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Securities Regulation Keyed to Coffee
WHX Corporation v. Securities and Exchange Commission
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- Facts: What are the factual circumstances that gave rise to the civil or criminal case? What is the relationship of the Parties that are involved in the case. Review the Facts of this case here:
WHX desired to make a hostile tender offer for Dynamics Corporation of America (DCA), but due to the annual shareholder meeting having passed already, WHX suggested to incorporate a condition extending the offer to shareholders who, as of the current date, were holders or to those who attained a valid proxy. The company’s attorney sought advice from the SEC about if this condition would cause trouble with the All Holders Rule, SEC Rule 14d-10(a)(l ), but was informed that no-action letters on this rule were not issued by the SEC. No bidder shall make a tender offer unless the “tender offer is open to all security holders of the class of securities subject to the tender offer”, as stated by the All Holders Rule. The purpose of the rule was mostly to eradicate offers that discriminate against identifiable shareholders. The attorney felt good-faith arguments existed regarding why the condition in this specific situation failed to violate the rule, considering how the rule is structured, the condition would not influence the security holders not included in the offer to sell to those included. Upon WHX continuing with the tender offer, it was advised by the SEC staff that the offer was in violation of the All Holders Rule then WHX explained to the Commissioners why they thought no remedial response was warranted by the condition. The pleas of WHX were futile and the SEC approved an enforcement action to stop the tender offer. WHX instantly withdrew the condition in response and following that, its takeover bid failed. Regardless, after a year and some had passed, the SEC began cease-and-desist proceedings against WHX. An Administrative Law Judge (ALJ) found no violation, however the SEC reversed and imposed on the cease-and-desist order. Review granted by the court of appeals.
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