Three Top Administration Aides Oppose SEC Ban on a Takeover-Related Tactic
WASHINGTON -- In an unusual show of official opposition, the heads of three government agencies have lined up against a proposed Securities and Exchange Commission rule that would prohibit the popular takeover-related tactic called "sweeping the Street."</br></br>The proposed rule would bar corporate raiders from jumping into the stock market during or just after a tender offer and rapidly buying big chunks of a target company's stock. Comments opposing the rule were filed with the SEC by Beryl Sprinkel, the chairman of the president's Council of Economic Advisers; James C. Miller III, the director of the Office of Management and Budget; and Charles Rule, the chief of the Justice Department's Antitrust Division.</br></br>Without necessarily endorsing the proposed rule, the commissioners voted 4-1 in September to sound out public response to it. Commissioner Charles Cox, who cast the sole opposing vote, said yesterday that he found it "significant" that the chiefs of three government offices dislike the rule, in that they don't comment often on rule proposals." Mr. Cox, who has been at the SEC five years, said he doesn't recall any previous instance of three government agencies lining up against a proposed SEC rule.</br></br>The proposed rule would, with certain exceptions, prohibit large open market or privately negotiated transactions that increase the holdings of the initial bidder or any other purchaser by 10% or more, either during the course of a formal tender offer or for 10 business days after the offer's expiration date. In addition, a bidder who announces takeover intentions but doesn't follow through with a formal offer would be required to wait 30 days before making open-market purchases.</br></br>The three letters of opposition make similar arguments along free-market lines. In his letter, Mr. Rule contended that, "There is . . . no evidence that shareholders are generally injured by market sweeps." Mr. Miller maintained that the rule would extend tender offer regulation to legitimate open market purchases, and in doing so impose new costs on the tender offer process. Finally, Mr. Sprinkel said, "The proposed rules appear to tip toward the interests of incumbent management."