Going private transactions involve a company delisting and deregistering its stock, and then cashing out investors, so that the firm or another interest can acquire the outstanding shares.
When Revlon executed its transition from public to private status, the company neglected to tell its independent board members that a third party had deemed the transaction inadequate.
"Going private transactions create opportunities for shareholder abuse and can have coercive effects on minority shareholders," said Antonia Chion, associate director of the SEC's enforcement division. "By erecting informational barriers, Revlon kept critically important information from its board and, in turn, misled investors."
The “ring fencing” violation centered on whether current and former Revlon employees who had invested in the company through their 401(k) plans could exchange their shares, the commission said.
“Revlon represented in its offering documents that the board's process was full, fair, and complete in determining the fairness of the exchange offer,” the agency said. “In reality, the process was compromised because Revlon's board was unable to consider the adequate consideration determination as part of its process to evaluate and ultimately approve the offer.”