SEC Rule 14e-4: Short Tendering Prohibition and Net Long Requirement
Under SEC Rule 14e-4, an investor who wishes to participate in a corporate tender offer is legally permitted to tender shares ONLY if the investor:
SEC Rule 14e-4 strictly prohibits 'short tendering' (tendering shares you do not own). An investor can ONLY tender shares if they are NET LONG the security at the time of the tender.
Complete Analysis & Legal Rationale
Owning out-of-the-money calls or borrowed shares does NOT constitute a net long position unless the options are exercised or conversion notices are submitted.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Accurately applies SEC Rule 14e-4 net long requirement for tendering shares.
Short tendering is strictly illegal under SEC Rule 14e-4.
Holding unexercised calls does not qualify as net long for tender offers.
Borrowed shares cannot be tendered.
Official Standard: Prohibits short tendering; mandates net long position.