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32062 CONGRESSIONAL RECORD-HOU!SE November 22, 1993 "(D) any of such investors are not provided (A) the use of fairness opinions in limited tablished by the association, except that for an option to receive or retain a security partnership rollup transactions; purposes of an exchange or tender offer, such under substantially the same terms and con- (B) the standards which preparers use in person shall file an objection in writing ditions as the original issue. making determinations of fairness; under the rules of the association during the "(5) EXCLUSIONS FROM DEFINITION.-Not- (C) the scope of review, quality of analysis, period in which the offer is outstanding.". withstanding paragraph (4), the term 'lim- qualifications and methods of selection of (b) LISTING STANDARDS OF NATIONAL SECU- ited partnership rollup transaction' does not preparers, costs of preparation, and any limi- RITIES EXCHANGES.-Section 6(b) of the Secu- include- tations imposed by issuers on such preparers; rities Exchange Act of 1934 (15 U.S.C. 78f(b)) "(A) a transaction that involves only a (D) the nature and quality of disclosures is amended by adding at the end the follow- limited partnership or partnerships having provided with respect to such opinions; ing: an operating policy or practice of retaining (E) any conflicts of interest with respect to "(9) The rules of the exchange prohibit the cash available for distribution and reinvest- the preparation of such opinions; and listing of any security issued in a limited ing proceeds from the sale, financing, or refi- (F) the usefulness of such opinions to lim- partnership rollup transaction (as such term nancing of assets in accordance with such ited partners. is defined in paragraphs (4) and (5) of section criteria as the Commission determines ap- (2) REPORT REQUIRED.-Not later than the 14(h)), unless such transaction was conducted propriate; end of the 18-month period referred to in in accordance with procedures designed to "(B) a transaction involving only limited paragraph (1), the Comptroller General of the protect the rights of limited partners, in- partnerships wherein the interests of the United States shall submit to the Congress a cluding- limited partners are repurchased, recalled, report on the evaluation required by para- "(A) the right of dissenting limited part- or exchanged in accordance with the terms graph (1). ners to one of the following: of the preexisting limited partnership agree- SEC. 303. RULES OF FAIR PRACTICE IN ROLLUP "(i) an appraisal and compensation; ments for securities in an operating com- TRANSACTIONS. "(ii) retention of a security under substan- pany specifically identified at the time of (a) REGISTERED SECURITIES ASSOCIATION tially the same terms and conditions as the the formation of the original limited part- RULE.-Section 15A(b) of the Securities Ex- original issue; nership; change Act of 1934 (15 U.S.C. 78o-3(b)) is "(iii) approval of the limited partnership "(C) a transaction in which the securities amended by adding at the end the following rollup transaction by not less than 75 per- to be issued or exchanged are not required to new paragraph: cent of the outstanding securities of each of be and are not registered under the Securi- "(12) The rules of the association to pro- the participating limited partnerships; ties Act of 1933; mote just and equitable principles of trade, "(iv) the use of a committee of limited "(D) a transaction that involves only issu- as required by paragraph (6), include rules to partners that is independent, as determined ers that are not required to register or report prevent members of the association from in accordance with rules prescribed by the under section 12, both before and after the participating in any limited partnership roll- exchange, of the general partner or sponsor, transaction; up transaction (as such term is defined in that has been approved by a majority of the "(E) a transaction, except as the Commis- paragraphs (4) and (5) of section 14(h)) unless outstanding units of each of the participat- sion may otherwise provide by rule for the such transaction was conducted in accord- ing limited partnerships, and that has such protection of investors, involving the com- ance with procedures designed to protect the authority as is necessary to protect the in- bination or reorganization of one or more rights of limited partners, including- terest of limited partners, including the au- limited partnerships in which a non-affili- "(A) the right of dissenting limited part- thority to hire independent advisors, to ne- ated party succeeds to the interests of a gen- ners to one of the following: gotiate with the general partner or sponsor eral partner or sponsor, if- "(i) an appraisal and compensation; on behalf of the limited partners, and to "(i) such action is approved by not less "(ii) retention of a security under substan- make a recommendation to the limited part- than 66% percent of the outstanding units of tially the same terms and conditions as the ners with respect to the proposed trans- each of the participating limited partner- original issue; action; or ships; and "(iii) approval of the limited partnership "(v) other comparable rights that are pre- "(ii) as a result of the transaction, the ex- rollup transaction by not less than 75 per- scribed by rule by the exchange and that are isting general partners will receive only cent of the outstanding securities of each of designed to protect dissenting limited part- compensation to which they are entitled as the participating limited partnerships: ners; expressly provided for in the preexisting lim- "(iv) the use of a committee that is inde- "(B) the right not to have their voting ited partnership agreements; or pendent, as determined in accordance with power unfairly reduced or abridged; "(F) a transaction, except as the Commis- rules prescribed by the association, of the "(C) the right not to bear an unfair portion sion may otherwise provide by rule for the general partner or sponsor, that has been ap- of the costs of a proposed limited partnership protection of investors, in which the securi- proved by a majority of the outstanding se- rollup transaction that is rejected: and ties offered to investors are securities of an- curities of each of the participating partner- "(D) restrictions on the conversion of con- other entity that are reported under a trans- ships, and that has such authority as is nec- tingent interests or fees into non-contingent action reporting plan declared effective be- essary to protect the interest of limited interests or fees and restrictions on the re- fore the date of enactment of this subsection partners, including the authority to hire ceipt of a non-contingent equity interest in by the Commission under section 11A, if- independent advisors, to negotiate with the exchange for fees for services which have not "(i) such other entity was formed, and such general partner or sponsor on behalf of the yet been provided. class of securities was reported and regularly limited partners, and to make a rec- As used in this paragraph, the term 'dissent- traded, not less than 12 months before the ommendation to the limited partners with date on which soliciting material is mailed ing limited partner' means a person who, on respect to the proposed transaction; or the date on which soliciting material is to investors; and "(v) other comparable rights that are pre- "(ii) the securities of that entity issued to mailed to investors, is a holder of a bene- scribed by rule by the association and that ficial interest in a limited partnership that investors in the transaction do not exceed 20 are designed to protect dissenting limited percent of the total outstanding securities of is the subject of a limited partnership rollup partners; transaction, and who casts a vote against the the entity, exclusive of any securities of "(B) the right not to have their voting such class held by or for the account of the transaction and complies with procedures es- power unfairly reduced or abridged; tablished by the exchange, except that for entity or a subsidiary of the entity.". "(C) the right not to bear an unfair portion (b) SCHEDULE FOR REGULATIONS.-The purposes of an exchange or tender offer, such Se- of the costs of a proposed limited partnership curities and Exchange Commission person shall file an objection in writing shall con- rollup transaction that is rejected; and duct rulemaking proceedings under the rules of the exchange during the and prescribe "(D) restrictions on the conversion of con- final regulations under the Securities Act of period during which the offer is outstand- tingent interests or fees into non-contingent 1933 and the Securities Exchange Act of 1934 ing.". interests or fees and restrictions on the re- to implement the requirements of section (c) STANDARDS FOR AUTOMATED QUOTATION ceipt of a non-contingent equity interest in 14(h) of the Securities Exchange Act of 1934, SYSTEMS.-Section 15A(b) of the Securities exchange for fees as amended by subsection (a), and such regu- for services which have not Exchange Act of 1934 (15 U.S.C. 78o-3(b)) is lations shall become effective not later than yet been provided. amended by adding at the end the following 12 months after the date of enactment of this As used in this paragraph, the term 'dissent- new paragraph: Act. ing limited partner' means a person who, on "(13) The rules of the association prohibit (C) EVALUATION OF FAIRNESS OPINION PREP- the date on which soliciting material is the authorization