Don't Ask, Don't Tell?

Lessons from the SEC's recent "ring fencing" settlement with Revlon

The recent settlement in the United States between the Securities and Exchange Commission (SEC) and Revlon highlights the importance of not appearing to obstruct the flow of material information to shareholders.

The SEC settled charges that Revlon misled shareholders during a going private transaction. The SEC's order found that to avoid a potential disclosure obligation, Revlon engaged in "ring fencing" to avoid knowing that the transaction's consideration had been deemed inadequate by a third party's financial advisor.

To address the pending maturity of a term loan with a controlling shareholder MacAndrews & Forbes Holdings Inc. (M&F), M&F asked Revlon's independent board members to consider a voluntary exchange offer. As Revlon pursued the voluntary exchange offer, a minority shareholder, the trustee of Revlon's pension plan, informed Revlon that plan members could only tender their shares