(dissenting) :
I dissent.
Although I agree with the majority’s conclusion that a preliminary injunction is not warranted in this case, I cannot accept the interpretation given by my colleagues to those provisions of the securities laws invoked against Bangor Punta. In my view Judge Tenney was substantially correct in his rulings below, and his order should be affirmed.
This case turns on two events, the issuance of the May 8 press release and Bangor Punta’s purchases of 120,200 shares of Piper stock from May 12 through May 24. I think that Bangor Punta acted properly in both situations. Not only was the May 8 release proper, but the parties could have done no less, for I read recent interpretations of the securities laws as imposing an affirmative obligation to disclose the matters announced in the release. As to the purchases of the 120,200 shares, Bangor Punta did not then know of any rule or interpretation precluding the transactions, and the Commission has at least twice passed up opportunities to enforce its “long-established” interpretation of 10b-6 against Bangor Punta. Although it was aware of the purchases when it was preparing its suit in the District Court for the District of Columbia, the SEC made no mention of them in the pleadings nor sought to enjoin Bangor Punta from further purchase in the consent decree. Later, the Commission approved Bangor Punta’s registration statement without requiring any disclosure of alleged violations of 10b-6. For the SEC now to take the position that Rule 10b-6 prohibited the purchases represents a complete reversal of the position it had taken towards Bangor Punta until now.
1. Section 5(c) and Rule 135
It was entirely proper for Bangor Punta to enter into the May 8th agreement with the Piper family, as the family had every right to choose between takeover by Chris-Craft, Bangor Punta, or ^ny other group.
Bangor Punta agreed to use its best efforts to acquire more than 50% of the Piper Common Stock. As “a part of such best efforts,” it promised to “take all steps necessary to make a further exchange offer to all holders of Piper Stock * * * ”; each share was to be exchanged for Bangor Punta securities or cash “having a value, in the written opinion of the First Boston Corporation, of $80 or more. * * * ” There was a similar provision to safeguard the Pipers in that they would receive consideration worth at least $80. Thus, as they well may have had a right to expect, the other shareholders of Piper were assured substantially equal treatment to that received by the Piper family. See Perlman v. Feldmann, 219 F.2d 173 (2d Cir. 1955); Andrews, The Stockholder’s Right to Equal Opportuni*580ty in the Sale of Shares, 78 Harv.L.Rev. 505 (1965).
Bangor Punta and Piper immediately notified the Stock Exchange of this agreement and issued a press release on May 8. I think Judge Tenney was correct in holding that the press release was consonant with the Exchange guidelines for announcing material corporation developments and with the mandate of SEC v. Texas Gulf Sulphur, 401 F.2d 833 (2d Cir. 1968), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1969).
In Texas Gulf, we reiterated our view that the securities laws should advance “the justifiable expectation of the market place that all investors trading on impersonal exchanges have relatively equal access to material information * * 401 F.2d at 848. It seems clear that if this principle is to be honored, the agreement with forty members of the Piper family, in conjunction with the decision to launch a tender offer, was material information requiring disclosure.
The majority intimates that the $80 figure was not a material fact, a suggestion with which I cannot agree. The test for materiality laid down in Texas Gulf is whether the fact is one to which “[a] reasonable man would attach importance * * * in determining his-choice of action in the transaction in question.” 401 F.2d at 849. On May 8 Chris-Craft was offering $65 for each Piper share in a taxable exchange; no reasonable man holding Piper shares on that date would find “unimportant” the fact that Bangor planned to offer, in the near future, a considerably more attractive package of securities, with a value of approximately $80.
To me, however, finding the fact material does not in every case compel disclosure, for the need for equal access to information does not automatically override competing policies of the securities laws as embodied in other statutory provisions and well-established regulations. Here, Rule 135 advances the basic principle that the prospectus and registration statement shall be the primary source of information during and before a contemplated offering, and only limited kinds of information can be released prior to filing.
The task of harmonizing regulations based on competing policies should of course be left to the SEC in the first instance. But when, as here, the Commission refuses even to recognize the existence of a conflict, we must strike the balance. Fortunately, our task here is not difficult, for there is language in Rule 135 which when read in the light of Texas Gulf authorizes the announcement.
Most of the May 8th announcement— the fact of the offering, the proposed date — was clearly authorized by Rule 135. While the $80 figure may seem more difficult to justify, under the circumstances its announcement was the only course open to Bangor Punta. Responding to the problem of valuation, Rule 135(c) (4) provides for notification of “the basis -upon which the exchange is proposed to be made. * * * ” Although not free from doubt, in the light of Texas Gulf I would read this provision as permitting announcement of the $80 figure.
The need for fair and equal access to information about the terms of a tender offer must be balanced against premature and incomplete disclosure of a securities offering in contravention of the registration and disclosure requirements underlying the 1933 Act. The conflict is sharply posed when, as here, the merger agreement sets only a value for the exchange package, with the underlying securities left to be determined later. When the securities to be offered are not specified at the time of the announcement, the investing public cannot even begin to make an independent evaluation of the offer1 and perforce may tend *581to react significantly but blindly to the unsupported dollar sum. Also, I realize there is a possibility for abuse, with companies employing this manner of agreement in order to gain the advantages of “jumping the gun.”
Despite these considerations, it seems to me that here the need for disclosure was paramount. In addition to the forty ' members of the Piper family and their agents, a large group of persons employed by independent firms, including accountants, escrow agents, banks, and printers, would of necessity work on the Piper agreement and so learn of the news. Not bound as insiders 2 or by the restraints of corporate trust imposed on employees of Piper and Bangor Punta, they would be free to trade upon this information, and with Piper trading at a considerably lower price on May 8, their response is easily foreseen. Even if under some legal or moral duty of restraint, a group this large could not be effectively policed or controlled. Further, the figure would rapidly spread; a dollar sum speeds the rumor as it is easily remembered and easily transmitted. Finally, Piper stockholders, thus apprised by the May 8 release of what they might receive if they held their shares rather than tendering to Chris-Craft, clearly benefited from the disclosure.3 Chris-Craft can hardly complain that it was placed at a disadvantage by reason of Bangor Punta’s higher bid and its ability to pay more; thus the law of the market place benefits the stockholders whose shares are sought.
On petition for rehearing, another factor compelling disclosure has been called to our attention. The so-called “tender offer” provision, section 13(d) (1) of the Securities Act of 1934, required Bangor Punta to file a detailed description of the May 8 agreement with the SEC within ten days, by May 18th. When timely filed, the description in accordance with section 13(d) (1) disclosed as an essential element of the Agreement that Bangor Punta planned a registered offer to the public shareholders of Piper, the offer to consist
“of cash and/or securities having a value of at least $80 per share. Such value to be determined by The First Boston Corporation. * * * ”
This wording is virtually identical to the May 8 announcement.
The 13(d) (1) statement was placed in the public files of the Commission, a repository over which, it is not unreasonable to assume, the keener investment houses maintain a close scrutiny. Thus, even if it be assumed that no “leaks” of the sort described above would have occurred, sophisticated investors within a few days would have obtained the $80 figure merely by a careful perusal of public records. The policies behind Texas Gulf command that such imperfect dissemination be corrected by broad disclosure through the public media, and Rule 135 must be read so as to permit such a course of action.
It is one thing to recognize the competing considerations and attempt to find a balanced solution and quite another to state flatly, as does the SEC, that the companies are under no duty to disclose. In its amicus brief, the Commission argues that Piper and Bangor Punta had no duty even to announce the fact of the agreement, let alone the price, since neither they nor any of their insiders were going to trade in the shares involved. I find this position wholly unrealistic and hardly designed to protect the other Piper stockholders. Simply *582put, Bangor Pupta and Piper realized they were faced with one of “those situations which are essentially extraordinary in nature and which are reasonably certain to have a substantial effect on the market price of the security if [the extraordinary situation is] disclosed.” SEC v. Texas Gulf Sulphur, 401 F.2d 833, 848. Disclosure was required.
Unlike the SEC, the New York Stock Exchange has tried to chart a course which accommodates the competing considerations. A Stock Exchange Rule adopted on July 18, 1968, in the wake of Texas Gulf in part provides:
Negotiations leading to acquisitions and mergers, stock splits, the making of arrangements preparatory to an exchange or tender offer * * * are the type of developments where the risk of untimely and inadvertent disclosure of corporate plans is most likely to occur. * * *
At some point it usually becomes necessary to involve other persons to conduct preliminary studies or assist in other preparations for contemplated transactions. * * * Experience has shown that maintaining security at this point is virtually impossible. Accordingly, fairness requires that the Company make an immediate public announcement as soon as confidential disclosures relating to such important matters are made to “outsiders.”
The extent of the disclosures will depend upon the state of discussion, studies, or negotiations. So far as possible, public statements should be definite as to price, ratio, timing and/or any other pertinent information necessary to permit a reasonable evaluation of the matter. As a minimum, they should include those disclosures made to “outsiders”. * * *
NYSE Company Manual A-19 (July 18, 1969) (Addendum at 19-20). This standard seems to me a realistic solution to the problem.
I would hold that the May 8 announcement was proper, reflecting a fair accommodation of Section 5(c) and Rule 135 and the obligation to disclose material facts.
2. Rule 10b-6
Nor would I find that any violation of Rule 10b-6 was occasioned by Bangor Punta’s purchases of 120,200 shares of Piper stock between May 14 and May 23. To reach these transactions, the majority would stretch the wording of 10b-6 beyond anything-that courts, commentators, and — in published actions — the SEC had considered included until this case.
Rule 10b-6 seeks to prevent the manipulation of the price of shares which are the subject of a current or impending public offering. It is concededly a highly technical rule, and, as the Commission explicitly noted at its adoption, it covers only a limited number of undesirable practices:
The Rules [10b-6, -7, -8] do not purport to cover, every possible type of manipulation or deceptive activity. The fact that a particular activity is not specifically dealt with or prohibited in such rules does not necessarily mean that it is not unlawful under the Act or the Commission’s other rules.
SEC Securities Act Release No. 5194 (July 5, 1955). The practice particularly condemned is the offering company purchasing its own shares on the market, thereby buoying up the market price close to that set in the public offering. As is so often the case in the field of securities laws, there are a host of other, closely related transactions having the ■ same manipulative effect on the tender offer which are also barred by the Rule. For example, section (b) controls the situation where the offering in prospect involves warrants; there, the issuer cannot purchase those of its shares represented by the rights. It seems to me improper to extend this sort of technical, limited and consistently interpreted rule to a common practice which until now has never been thought within its ambit.
As an original matter, it might be desirable to prohibit a tendering com*583pany from purchasing the target company’s shares, but the proper way to accomplish this end, taken by the Commission with its new Rule 10b-13, is to adopt a new rule rather than stretch an established one beyond its recognized bounds. The Commission, however, seems not to have been content to wait until 10b-13 became effective to enforce its new policy. Rather, it invoked 10b-6 during the interim by a boot-strap operation, claiming in the release announcing 10b-13 that the proposed rule was “in effect, a codification of existing interpretations under Rule 10b-6. * * ” I sympathize with the Commission’s dilemma when, having announced a new policy, it cannot reach current transactions until the new rule becomes effective. But it seems to me that the cost of waiting will rarely be too great as the Commission presumably has lived with the offending practice for years; it expects us to make bad law to bail it out.
My belief that 10b-6 is being invoked here merely as a stop-gap measure is strengthened by several factors. Although the Commission claims that its position reflects consistent staff practice, I have found no published interpretations, either administrative or judicial, before the Release accompanying proposed Rule 10b-13 that indicate the Commission’s view that 10b-6 reaches the shares of a target company. And discussions of the phrase “rights to purchase any such security” and of section 10b-6(b) by the commentators have been directed exclusively to the situations involving two securities of the same company, such as the distribution of a convertible debenture coupled with purchases of the underlying security. See, e. g., Comment, The SEC’s Rule 10b-6: Preserving a Competitive Market During Distributions, 1967 Duke L.J. 809, 831; Disclosure Requirements of Public Companies and Insiders 138-142 (Flom, Garfinkel & Freund ed. 1967).
Significantly, the SEC did not see fit to apply its interpretation of 10b-6 to Bangor Punta, although it knew of the May purchases.4 The final paragraph of the consent decree, entered on May 26, does not prohibit Bangor Punta from acquiring Piper stock other than through the exchange offer. Nor did the SEC require Bangor Punta to include an appropriate disclosure in its prospectus, as it clearly had the power to do,5 of an alleged violation of its Rules, although Bangor Punta did mention the May purchases. Thus, I feel the SEC’s own conduct casts doubt on its claim that “the Commission’s staff has so construed the rule in similar situations.”
Rule 10b-6 has until this case been a limited, highly technical rule. Despite the fact that a change in Commission policy cannot be put into effect for several months because of the procedural safeguards of the Administrative Procedure Act, the Commission now claims that we must reach the same result by accepting its interpretation, i. e., that the rule has meant this all along. I cannot believe that this practice is consonant with the standards of due process and elemental fairness long engrained in the operation of administrative law.
Since I conclude that Bangor Punta’s purchases do not fall within the ambit of Rule 10b-6 as consistently interpreted *584and universally understood as of May, 1969, and I do not believe the May 8th announcement was in violation of the securities laws, I would affirm Judge Tenney’s opinion below.
. This situation must be distinguished from an agreement stipulating that the undetermined securities are to have a certain cash value. This can occur when the tendering company promises to offer only widely traded securities in its pack*581age; then, the market price of widely traded securities as of the date the exchange becomes effective determines the exchange ratio. There, the public is fully protected, and I can see no arguments against full and immediate disclosure.
. The status of “insiders” as to all these people has not yet been established and would raise difficult questions of enforcement.
. Indeed, if the price had not been announced, a Piper stockholder who tendered his shares to Chris-Craft during the interim might well have grounds for an action against Bangor Punta and Piper.
. It may well be that the Commission’s course of action was prompted by internal confusion. While Chris-Craft was warned on April 7th that the Commission would consider purchase of Piper stock while its tender offer was pending a violation of 10b-6, no such warning was ever communicated to Bangor Punta. When Chris-Craft abided by this prohibition, the Commission may have felt that its error had given Bangor Punta an inequitable advantage which it ought to seek to correct by tlie position it has taken in its amicus brief. I do not feel, however, that Bangor Punta — an equally innocent party — should be made to suffer for any failure on the part of the Commission or its staff. In any event, Bangor Punta acted within the law and consistent with the rulings of the SEC with respect to Bule 10b-6.
. See, e. g., Northwest Industries Begistration Effective, SEC News Digest, Issue No. 69-73 (April 17, 1969).