Subject To Only Some SEC Regulations
If an offer to purchase securities is for less than 5% of the company's securities, it is not governed by Section 14(d) of the Securities Exchange Act or Regulation 14D, but only subject to the anti-fraud rules under Regulation 14E. Thus, such offers are not required to be filed on a Schedule TO with the U.S. Securities and Exchange Commission. Thus, mini-tenders do not have to comply with the same required disclosures that are in place for larger tender offers, but are still subject to the anti-fraud provisions of the Securities Exchange Act that state that it is illegal "to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer."
The SEC advises extreme caution, so the investor should carefully read the mini-tender disclosure and check market prices with their broker. Many mini-tender offers are made with respect to companies that do not trade on an established market, however.
Problematic is the back office systems of many broker-dealers which do not distinguish between mini-tenders and SEC-registered tender offers. In a potentially deceptive practice, a mini-tender is never labeled as a "mini-tender." It has been reported that investors assume that mini-tenders have the same protection as larger tenders, simply because both types of offers are presented as a solicitation on the broker's letterhead.
Some mini-tenders are exchange offers, in which one security is exchanged for another. If the investor tenders publicly traded shares in return for shares with an illiquid market, they will end up with securities that they cannot sell.
Crucially, some mini-tender offers do not have to allow investors to back out after tendering their shares, whereas a registered tender offer allows investors to change their minds.
Read more about this topic: Mini-tender Offer
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