions of, and additions to, the Commission's 
rules.
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    \19\15 U.S.C. 78n(h).
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    With respect to disclosure requirements, the Act largely codifies 
the disclosure requirements of subpart 900 of Regulation S-K. There are 
only three minor revisions required by the Act in the area of 
disclosure, concerning appraisals, reports, and fairness opinions, as 
discussed below.
    The legislation also requires revisions to the Commission's proxy 
and tender offer rules. These revisions include: an exemption for 
preliminary shareholder communications among security holders for the 
purpose of determining whether to solicit proxies, consents or 
authorizations in opposition to a proposed roll-up transaction; an 
expansion of the category of roll-up transactions in which security 
holder lists must be provided; and a prohibition of differential or 
contingent compensation in connection with roll-up transactions.
    The legislation also contains a definition of ``limited partnership 
rollup transaction.'' The legislation generally defines the term as a 
transaction involving the combination or reorganization of one or more 
limited partnerships, directly or indirectly, in which some or all the 
investors receive new securities or securities in another entity. A 
roll-up may be structured as an acquisition, a merger, a tender 
(exchange) offer or in some other fashion. The legislative definition 
contains a number of exclusions from its coverage, which makes it 
narrower than the Commission's current definition of roll-up 
transaction in Item 901 of Regulation S-K (``S-K Definition''). 
Although not required by the Act, the Commission is proposing to revise 
its S-K Definition of roll-up transaction in certain respects to 
conform more closely to the legislative definition. The S-K Definition 
would apply to the disclosure and certain other requirements governing 
roll-ups, as discussed below, while the legislative definition applies 
to all of the new substantive requirements imposed by the Act. Under 
today's proposals, the S-K Definition would continue to be broader than 
that in the legislation.
    Finally, the legislation also amended Sections 6(b) and 15A of the 
Exchange Act20 by adding new Sections 6(b)(9) and 15A(b)(12)-
(13).21 These two amendments require registered securities 
associations (i.e., the National Association of Securities Dealers 
(``NASD'')) to adopt rules to prevent their members from participating 
in any roll-up transaction unless the transaction provides specified 
protections for limited partners,22 and also require national 
securities exchanges to promulgate rules prohibiting the listing of any 
national market system security resulting from a limited partnership 
roll-up transaction unless the transaction provides those protections 
for limited partners (collectively, ``SRO rules''). For example, 
registered securities associations are required to promulgate rules 
preventing their members from participating in roll-up transactions 
unless a dissenting limited partner is given the opportunity to receive 
an appraisal and compensation for the limited partnership security, or 
other comparable rights are provided.23
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    \2\015 U.S.C. 78f(b) and 15 U.S.C. 78o-3.
    \2\115 U.S.C. 78f(b)(9) and 15 U.S.C. 78o-3(b)(12)-(13).
    \2\2The amendments also prohibit the authorization for quotation 
on an automated interdealer quotation system sponsored by a 
registered securities association of any security designated by the 
Commission as a national market system security resulting from a 
roll-up transaction that does not provide for certain investor 
protections.
    See Release No. 34-34533 (August 15, 1994) [59 FR 43147] for 
recent NASD rulemaking relating to limited partnership roll-up 
transactions.
    \2\3Exchange Act Section 15A(b)(12)(A)(i) [15 U.S.C. 78o-
3(b)(12)(A)(i)].
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B. Proposed Revisions to Regulation S-K Definition of Roll-up 
Transaction

1. Basic Coverage of Definition
    As noted above, the current S-K Definition of ``roll-up 
transaction''24 applies to the Commission's existing requirements 
governing roll-ups--special disclosure, a 60-day proxy solicitation or 
tender offer period, and the security holder list requirement in proxy 
solicitations. The Act has a narrower definition of ``roll-up 
transaction'' than the current S-K Definition, since it applies only to 
limited partnerships and not all finite life entities. In addition, the 
legislative definition contains a number of exclusions not currently 
included in the S-K definition. The Commission has analyzed the 
legislative coverage of only limited partnerships, as well as each 
legislative exclusion, and what coverage and which exclusions would be 
appropriate for purposes of its current disclosure and procedural roll-
up requirements. The Commission today is proposing to limit its S-K 
Definition of roll-up transaction to encompass certain, but not all, of 
the legislative exclusions.25 In effect, this would narrow the 
current S-K Definition and reduce disclosure and procedural compliance 
burdens for certain entities involved in transactions that would no 
longer fall within the S-K Definition of roll-up transaction. The 
legislative definition would continue to govern the SRO rules and would 
be used in the rule proposals relating to differential compensation.
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    \2\4Item 901(c) of Regulation S-K.
    \2\5The S-K Definition is not proposed to be restricted to 
limited partnerships.
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    For purposes of disclosure provided to investors in connection with 
roll-up transactions, the S-K Definition would differ from the 
legislative definition in two principal respects, as discussed in more 
detail below. First, the Act applies only to transactions involving 
limited partnership entities, while the S-K Definition of a ``roll-up 
transaction'' covers, and would continue to cover, transactions 
involving finite-life entities, however organized.26 Second, the 
Act includes two separate exclusions that depend upon the listed status 
of the securities to be issued or exchanged, which would be replaced in 
the S-K Definition by a different exclusion for transactions in which 
both the partnership securities to be exchanged and the securities to 
be issued in the roll-up are listed securities.27
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    \2\6``Partnership'' is defined at Item 901(b) of Regulation S-K 
[17 CFR 229.901(b)] to mean any finite-life limited partnership, or 
other finite-life entity. ``Finite-life'' is defined at Item 
901(b)(2)(i) [17 CFR 229.901(b)(2)(i)].
    \2\7The term ``listed securities'' is discussed in Part I.B.4, 
below.
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    Under the current S-K Definition, a roll-up transaction involves 
the combination or reorganization of one or more partnerships, directly 
or indirectly, in which some or all of the investors in any of such 
partnerships will receive new securities or securities in another 
entity. This would continue to be the basic S-K Definition,28 but 
under the rules proposed today, the following transactions would be 
excluded from the S-K Definition for the first time:29
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    \2\8Proposed amendments to Item 901(c)(1) of Regulation S-K.
    \2\9The proposed S-K Definition, like the legislative definition 
also would specifically exclude transactions in which the securities 
to be issued or exchanged are not required to be and are not 
registered under the Securities Act. These transactions have never 
been subject to the Commission's roll-up requirements, since such 
requirements are triggered by the filing of a Securities Act 
registration statement.
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     Transactions where the interests of the partners are 
repurchased, recalled or exchanged, in accordance with the terms of the 
preexisting partnership agreement, for securities in an operating 
company specifically identified at the time of the formation of the 
original limited partnership;
     Transactions involving only issuers (both the subject 
partnerships and the surviving entity) that are not required to 
register or report under Section 12 of the Exchange Act,30 both 
before and after the transaction;31
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    \3\015 U.S.C. 78l.
    \3\1If a transaction involves the issuance of a security that, 
after the transaction, would be convertible into a security of an 
issuer that is required to register or report under Section 12, this 
exclusion would not be available since the transaction would not 
involve only non-Section 12 issuers.
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     Transactions involving the combination or reorganization 
of one or more partnerships in which a non-affiliated party succeeds to 
the interests of a general partner or sponsor, if not less than 66\2/
3\% of the outstanding units of each of the participating partnerships 
approve the roll-up, and, as a result of the transaction, the existing 
general partners receive only compensation to which they are entitled 
as expressly provided in the preexisting partnership agreement;
     Transactions where investors receive securities of an 
entity formed more than 12 months before the mailing of soliciting 
materials, and such securities are regularly traded and do not exceed 
20% of the total outstanding securities of the issuer, exclusive of any 
securities of such class held by or for the account of the entity or a 
subsidiary of the entity;
     Transactions in which both the securities to be issued and 
the securities to be exchanged in the roll-up are listed securities;
     Transactions in which the investors in none of the 
partnerships involved are subject to a significant adverse change with 
respect to voting rights, the term of existence of the entity, 
management compensation or investment objectives; and
     Transactions in which all investors are provided an option 
to receive or retain a security under substantially the same terms and 
conditions as the original issue.32
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    \3\2Proposed Item 901(c)(2) of Regulation S-K. Proposed Item 
901(c) of Regulation S-K would not contain the exclusion contained 
in Section 14(h)(5)(A) of the Exchange Act [15 U.S.C. 78n(h)(5)(A)] 
for transactions involving non-finite life entities, since the term 
``partnership'' is already defined at Item 901(b)(1) of Regulation 
S-K [17 CFR 229.901(b)(1)] to include only ``finite-life'' entities.
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    Transactions falling within the proposed exclusions from the 
definition of ``roll-up transaction'' listed above generally are not 
the type that have generated the abuses giving rise to the Act and the 
Commission's roll-up rules. Therefore, the Commission believes it 
appropriate to simplify compliance burdens by more closely conforming 
the S-K Definition to the legislative definition. Comment is requested 
on the appropriateness of the proposed exclusions, and whether any or 
all of them should be deleted from the proposed S-K Definition, 
particularly in view of the disclosure requirements in the roll-up 
rules that would no longer apply.33
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    \3\3Although such transactions would be excluded from the 
coverage of the roll-up rules, if a transaction raises concerns 
addressed by the roll-up rules, whether or not excluded from the 
rules, the disclosure required under the rules should be considered 
from an anti-fraud perspective. See Release No. 33-6922, Section 
III.B.
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    Consistent with the Act, Regulation S-K also would provide that the 
Commission may exempt by rule or order any security or class of 
securities, any transaction or class of transactions or any person or 
class of persons from the definition of roll-up transaction or the 
requirements imposed on a roll-up transaction.34 This would 
broaden the current provision, which provides for exemptive action only 
on a transaction by transaction basis.35
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    \3\4Proposed Item 901(c)(3) of Regulation S-K.
    \3\5Item 901(c)(2) of Regulation S-K [17 CFR 229.901(c)(2)].
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2. Definition of ``Regularly Traded'' for Purposes of Exclusion
    The legislative history of the Act36 indicates that Congress 
intended to include as ``regularly traded'' securities those securities 
that have a readily ascertainable market value, which are generally 
liquid and which investors may sell following the exchange of 
securities. Therefore, for purposes of the exclusion above, the 
Commission proposes to define the term ``regularly traded'' security as 
any security with a minimum closing price of $2.00/share or more for a 
majority of the business days during the preceding three-month period 
and a six-month minimum average daily trading volume of 1,000 
shares.37 The Commission believes that this definition would mean 
that only those securities that are too thinly traded to permit 
investors to evaluate the consideration being offered in exchange for 
their interest would fail to qualify for the exclusion above and that a 
public market will be available for those securities qualifying for the 
exclusion. Comment is requested as to whether the scope of the proposed 
definition is appropriate or whether alternative definitions would meet 
the goals of the Act.
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    \3\6S. Rep. No. 121, 103d Cong., 1st Sess. 15 (1993).
    \3\7Proposed Item 901(c)(2)(v)(C) of Regulation S-K.
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    In commenting on the appropriateness of the proposed definition 
and/or possible alternatives, commenters should address whether the 
proposed definition would exclude certain securities having a readily 
ascertainable market value and for which a public market is available. 
Comment also is requested as to whether the proposed definition would 
include certain securities not having a readily ascertainable market 
value or for which a public market is not readily available. In 
particular, the Commission seeks comment on whether the price per share 
and average daily trading volume should be set at a higher or lower 
level than currently proposed or whether the price/volume criteria 
should have an inverse relationship, e.g., $3.00/share with average 
daily volume of 500 shares or $1.00/share with average daily volume of 
2,500 shares. The Commission notes that the proposed definition would 
exclude certain securities with a relatively high price per share but a 
low average daily share volume. Therefore, comment is solicited as to 
whether it would be appropriate to define ``regularly traded'' security 
with reference to the average daily dollar volume of a security in lieu 
of its average daily share volume.
3. Exclusions for No Significant Adverse Change or Provision of Option 
To Receive or Retain Substantially the Same Security
    The sixth and seventh exclusions listed above would provide that 
the roll-up requirements do not apply to transactions in which, 
respectively, the investors are not subject to significant adverse 
changes or the investors have an option to receive or retain a security 
under substantially the same terms and conditions. Comment is solicited 
on whether it would be preferable to approach these classes of 
transactions on a case by case basis, since the availability of these 
exclusions can only be determined based on the particular facts and 
circumstances of individual transactions. Specifically, commenters 
should address whether the Commission, instead of adopting these two 
exclusions, should address these types of transactions under its 
Regulation S-K exemptive authority, as discussed above.
4. Statutory Exclusions Not Proposed To Be Included in S-K Definition
    As noted above, unlike the legislative definition, the proposed S-K 
Definition of roll-up transaction would not be restricted to 
transactions involving limited partnerships. Rather, the proposed S-K 
Definition would continue to apply to all finite life entities, whether 
or not organized as limited partnerships. Based on the Commission's 
experience reviewing the disclosure documents filed in connection with 
roll-up transactions by finite life entities, including non-partnership 
entities, it appears that no differing disclosure is warranted and that 
the Commission's roll-up rules should apply to roll-ups of non-
partnership finite life entities, such as finite life trusts, just as 
to roll-ups of finite life limited partnerships.
    Comment is requested on the appropriateness of continuing the 
application of the Commission's roll-up rules to transactions involving 
non-partnership entities. Commenters favoring complete conformity to 
the legislative definition are asked to address why the technical legal 
structure of the participating entities would change the disclosure 
needed in connection with these transactions.
    Also, the proposed S-K Definition would not include the two 
exclusions set forth in the Act for transactions where either no listed 
securities, as described below, would be issued or where all of the 
partnership interests to be exchanged are listed securities at the time 
of filing.38 Instead, a separate exclusion for transactions where 
both the securities of the subject partnerships and the surviving 
entity are listed securities would be provided.39
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    \3\8Exchange Act Sections 14(h)(4)(A) and (B).
    \3\9Proposed Item 901(c)(2)(vi) of Regulation S-K.
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    The transactions encompassed by these two exclusions from the Act's 
definition may raise the concerns that led to the Commission's current 
roll-up disclosure and procedural rules. With regard to the first 
exclusion, it is unlikely that a transaction would be proposed where no 
listed securities would be issued since roll-ups historically have been 
proposed principally as a means to achieve liquidity. However, such a 
transaction still could involve significant conflicts of interest, 
adverse changes and differing effects for partnership investors, which 
would be addressed by the Commission's roll-up disclosure rules. 
Further, if the securities to be issued would not be listed and the 
limited partnership interests were not listed securities, investors 
would not have the alternative of disposing of their interests rather 
than participating. The second exclusion, for transactions where all 
partnership securities were listed securities, does not assure that 
investors who participate would be able to sell after the roll-up since 
it does not require that the securities to be issued be listed 
securities. Accordingly, rather than incorporating these exclusions 
into the proposed S-K Definition, the Commission proposes to exclude 
transactions where both the partnership interests and the securities to 
be issued are listed securities. In these transactions, investors 
should be able to dispose of their securities either to avoid 
participating in the roll-up or after the roll-up is completed.
    Comment is requested concerning whether the two separate exclusions 
in the Act should be incorporated in the S-K Definition. Commenters 
favoring such exclusions from the regulatory coverage should address 
whether these transactions could raise the concerns addressed by the 
roll-up rules. Comment also is requested on the proposed new exclusion.
    The term ``listed securities'' encompasses securities listed on the 
New York Stock Exchange or the American Stock Exchange (``Amex'') 
(including those listed on the Emerging Companies Marketplace) or 
authorized for quotation on Nasdaq/NM, or in some cases listed on 
regional exchanges that substantially meet the Amex listing criteria. 
The proposed rule, like the Act, refers to transactions in which all of 
the partnerships' securities are reported under a transaction reporting 
plan declared effective under Section 11A of the Exchange Act40 by 
the date of the enactment of the Act. Comment is requested as to 
whether this is the appropriate formulation for describing the 
securities for which this exclusion would be available. Comment is 
specifically requested as to whether it would be appropriate to narrow 
the scope of this exclusion. For example, should the listed to listed 
exclusion be narrowed to exclude entities listed on the Emerging 
Companies Marketplace, regional exchange listed securities, or any 
other specified category of securities?
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    \4\015 U.S.C. 78k-1.
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C. Proposed Rule Defining Terms Related to Legislative Definition

    As noted above, while the S-K Definition of ``roll-up transaction'' 
governs the Commission's disclosure and procedural rules, the 
legislative definition establishes the scope of other requirements, 
such as the SRO rules. Accordingly, a new Exchange Act rule is proposed 
in order to define related terms used in the legislative definition for 
purposes of those other requirements.41 These provisions of the 
Act apply to ``limited partnership roll-up transactions'' as defined in 
the Act. The related terms addressed in the proposed new rule would be 
as follows:
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    \4\1Exchange Act Sections 6(b)(9) and 15A(b)(12)-(13) discussed 
in Part I.A, above.
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     As provided in the Act, criteria would be set forth to 
determine when a partnership has an operating policy or practice of 
retaining cash available for distribution and reinvesting proceeds from 
the sale, financing or refinancing of assets.42
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    \4\2Proposed Rule 3b-11(a). This would be accomplished by 
referring to the definition of ``finite life'' in Item 901(b)(2) of 
Regulation S-K [17 CFR 229.901(b)(2)]. If a partnership is not 
finite life as defined in 901(b)(2), then it would be a reinvesting 
partnership for purposes of the exclusion from the Act for 
transactions involving only reinvesting partnerships. See Section 
14(h)(5)(A) of the Act.
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     An exclusion from the roll-up definition would be provided 
for transactions involving only entities registered under the 
Investment Company Act of 194043 or regulated as business 
development companies.44 This exclusion already is in the current 
S-K Definition45 and would remain in effect under the proposal; 
transactions involving such entities are subject to extensive 
regulation, and the concerns associated with roll-ups have not been 
perceived in this area.
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    \4\315 U.S.C. 80a et seq.
    \4\4Proposed Rule 3b-11(b).
    \4\5Item 901(c)(3) of Regulation S-K [17 CFR 229.901(c)(3)].
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     The term ``regularly traded,'' for purposes of the related 
exclusion in the Act, would be defined in the same manner as the 
proposed S-K definition discussed above.46
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    \4\6Proposed Rule 3b-11(c).
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D. Proxy and Tender Offer Rule Revisions

1. Exemption for Preliminary Communications
    The Act mandates a new proxy rule exemption to allow preliminary 
communications among security holders for the purpose of determining 
whether to solicit proxies, consents or authorizations in opposition to 
a proposed roll-up transaction. The Act requires that persons relying 
on the exemption who are in the business of buying and selling limited 
partnership interests in the secondary market, and who hold 5% or more 
of the securities subject to the roll-up, provide specified disclosure 
to the security holders to whom the communication is made.
    The new exemption47 would exempt preliminary communications 
from all the proxy rules, except the anti-fraud prohibitions of Rule 
14a-9.48 As proposed, the exemption would be available in 
connection with any roll-up transaction within the S-K Definition. 
Comment is requested as to whether the exemption should be limited to 
legislatively defined roll-up transactions.49
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    \4\7Proposed Rule 14a-2(b)(4).
    \4\817 CFR 240.14a-9. The other solicitation exemptions in the 
proxy rules, including the exemption afforded by Rule 14a-2(b)(1) 
[17 CFR 240.14a-2(b)(1)], also would be available to roll-up 
communications meeting the conditions of those exemptions.
    \4\9No exemption is needed for solicitations involving 
securities that are not registered under the Exchange Act, since 
they are not subject to the proxy rules.
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    The proposed exemption contains two conditions. First, the 
exemption would be available only to a holder of a security that is the 
subject of a proposed roll-up transaction and who is not an affiliate 
of the registrant, general partner or sponsor. Second, any person 
relying on the new exemption who at the beginning of the solicitation 
owns 5% or more of any class of securities that is subject to the 
proposed roll-up transaction and who is engaged in the business of 
buying and selling limited partnership interests in the secondary 
market would be entitled to rely on the exemption only if specified 
disclosures are made. The person would be required to disclose to any 
security holder solicited under this exemption that person's security 
ownership and any relations of the person to the parties to the 
transaction or to the transaction itself, as set forth in a new Notice 
of Exempt Preliminary Roll-up Communication, and furnish or mail the 
notice to the Commission within three days of the first exempt 
communication.50 As proposed, the information may be provided to 
the security holder orally, if the exempt communication is oral. Any 
written exempt communication would have to contain the information set 
forth in the Notice. The Notice would be required to be submitted to 
the Commission whether the exempt communication was oral or written.
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    \5\0The notice submission requirement would be set forth in 
proposed Rule 14a-6(n) and proposed Schedule 14a-104, ``Notice of 
Exempt Preliminary Roll-up Communication.''
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    The new Notice would contain the following identifying information: 
The name of the registrant appearing on the Securities Act registration 
statement for the roll-up transaction (or, if a registration statement 
has not been filed, the name of the entity into which partnerships are 
to be rolled-up); the name of the partnership that is the subject of 
the proposed roll-up transaction; the name of the person relying on the 
exemption; and the address of the person relying on the exemption. 
Further, pursuant to the Act, the security holder's ownership interests 
would have to be disclosed (including any holdings in any of the other 
entities involved in the roll-up transaction), as well as any relations 
of the holder to the parties to the transaction or to the transaction 
itself. With respect to the latter, the Notice would require the 
security holder to specify and describe these relations if:
     The business of the holder in the buying and selling of 
limited partnership interests in the secondary market would be 
adversely affected if the roll-up transaction was completed;
     The holder would suffer direct (or indirect) material 
financial injury if the roll-up transaction was completed since the 
holder is a service provider (e.g., a property manager) to an affected 
limited partnership;
     The holder is engaged in another transaction that may be 
competitive with the pending roll-up transaction; or
     The holder has any other relations to the parties involved 
in the transaction or to the transaction itself, or enjoys benefits not 
shared on a pro-rata basis by all other security holders of the same 
class.
    Comment is requested as to the appropriateness of limiting the 
exemption to unaffiliated security holders. Comment is also requested 
as to the need for the Notice of Exempt Preliminary Roll-up 
Communication and its submission to the Commission. Should the rules 
require the information to be delivered in writing to all security 
holders receiving the exempt communication? With respect to the Notice, 
should the remainder of any written communication be required to be 
submitted, as in the current Notice of Exempt Solicitation in the proxy 
rules?51 Further, comment is requested on the appropriateness of 
the various categories of relations of the security holder to the 
parties to the transaction or to the transaction itself set forth in 
the Notice. Should any proposed category (or categories) be excluded? 
Conversely, should any additional category (or categories) be included? 
With respect to the timing of the Notice, should the Notice be required 
to be submitted within a shorter period of time (e.g., two days) or 
longer period of time (e.g., five days) after the first exempt 
communication?
---------------------------------------------------------------------------

    \5\117 CFR 240.14a-103.
---------------------------------------------------------------------------

2. Security Holder Lists
    The Act requires issuers to provide to holders of securities that 
are the subject of a roll-up a list of the holders of the securities of 
that entity in accordance with rules prescribed by the 
Commission.52 As noted above, as part of its proxy reform adopted 
in 1992, the Commission provided such rights for security holders in 
connection with a roll-up related proxy solicitation involving Section 
12 registered securities.53 The requesting security holder has the 
option of receiving the list of security holders or having the issuer 
mail his or her material. To fully implement the Act, Rule 14a-7 is 
proposed to be amended to extend this provision to legislatively 
defined roll-ups,54 whether or not involving entities with 
securities registered pursuant to Section 12.55 As a result, the 
Commission's current provision would continue to apply as it has in the 
past; the only change would be to add to legislatively defined roll-ups 
involving non-Section 12 limited partnerships.
---------------------------------------------------------------------------

    \5\2Section 14(h)(1)(B) of the Exchange Act [15 U.S.C. 
78n(h)(1)(B)].
    \5\3See Section I.A, above. Rule 14a-7 refers to roll-up 
transaction as defined in Item 901(c) of Regulation S-K. However, 
because Rule 14a-7 currently only applies to solicitations of 
shareholders of Section 12 entities, not all roll-ups as defined in 
Item 901(c) of Regulation S-K are subject to the rule.
    \5\4Legislatively defined roll-ups, as described in the proxy 
and tender offer rules, would consist of roll-up transactions as 
defined in Item 901(c) of Regulation S-K, except for transactions 
that do not involve limited partnerships, and transactions that meet 
one of the legislative exclusions not encompassed by the proposed 
new Regulation S-K definition.
    \5\5Rule 14a-2 [17 CFR 240.14a-2], which describes the scope of 
the proxy rules, would be amended to make it clear that the rules 
apply in some instances to roll-ups not involving Section 12 
registered securities.
    To the extent that the transaction involves only issuers that 
are not required to register or report under Section 12, both before 
and after the transaction, the transaction would be excluded from 
the definition of roll-up pursuant to proposed Item 901(c)(2) of 
Regulation S-K. See Part I.B.4, above.
---------------------------------------------------------------------------

    The current tender offer rules also contain a security holder list 
provision, but it is applicable only to bidders.56 The proposals 
would add a rule requiring subject companies to provide to holders of 
securities that are the subject of a roll-up structured as a tender 
offer a list of the holders of that entity at the holder's 
option.57 Both roll-up transactions involving Section 12 
registered entities and legislatively defined roll-ups would be 
covered.
---------------------------------------------------------------------------

    \5\6Exchange Act Rule 14d-5 [17 CFR 240.14d-5].
    \5\7Proposed Rule 14e-7(b).
---------------------------------------------------------------------------

F. Differential or Contingent Compensation

    The Act prohibits the compensation of a person soliciting proxies, 
consents or authorizations in connection with a roll-up transaction on 
the basis of whether or not the solicited proxy, consent or 
authorization either approves or disapproves the proposed transaction, 
or is contingent on approval, disapproval or completion of the 
transaction.58 Since 1991, the rules of the NASD have forbidden 
members, in connection with a roll-up transaction (whether a proxy 
solicitation or a tender offer), from accepting compensation based upon 
the result of the solicitation.59 The proposed rule60 would 
make this requirement applicable to all solicitors, regardless of NASD 
membership, in connection with a legislatively defined roll-up 
transaction.61 The limitation to legislatively defined roll-ups is 
consistent with the NASD's pending rule proposal in this area.62
---------------------------------------------------------------------------

    \5\8Section 14(h)(1)(C) of the Exchange Act [15 U.S.C. 
78n(h)(1)(C)].
    \5\9See Article III, Section 34(b)(6) to the Rules of Fair 
Practice of the NASD.
    \6\0Proposed Rule 14a-15.
    \6\1See, e.g., House Report on H.R. 617, in which the Committee 
on Energy and Commerce noted that ``. . . the bill would have the 
effect of both `locking-in' this rule change [the NASD rule change] 
and assuring its extension to non-NASD members, such as proxy 
solicitation firms used to solicit consents to a roll-up.''
    \6\2Release No. 34-34533. See Part I.A, above.
---------------------------------------------------------------------------

    As with the shareholder list provision, the differential and 
contingent compensation provision of the Act also would be applicable 
to legislatively defined roll-up transactions structured as tender 
offers.63 Legislative history indicates that the Commission is to 
make its differential or contingent compensation rule parallel to the 
NASD rules.64 At the time the Act was passed, the NASD rules 
referred to tender offers. Accordingly, pursuant to the Act, a new 
rule65 would prohibit this type of compensation in legislatively 
defined roll-ups structured as tender offers. This is consistent with 
the comparable provision in the NASD rules.66 Thus, as with 
persons seeking a proxy approving a roll-up transaction, persons 
seeking tenders in a roll-up transaction could not be paid based on 
whether the person solicited participated in the tender offer or on 
whether the offer was successful.
---------------------------------------------------------------------------

    \6\3Proposed Rule 14e-7(a).
    \6\4See House Report on H.R. 617 and Senate Report on S. 424.
    \6\5Proposed Rule 14e-7(b).
    \6\6Article III, Section 34(b)(6) of the Rules of Fair Practice 
of the NASD.
---------------------------------------------------------------------------

G. Disclosure Regarding Appraisals, Reports and Fairness Opinions

    The statutory requirements that specific information be included in 
any roll-up transaction disclosure document largely parallels the 
current roll-up rules.67 The only changes required by the 
Act68 would affect the disclosure requirements pertaining to 
appraisals, reports, and fairness opinions contained in Item 911 of 
Regulation S-K.69 The new requirements listed below, while not 
currently explicitly required by Regulation S-K, would mandate 
information that generally is required under Securities Act Rule 
40870 and Exchange Act Rule 12b-20.71 The amendments would 
require specific disclosure of:
---------------------------------------------------------------------------

    \6\7Section 14(h)(1)(D)-(I) of the Exchange Act [15 U.S.C. 
78n(h)(1)(D)-(I)].
    \6\8Sections 14(h)(1)(G) and (H) of the Exchange Act [15 U.S.C. 
78n(h)(1)(G) and (H)].
    \6\917 CFR 229.911.
    \7\017 CFR 230.408.
    \7\117 CFR 240.12b-20.
---------------------------------------------------------------------------

     Any compensation of the preparer of any opinion, appraisal 
or report (other than an opinion of counsel) that is contingent on the 
transaction's approval or completion and, if so, the reasons for 
compensating that party on a contingent basis;72
---------------------------------------------------------------------------

    \7\2Proposed Item 911(a)(2)(vii) of Regulation S-K.
---------------------------------------------------------------------------

     Any reasons for the general partner, sponsor or affiliate 
placing a limitation on the scope of the outside party's investigation 
in connection with any opinion, appraisal, or report, including, but 
not limited to, access to its personnel, premises and relevant books 
and records;73 and
---------------------------------------------------------------------------

    \7\3Proposed amendment to Item 911(a)(2)(vi) of Regulation S-K.
---------------------------------------------------------------------------

     With respect to fairness opinions only, any reasons for 
the general partner or sponsor concluding that a fairness opinion was 
not necessary for the limited partners or shareholders to make an 
informed decision on the proposed transaction if such an opinion on the 
fairness of the proposed roll-up transaction to investors in each of 
the affected partnerships was not obtained.74
---------------------------------------------------------------------------

    \7\4Proposed Item 911(b)(2) of Regulation S-K.
---------------------------------------------------------------------------

II. Request for Comment

    Any interested persons wishing to submit written comments on the 
proposed revisions to the Commission's roll-up rules, as well as on 
other matters that might have an impact on the proposals contained 
herein, are requested to do so. Comments are requested on the impact of 
the proposals on registrants, security holders, general partners, 
sponsors, broker-dealers, and others. The Commission also requests 
comment on whether the proposed rules, if adopted, would have an 
adverse impact on competition that is neither necessary nor appropriate 
in furthering the purposes of the Exchange Act. Comments will be 
considered by the Commission in complying with its responsibilities 
under Section 23(a) of the Exchange Act.75 Comment letters should 
refer to File No. S7-26-94. All comments received will be available for 
public inspection and copying in the Commission's Public Reference 
Room, 450 Fifth Street, NW., Washington, DC 20549.
---------------------------------------------------------------------------

    \7\515 U.S.C. 78w(a).
---------------------------------------------------------------------------

III. Transition to New Rules

    If the proposed rule revisions are adopted, the Commission intends 
to make them effective as of their date of publication in the Federal 
Register. Pending roll-up transactions, including those that have been 
declared effective but have not yet completed the proxy solicitation or 
tender offer, would be subject to the new rules as of the date of the 
rules' effectiveness. The exempt communication, shareholder list and 
differential compensation provisions would be applicable to roll-ups in 
progress, but only from the effective date onward. With respect to the 
proposed Regulation S-K disclosure requirements, in view of the fact 
that the new disclosure obligations are generally required under 
existing rules, all pending registration statements should comply with 
these disclosure requirements and thus be unaffected by the immediate 
effectiveness of the explicit requirements.

IV. Cost-Benefit Analysis

    To assist the Commission in its evaluation of the costs and 
benefits that may result from the proposals, commenters are requested 
to provide views and data relating to any costs and benefits associated 
with these proposals. The proposals, which are intended to carry out 
the purposes of the Act, are expected to have little effect on the net 
costs to entities involved in a roll-up transaction. The proposals 
would afford investors certain procedural protections to facilitate 
shareholder communications and avoid conflicts of interests by persons 
soliciting proxies and being compensated for delivery of a certain 
outcome. Any additional burdens should be outweighed by the value to 
investors of these protections.
    Further, some transactions that would be subject to the roll-up 
requirements under the current rules would no longer be so subject 
under the proposals. Thus, costs would be reduced for entities engaging 
in such transactions.

V. Summary of the Initial Regulatory Flexibility Analysis

    An initial regulatory flexibility analysis has been prepared in 
accordance with 5 U.S.C. 603 concerning the proposed amendments. The 
analysis notes that the amendments are intended to comport with the 
requirements of the Act.
    As discussed more fully in the analysis, the proposals would affect 
persons that are small entities, as defined by the Commission's rules, 
but would affect small registrants in the same manner as other 
registrants. The proposed amendments and new rules, however, are 
designed to minimize these costs to the greatest extent possible while 
enhancing the ability of security holders to analyze roll-up 
transactions.
    Written comments are encouraged with respect to any aspect to the 
analysis. Such comments will be considered in the preparation of the 
Final Regulatory Flexibility Analysis if the proposed amendments are 
adopted. A copy of the analysis may be obtained by contacting Robert B. 
Toomey, Office of Disclosure Policy, Division of Corporation Finance, 
Mail Stop 3-12, 450 Fifth Street, N.W., Washington, D.C. 20549.

VI. Statutory Basic for Rules

    The amendments to Regulation S-K and Forms S-4 and F-4 are being 
proposed pursuant to sections 6, 7, 8, 10, and 19 of the Securities 
Act, as amended,\76\ and Section 14 of the Exchange Act, as 
amended.77
---------------------------------------------------------------------------

    \76\15 U.S.C. 77f, 77g, 77h, 77j, 77s.
    \77\15 U.S.C. 78n.
---------------------------------------------------------------------------

    The amendments to the proxy and tender offer rules are being 
proposed pursuant to Sections 14 and 23 of the Exchange Act, as 
amended.78
---------------------------------------------------------------------------

    \78\15 U.S.C. 78n, 78w.
---------------------------------------------------------------------------

List of Subjects in 17 CFR Parts 229, 239 and 240

    Reporting and recordkeeping requirements, Securities.

Text of Proposals

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER THE 
SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY 
POLICY AND CONSERVATION ACT OF 1975--REGULATION S-K

    1. The authority citation for Part 229 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79e, 79n, 
79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.

    2. By revising Sec. 229.901(c) to read as follows:


Sec. 229.901  (Item 901) Definitions.

* * * * *
    (c)(1) Except as provided in paragraph (c)(2) or (c)(3) of this 
Item, roll-up transaction means a transaction involving the combination 
or reorganization of one or more partnerships, directly or indirectly, 
in which some or all of the investors in any of such partnerships will 
receive new securities, or securities in another entity.
    (2) Notwithstanding paragraph (c)(1) of this Item, roll-up 
transaction shall not include:
    (i) A transaction wherein the interests of all of the investors in 
each of the partnerships are repurchased, recalled, or exchanged in 
accordance with the terms of the preexisting partnership agreement for 
securities in an operating company specifically identified at the time 
of the formation of the original partnership;
    (ii) A transaction in which the securities to be issued or 
exchanged are not required to be and are not registered under the 
Securities Act of 1933 (15 U.S.C. 77a et seq.);
    (iii) A transaction that involves only issuers that are not 
required to register or report under Section 12 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78l), both before and after the 
transaction;
    (iv) A transaction that involves the combination or reorganization 
of one or more partnerships in which a non-affiliated party succeeds to 
the interests of a general partner or sponsor, if:
    (A) Such action is approved by not less than 66\2/3\% of the 
outstanding units of each of the participating partnerships; and
    (B) As a result of the transaction, the existing general partners 
will receive only compensation to which they are entitled as expressly 
provided for in the preexisting partnership agreements;
    (v) A transaction in which the securities offered to investors are 
securities of another entity that are reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under Section 11A of the Securities Exchange Act of 1934 (15 
U.S.C. 78k-1), if:
    (A) Such other entity was formed, and such class of securities was 
reported and regularly traded, not less than 12 months before the date 
on which soliciting material is mailed to investors; and
    (B) The securities of that entity issued to investors in the 
transaction do not exceed 20% of the total outstanding securities of 
the entity, exclusive of any securities of such class held by or for 
the account of the entity or a subsidiary of the entity;
    (C) For purposes of subparagraph (c)(2)(v) of this Item 
(Sec. 229.901(c)(2)(v)), a regularly traded security means any security 
with a minimum closing price of $2.00 or more for a majority of the 
business days during the preceding three-month period and a six-month 
minimum average daily trading volume of 1,000 shares.
    (vi) A transaction in which all of the investors' partnership 
securities are reported under a transaction reporting plan declared 
effective before December 17, 1993 by the Commission under Section 11A 
of the Securities Exchange Act of 1934 (15 U.S.C. 78k-1) and such 
investors receive new securities or securities in another entity that 
are reported under a transaction reporting plan declared effective 
before December 17, 1993 by the Commission under Section 11A of the 
Securities Exchange Act of 1934 (15 U.S.C. 78k-1);
    (vii) A transaction in which the investors in any of the 
partnerships involved in the transaction are not subject to a 
significant adverse change with respect to voting rights, the terms of 
existence of the entity, management compensation or investment 
objectives; or
    (viii) A transaction in which all investors are provided an option 
to receive or retain a security under substantially the same terms and 
conditions as the original issue.
    (3) The Commission, upon written request or upon its own motion, 
may exempt by rule or order any security or class of securities, any 
transaction or class of transactions, or any person or class of 
persons, in whole or in part, conditionally or unconditionally, from 
the definition of roll-up transaction or the requirements imposed on 
roll-up transactions by Items 902-915 of Regulation S-K (Secs. 229.902-
915), if it finds such action to be consistent with the public interest 
and the protection of investors.
* * * * *
    3. By amending Sec. 229.911 by adding a sentence to the end of 
paragraph (a)(2)(vi), adding paragraph (a)(2)(vii), and revising 
paragraph (b) to read as follows:


Sec. 229.911  (Item 911) Reports, opinions and appraisals.

    (a) * * *
    (2) * * *
    (vi) * * * If any limitation was imposed by the general partner, 
sponsor or affiliate on the scope of the investigation, including, but 
not limited to, access to its personnel, premises, and relevant books 
and records, state the reasons therefor.
    (vii) State whether any compensation paid to such outside party is 
contingent on the approval or completion of the roll-up transaction 
and, if so, the reasons for compensating such parties on a contingent 
basis.
* * * * *
    (b) Fairness Opinions: (1) If any report, opinion or appraisal 
relates to the fairness of the roll-up transaction to investors in the 
partnerships, state whether or not the report, opinion or appraisal 
addresses the fairness of:
    (i) The roll-up transaction as a whole and to investors in each 
partnership; and
    (ii) All possible combinations of partnerships in the roll-up 
transaction (including portions of partnerships if the transaction is 
structured to permit portions of partnerships to participate). If all 
possible combinations are not addressed:
    (A) Identify the combinations that are addressed;
    (B) Identify the person(s) that determined which combinations would 
be addressed and state the reasons for the selection of the 
combinations; and
    (C) State that if the roll-up transaction is completed with a 
combination of partnerships not addressed, no report, opinion or 
appraisal concerning the fairness of the roll-up transaction will have 
been obtained.
    (2) If the sponsor or the general partner has not obtained any 
opinion on the fairness of the proposed roll-up transaction to 
investors in each of the affected partnerships, state the sponsor's or 
general partner's reasons for concluding that such an opinion is not 
necessary in order to permit the limited partners or shareholders to 
make an informed decision on the proposed transaction.
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    4. The authority citation for Part 239 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l, 
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m, 
79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise 
noted.
* * * * *
    5. By amending Form S-1 (referenced in Sec. 239.11) by adding 
General Instruction IV. to read as follows:

    Note: The text of Form S-1 does not, and the amendment will not, 
appear in the Code of Federal Regulations.

Form S-1

* * * * *

General Instructions

* * * * *

IV. Roll-up Transactions

    If the securities to be registered on this Form will be issued 
in a roll-up transaction as defined in Item 901(c) of Regulation S-K 
(17 CFR 229.901(c)), attention is directed to the requirements of 
Form S-4 applicable to roll-up transactions, including, but not 
limited to, General Instruction I.
* * * * *
    6. By amending General Instruction I. to Form S-4 (referenced in 
Sec. 239.25) by adding a sentence to paragraph 1 between the first and 
second sentence and adding paragraph 3. to read as follows:

    Note: The text of Form S-4 does not, and the amendment will not, 
appear in the Code of Federal Regulations.

Form S-4

* * * * *

General Instructions

* * * * *

I. Roll-up Transactions

    1. * * * A ``small business issuer,'' defined in Sec. 230.405, 
that is engaged in a roll-up transaction shall refer to the 
disclosure items in subpart 900 of Regulation S-K. * * *
    2. * * *
    3. Attention is directed to the proxy rules (17 CFR 240.14a-1 et 
seq.) and Rule 14e-7 of the tender offer rules (17 CFR 240.14e-7) if 
securities to be registered on this Form will be issued in a roll-up 
transaction. Such rules contain provisions specifically applicable 
to roll-up transactions, whether or not the entities involved have 
securities registered pursuant to Section 12 of the Exchange Act.
* * * * *
    7. By amending Form S-11 (referenced in Sec. 239.18) by adding 
General Instruction F. to read as follows:

    Note: The text of Form S-11 does not, and the amendment will 
not, appear in the Code of Federal Regulations.

Form S-11

* * * * *

General Instructions

* * * * *

F. Roll-up Transactions

    If the securities to be registered on this Form will be issued 
in a roll-up transaction as defined in Item 901(c) of Regulation S-K 
(17 CFR 229.901(c)), attention is directed to the requirements of 
Form S-4 applicable to roll-up transactions, including, but not 
limited to, General Instruction I.
* * * * *
    8. By amending Form F-1 (referenced in Sec. 239.31) by adding 
General Instruction IV. to read as follows:

    Note: The text of Form F-1 does not, and the amendment will not, 
appear in the Code of Federal Regulations.

Form F-1

* * * * *

General Instructions

* * * * *

IV. Roll-up Transactions

    If the securities to be registered on this Form will be issued 
in a roll-up transaction as defined in Item 901(c) of Regulation S-K 
(17 CFR 229.901(c)), attention is directed to the requirements of 
Form S-4 applicable to roll-up transactions, including, but not 
limited to, General Instruction I.
* * * * *
    9. By amending Form F-4 (referenced in Sec. 239.34) by adding 
paragraph 3. to General Instruction G. to read as follows:

    Note: The text of Form F-4 does not, and the amendment will not, 
appear in the Code of Federal Regulations.

Form F-4

* * * * *

General Instructions

* * * * *

G. Roll-up Transactions.

* * * * *
    3. Attention is directed to the proxy rules (17 CFR 240.14a-1 et 
seq.) and Rule 14e-7 of the tender offer rules (17 CFR 240.14e-7) if 
securities to be registered on this Form will be issued in a roll-up 
transaction. Such rules contain provisions specifically applicable 
to roll-up transactions, whether or not the entities involved have 
securities registered pursuant to Section 12 of the Exchange Act.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    10. The authority citation for Part 240 continues to read, in part, 
as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg, 
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p, 
78s, 78w, 78x, 78ll(d), 78q, 79t, 80a-20, 80a-23, 80a-29, 80-37, 
80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
    11. By reserving Sec. 240.3b-10 and adding Sec. 240.3b-11 to read 
as follows:


Sec. 240.3b-11  Definitions relating to limited partnership roll-up 
transactions for purposes of sections 6(b)(9), 14(h) and 15A(b)(12)-
(13).

    For purposes of Sections 6(b)(9), 14(h) and 15A(b)(12)-(13) of the 
Act (15 U.S.C. 78f(b)(9), 78n(h) and 15 U.S.C. 78o-3(b)(12)-(13)):
    (a) The term limited partnership roll-up transaction does not 
include a transaction involving only entities that are not ``finite-
life'' as defined in Item 901(b)(2) of Regulation S-K 
(Sec. 229.901(b)(2) of this chapter).
    (b) The term limited partnership roll-up transaction does not 
include a transaction involving only entities registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or any 
Business Development Company as defined in Sec. 2(a)(48) of that Act 
(15 U.S.C. 80a-2(a)(48)).
    (c) The term ``regularly traded'' shall be defined as in Item 
901(c)(2)(v)(C) of Regulation S-K (Sec. 229.901(c)(2)(v)(C) of this 
chapter).
* * * * *
    12. By amending Sec. 240.14a-2 by revising the section heading, the 
introductory text, the reference ``240.14a-14'' in the introductory 
text of paragraph (a) to read ``240.14a-15'' and the reference ``14a-
14'' in the introductory text of paragraph (b) to read ``240.14a-15'' 
and by adding paragraph (b)(4) to read as follows:


Sec. 240.14a-2  Solicitations to which Sec. 240.14a-3 to Sec. 240.14a-
15 apply.

    Sections 240.14a-3 to 240.14a-15, except as specified below, apply 
to every solicitation of a proxy with respect to securities registered 
pursuant to Section 12 of the Act (15 U.S.C. 78l), whether or not 
trading in such securities has been suspended. To the extent specified 
below, certain of these sections also apply to roll-up transactions 
that do not involve an entity with securities registered pursuant to 
Section 12 of the Act.
* * * * *
    (b) * * *
    (4) Any solicitation in connection with a roll-up transaction as 
defined in Item 901(c) of Regulation S-K (Sec. 229.901 of this chapter) 
in which the holder of a security that is the subject of a proposed 
roll-up transaction engages in preliminary communications with other 
holders of securities that are the subject of the same limited 
partnership roll-up transaction for the purpose of determining whether 
to solicit proxies, consents, or authorizations in opposition to the 
proposed limited partnership roll-up transaction; provided, however, 
that:
    (i) This exemption shall not apply to a security holder who is an 
affiliate of the registrant or general partner or sponsor; and
    (ii) This exemption shall not apply to a holder of five percent 
(5%) or more of the outstanding securities of a class that is the 
subject of the proposed roll-up transaction who engages in the business 
of buying and selling limited partnership interests in the secondary 
market unless that holder discloses to the persons to whom the 
communications are made such ownership interest and any relations of 
the holder to the parties of the transaction or to the transaction 
itself, as required by Sec. 240.14a-6(n)(1) and specified in the Notice 
of Exempt Preliminary Roll-up Communication (Sec. 240.14a-104). If the 
communication is oral, this disclosure may be provided to the security 
holder orally. Whether the communication is written or oral, the notice 
required by Sec. 240.14a-6(n) and Sec. 240.14a-104 shall be furnished 
to the Commission.
    13. By amending Sec. 240.14a-6 by adding paragraph (n) to read as 
follows:


Sec. 240.14a-6  Filing requirements.

* * * * *
    (n) Solicitations subject to Sec. 240.14a-2(b)(4). (1) Any person 
who:
    (i) Engages in a solicitation pursuant to Sec. 240.14a-2(b)(4), and
    (ii) At the commencement of that solicitation both owns five 
percent (5%) or more of the outstanding securities of a class that is 
the subject of the proposed roll-up transaction, and engages in the 
business of buying and selling limited partnership interests in the 
secondary market, shall furnish or mail to the Commission, not later 
than three days after the date an oral or written solicitation by that 
person is first made, sent or provided to any security holder, five 
copies of a statement containing the information specified in the 
Notice of Exempt Preliminary Roll-up Communication (Sec. 240.14a-104). 
Five copies of any amendment to such statement shall be furnished or 
mailed to the Commission not later than three days after a 
communication containing revised material is first made, sent or 
provided to any security holder.
    14. By amending Sec. 240.14a-7 by revising paragraph (b) to read as 
follows:


Sec. 240.14a-7  Obligations of registrants to provide a list of, or 
mail soliciting material to, security holders.

    (a) * * *
    (b)(1) The requesting security holder shall have the options set 
forth in paragraph (a)(2) of this section, and the registrant shall 
have corresponding obligations, if the registrant or general partner or 
sponsor is soliciting or intends to solicit with respect to:
    (i) A proposal that is subject to Sec. 240.13e-3;
    (ii) A roll-up transaction as defined in Item 901(c) of Regulation 
S-K (Sec. 229.901(c) of this chapter) that involves an entity with 
securities registered pursuant to Section 12 of the Act (15 U.S.C. 
78l); or
    (iii) A roll-up transaction as defined in Item 901(c) of Regulation 
S-K (Sec. 229.901(c) of this chapter) that involves a limited 
partnership, unless the transaction involves only:
    (A) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under Section 11A of the Act (15 U.S.C. 78k-1); or
    (B) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under Section 11A of the Act (15 U.S.C. 78k-1).
    (2) With respect to all other requests pursuant to this section, 
the registrant shall have the option to either mail the security 
holder's material or furnish the security holder list as set forth in 
this section.
* * * * *
    15. By adding Sec. 240.14a-15 to read as follows:


Sec. 240.14a-15  Differential and contingent compensation in connection 
with roll-up transactions.

    (a) It shall be unlawful for any person to receive compensation for 
soliciting proxies, consents, or authorizations directly from security 
holders in connection with a roll-up transaction as provided in 
paragraph (b) of this section, if the compensation is:
    (1) Based on whether the solicited proxy, consent, or authorization 
either approves or disapproves the proposed roll-up transaction; or
    (2) Contingent on the approval, disapproval, or completion of the 
roll-up transaction.
    (b) This section is applicable to a roll-up transaction as defined 
in Item 901(c) of Regulation S-K (Sec. 229.901(c) of this chapter), 
except for a transaction involving only:
    (1) Finite life entities that are not limited partnerships;
    (2) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under Section 11A of the Act (15 U.S.C. 78k-1); or
    (3) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under Section 11A of the Act (15 U.S.C. 78k-1).
    16. By adding Sec. 240.14a-104 to read as follows:


Sec. 240.14a-104  Notice of Exempt Preliminary Roll-up Communication. 
Information regarding ownership interests and any potential conflicts 
of interest to be included in statements submitted by or on behalf of a 
person pursuant to Sec. 240.14a-2(b)(4) and Sec. 240.14a-6(n).

United States Securities and Exchange Commission

Washington, D.C. 20549

Notice of Exempt Preliminary Roll-up Communication

    1. Name of registrant appearing on Securities Act of 1933 
registration statement for the roll-up transaction (or, if 
registration statement has not been filed, name of entity into which 
partnerships are to be rolled up):

----------------------------------------------------------------------

    2. Name of partnership that is the subject of the proposed roll-
up transaction:

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    3. Name of person relying on exemption:

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    4. Address of person relying on exemption:

----------------------------------------------------------------------

    5. Ownership interest of security holder in partnership that is 
the subject of the proposed roll-up transaction:

----------------------------------------------------------------------

----------------------------------------------------------------------

    Note: To the extent that the holder owns securities in any other 
entities involved in this roll-up transaction, disclosure of these 
interests also should be made.

    6. Describe any and all relations of the holder to the parties 
to the transaction or to the transaction itself:
    a. The holder is engaged in the business of buying and selling 
limited partnership interests in the secondary market would be 
adversely affected if the roll-up transaction were completed.

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

    b. The holder would suffer direct (or indirect) material 
financial injury if the roll-up transaction were completed since it 
is a service provider to an affected limited partnership.
----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

    c. The holder is engaged in another transaction that may be 
competitive with the pending roll-up transaction.

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

    d. Any other relations to the parties involved in the 
transaction or to the transaction itself, or any benefits enjoyed by 
the holder not shared on a pro rata basis by all other holders of 
the same class of securities of the partnership that is the subject 
of the proposed roll-up transaction.
----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------


    17. By adding Sec. 240.14e-7 to read as follows:


Sec. 240.14e-7  Unlawful tender offer practices in connection with 
roll-ups.

    In order to implement Section 14(h) of the Act (15 U.S.C. 78n(h)):
    (a)(1) It shall be unlawful for any person to receive compensation 
for soliciting tenders directly from security holders in connection 
with a roll-up transaction as provided in paragraph (a)(2) of this 
section, if the compensation is:
    (i) Based on whether the solicited person participates in the 
tender offer; or
    (ii) Contingent on the success of the tender offer.
    (2) Paragraph (a)(1) of this section is applicable to a roll-up 
transaction as defined in Item 901(c) of Regulation
S-K (Sec. 229.901(c) of this chapter), structured as a tender offer, 
except for a transaction involving only:
    (i) Finite life entities that are not limited partnerships;
    (ii) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under Section 11A of the Act (15 U.S.C. 78k-1); or
    (iii) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under Section 11A of the Act (15 U.S.C. 78k-1).
    (b)(1) It shall be unlawful for any finite life entity that is the 
subject of a roll-up transaction as provided in (b)(2) to fail to 
provide a security holder list or mail communications related to a 
tender offer that is in furtherance of the roll-up transaction, at the 
option of a requesting security holder, pursuant to the procedures set 
forth in Sec. 240.14a-7.
    (2) Paragraph (b)(1) of this section is applicable to a roll-up 
transaction as defined in Item 901(c) of Regulation
S-K (Sec. 229.901(c) of this chapter), structured as a tender offer, 
that involves:
    (i) An entity with securities registered pursuant to Section 12 of 
the Act (15 U.S.C. 78l); or
    (ii) A limited partnership, unless the transaction involves only:
    (A) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under Section 11A of the Act (15 U.S.C. 78k-1); or
    (B) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under Section 11A of the Act (15 U.S.C. 78k-1).

    Dated: September 1, 1994.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-22124 Filed 9-7-94; 8:45 am]
BILLING CODE 8010-01-P