Compliance and Disclosure Interpretations - Securities Act Rules

6/25/2015
Compliance and Disclosure Interpretations: Securities Act Rules
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SecuritiesActRules
LastUpdate:June23,2015
TheseComplianceandDisclosureInterpretations(C&DIs)comprisethe
DivisionsinterpretationsoftherulesadoptedundertheSecuritiesAct.
SomeoftheseC&DIswerefirstpublishedinpriorDivisionpublications
andhavebeenrevisedinsomecases.Thebracketeddatefollowingeach
C&DIisthelatestdateofpublicationorrevision.
QUESTIONSANDANSWERSOFGENERALAPPLICABILITY
Sections101to109.Rules100to133[Reserved]
Section110.Rule134CommunicationsNotDeemedaProspectus
Question110.01
Question:AcommunicationmadeinrelianceonRule134mustcontainthe
statementrequiredbyRule134(b)(1)andinformationrequiredbyRule
134(b)(2),unlesstheconditionsofRule134(c)aremet.Inaddition,ifthe
communicationsolicitsfromtherecipientanoffertobuythesecurityor
requeststherecipienttoindicatewhetherheorshemightbeinterestedin
thesecurity,itmustincludethestatementrequiredbyRule134(d).
Someelectroniccommunicationplatforms,suchasthosemadeavailable
throughcertainsocialmediawebsites,limitthenumberofcharactersor
amountoftextthatcanbeincludedinthecommunication,effectively
precludingdisplayoftherequiredstatementstogetherwiththeother
information.Underwhatcircumstanceswouldtheuseofahyperlinktothe
requiredstatementssatisfytheRule134(b)orRule134(d)requirements?
Answer:Recognizingthegrowinginterestinusingtechnologiessuchas
socialmediatocommunicatewithsecurityholdersandpotentialinvestors,
thestaffwillnotobjecttotheuseofanactivehyperlinktosatisfythe
requirementsofRule134(b)orRule134(d)inthefollowinglimited
circumstances:
Theelectroniccommunicationisdistributedthroughaplatformthat
hastechnologicallimitationsonthenumberofcharactersoramount
oftextthatmaybeincludedinthecommunication
Includingtherequiredstatementsintheirentirety,togetherwiththe
otherinformation,wouldcausethecommunicationtoexceedthelimit
onthenumberofcharactersoramountoftextand
Thecommunicationcontainsanactivehyperlinktotherequired
statementsandprominentlyconveys,throughintroductorylanguage
orotherwise,thatimportantorrequiredinformationisprovided
throughthehyperlink.
http://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm#182.01
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Whereanelectroniccommunicationiscapableofincludingtherequired
statements,alongwiththeotherinformation,withoutexceedingthe
applicablelimitonnumberofcharactersoramountoftext,theuseofa
hyperlinktotherequiredstatementswouldbeinappropriate.[April21,
2014]
Question110.02
Question:Someelectroniccommunicationplatforms,suchasthosemade
availablethroughcertainsocialmediawebsites,permituserstoretransmit
apostingormessagetheyreceivefromanotherparty.Whenanissuer
distributesanelectroniccommunicationincompliancewithRule134or
Rule433,musttheissuerensurecompliancewithRule134orRule433ofa
retransmissionofthatcommunicationbyathirdpartythatisnotan
offeringparticipant?
Answer:Ifthethirdpartyisneitheranofferingparticipantnoractingon
behalfoftheissueroranofferingparticipantandtheissuerhasno
involvementinthethirdpartysretransmissionbeyondhavinginitially
preparedanddistributedthecommunicationincompliancewitheitherRule
134orRule433,theretransmissionwouldnotbeattributabletothe
issuer.AsexplainedinSecuritiesActReleaseNo.338591(July19,2005),
[W]hetherinformationpreparedanddistributedbythirdpartiesthatare
notofferingparticipantsisattributabletoanissuerorotheroffering
participantdependsuponwhethertheissuerorotherofferingparticipant
hasinvolveditselfinthepreparationoftheinformationorexplicitlyor
implicitlyendorsedorapprovedtheinformation.[April21,2014]
Section128.Rule144PersonsDeemedNottobeEngagedina
DistributionandThereforeNotUnderwritersGeneralGuidance
Question128.01
Question:IsRule144availabletotheissuerofthesecurities?
Answer:No.Rule144isnotavailabletotheissuerofthesecurities.See
SecuritiesActReleaseNo.5306(Sept.26,1972).[Jan.26,2009]
Question128.02
Question:Howlongmustanunderwriterwaitbeforeitresellstheunsold
portionofastickypublicofferingasifitwerecompensation?
Answer:Anunderwritermayreselltheunsoldportionofastickypublic
offeringasifitwerecompensationwaitsixmonthsfromthelastsale
undertheregistrationstatementandfollowRule144exceptforfilingthe
form.[Jan.26,2009]
Question128.03
Question:AresecuritiesthatarereceivedpursuanttoSection1145(a)of
theBankruptcyCodedeemedrestrictedsecurities?
Answer:No.SecuritiesreceivedpursuanttoaBankruptcyCodeproceeding
underthecircumstancesdescribedinSection1145(a)oftheBankruptcy
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Codewouldnotbedeemedrestrictedsecuritiesbecausetheywouldhave
beenreceivedinapublicofferingunderSection1145(c)oftheCode.
[Jan.26,2009]
Question128.04
Question:Ifaninstitutionalpurchaserbuysablockofshelfregistered
securitiesdirectlyfromtheissuer,willthesecuritiesbedeemedrestricted
securities?
Answer:Whenthereisasaleofablockofshelfregisteredsecurities
directlybytheissuertoaninstitutionalpurchaser,thesecuritieswillnotbe
deemedtoberestrictedsecuritiesthatareacquireddirectlyorindirectly
fromtheissuer...inatransaction...notinvolvinganypublicoffering.
However,thepurchaserofthesecuritieswillstillhavetodetermine
whetheritmaybedeemedanunderwriterinconnectionwithresalesof
suchsecuritiessuchadeterminationwilldependuponthefactsand
circumstancesoftheparticularcase.[Jan.26,2009]
Question128.05
Question:Mayrestrictedsecuritiesbetenderedinconnectionwitha
tenderofferwithoutcompliancewithRule144?
Answer:Yes.Restrictedsecuritiesmaybetenderedinconnectionwitha
tenderofferwithoutcompliancewithRule144.Theruleisnottheexclusive
meansforresellingrestrictedsecurities.[Jan.26,2009]
Section129.Rule144(a)Definitions
Question129.01
Question:Whatisacircumstanceunderwhichsecuritiesissuedunder
stockoptionplansandexcesscompensationplansfordirectorswill
constituterestrictedsecurities?
Answer:Securitiesoftenareissuedunderemployeebenefitplanswhere
thebasisfornonregistrationofthedistributionisotherthananosale
theoryunderSecuritiesActSection2(a)(3).Suchplansincludestockoption
plansandexcesscompensationplansfordirectorswherethesecuritiesare
issuedpursuanttotheSecuritiesActSection4(2)privateoffering
exemptionorRegulationD.[Jan.26,2009]
Question129.02
Question:Aresharesacquiredinaprivatetransactionfromthespouseof
anaffiliatedeemedrestrictedsecurities?
Answer:Yes,ifthespousehasthesamehomeastheaffiliate,asthey
wouldthenberegardedasthesamepersonunderRule144(a)(2)(i).[Jan.
26,2009]
Question129.03
Question:Anaffiliatedonortransfers,bybonafidegift,companystock
acquiredintheopenmarket(i.e.,thesecuritiesarenotrestricted
securitiesintheaffiliateshands)toadoneeinanonpublictransaction.
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Whatisthestatusofthesesecuritiesinthedoneeshands,andwhat
requirementsinRule144areapplicabletoadoneewhoisanonaffiliate
whenheorsheresellsthesesecurities?
Answer:Inthedoneeshands,thesesecuritiesarerestrictedsecurities
becausetheyhavebeenacquireddirectlyorindirectlyfromtheissuer,or
fromanaffiliateoftheissuer,inatransactionorchainoftransactionsnot
involvinganypublicoffering.Asthesesecuritieswerenotsubjecttoany
holdingperiodrequirementintheaffiliatedonorshands,however,the
doneeneednotcomplywiththeholdingperiodrequirementinRule144(d)
forsubsequentsales.Ifthedoneeisanonaffiliateandhasnotbeenan
affiliateduringtheprecedingthreemonths,thenthedoneemayresellthe
securitiespursuanttoRule144(b)(1)subjectonlytothecurrentpublic
informationrequirementinRule144(c)(1),asapplicable.[May16,2013]
Section130.Rule144(b)ConditionsToBeMet
Question130.01
Question:MaythetackingprovisionsinRule144(d)(3)beappliedin
determiningwhether,underRule144(b)(1)(i),theRule144(c)(1)condition
hasbeenmetfortheoneyearperiod?
Answer:Yes.[Jan.26,2009]
Section131.Rule144(c)CurrentPublicInformation
Question131.01
Question:IfsecuritiesaresoldpursuanttoRule144atvarioustimesover
athreemonthperiod,atwhichtime(s)musttheissuersatisfythecurrent
publicinformationrequirement?
Answer:Whenthecurrentpublicinformationrequirementmustbemet
inorderforthesecurityholdertosellsecuritiesundertheRule144safe
harbor,theissuermustcontinuetosatisfythisrequirementatthetime
eachsaleismade.[Jan.26,2009]
Question131.02
Question:WhentheconditionsofRule144(c)(1)mustbesatisfiedin
sellingsecuritiesundertheRule144safeharbor,maysalescontinueduring
theRule12b25extensionperiod?
Answer:ThereisariskinsellingunderRule144duringthe5dayor15
dayperiodfollowingthefilingoftheForm12b25because,ifthemissing
reportorportionthereofisnotfiledduringthatperiod,theissuermaybe
deemednotcurrentuntilitisfiled.[Sept.30,2008]
Question131.03
Question:WhenyouhaveaneffectiveFormS1registrationstatement
followedbyaregistrationstatementpursuanttoExchangeActSection
12(g),whendoesthe90dayreportingperiodrequiredbyRule144(c)(1)
begin?
Answer:The90dayreportingperiodcommenceswiththeeffectivedateof
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theFormS1.[Jan.26,2009]
Question131.04
Question:DoreportsfiledunderSection30(a)oftheInvestmentCompany
ActsatisfythecurrentpublicinformationrequirementofRule144(c)(1)?
Question131.05
Question:DoestheinformationstandardofExchangeActRule15c211
requirethattheinformationbecurrent?
Answer:Yes.ThepublicinformationstandardofRule15c211relatingto
issuersnotsubjecttoSection13(a)or15(d)ismetonlyiftheRule15c211
informationiscurrent.Itisirrelevantthatbrokerdealersmaypublish
quotesontheissuerssecuritiespiggybackingfromtheirpriorquotes
basedonRule15c211informationwhichwascurrentatthetimesuch
quotationswereinitiated.[Jan.26,2009]
Question131.06
Question:Dothefinancialstatementsofnonreportingissuersneedtobe
auditedorpreparedincompliancewithRegulationSXinordertosatisfy
thecurrentpublicinformationrequirementofRule144(c)(2)?
Answer:No.ThecurrentpublicinformationrequirementofRule144(c)
(2)doesnotrequirethefinancialstatementsofnonreportingissuerstobe
eitherauditedorpreparedincompliancewithRegulationSX,asthatisnot
requiredbyclauses(xii)and(xiii)ofExchangeActRule15c211(a)(5),to
whichRule144(c)(2)refers.[Jan.26,2009]
Question131.07
Question:IsthecurrentpublicinformationrequirementinRule144(c)(1)
applicabletoanissuerthatsubmitsExchangeActreportsonavoluntary
basis?
Answer:No.Rule144(c)(1)appliesonlytoissuersthatare,andhave
beenforatleast90daysimmediatelybeforethesale,subjecttothe
reportingrequirementsofExchangeActSection13or15(d).Avoluntary
filerisnotsubjecttoExchangeActSection13or15(d)becauseitisnot
obligatedtofileExchangeActreportspursuanttoeitherofthose
provisions.Accordingly,thecurrentpublicinformationrequirementinRule
144(c)(2)isapplicabletovoluntaryfilers.[Jan.26,2009]
Section132.Rule144(d)HoldingPeriodforRestrictedSecurities
Question132.01
Question:Towhomdoesthephrase"withoutrecourse"inRule144(d)(3)
(iv)refer?
Answer:Thephrase"withoutrecourse"appearinginRule144(d)(3)(iv)
referstorecourseagainstthepledgorpersonallyintheusualsituationin
whichthepledgorandborrowerarethesameperson.Thisinterpretation
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wouldnotapply,however,ifthepledgorandborrowerweredifferent
persons,becauseRule144(d)(3)(iv)requiresrecourseonlyagainstthe
borrowerunderthenote.[Jan.26,2009]
Question132.02
Question:Maycloselyheldentitiesmakeinkinddistributionsofrestricted
securitiesofanaffiliatedissuerwithoutdisturbingtheholdingperiodofthe
restrictedsecurities?
Answer:Thetransferoftherestrictedsecuritiesfromtheportfolioofthe
closelyheldentitytoitsequityholderswillnotdisturbtheholdingperiodif
thedistributionismaderatablyandwithoutthepaymentofconsideration
forthetransfer.SeeSecuritiesActReleaseNo.6099(Aug.2,1979),at
Question34,andtheHaleandDorrinterpretiveletter(June12,1991)
issuedbytheDivision.[Jan.26,2009]
Question132.03
Question:AftertheSupremeCourtsdecisioninRubinv.UnitedStates,
449U.S.424(1981),dotheprovisionsofRule144(d)stillpermitthe
tackingofholdingperiodsofapledgorandpledgee?
Answer:Yes.NotwithstandingtheSupremeCourtsdecisioninRubinthat
apledgemaybeasalefordeterminingapplicationoftheantifraud
provisionsofthefederalsecuritieslaws,itistheDivisionsviewthatthe
provisionsofRule144(d)expresslypermittingthetackingofholding
periodsofapledgorandpledgeecontinuetoapply.[Jan.26,2009]
Question132.04
Question:DoesRule144(d)(3)(vii)applyonlytosecuritiesownedbythe
decedent?
Answer:Yes.Paragraph(d)(3)(vii)ofRule144,whichprovidesan
exemptionfromtheRule144(d)holdingperiodrequirementforsalesof
restrictedsecuritiesbyanonaffiliateestate,appliesonlytosecurities
ownedbythedecedent.Itdoesnotexemptanonaffiliateestatefromthe
holdingperiodrequirementinthecaseofsecuritiesacquiredbytheestate
upontheexerciseofstockoptionsheldbythedecedent.[Jan.26,2009]
Question132.05
Question:Mayapersontransferrestrictedsecuritiesintohisorher
individualretirementaccountwithoutinterruptingtheRule144(d)holding
periodforthesecurities?
Question132.06
Question:Anindividualacquiressharespursuanttoantidilutionrights
attachingtorestrictedsecurities.Arethesenewlyacquiredsharesrestricted
securities?
Answer:ForpurposesofRule144,sharesacquiredpursuanttoanti
dilutionrightsattachingtorestrictedsecuritiesarerestrictedsecurities
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themselvesbuttheirholdingperioddatesbacktotheoriginalplacementof
shares,nottheexerciseoftheantidilutionprovisions.[Jan.26,2009]
Question132.07
Question:Whendoestheholdingperiodbeginforrestrictedsecurities
acquiredpursuanttoasubscriptionagreement?
Answer:Theholdingperiodforrestrictedsecuritiesacquiredpursuanttoa
subscriptionagreementbeginsatthetimetheagreementisacceptedby
theissuer,ratherthanthedateitissignedbythepurchaserorthedatethe
sharesareissued,assumingthatthefullpurchasepricehasbeenpaid.
[Jan.26,2009]
Question132.08
Question:Whatistherestrictedsecurityandholdingperiodstatusof
securitiesexchangedforothersecuritiesoftheissuerunderSecuritiesAct
Section3(a)(9)?
Answer:Whensecuritiesareexchangedforothersecuritiesoftheissuer
underSection3(a)(9),thesecuritiesreceivedassumethecharacterofthe
exchangedsecurities.Thus,forexample,ifrestrictedsecuritiesare
exchanged,thenewsecuritiesaredeemedrestrictedandtackingofthe
holdingperiodoftheformersecuritiesispermitted.[Jan.26,2009]
Question132.09
Question:DoestheoneyearholdingperiodrequirementinRule144(d)(1)
(ii)applytotherestrictedsecuritiesofanissuerthatsubmitsExchangeAct
reportsonavoluntarybasis?
Answer:Yes.ThesixmonthholdingperiodrequirementinRule144(d)(1)
(i)isapplicableonlytotherestrictedsecuritiesofanissuerthatis,andhas
beenforatleast90daysimmediatelybeforethesale,subjecttothe
reportingrequirementsofExchangeActSection13or15(d).Avoluntary
filerisnotsubjecttoExchangeActSection13or15(d)becauseitisnot
obligatedtofileExchangeActreportspursuanttoeitherofthose
provisions.Consequently,theoneyearholdingperiodrequirementinRule
144(d)(1)(ii)appliestotherestrictedsecuritiesofavoluntaryfiler.[Jan.
26,2009]
Question132.10
Question:HowisthesixmonthholdingperiodcomputedunderRule
144(d)(1)(i)?
Answer:UnderRule144(d)(1)(i),aminimumofsixmonthsmustelapse
betweenthedateofacquisitionoftherestrictedsecuritiesfromanissueror
fromanaffiliateoftheissuer,whicheverislater,andanyresaleofsuch
securitiesunderRule144.Thisperiodcoversthesixmonthsimmediately
precedingthedateofsaleundertherule.Forexample,onMay15,X
acquiresrestrictedsecuritiesinatransactionnotinvolvinganypublic
offeringfromanissuer.Assumingthatthesixmonthholdingperioddidnot
restartatanypointsinceMay15andthattheotherapplicableconditionsof
Rule144wouldbemetatthetimeofsale,Xmaysellthesecuritiesunder
Rule144onNovember15,providedthattheissueris,andhasbeenforat
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leasttheimmediatelypreceding90days,subjecttothereporting
requirementsofExchangeActSection13or15(d)atsuchtime.[Jan.26,
2009]
Question132.11
Question:Onwhatdatedoestheholdingperiodbeginforrestricted
securitiesacquiredunderanemployeestockoption?
Answer:Theholdingperiodforrestrictedsecuritiesacquiredunderan
employeestockoptionalwaysbeginsontheexerciseoftheoptionandfull
paymenttotheissueroftheexerciseprice.Thedateoftheoptionsgrant
mayneverbeusedforthispurpose,eveniftheexerciseinvolvesno
paymentofcashorotherconsiderationtotheissuer.Becausetheoptionis
issuedtotheemployeewithoutanypaymentforthegrant,theoptionee
holdsnoinvestmentriskintheissuerbeforetheexercise.[Jan.26,2009]
Question132.12
Question:Doesachangeinthelegalformofenterpriserestarttheholding
periodforrestrictedsecuritiesoftheissuer?
Answer:Achangeinthelegalformofanenterprisefromapartnershipor
alimitedliabilitycompanytoacorporationnormallywillrestarttheholding
periodforrestrictedsecuritiesoftheissuer.However,aholdermaytack
holdingperiodsinthiscontextifthefollowingconditionsaresatisfied:
(1)thecontrollingagreemententeredintoatthetimeofthe
partnershiporlimitedliabilitycompanysformationspecifically
contemplatedthechangeofform
(2)thepartnersormembersseekingtotackhadnovetoorvoting
rightsoverthereorganization
(3)thereorganizationdoesnotresultinachangeinthebusinessor
operationsofthesurvivingentity
(4)theproportionateequityinterestsinthesuccessorarethesameas
theinterestsinthepredecessorentityand
(5)theequityholdersprovidenoadditionalconsiderationforthe
securitiestheyreceiveinexchangefortheirequityinterestsinthe
predecessorentity.[Jan.26,2009]
Question132.13
Question:Doesthepaymentofevenademinimisamountofcashupona
warrantexerciseprecludetheholderfromtackingtheholdingperiodofthe
warranttothatofthecommonstockunderRule144(d)(3)(x)?
Answer:Yes.Thepaymentofevenademinimisamountofcashupona
warrantexercisewouldprecludetheholderfromtackingtheholdingperiod
ofthecommonstocktothewarrantunderRule144(d)(3)(x).Thewarrant
exercisemustbecashless(similartotheanalysisunderSection3(a)(9))
inordertotacktheholdingperiodofthecommonstocktothewarrant.
[Jan.26,2009]
Question132.14
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Question:IstheapplicablelengthoftheRule144(d)holdingperiod
requirementforrestrictedsecurities(i.e.,whetheritissixmonthsunder
Rule144(d)(1)(i)oroneyearunderRule144(d)(1)(ii))determinedasof
(1)thedateoftheacquisitionofthesecuritiesfromtheissueroran
affiliateoftheissuer,or(2)thetimeoftheproposedsaleunderRule144?
Answer:TheapplicablelengthoftheRule144(d)holdingperiod
requirementisdeterminedasofthetimeoftheproposedRule144sale.
Forexample,onMarch5,2008,anonreportingissuersoldsharesofits
commonstocktoaninvestorpursuanttoaprivateplacement.Threeweeks
later,theissuerfiledaregistrationstatementonForm10toregisterits
commonstockunderExchangeActSection12(g).OnOctober1,2008,the
investorwishedtoreselltheshareshehadacquiredonMarch5fromthe
issuer.Theapplicableholdingperiodrequirementforsuchsharesasof
October1wouldbethesixmonthholdingperiodunderRule144(d)(1)(i),
sincetheissuerwas,andhadbeenforatleasttheimmediatelypreceding
90days,subjecttothereportingrequirementsofExchangeActSection13
or15(d)onsuchdate.
Conversely,iftheissuerhadbeenanExchangeActreportingissueron
March5,2008,butwasnotsubjecttothereportingrequirementsof
ExchangeActSection13or15(d)(orhadnotbeenforatleastthe
immediatelypreceding90days)asofOctober1,2008,theoneyear
holdingperiodunderRule144(d)(1)(ii)wouldbeapplicabletosuch
securitiesasofOctober1.Hence,theinvestorwouldnothavesatisfiedthe
Rule144(d)holdingperiodrequirementasofthatdate.[Jan.26,2009]
Question132.15
Question:Apledgorwhoisanaffiliatedefaultsonaloanthathadbeen
secured,inabonafidepledgesituation,byrestrictedsecurities.What
conditionsofRule144applytoanonaffiliatepledgeewhoissellingsuch
restrictedsecuritiesunderRule144?
Answer:Anonaffiliatepledgee(whohasnotbeenanaffiliateduringthe
precedingthreemonths)mayreselltherestrictedsecuritiespursuanttothe
Rule144safeharborbycomplyingwiththeapplicableconditionsinRule
144(b)(1).Dependingonthecircumstances,tackingpursuanttoRule
144(d)(3)(iv)maybepermittedindeterminingwhethertheholdingperiod
requirementinRule144(d)hasbeensatisfied.[Jan.26,2009]
Question132.16
Question:Afterreceivingagiftofrestrictedsecuritiesfromanaffiliate
donor,whatconditionsofRule144applytoanonaffiliatedoneewhois
sellingsuchrestrictedsecuritiesunderRule144?
Answer:Anonaffiliatedonee(whohasnotbeenanaffiliateduringthe
precedingthreemonths)mayreselltherestrictedsecuritiespursuanttothe
Rule144safeharborbycomplyingwiththeapplicableconditionsinRule
144(b)(1).TackingpursuanttoRule144(d)(3)(v)maybepermittedin
determiningwhethertheholdingperiodrequirementinRule144(d)has
beensatisfied.[Jan.26,2009]
Question132.17
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Question:IstackingunderRule144(d)(3)(ii)availablewhenthesecurities
tobesoldwereacquiredinanexchangetransactionthatwasexemptunder
SecuritiesActSection4(2)insteadofSection3(a)(9)?
Answer:Yes,providedthattheconditionsinRule144(d)(3)(ii)are
satisfied.[June4,2010]
Question132.18
Question:CompanyAsellsmandatorilyexchangeableNotestoaninvestor
inaprivateplacementtransaction.UnderthetermsoftheNotes,theNotes
canbeexchangedforafixednumberofsharesofCompanyB,anaffiliate
ofCompanyA,eitheratCompanyA'soptionorupontheoccurrenceof
certaineventsoutsidetheinvestor'scontrol.Ifsuchanexchangetakes
place,whendoestheholdingperiodfortheCompanyBSharesbegintorun
forpurposesofRule144(d)(1)?
Answer:WhenCompanyAsellstheNotes,thereisdeemedtobea
concurrentprivateofferingoftheunderlyingCompanyBShares,andthe
investorhasnosubsequentinvestmentdecisiontomakebecausethe
exchangeiseitheratCompanyA'soptionoroccursautomaticallyuponthe
occurrenceofcertaineventsoutsidetheinvestor'scontrol.Accordingly,the
investor'sRule144(d)holdingperiodfortheCompanyBShareswould
beginatthetimetheinvestororiginallyacquiredtheNotesfromCompany
A,andnotwhentheinvestorlaterreceivestheCompanyBSharesin
exchangefortheNotes.
IftheNotesalsoincludeaprovisionallowingtheexchangetooccuratthe
investor'soptionandtheinvestordecidestoexchangetheNotesfor
CompanyBShares,thentheholdingperiodfortheCompanyBShares
wouldbeginonthedateoftheexchange.IftheNotesalsoincludethis
provisionbuttheexchangeoccursnotbecauseoftheinvestor'sdecision
butbecauseofeitherCompanyA'sdecisionortheoccurrenceofcertain
eventsoutsidetheinvestor'scontrol,thentheholdingperiodforthe
CompanyBShareswouldbeginatthetimetheinvestororiginallyacquired
theNotesfromCompanyA.[Mar.4,2011]
Section133.Rule144(e)LimitationonAmountofSecuritiesSold
Question133.01
Question:Whatexchangesareencompassedbythetermnational
securitiesexchangesinRule144(e)?
Answer:Thetermnationalsecuritiesexchanges,asusedinRule144(e),
encompassesonlyexchangesthatareregisteredwiththeCommission
pursuanttoSection6(a)oftheExchangeAct.BecauseCanadianexchanges
arenotsoregistered,thevolumeofsecuritiestradedonsuchanexchange
maynotbetakenintoaccountwhencomputingthevolumelimitationunder
Rule144.[Jan.26,2009]
Question133.02
Question:IstheOTCBulletinBoardanautomatedquotationsystemfor
purposesofRule144(e)?
Answer:No.Consequently,themarketbasedvolumelimitationthatthe
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ruleallowsforisunavailableforsecuritiesquotedonlyovertheOTC
BulletinBoard.[Jan.26,2009]
Question133.03
Question:Whateffect(s)dostocksplitsandreversestocksplitshaveon
availablevolumeunderRule144(e)?
Answer:Stocksplitsandreversestocksplits,whicharenoteventsofsale
undertheSecuritiesAct,havenorealeffectonavailablevolumeunderRule
144(e)becausethesplitorreversesplitshouldnotchangetheproportion
oftheissuerssecuritiesthatanaffiliateispermittedtosellduringthe
rulesthreemonthmeasuringperiod.Tocalculateavailablevolumeaftera
splitorreversesplit,anaffiliateshouldgiveeffecttothesplitorreverse
splitthroughoutthewholethreemonthperiod,asthoughithadoccurred
onthefirstdayoftheperiod,eventhoughtherecordandeffectivedates
werelater.Thismethodmaybeusedfortherulesonepercent
measurementorthemarketbasedalternativeforsecuritieslistedonan
exchange.[Jan.26,2009]
Question133.04
Question:Indeterminingtheamountofsecuritiesthatanindividualmay
sellpursuanttoGeneralInstructionC.2(b)ofFormS8,doestheindividual
needtoaggregatetheamountofsecuritiesthattheindividualhassold
pursuanttoRule144?
Answer:No.GeneralInstructionC.2(b)toFormS8providesthatifthe
registrant,atthetimeoffiling,doesnotsatisfytheregistrantrequirements
foruseofFormS3orFormF3,theamountofbothcontrolandrestricted
securitiestobereofferedbymeansofthereofferprospectusbyeach
person,andanyotherpersonwithwhomsuchpersonisactinginconcert
forthepurposeofsellingsecuritiesoftheregistrant,shallbelimitedduring
anythreemonthperiodtotheamountspecifiedinRule144(e).This
limitationisstrictlyalimitationonthenumberofsecuritiestoberesold
pursuanttotheregistrationstatement,anddoesnotrequireaggregationof
suchsecuritieswithsecuritiestobesoldbythesamepersonpursuantto
Rule144.Theapplicationofthisinstructionisreassessedeachtimethe
FormS8isupdatedpursuanttoSecuritiesActSection10(a)(3).[Jan.26,
2009]
Question133.05
Question:Isapublicofferingincludedinthevolumecomputationwhen
computingtheaverageweeklytradingvolumeoftheissuerduringthefour
weekperiod?
Answer:Incomputingaverageweeklytradingvolumewherethereisa
publicofferingofsharesbytheissuerduringthefourweekperiod,the
publicofferingisnotincludedinthevolumecomputationhowever,
increasedvolumeintheaftermarketasaresultoftheofferingcanbe
includedforpurposesoftherule.[Jan.26,2009]
Question133.06
Question:Howisthefourweekperiodforcomputingtheaverageweekly
tradingvolumecomputed?
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Answer:ForpurposesofcomputingvolumelimitationsunderRule144(e)
(l)(ii)and(iii),thefourcalendarweeksprecedingthefilingofnoticeon
Form144arethefourweeksprecedingtheweekinwhichtheformis
transmittedforfilinginaccordancewithRule144(h).SeeSecuritiesAct
ReleaseNo.6099(Aug.2,1979),atQuestion38.[Jan.26,2009]
Question133.07
Question:Areanaffiliatessalesofsecuritiesbacktotheissuerinanon
publictransactionexcludablewhencalculatingtheamountofsecuritiesthat
maybesoldbytheaffiliateunderRule144?
Answer:Yes.UnderRule144(e)(3)(vii)(C),securitiessoldinatransaction
thatisexemptpursuanttoSecuritiesActSection4anddoesnotinvolve
anypublicofferingneednotbeincludedindeterminingtheamountof
securitiesthatmaybesoldunderRule144.Thiswouldincludeanaffiliates
nonpublicsalesofsecuritiesbacktotheissuer.[May16,2013]
Section134.Rule144(f)MannerofSale
Question134.01
Question:Canaprincipalofabrokeragefirmusethatfirmtoeffect
ordinarybrokerstransactionsfortheprincipalspersonalaccountunder
Rule144(f)?
Answer:Yes.Aprincipalofabrokeragefirmmayusethatfirmtoeffect
ordinarybrokerstransactionsfortheprincipalspersonalaccountunder
Rule144(f).[Jan.26,2009]
Question134.02
Question:Doesthepublicationofacustomerlimitorderinaccordance
withExchangeActRule11Ac14constitutethesolicitationorarrangement
forthesolicitationoforderstobuysecuritieswithinthemeaningofRule
144(f)(2)?
Answer:No.Thepublicationofacustomerlimitorderinaccordancewith
ExchangeActRule11Ac14wouldnotconstitutethesolicitationor
arrangementforthesolicitationoforderstobuysecuritieswithinthe
meaningofRule144(f)(2).SeetheGoldman,Sachs&Co.noactionletter
(Dec.6,1996)issuedbytheDivision.[Jan.26,2009]
Section135.Rule144(g)[Reserved]
Section136.Rule144(h)NoticeofProposedSale
Question136.01
Question:DoesanamendmenttoForm144needtobefiledintheevent
thatapersondoesnotsellthesecuritiesreferredtointheForm?
Answer:No.IfapersonwhohasfiledaForm144doesnotsellthe
securitiesreferredtotherein,noamendmentreflectingthisfactneedbe
filed.[Jan.26,2009]
Question136.02
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Question:DoesanamendedForm144needtobefiledtoreflecta
companyslistingonanationalsecuritiesexchangeorastocksplit?
Answer:No.AForm144neednotbeamendedtoreflect:(1)acompanys
listingonanationalsecuritiesexchangeor(2)astocksplit.[Jan.26,
2009]
Question136.03
Question:Ifapersonintendstousetwobrokers,mustthepersonallocate
aspecificnumberofsharestoeachbrokerontheForm144?
Answer:ApersonwhofilesaForm144indicatingthatitmaysellshares
througheitheroftwobrokersneednotallocateaspecificnumberofshares
toeachbrokerontheform.[Jan.26,2009]
Question136.04
Question:DoesthedeminimisexemptionofRule144(h)applytoeach
individualsellerwhoisrequiredtofileaForm144whensalesarerequired
tobeaggregatedunderRule144(e)?
Answer:Yes.InasituationinwhichsalesunderRule144arerequiredto
beaggregatedforpurposesofRule144(e),thedeminimisexemptionof
Rule144(h)(forfilingForm144),nonetheless,appliestoeachindividual
sellerwhoisrequiredtofileaForm144.[Jan.26,2009]
Question136.05
Question:WhenaForm144isrequiredtobefiled,isawaitingperiod
requiredbetweenthetimethepersonplacesanorderwithabrokerandthe
timethebrokerexecutestheorder?
Answer:WhenapersonisrequiredtofileaForm144,nowaitingperiodis
requiredbetweenthetimethepersonplacesanorderwithabrokerandthe
timethebrokerexecutestheordersolongasthepersonconcurrently,with
givingtheorder,transmitstheformtotheCommissionandtheprincipal
exchangeonwhichthesecuritiesarelisted.[Jan.26,2009]
Question136.06
Question:ShouldaForm144beamendedtoreflectachangeinbroker?
Answer:Yes.AForm144shouldbeamendedtoreflectachangein
broker.However,amendingForm144toreflectachangeinthebroker
doesnotpermitthecalculationofanewvolumelimitationbasedon
trading.[Jan.26,2009]
Question136.07
Question:WhatistheeffectofanamendedForm144thatisfiledto
correctinaccuracies?
Answer:AnamendedForm144maybefiledtocorrectinaccuraciesinthe
originalForm144atthetimeof,orsubsequentto,itsfiling.However,the
filingofanamendedForm144doesnotcureanydeficiencieswithregard
tosalesmadeafterfilingtheinitialForm144andpriortothefilingofthe
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amendedForm144.[Jan.26,2009]
Question136.08
Question:Underwhatcircumstancesdoesasellorderthatisplacedwitha
brokeratabovethecurrentmarketpricecontravenetherequirementin
Rule144(h)thatthepersonfilingaForm144haveabonafideintentionto
sellthesecuritiesreferredtointheForm144withinareasonabletime?
Answer:Thefactthatasellorderisplacedwithabrokeratapriceabove
thecurrentmarketpricedoesnotcontravenethisrequirementinRule
144(h),unlessthepricereflectedinthesellorderwasnotconsistentwitha
bonafideintentiontosellwithinareasonabletime.[Jan.26,2009]
Question136.09
Question:Rule144(h)providesthattheForm144shallbetransmittedfor
filing"concurrently"witheithertheplacingofasaleorderwithabrokeror
theexecutionofthesaledirectlywithamarketmaker.Does"concurrently"
meanthattheForm144shouldbetransmittedforfilingonthesameday
astheplacingofasaleorderortheexecutionofthesale?
Answer:Yes.Forexample,ifapersonisfilingaForm144bymail,heor
shemeetstherequirementsofRule144(h)iftheFormismailedonthe
samedayastheplacingofasaleorderortheexecutionofthesale.The
envelopeshouldbeaddressedtotheCommission'sOfficeoftheSecretary.
[Mar.4,2011]
Section137.Rule144(i)UnavailabilitytoSecuritiesofIssuers
withNoorNominalOperationsandNoorNominalNonCashAssets
Question137.01
Question:Ifanissuerhadpreviouslybeenashellcompanybutisan
operatingcompanyatthetimethatitissuessecurities,istheRule144safe
harboravailablefortheresaleofsuchsecuritiesifalloftheconditionsin
Rule144(i)(2)arenotsatisfiedatthetimeoftheproposedsale?
Answer:No.Rule144(i)(1)statesthattheRule144safeharborisnot
availablefortheresaleofsecuritiesinitiallyissuedbyashellcompany
(otherthanabusinesscombinationrelatedshellcompany)oranissuerthat
hasatanytimepreviouslybeenashellcompany(otherthanabusiness
combinationrelatedshellcompany).Consequently,theRule144safe
harborisnotavailablefortheresaleofsuchsecuritiesunlessanduntilall
oftheconditionsinRule144(i)(2)aresatisfiedatthetimeoftheproposed
sale.[Jan.26,2009]
Question137.02
Question:DoesRule144(i)applytosecuritiesissuedbeforeFebruary15,
2008,whichwastheeffectivedateoftheamendmentstoRule144inwhich
theCommissionadoptedRule144(i)?
Section138.Rule144APrivateResalesofSecuritiesto
Institutions
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Question138.01
Question:Mayaffiliatesofanissuermakeresalesoftheissuerseligible
securitiesunderRule144A?
Answer:Yes.Affiliatesoftheissuermaymakeresalesofeligiblesecurities
underRule144A.Theruleisavailabletoanypersonotherthantheissuer.
Issuer,asusedinRule144A(b),hasonlythemeaninggivenbySecurities
ActSection2(a)(4).(ThecontrolclauseofSecuritiesActSection2(a)(11)
equatestheissueranditsaffiliatessolelyforthepurposeofidentifying
intermediariestothepublicmarketwhoareunderwriterswithinthe
statutesmeaning.Bydefinition,saleseffectedunderRule144Aarenot
madetothepublicmarket.)[Jan.26,2009]
Question138.02
Question:Whendeterminingitsstatusasaqualifiedinstitutionalbuyer
eligibletoparticipateinanofferingeligibleforresaleunderRule144A,may
abuyerincludetheamountofsecuritiesexpectedtobepurchasedinsuch
offering?
Answer:No.Abuyermaynotincludetheamountofsecuritiesexpectedto
bepurchasedintheofferingwhencalculatingtheamountofsecuritiesit
ownsorinvestsonadiscretionarybasisforthepurposeofdeterminingits
statusasaqualifiedinstitutionalbuyereligibletoparticipateintheoffering.
[Jan.26,2009]
Question138.03
Question:UnderRule144A,securitiesmaybeofferedtopersonsother
thanqualifiedinstitutionalbuyersbymeansofgeneralsolicitation.Does
therulerequirethatthegeneralsolicitationbeconductedbyonlythe
issuer?
Answer:No.InRule144Aofferingsinwhichthesecuritieswereinitially
soldtofinancialintermediariesintransactionsexemptunderSecuritiesAct
Section4(a)(2)orRegulationS,thegeneralsolicitationmaybeconducted
bytheissueraswellasinitialpurchasersinvolvedintheSection4(a)(2)or
RegulationStransactionandotherdistributionparticipants.[Nov.13,
2013]
Question138.04
Question:DidtheamendmentstoRule144Apermittingtheuseof
generalsolicitationchangehowdirectedsellingeffortsunderRegulationS
areanalyzedinconcurrentRule144AandRegulationSofferings?
Answer:No.[Nov.13,2013]
Section139.Rule145ReclassificationofSecurities,Mergers,
ConsolidationsandAcquisitionsofAssets
Question139.01
Question:CananissuerthatplanstoregisteraRule145transaction,and
whoseproxystatementwillnecessarilycontainunrelateditemssuchas
electionofdirectors,avoidSecuritiesActliabilityfortheunrelateditemsby
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filingaFormS1registrationstatementdealingsolelywiththeRule145
transaction,andincorporatingtheS1prospectusbyreferenceintoits
proxystatement?
Question139.02
Question:MustapersonsubjecttoRule145(c)whoissellingbothRule
145sharesandsharesnotsubjecttoRule144(e)takeintoaccountthe
salesofthesharesnotsubjecttoRule144(e)indeterminingwhetherthe
volumelimitationofRule145(d)hasbeenexceeded?
Answer:No.[Jan.26,2009]
Question139.03
Question:WouldamergerbyCompanyAwithanewholdingcompany
formedbyCompanyAinanotherstatequalifyforthechangeindomicile
exceptioninRule145(a)(2)?
Answer:No.TheexceptionfromRule145providedbyRule145(a)(2)fora
changeindomicileisnotavailablewhen,inadditiontoachangein
domicile,aneworganizationalstructureiscreated,suchasanewholding
company.[Jan.26,2009]
Question139.04
Question:Ifacorporationdeterminestosellitsassetsforapromissory
noteissuedbyanothercorporation,butwillnotdistributeinterestsinthe
notetoitsshareholders,isthetransactionatransferofassetswithinthe
meaningofRule145(a)(3)?
Question139.05
Question:CansalesbemadeinrelianceonRule145(d)beforetheone
yearperiodinRule144(i)(2)ismet?
Question139.06
Question:IndeterminingtheRule145(d)(2)holdingperiod,canthe
holdingperiodforrestrictedsecuritiessurrenderedintheRule145
transactionbetackedtotheholdingperiodforthesharesreceived?
Answer:No.SeeRule144(d)(3)(viii).[Jan.26,2009]
Question139.07
Question:AregistrationstatementonFormS4isfiledtoregisterstockto
beissuedintheacquisitionofanonreportingcompanybyareporting
company.Onlythenonreportingcompanywillsolicitproxies.Canaproxy
cardbesentwiththeredherringprospectus?
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Answer:No.AlthoughthissolicitationisnotsubjecttoRegulation14A,it
neverthelesswillinvolveasaleunderRule145,whichcannotbe
consummatedwithoutaneffectiveregistrationstatement.Accordingly,a
proxycardcanbesentonlywiththeRule424(b)prospectus,notwiththe
redherring.[Jan.26,2009]
Section140.Rule146[Reserved]
Section141.Rule147PartofanIssue,PersonResident,and
DoingBusinessWithinforPurposesofSection3(a)(11)
Question141.01
Question:MayanissuerrelyonRule147toofferorsellsecuritieswithina
singlestatetoapersonwhoseprincipalresidenceisinsuchstatebutwho
residestemporarilyoutofthestate?
Question141.02
Question:Mayabrokerdealerdistributesecuritiesinanintrastateoffering
madeinrelianceonRule147withoutjeopardizingtheexemptionavailable
underthatrule?
Question141.03
Question:Ifanissuerplanstoconductanintrastateofferingpursuantto
theSection3(a)(11)exemption,maytheissuerengageingeneral
advertisingorageneralsolicitation?
Answer:SecuritiesActRule147doesnotprohibitgeneraladvertisingor
generalsolicitation.Anysuchgeneraladvertisingorsolicitation,however,
mustbeconductedinamannerconsistentwiththerequirementthatoffers
madeinrelianceonSection3(a)(11)andRule147bemadeonlytopersons
residentwithinthestateorterritoryofwhichtheissuerisaresident.[April
10,2014]
Question141.04
Question:AnissuerplanstouseathirdpartyInternetportaltopromote
anofferingtoresidentsofasinglestateinaccordancewithastatestatute
orregulationintendedtoenablesecuritiescrowdfundingwithinthatstate.
AssumingtheissuermettheotherconditionsofRule147,coulditrelyon
Rule147foranexemptionfromSecuritiesActregistrationfortheoffering,
orwoulduseofanInternetportalnecessarilyentailmakingoffersto
personsoutsidetherelevantstateorterritory?
Answer:UseoftheInternetwouldnotbeincompatiblewithaclaimof
exemptionunderRule147iftheportalimplementsadequatemeasuresso
thatoffersofsecuritiesaremadeonlytopersonsresidentintherelevant
stateorterritory.Inthecontextofanofferingconductedinaccordance
withstatecrowdfundingrequirements,suchmeasureswouldinclude,ata
minimum,disclaimersandrestrictivelegendsmakingitclearthatthe
offeringislimitedtoresidentsoftherelevantstateunderapplicablelaw,
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andlimitingaccesstoinformationaboutspecificinvestmentopportunities
topersonswhoconfirmtheyareresidentsoftherelevantstate(for
example,byprovidingarepresentationastoresidenceorinstate
residenceinformation,suchasazipcodeorresidenceaddress).Ofcourse,
anyissuerseekingtorelyonRule147fortheofferingalsowouldhaveto
meetalltheotherconditionsofRule147.[April10,2014]
Question141.05
Question:Cananissueruseitsownwebsiteorsocialmediapresenceto
offersecuritiesinamannerconsistentwithRule147?
Answer:Issuersgenerallyusetheirwebsitesandsocialmediapresenceto
advertisetheirmarketpresenceinabroadandopenmannersothat
informationiswidelydisseminatedtoanymemberofthegeneralpublic.
Althoughwhetheraparticularcommunicationisan"offer"ofsecuritieswill
dependonallofthefactsandcircumstances,usingsuchestablished
Internetpresencetoconveyinformationaboutspecificinvestment
opportunitieswouldlikelyinvolveofferstoresidentsoutsidetheparticular
stateinwhichtheissuerdidbusiness.
Webelieve,however,thatissuerscouldimplementtechnologicalmeasures
tolimitcommunicationsthatareoffersonlytothosepersonswhose
InternetProtocol,orIP,addressoriginatesfromaparticularstateor
territoryandpreventanyofferstobemadetopersonswhoseIPaddress
originatesinotherstatesorterritories.Offersshouldincludedisclaimers
andrestrictivelegendsmakingitclearthattheofferingislimitedto
residentsoftherelevantstateunderapplicablelaw.Issuersmustcomply
withallotherconditionsofRule147,includingthatsalesmayonlybemade
toresidentsofthesamestateastheissuer.[October2,2014]
Sections142to149.Rules148to152a[Reserved]
Section150.Rules153,153aand153b
Question150.01
Question:Anissuerhasregisteredan"atthemarket"offeringofits
commonstockinrelianceonRule415(a)(4)andhasengagedabroker
dealertosellthesecuritiesintotheexistingtradingmarket.Doesthe
brokerdealerhaveaprospectusdeliveryobligationwithrespecttothe
primaryofferingoftheissuer'ssecuritiesintothetradingmarketand,ifso,
maythebrokerdealerrelyonRule153tosatisfysuchprospectusdelivery
obligation?Also,doesthebrokerdealerhaveanobligationtoprovidea
Rule173noticeand,ifso,towhom?
Answer:An"atthemarket"offeringofsecuritiesbyabrokerdealeron
behalfofanissuerisaprimaryofferingoftheissuer'ssecurities.Thereisa
prospectusdeliveryobligationastosuchprimaryoffering.Theprovisionsof
Rule153applyonlytotransactionsbetweenbrokers,asitcoversthe
requirementofabrokerordealertodeliveraprospectustoabrokeror
dealer.Rule153doesnotaffectabroker'sdeliveryobligationtopurchasers
otherthanbrokersordealers.Asaconsequence,brokersordealers
effectingtransactionsintheissuer'ssecuritiesundertheregistration
statementmayhaveaprospectusdeliveryobligationtotheirclientswho
acquiredthosesecurities(whichmaybesatisfiedinrelianceonRule172)
andsimilarlymayhaveanobligationtoprovideanoticepursuanttoRule
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173.Rule173excludestransactionssolelybetweenbrokersordealersin
relianceonRule153,butnotastootherpurchasersoftheissuer's
securitiesundertheregistrationstatement.[Aug.14,2009]
Section152.Rule155IntegrationofAbandonedOfferings
Question152.01
Question:CananissuerrelyonRule155(b)foranabandonedprivate
offeringfollowedbyashelftakedowniftheshelfregistrationstatementwas
filedpriortotheprivateoffering?
Answer:Yes,providedthatthetakedownisnotdoneuntilafterthetime
providedinRule155(b).[Jan.26,2009]
Question152.02
Question:Ifanissuerisunsuccessfulincompletinganofferingasa
takedownfromanexistingshelfregistrationstatement,mayitrelyonRule
155(c)tocompletetheofferingprivately?
Answer:Yes.Inashelfoffering,thefilingofaprospectussupplement
disclosingtheterminationoftheofferingisdeemedtosatisfytheRule
155(c)(2)requirementtowithdrawtheregistrationstatement.[Jan.26,
2009]
Question152.03
Question:Rule155(c)(5)requiresanywrittendisclosuredocumentusedin
thesubsequentprivateofferingtodiscloseanychangesintheissuers
businessorfinancialconditionthatoccurredaftertheissuerfiledthe
registrationstatementandarematerialtotheinvestmentdecisioninthe
privateoffering.Doesthisrequirementapplywhetherthewrittendisclosure
isprovidedonamandatory(Rule502(b)(1))orvoluntarybasis?
Section161.Rule163ExemptionfromSection5(c)oftheActfor
CertainCommunicationsbyoronBehalfofWellKnownSeasoned
Issuers
Question161.01
Question:Ifanissuerhasnotpreviouslyfiledanyshelfregistration
statementandatthedateofitslastForm10Kdidnotqualifyasawell
knownseasonedissuer,woulditbeabletodetermineitsstatusasawell
knownseasonedissueratthetimeitwantstorelyonRule163forpre
filingoffers?
Answer:No.Thedefinitionofwellknownseasonedissuerpermitsan
issuertoevaluateitsstatusasawellknownseasonedissueronlyupon
specifiedeventsthedateofintendedrelianceonRule163isnotoneof
thoseevents.Therefore,ifthereisnoshelfregistrationstatementonfile
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andtheissuerdidnotsatisfythedefinitionofwellknownseasonedissuer
atthetimeitfileditsmostrecentForm10K,theissuersstatuswouldnot
changeuntiliteitherfilesashelfregistrationstatementorfilesitsnext
Form10K.[Jan.26,2009]
Question161.02
Question:MayRule163beusedforcommunicationsbyanunderwriterif
theissuerpreviouslyauthorizedthecommunication?
Answer:No.Rule163isnotavailableforusebyanunderwriter.[Jan.26,
2009]
Sections162to163.Rules163Ato164[Reserved]
Section164.Rule165OffersMadeinConnectionWithaBusiness
CombinationTransaction
Question164.01
Question:Mayanissuercontemplatingaregisteredexchangeoffersubject
toExchangeActRule13e4relyonRules165and166tocommunicate
withitssecurityholdersbeforeandafterthefirstpublicannouncementof
theoffering?
Answer:Yes,solongastheissuersatisfiestheconditionssetforthin
Rules165and166.Inparticular,theprimarypurposeoreffectofthe
communicationmustbetoconveyinformationconcerningabusiness
combinationtransaction,asdefinedinRule165(f),andnottoconditionthe
marketforacapitalraisingorresaletransaction.Rules165and166are
intendedtoapplytocommunicationsrelatingtoexchangeoffersmadein
accordancewiththeapplicabletenderofferrules,includingofferssubjectto
ExchangeActRule13e4.[June4,2010]
Question164.02
Question:AnelectroniccommunicationrelyingontheexemptioninRule
165mustcontainthelegendrequiredbyparagraph(c)(1)ofthatrule.
Someelectroniccommunicationplatforms,suchasthosemadeavailable
throughcertainsocialmediawebsites,limitthenumberofcharactersor
amountoftextthatcanbeincludedinthecommunication,effectively
precludingdisplayofthelegendtogetherwiththeotherinformation.Under
whatcircumstanceswouldtheuseofahyperlinktothelegendsatisfythe
Rule165(c)(1)requirement?
socialmediatocommunicatewithsecurityholders,thestaffwillnotobject
totheuseofanactivehyperlinktosatisfytherequirementsofRule165(c)
(1)inthefollowinglimitedcircumstances:
Includingthelegendinitsentirety,togetherwiththeother
information,wouldcausethecommunicationtoexceedthelimiton
thenumberofcharactersoramountoftextand
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legendandprominentlyconveys,throughintroductorylanguageor
otherwise,thatimportantorrequiredinformationisprovidedthrough
thehyperlink.
legend,alongwiththeotherinformation,withoutexceedingtheapplicable
limitonnumberofcharactersoramountoftext,theuseofahyperlinkto
therequiredlegendwouldbeinappropriate.Thispositionalsoappliesto
writtencommunicationsthatconstitutesolicitationsmadeinrelianceon
ExchangeActRule14a12andprecommencementwrittencommunications
subjecttoExchangeActRules13e4(c),14d2(b)and14d9(a).[April21,
2014]
Section165.Rule166ExemptionfromSection5(c)forCertain
CommunicationsinConnectionWithBusinessCombination
Transactions
Question165.01
Question:Mayanissuercontemplatingaregisteredexchangeoffersubject
toExchangeActRule13e4relyonRules165and166tocommunicate
withitssecurityholdersbeforeandafterthefirstpublicannouncementof
theoffering?
Answer:Yes,solongastheissuersatisfiestheconditionssetforthin
Rules165and166.Inparticular,theprimarypurposeoreffectofthe
communicationmustbetoconveyinformationconcerningabusiness
combinationtransaction,asdefinedinRule165(f),andnottoconditionthe
marketforacapitalraisingorresaletransaction.Rules165and166are
intendedtoapplytocommunicationsrelatingtoexchangeoffersmadein
accordancewiththeapplicabletenderofferrules,includingofferssubjectto
ExchangeActRule13e4.[June4,2010]
Section171.Rule172DeliveryofProspectuses
Question171.01
Question:AretheprovisionsofRule172availabletodealersthatare
participantsintheunderwritingaswellastothosedealersthatarenot
participantsintheunderwriting?
Answer:Yes.Rule172isavailabletodealersthatparticipateinthe
underwriting,includingsellinganunsoldallotment,aswellastodealers
thatdonotparticipate.AdealermaynotrelyonRule174tonotdelivera
prospectuswhenthedealerisparticipatingintheofferingorissellingan
unsoldallotment.WhenSection4(3)requiresdeliveryofaprospectus,the
dealermayrelyonRule172tosatisfyitsdeliveryobligation,exceptinthe
caseofofferingsofblankcheckcompanies.[Jan.26,2009]
Question171.02
Question:SecuritiesActSection2(a)(10)setsforththedefinitionof
prospectus.Clause(a)ofSection2(a)(10)providesanexceptionfromthe
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definitionofprospectusforacommunicationthatissentorgivenafter
theeffectivedateoftheregistrationstatementifitisprovedthatpriorto
oratthesametimewithsuchcommunicationawrittenprospectusmeeting
therequirementsofsubsection(a)of[S]ection10atthetimeofsuch
communicationwassentorgiventothepersontowhomthe
communicationwasmade.IsRule172availabletosatisfytheconditionto
theexceptioninclause(a)ofSection2(a)(10)thattheSection10(a)
prospectusbesentorgiventothepersontowhomthecommunication
wasmade?
Answer:No.Rule172providesthatafinalSection10(a)prospectuswill
bedeemedtoprecedeoraccompanythecarryingordeliveryofasecurity
forsaleforpurposesofSecuritiesActSection5(b)(2)andprovidesa
conditionalexemptionfromSecuritiesActSection5(b)(1)forwritten
confirmationsandnoticesofallocations.AstheCommissionstatedin
SecuritiesActReleaseNo.8591(July19,2005),atfootnote561,afinal
prospectusonlyfiledasprovidedinRule172willnotbeconsideredtobe
sentorgivenpriortoorwithawrittenofferwithinthemeaningofclause
(a)ofSecuritiesActSection2(a)(10).[Jan.26,2009]
Question171.03
Question:Canspecialpurposeacquisitioncompanies(SPACs)relyonRule
172tosatisfytheirprospectusdeliveryobligationsfollowingtheirinitial
publicofferings?
Question171.04
Question:IsRule172availabletosatisfyprospectusdeliveryobligations
ofsellingsecurityholdersiftherequirementsoftherulearemet?
Answer:Yes.Sellingsecurityholderswithaprospectusdeliveryobligation
mayrelyonRule172.[Jan.26,2009]
Section172.Rule173NoticeofRegistration
Question172.01
Question:Rule173requiresthateachunderwriterordealerparticipating
inaregisteredofferingmustprovidetoeachofitspurchasersacopyofthe
finalprospectusor,inlieuofthefinalprospectus,anoticethatthesalewas
madepursuanttoaregistrationstatement,withintwobusinessdays
followingthecompletionofsuchsale.InthecontextofRule173,does
completionofsuchsalemeanthedateofsettlement?
Answer:Yes.ForpurposesofRule173,completionofsuchsalemeans
thedateofsettlement.ThedateofsaleunderSecuritiesActSection2(a)
(3)maybeearlierthanthedateofthecompletionofsuchsale.[Jan.26,
2009]
Question172.02
Question:Mustanissuer,underwriterordealerthatintendstodelivera
Rule173noticeinlieuofafinalprospectusensurethatthenoticeis
receivedbythepurchaserwithintwobusinessdaysinordertocomplywith
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theRule173requirementtoprovidetheRule173noticenotlaterthan
twobusinessdaysfollowingthecompletionofsuchsale?
Answer:No.TherequirementtoprovidetheRule173noticerequires
thatthenoticebesent,notnecessarilyreceived,withintwobusinessdays.
[Jan.26,2009]
Section173.Rule174DeliveryofProspectusbyDealers
ExemptionsUnderSection4(3)oftheAct
Question173.01
Question:AretheprovisionsofRule172availabletodealersthatare
participantsintheunderwritingaswellastothosedealersthatarenot
participantsintheunderwriting?
Answer:Yes.Rule172isavailabletodealersthatparticipateinthe
underwriting,includingsellinganunsoldallotment,aswellastodealers
thatdonotparticipate.AdealermaynotrelyonRule174tonotdelivera
prospectuswhenthedealerisparticipatingintheofferingorissellingan
unsoldallotment.WhenSection4(3)requiresdeliveryofaprospectus,the
dealermayrelyonRule172tosatisfyitsdeliveryobligation,exceptinthe
caseofofferingsofblankcheckcompanies.[Jan.26,2009]
Section174.Rule175LiabilityforCertainStatementsbyIssuers
Question174.01
Question:Rule175providesasafeharborforforwardlookingstatements
madebyoronbehalfofanissuerthatarecontainedin(1)adocumentfiled
withtheCommission,(2)PartIofaForm10Qor(3)anannualreportto
securityholdersmeetingtherequirementsofExchangeActRule14a3(b)
and(c)orRule14c3(a)and(b).DoesRule175sforwardlooking
statementssafeharboralsoapplytostatementsmadeinaForm6K,
notwithstandingthefactthatForm6KisnotexplicitlymentionedinRule
175andtheformissubmittedandnotfiled?
Answer:Yes.Therationalefortheforwardlookingstatementssafeharbor
applieswithequalforcetostatementsinForm6Kreportsasitdoesto
statementsinannualreportsandForm10Qreports.[Jan.26,2009]
Section179.Rule215AccreditedInvestor
Question179.01
[withdrawn,February27,2012]
Section180.Rule236ExemptionofSharesOfferedinConnection
withCertainTransactions
Question180.01
Question:Rule236providesanexemptionfromSecuritiesActregistration
fortheaggregationoffractionalsharesinconnectionwithcertain
transactions.Therulerequiresthatspecifiedinformationbefurnishedto
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theCommissionatleast10dayspriortotheoffering.Isthereaspecific
SecuritiesActformforthisinformation?
Answer:No.AlettershouldbesenttotheCommissionthatspecifiesthe
natureofthesubmission.Nofeeisapplicable.[Jan.26,2009]
Section181.Rules237to250[Reserved]
Section182.Rules251to263
Question182.01
Question:Whereanissuerelectstononpubliclysubmitadraftoffering
statementforstaffreviewpursuanttoRule252(d)ofRegulationAbefore
publiclyfilingitsForm1A,Item15(AdditionalExhibits)ofPartIII
(Exhibits)toForm1Arequiresissuerstofileasanexhibittothepublicly
filedofferingstatement:(1)anynonpublic,draftofferingstatement
previouslysubmittedpursuanttoRule252(d),and(2)anyrelated,non
publiccorrespondencesubmittedbyoronbehalfoftheissuers.Wouldan
issuerthatelectstomakethenonpublic,draftofferingstatementspublic
ontheEDGARLinksubmissionspageofEDGAR(seeChapter7(Preparing
andTransmittingEDGARLinkOnlineSubmissions)ofVolumeIIofthe
EDGARFilerManual,availableat:
http://www.sec.gov/info/edgar/edmanuals.htm)atthetimeitpubliclyfiles
itsForm1Aalsoberequiredtorefilesuchmaterialasanexhibitpursuant
toItem15ofPartIII?
Answer:No.If,atthetimeitfirstfilestheofferingstatementpublicly,the
issuermakespublicontheEDGARLinksubmissionspageallpriornon
public,draftofferingstatements,theofferingstatementswillnolongerbe
nonpublicandtheissuerwillnotberequiredtofilethemasexhibits.The
issuerisstillrequiredtofileasanexhibitanyrelated,nonpublic
correspondencesubmittedbyoronbehalfoftheissuerregardingnon
publicdraftofferingstatementssubmittedpursuanttoRule252(d).[June
23,2015]
Question182.02
Question:Ifanissuerelectstosubmitadraftofferingstatementfornon
publicstaffreviewbeforepublicfilingpursuanttoRule252(d),and,aspart
ofthatprocess,submitscorrespondencerelatingtoitsofferingstatement,
whatmustitdoifitwantstoprotectportionsofthatcorrespondencefrom
publicrelease?
Answer:Duringthereviewofthedraftofferingstatement,theissuer
wouldrequestconfidentialtreatmentofanyinformationintherelated
correspondencepursuanttoRule83,inthesamemanneritwouldduringa
typicalreviewofaregisteredoffering.Itwouldsubmitaredactedcopyof
thecorrespondenceviaEDGAR,withtheappropriatelegendindicatingthat
itwasbeingsubmittedpursuanttoaconfidentialtreatmentrequestunder
Rule83.Atthesametime,itwouldsubmitanunredactedpaperversionto
theSEC,inthemannerrequiredbythatrule.Whentheissuermakesits
publicfilingoftheofferingstatement,itwillberequiredtofileasanexhibit
totheelectronicallyfiledofferingstatementanypreviouslysubmittednon
publiccorrespondencerelatedtothenonpublicreview.Sincethat
correspondencewillbeinformationrequiredtobefiledwiththeSEC,the
issuermustredacttheconfidentialinformationfromthefiledexhibit,
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includetherequiredlegendsandredactionmarkings,andsubmitinpaper
formattotheSECsOfficeoftheSecretaryanapplicationforconfidential
treatmentoftheredactedinformationunderRule406.Thestaffwill
considerandactonthatapplicationinthesamemanneritwouldwithany
otherapplicationunderRule406forothertypesoffiledexhibits.Aswith
registeredofferings,thereviewstaffwillactonRule406confidential
treatmentapplicationsbeforetheofferingstatementisqualified.Forthe
requirementsaregistrantmustsatisfywhenrequestingconfidential
treatment,seeDivisionofCorporationFinanceStaffLegalBulletinNo.1
(withAddendum).[June23,2015]
Question182.03
Question:Wouldacompanywithheadquartersthatarelocatedwithinthe
UnitedStatesorCanada,butwhosebusinessprimarilyinvolvesmanaging
operationsthatarelocatedoutsidethosecountriesbeconsideredtohave
itsprincipalplaceofbusinesswithintheUnitedStatesorCanadafor
purposesofdeterminingissuereligibilityunderRegulationA?
Answer:Yes,anissuerwillbeconsideredtohaveitsprincipalplaceof
businessintheUnitedStatesorCanadaforpurposesofdeterminingissuer
eligibilityunderRule251(b)ofRegulationAifitsofficers,partners,or
managersprimarilydirect,controlandcoordinatetheissuersactivities
fromtheUnitedStatesorCanada.[June23,2015]
Question182.04
Question:Isacompanythatwaspreviouslyrequiredtofilereportswith
theCommissionunderSection15(d)oftheExchangeAct,butthathas
sincesuspendeditsExchangeActreportingobligation,aneligibleissuer
underRule251(b)(2)ofRegulationA?
Answer:Yes.AcompanythathassuspendeditsExchangeActreporting
obligationbysatisfyingthestatutoryprovisionsforsuspensioninSection
15(d)oftheExchangeActortherequirementsofExchangeActRule12h3
isnotconsideredtobesubjecttoSection13or15(d)oftheExchangeAct
forpurposesofRule251(b)(2)ofRegulationA.[June23,2015]
Question182.05
Question:IsavoluntaryfilerundertheExchangeActaneligibleissuerfor
purposesofRule251(b)(2)ofRegulationA?
Answer:Yes.AvoluntaryfilerisnotsubjecttoExchangeActSection13or
15(d)becauseitisnotobligatedtofileExchangeActreportspursuantto
eitherofthoseprovisions.[June23,2015]
Question182.06
Question:IsaprivatewhollyownedsubsidiaryofanExchangeAct
reportingcompanyparenteligibletosellsecuritiespursuanttoRegulation
A?
Answer:Yes,althoughtheExchangeActreportingcompanyparentcould
notbeaguarantororcoissuerofthesecuritiesoftheprivatewholly
ownedsubsidiary.[June23,2015]
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Question182.07
Question:CanRegulationAberelieduponbyanissuerforbusiness
combinationtransactions,suchasamergeroracquisition?
Answer:Yes.ThefinalrulesdonotlimittheavailabilityofRegulationAfor
businesscombinationtransactions,but,astheCommission(SECRel.No.
339497)indicated,RegulationAwouldnotbeavailableforbusiness
acquisitionshelftransactions,whicharetypicallyconductedonadelayed
basis.[June23,2015]
Question182.08
Question:Mayarecentlycreatedentitychoosetoprovideabalancesheet
asofitsinceptiondate?
Answer:Yes,aslongastheinceptiondateiswithinninemonthsbefore
thedateoffilingorqualificationandthedateoffilingorqualificationisnot
morethanthreemonthsaftertheentityreacheditsfirstannualbalance
sheetdate.Thedateofthemostrecentbalancesheetdetermineswhich
fiscalyears,orperiodsinceexistenceforrecentlycreatedentities,the
statementsofcomprehensiveincome,cashflowsandchangesin
stockholdersequitymustcover.Whenthebalancesheetisdatedasof
inceptionthestatementsofcomprehensiveincome,cashflowsandchanges
instockholdersequitywillnotbeapplicable.[June23,2015]
Question182.09
Question:Cananissuersolicitinterest(ortestthewaters)ina
RegulationAofferingonaplatformthatlimitsthenumberofcharactersor
amountoftextthatcanbeincluded,therebypreventingtheinclusionin
suchcommunicationoftheinformationrequiredbyRule255?
Answer:Yes.Thestaffwillnotobjecttotheuseofanactivehyperlinkto
satisfytherequirementsofRule255inthefollowinglimitedcircumstances:
Includingtherequiredstatementsintheirentirety,togetherwiththe
otherinformation,wouldcausethecommunicationtoexceedthelimit
onthenumberofcharactersoramountoftextand
statementsthatotherwisesatisfyRule255and,wherepossible,
prominentlyconveys,throughintroductorylanguageorotherwise,
thatimportantorrequiredinformationisprovidedthroughthe
hyperlink.
Whereanelectroniccommunicationiscapableofincludingtheentiretyof
therequiredstatements,alongwiththeotherinformation,without
exceedingtheapplicablelimitonnumberofcharactersoramountoftext,
theuseofahyperlinktotherequiredstatementswouldbeinappropriate.
[June23,2015]
Question182.10
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Question:Arestatesecuritieslawregistrationandqualification
requirementspreemptedwithrespecttoresalesofsecuritiespurchasedina
Tier2offering?
Answer:No.Statesecuritieslawregistrationandqualification
requirementsareonlypreemptedwithrespecttoprimaryofferingsof
securitiesbytheissuerorsecondaryofferingsbysellingsecurityholders
thatarequalifiedpursuanttoRegulationAandofferedorsoldtoqualified
purchaserspursuanttoaTier2offering.Resalesofsecuritiespurchasedin
aTier2offeringmustberegistered,orofferedorsoldpursuanttoan
exemptionfromregistration,withstatesecuritiesregulators.[June23,
2015]
Question182.11
Question:Whenisanissuerrequiredtoengagetheservicesofa
registeredtransferagentbeforebeingabletoavailitselfoftheconditional
exemptionfrommandatoryregistrationunderSection12(g)ofthe
ExchangeActdescribedinExchangeActRule12g51(a)(7)?
Answer:Anissuerthatseekstorelyontheconditionalexemptionfrom
mandatoryregistrationunderSection12(g)oftheExchangeActmustat
thetimeofrelianceontheconditionalexemptionsatisfytherequirements
ofRule12g51(a)(7).[June23,2015]
Section198.Rule401RequirementsastoProperForm
Question198.01
Question:WhenanissuerwithaneffectiveFormS3registration
statementnolongersatisfiestheapplicableFormS3requirements,how
cantheissuerupdatetheregistrationstatementforpurposesofcomplying
withSection10(a)(3)?
Answer:Theissuercanupdatetheregistrationstatementbyfilingapost
effectiveamendmentonaSecuritiesActregistrationformforwhichit
qualifiesatthetimeoffilingsuchamendment,suchasaFormS1orForm
S11.[Jan.26,2009]
Question198.02
Question:AregistranthasaneffectiveregistrationstatementonFormS
3,butatthetimeoffilingitsForm10K,itnolongersatisfiestheeligibility
requirementsofFormS3.DoesthefilingoftheregistrantsForm10K
affecttheabilityoftheregistranttocontinueusingitsFormS3?
Answer:Yes.ForpurposesofSecuritiesActRule401(b),thefilingofa
Form10Kcontainingtheregistrantsauditedfinancialstatementsforits
mostrecentlycompletedfiscalyearoperatesasaSection10(a)(3)update
toaFormS3registrationstatement.Therefore,ifaregistrantwasnot
eligibletouseFormS3atthetimeofsuchupdatingthroughthefilingof
theForm10K,itwouldberequiredtofileaposteffectiveamendmenton
whateverotherSecuritiesActregistrationformwouldbeavailabletothe
registrantatthetime.[Nov.26,2008]
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Question198.03
Question:Ifawellknownseasonedissuerfilesanautomaticshelf
registrationstatementatthebeginningoftheyear,andduringthatyear
butbeforeitsSection10(a)(3)updateisdue,theissuerlosesitsstatusas
awellknownseasonedissuer,whatistheimpactontheeffectivenessand
useofthatautomaticshelfregistrationstatement?
Answer:Anissuerslossofeligibilitytousearegistrationformafter
effectivenessandbeforeitsSection10(a)(3)updatewillnotaffectitsability
tousethatregistrationstatementuntilthetimeofitsSection10(a)(3)
update.Iftheissuerisnolongerawellknownseasonedissueratthetime
ofitsSection10(a)(3)update,theissuerwouldberequiredtoamendits
automaticshelfregistrationstatementontoaformitistheneligibletouse
toofferandsellsecurities.[Jan.26,2009]
Question198.04
Question:DoesRule401(e)permitaregistrantupdatingaFormS1
registrationstatementpursuanttoSection10(a)(3)tofileaposteffective
amendmentonFormS3ifitiseligibletousethatformwithrespectto
suchofferingatthetimetheamendmentisfiled?
Answer:Yes.Theregistrantcouldnot,however,converttheFormS1to
anautomaticshelfregistrationstatementbyfilingaposteffective
amendment.[Jan.26,2009]
Question198.05
Question:Mayanissuerfileoruseanautomaticshelfregistration
statementonFormS3aftertheissuerhasfileditsForm10Kbutpriorto
filingthePartIIIinformationthatwillbeincorporatedbyreferenceintothe
Form10K?
Answer:Yes.However,issuersareresponsibleforensuringthatany
prospectususedinconnectionwitharegisteredofferingcontainsthe
informationrequiredtobeincludedthereinbySecuritiesActSection10(a)
andScheduleA.[Jan.26,2009]
Question198.06
Question:UnderRule401(b),ifanamendmenttoaregistration
statementisfiledtosatisfySecuritiesActSection10(a)(3),theformand
contentsoftheamendmentmustconformtotheapplicablerulesandforms
asineffectonthefilingdateoftheamendment.Forexample,ifanissuer
isnolongereligibletouseFormS3foraprimaryofferingatthetimeit
filesitsForm10KthatactsasaSection10(a)(3)update,theissuermust
fileaposteffectiveamendmentornewregistrationstatementtoconvert
theFormS3registrationstatementontoaformthattheissueristhen
eligibletouseinordertocontinueoffersandsales.Ifawellknown
seasonedissuerwithaneffectiveautomaticshelfregistrationstatementwill
nolongerbeawellknownseasonedissueratthetimeoffilingitsForm10
K,itwillnolongerbeeligibletorelyonGeneralInstructionI.DtoFormS
3.Ifthatissuerwillremaineligibletoconductprimaryofferingsunder
GeneralInstructionI.B.1orI.B.2ofFormS3,maytheissuercontinueto
offerandsellsecuritiesoffofitsautomaticshelfregistrationstatement
pendingtheeffectivenessoftheposteffectiveamendmentthattheissuer
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willfileinordertoconverttheregistrationstatementfromanautomatic
shelfregistrationstatementonFormS3filedinrelianceonGeneral
InstructionI.DtoanonautomaticshelfregistrationstatementonFormS3
filedinrelianceonGeneralInstructionI.B.1orI.B.2?
Answer:Yes.Inthissituation,theissuermaycontinuetoofferandsell
securitiesusingtheautomaticshelfregistrationstatement,butonlyif,prior
tofilingtheForm10K,theissueramendstheautomaticshelfregistration
statementsothatitconformstotherequirementsthatapplytoaFormS3
filedinrelianceonGeneralInstructionI.B.1orI.B.2.Specifically,the
followingconditionsmustbesatisfied:
PriortofilingtheForm10K,theissuermustfileaposteffective
amendmenttotheautomaticshelfregistrationstatement(onEDGAR
submissiontypePOSASR)toregisteraspecificamountofsecurities
andtopaytheassociatedfilingfee
Theprospectusincludedintheposteffectiveamendmenttothe
automaticshelfregistrationstatementmaynotomitinformationin
relianceonprovisionsofRule430Bthatareavailableonlyto
automaticshelfregistrationstatementsandinsteadmustcontainall
informationrequiredtobeincludedinaFormS3filedinrelianceon
GeneralInstructionI.B.1orI.B.2and
TheissuermustremaineligibletouseFormS3inrelianceon
GeneralInstructionI.B.1orI.B.2atthetimeofthefilingoftheForm
10K.
AtleastpromptlyaftertheForm10Kisfiled,theissuermustfileeithera
posteffectiveamendmentusingEDGARsubmissiontypePOSAMoranew
FormS3registrationstatementusingEDGARsubmissiontypeS3to
converttheFormS3totheproperEDGARsubmissiontypeforanon
automaticshelfregistrationstatement.Pendingtheeffectivenessofthe
filing,theissuermaycontinuetoofferandsellsecuritiesusingthe
amendedautomaticshelfregistrationstatement.[Jan.26,2009]
Question198.07
Question:Rule401(g)(2)requiresanissuertofileanewregistration
statementorposteffectiveamendment"promptly"oncethestaffnotifies
theissuerofitsobjectiontotheissuer'suseofanautomaticshelf
registrationstatement.Doesthe"promptly"requirementalsoextendto
respondingtostaffcomments,ifany,andsubmittingarequestfor
effectivenessofthenewregistrationstatementorposteffective
amendment?
Answer:Yes.[Aug.14,2009]
Question198.08
Question:AnissuerhasaregistrationstatementonFormS3orFormF3
thatwasdeclaredeffectivebeforeJuly22,2010andincludesor
incorporatesbyreferenceratingsinformationthatisnotlimitedtoissuer
disclosurerelatedratingsinformation.Cantheissuercontinuetouseits
registrationstatementwithoutfilingaconsentbythecreditratingagency?
Answer:Yes.Inthisfactpattern,thestaffwouldnotobjecttoreliance
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uponRule401(a)undertheSecuritiesActtoallowcontinueduseofthe
registrationstatementforthelimitedperiodpermittedunderRule401(a).
Thiswouldbeapplicableonlyuntilthenextposteffectiveamendmentto
suchregistrationstatementandonlyifnosubsequentlyincorporated
periodicorcurrentreportcontainsratingsinformationthatisnotlimitedto
issuerdisclosurerelatedratingsinformation.Notethatthefilingofthe
issuersnextannualreportonForms10K,20For40Fisdeemedtobe
theposteffectiveamendmentofsuchregistrationstatementforpurposes
ofSecuritiesActSection10(a)(3),sothatinaccordancewithRule401(a),
theregistrationstatementcouldnolongerbeusedaftertheannualreport
isfiledwithoutthefilingoftheconsent.[July27,2010]
Sections199to202.Rules401ato404[Reserved]
Section203.Rule405DefinitionofTerms
Question203.01
Question:TheRule405definitionofemployeebenefitplanstatesthat
consultantsoradvisorsmayparticipateinanemployeebenefitplanonlyif
(1)theyarenaturalpersons,(2)theyprovidebonafideservicestothe
registrant,and(3)theservicesarenotinconnectionwiththeofferorsale
ofsecuritiesinacapitalraisingtransactionanddonotdirectlyorindirectly
promoteormaintainamarketfortheregistrantssecurities.Cansecurities
issuableunderaplanthatpermitsconsultantstobecompensatedfor
capitalraisingservices,aswellasservicesthatqualifyunderRule405,be
registeredonFormS8?
Answer:No.TheplandoesnotsatisfytheRule405definitionofemployee
benefitplan,andtherefore,nosecuritiesissuableundertheplancanbe
registeredonFormS8.[Jan.26,2009]
Question203.02
Question:AstockoptionplanregisteredonFormS8permitstheissuance
oftransferableoptions.Theregistrationstatementcoversonlytheissuance
ofthecommonstockontheexerciseoftheoptions.Cananonemployee,
whoacquiresanoptionfromanemployee,exercisethatoptionunderthe
FormS8registrationstatement?
Answer:No.Whilesecuritiesissuableundertheplancancontinuetobe
registeredonFormS8,anonemployee(otherthananemployeesfamily
memberwhoacquiresanoptionfromanemployeethroughagiftor
domesticrelationsorder)cannotexerciseoptionsundertheFormS8
registrationstatement.Inaddition,whentheissuersponsorsaprogramor
otherwiseactivelyarrangesforemployeestosellemployeebenefitplan
optionsorotherwisetransferemployeebenefitplanoptionstopersonswho
arenotfamilymembers,theplannolongerwouldbesolelyforemployees
andtheotherpersonsspecifiedintheRule405definitionofemployee
benefitplan.Inthissituation,securitiesissuableundertheplancouldnot
continuetoberegisteredonFormS8unlessaplanamendmentremoves
thetransferredoptionsandthesecuritiesunderlyingthemfromtheplan,so
thattheplanwouldcontinuetosatisfytheRule405definitionofemployee
benefitplan.[Jan.26,2009]
Question203.03
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Question:ThedefinitionofineligibleissuerinRule405includesan
issuer,oranyentitythatatthetimewasasubsidiaryoftheissuer,that
withinthepastthreeyearswasconvictedofanyfelonyormisdemeanor
describedinparagraphs(i)through(iv)of[S]ection15(b)(4)(B)ofthe
SecuritiesExchangeActof1934.Howisaconvictionbyaforeigncourt
treatedunderthisprovision?
Answer:Aconvictionbyaforeigncourtastotheactivitiesdescribedin
paragraphs(i)through(iv)ofSection15(b)(4)(B)oftheExchangeAct
wouldtriggerineligibilityunderthedefinition.[Jan.26,2009]
Question203.04
Question:Awellknownseasonedissuerwantstoformawhollyowned
financesubsidiarytosellnonconvertibledebtthatwillbefullyand
unconditionallyguaranteedbythewellknownseasonedissuer.Priortothe
firstofferandsaleofthefinancesubsidiarysdebtsecurities,thesubsidiary
wouldhavenominalassetsandoperations.Wouldthefinancesubsidiarybe
ashellcompanyasdefinedinRule405,andthereforeanineligible
issuerthatcouldnotregisteritsdebtsecuritiesonthewellknown
seasonedissuerparentsautomaticshelfregistrationstatement?
Answer:Assumingthefinancesubsidiarysatisfiestheconditionsofawell
knownseasonedissuermajorityownedsubsidiaryandisnototherwisean
ineligibleissuer,thefinancesubsidiaryborrowingwithitsparentsfulland
unconditionalguaranteewouldnotbeashellcompanyforpurposesofthe
definitionofineligibleissuer.[Jan.26,2009]
Question203.05
Question:Anissuerwhosepredecessorhadpreviouslybeeninbankruptcy
isplanninganinitialpublicoffering.TheplannedFormS1wouldinclude
auditedfinancialstatementsoftheissuerfollowingitsemergencefrom
bankruptcy.Underthedefinitionofineligibleissuer,anissuers
ineligibilityduetoabankruptcyfilingterminateswhentheissuerfiles
auditedfinancialstatementsinanannualreportsubsequenttoits
emergencefrombankruptcy.Wouldtheissuercontinuetobeanineligible
issuerifitincludedauditedfinancialsintheFormS1butdidnotfilean
annualreport?
Answer:No.Theissuerwouldhaveemergedfrombankruptcypriortothe
filingoftheregistrationstatementanditsauditedfinancialstatementsfiled
aspartofitsregistrationstatementwouldbeoftheentityasofadateafter
itemergedfrombankruptcy.[Jan.26,2009]
Question203.06
Question:UnderRule405,alimitedpartnershipthatisofferingand
sellingitssecuritiesotherthanthroughafirmcommitmentunderwritingis
anineligibleissuer.Wouldamasterlimitedpartnershipbeanineligible
issuerifitoccasionallyofferssecuritiesinotherthanfirmcommitment
underwrittendeals?
Answer:Amasterlimitedpartnershipisanineligibleissuerwithrespect
toanyofferingsconductedonotherthanafirmcommitmentunderwritten
basis,includingresalesbysellingsecurityholders.Foranyoffering
conductedonafirmcommitmentbasis,themasterlimitedpartnership
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wouldnotbeanineligibleissuer.[Jan.26,2009]
Question203.07
Question:Isanissueranineligibleissuerthatmaynotincorporateby
referenceintoaFormS1ifanyregisteredsecuritiesoffering(whether
primaryorresale)oranyprivateprimarysecuritiesofferingoccurredduring
thethreeyearlookbackwindowatatimewhentheissuerssecurities
wouldhavequalifiedaspennystock?
Answer:Yes.Theissuerwouldnot,however,needtoconsider
unregisteredresaletransactionsinmakingthisdetermination.[Jan.26,
2009]
Question203.08
Question:Indeterminingwhetheranissuerqualifiesasapennystock
issuerthatisanineligibleissuerunderRule405,musttheissuerconsider
offeringsregisteredonFormS8ifnosalesweremadeduringthe
applicablethreeyearwindow?
Answer:Yes.OffersregisteredonFormS8wouldbeconsideredongoing
offersduringthependencyoftheregistrationstatementandthereforemay
resultintheissuerbeingconsideredapennystockissuer,whetherornot
salesoccurredatatimewhentheissuersstockwouldhavequalifiedas
pennystock.[Jan.26,2009]
Question203.09
Question:Anissuerthathasnotpreviouslyfiledashelfregistration
statementbelievesthatitmeetsthetestforwellknownseasonedissuer
statusanddecidestofileanautomaticshelfregistrationstatement.Whatis
thisissuersinitialdeterminationdateforwellknownseasonedissuer
statusforpurposesofdeterminingitseligibilitytofileanautomaticshelf
registrationstatement?
Answer:Theissuersinitialdeterminationdateforwellknownseasoned
issuerstatuswillbethetimeitfilestheautomaticshelfregistration
statement.[Jan.26,2009]
Question203.10
Question:Anissuerwithaneffectiveshelfregistrationstatementbelieves
thatitmeetsthetestforwellknownseasonedissuerstatusanddecidesto
fileanautomaticshelfregistrationstatement.Whatisthisissuersinitial
determinationdateforwellknownseasonedissuerstatusforpurposesof
determiningitseligibilitytofileanautomaticshelfregistrationstatement?
Answer:Theissuersinitialdeterminationdateforwellknownseasoned
issuerstatuswillbethetimeitfilestheautomaticshelfregistration
Question203.11
Question:Ifawellknownseasonedissuerfilesanautomaticshelf
registrationstatement,isitsstatusasawellknownseasonedissuerre
evaluatedwhenitfilesitsForm10KorForm20Fforthefiscalyearin
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whichtheautomaticshelfregistrationstatementisfiledandbecomes
effective?Forexample,ifanissuerwithaDecember31fiscalyearendfiles
anautomaticshelfregistrationstatementonAugust15,2006andfilesits
Form10Kforits2006fiscalyearonFebruary28,2007,mustitre
evaluateitswellknownseasonedissuerstatusonthedateitfilesthat
Form10K?
Answer:Yes.ForpurposesofSecuritiesActSection10(a)(3),Item512(b)
ofRegulationSKprovidesthateachfilingoftheregistrantsannualreport
pursuanttosection13(a)orsection15(d)oftheSecuritiesExchangeActof
1934thatisincorporatedbyreferenceintheregistrationstatementshall
bedeemedtobeanewregistrationstatementrelatingtothesecurities
offeredthereinAssuch,theissuerinthisexamplemustreevaluateits
wellknownseasonedissuerstatuswhenitfilesitsForm10KonFebruary
28,2007.Further,issuersarerequiredtoindicatetheirwellknown
seasonedissuerstatusonthecoverpageoftheirForm10KorForm20F.
Whenanissuerthatwasawellknownseasonedissuerandhasaneffective
automaticshelfregistrationstatementdeterminesthatitnolongerisa
wellknownseasonedissueratthetimeitfilesitsannualreport(oronthe
duedateofsuchreportintheeventtheannualreportisnotfiledbythe
duedateoftheSection10(a)(3)update),thatissuershouldamendits
automaticshelfregistrationstatementontheformthatitistheneligibleto
use.[Jan.26,2009]
Question203.12
Question:CanaCanadianissuerfilingannualreportsonForm40Funder
theMultiJurisdictionalDisclosureSystembeawellknownseasoned
issuerunderthedefinitioninRule405?
Answer:No.OnlyissuersfilingannualreportsonForm10KorForm20F
areeligibletobewellknownseasonedissuers.TheCommissionsintentto
limitwellknownseasonedissuerstatusonlytothoseissuersfilingannual
reportsonForm10KandForm20Fisevidencedby,amongotherthings,
thefactthatForm40Fwasnotrevisedtoincludeeitherawellknown
seasonedissuercheckboxortorequirethedisclosureofunresolvedstaff
comments(eachofwhichtheCommissionincludedinamendedForm10K
andForm20F).[Jan.26,2009]
Question203.13
Question:Ifanissuerhasnotpreviouslyfiledanyshelfregistration
statementandatthedateofitslastForm10Kdidnotqualifyasawell
knownseasonedissuer,woulditbeabletodetermineitsstatusasawell
knownseasonedissueratthetimeitwantstorelyonRule163forpre
filingoffers?
Answer:No.Thedefinitionofwellknownseasonedissuerpermitsan
issuertoevaluateitsstatusasawellknownseasonedissueronlyupon
specifiedeventsthedateofintendedrelianceonRule163isnotoneof
thoseevents.Therefore,ifthereisnoshelfregistrationstatementonfile
andtheissuerdidnotsatisfythedefinitionofwellknownseasonedissuer
atthetimeitfileditsmostrecentForm10K,theissuersstatuswouldnot
changeuntiliteitherfilesashelfregistrationstatementorfilesitsnext
Form10K.[Jan.26,2009]
Question203.14
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Question:Thedefinitionofwellknownseasonedissuerreferstothetime
offilingofanissuersmostrecentshelfregistrationstatement.Wouldan
issuersmostrecentshelfincludeaFormS4orFormS8underwhich
securitiesmightbeofferedpursuanttoRule415onadelayedorcontinuous
basis?
Answer:Yes.Itwouldincludeanyregistrationstatementfiledinreliance
onRule415.[Jan.26,2009]
Question203.15
Question:Inthedefinitionofwellknownseasonedissuer,doesthe
phrasewithin60daysofthedeterminationdateincludeboththe60days
beforeandthe60daysafterfilingtheregistrationstatementortheSection
10(a)(3)update?
Answer:No.Itincludesonlyadatethatiswithin60daysbeforethe
determinationdate.[Jan.26,2009]
Question203.16
Question:Ifaspunoffsubsidiarymeetstheconditionsdiscussedin
Questions8and9ofStaffLegalBulletinNo.4,includingthe12month
segmentfinancialreportingrequirement,thatpermitasubsidiaryto
considertheparentsreportinghistorywhendeterminingwhetherthe
subsidiaryiseligibletouseFormS3,maythesubsidiaryrelyonthe
parentsprespinoffreportinghistoryforpurposesofevaluatingwhether
thesubsidiaryisawellknownseasonedissuerandeligibletofileaFormS
3ASR?
Answer:Yes.Thespunoffsubsidiaryalsowouldneedtoindependently
meetallotherrequirementsforwellknownseasonedissuerstatus.It
shouldbenotedthatifaspunoffentityreliesonitsparentsreporting
historyforpurposesoffilingaFormS3oraFormS3ASR,itwouldneed
tocomplywithItems308(a)and308(b)ofRegulationSKinthefirst
annualreportthatitfiles,totheextentitsparentisrequiredtodoso.See
SecuritiesActReleaseNo.8760(Dec.15,2006),atfn.76.[Jan.26,2009]
Section208.Rule411IncorporationbyReference
Question208.01
Question:MayaregistrantfilingaFormS1includeinformationabouta
FormS3companyinitsprospectusthroughincorporationbyreference?
Answer:No.ThisprocedureisnotauthorizedbyFormS1orRule411.If
theinformationabouttheothercompanyismaterial,itmustbesetforthin
theprospectusinfull.[Jan.26,2009]
Question208.02
Question:Mayexhibitsbeincorporatedbyreferencefromaregistration
statementfiledbyanotherissuer?
Answer:Yes.Rule411(c)permitsexhibitstobeincorporatedbyreference
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fromaregistrationstatementfiledbyanotherissuer.[Jan.26,2009]
Question208.03
Question:MayaregistrantfilingaFormS1toregisteraninitialpublic
offeringincorporatebyreferenceexhibitsfiledwithapreviousSecurities
ActregistrationstatementwhichwaswithdrawnpursuanttoRule477?
Answer:Yes.Thewithdrawnregistrationstatementremainsafiled
documentforpurposesofRule411(c)and,accordingly,theexhibitsmaybe
incorporatedbyreference.[Jan.26,2009]
Section210.Rule413RegistrationofAdditionalSecuritiesand
AdditionalClassesofSecurities
Question210.01
Question:MayaregistrantrequestawaiverfromtherequirementinRule
413(a)thataposteffectiveamendmentcannotbeusedtoregister
additionalsecuritiestobeincludedinanoffering?
Answer:No.Unlesstheregistrationstatementisanautomaticshelf
registrationstatementcoveredbyRule413(b),theproperprocedureisto
fileaseparateregistrationstatementfortheofferandsaleoftheadditional
securities.TheregistrantcanuseacombinedprospectuspursuanttoRule
429fortheoffering.[Jan.26,2009]
Question210.02
Question:Mayapendingregistrationstatementbeamendedtoadd
additionalsecuritiespriortoitseffectivedate?
Answer:Yes.Priortotheeffectivedate,additionalsecuritiesmaybe
addedforregistrationwiththepaymentoftherequisiteadditionalfee.[Jan.
26,2009]
Question210.03
Question:Anissuerfilesanautomaticshelfregistrationstatementon
FormS3toregistertheofferandsaleofaspecifiednumberofsecuritiesof
aspecifiedclassofsecurities.Maytheissuerposteffectivelyamendthis
FormS3toaddmoresecuritiesofthesameclassalreadyregistered?
Answer:Yes.Anissuermayaddtotheautomaticshelfregistration
statementonFormS3,byposteffectiveamendment,moresecuritiesof
thesameclassalreadyregistered.[May16,2013]
Section212.Rule415DelayedorContinuousOfferingandSaleof
Securities
Question212.01
Question:Inwhatcircumstancesdoesanoverallotmentoffering
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constituteadelayedofferingsuchthatcompliancewithRule415is
necessary?
Answer:Asamatterofadministrativepractice,overallotmentoptions
withtermsofupto45daysmaybemadewithouttriggeringcompliance
withRule415.[Jan.26,2009]
Question212.02
Question:Maysecuritiesthatareregisteredonashelfregistration
statementpursuanttoRule415besoldconcurrentlyinanyofthe
transactionsforwhichtheywereregistered?
Answer:Yes.Forexample,iftheshelfregistrationstatementindicatesthat
thesecuritiesregisteredcouldbesoldinfirmcommitmentunderwritingand
atthemarketofferings,bothtypesoftransactionscouldbeundertakenat
thesametime(subjecttoformeligibility).[Jan.26,2009]
Question212.03
Question:IsthereapresumptiveunderwriterstandardunderRule415?
Question212.04
Question:Ifanissueriseligibletofileashelfregistrationstatementon
FormS3,mayitamendapendingnonshelfregistrationstatementto
becomeashelfregistrationstatementonFormS3priortoitseffective
date?
Question212.05
Question:CanaregistrationstatementunderRule415bedeclared
effectivewithoutanopinionofcounselastothelegalityofthesecurities
beingissuedwhennoimmediatesalesarecontemplated?
Answer:No.However,whensalesarenotexpectedinthenearfuture,the
registrantmayfileaqualifiedopinionofcounselandhaveitsregistration
statementbedeclaredeffective,subjecttotheunderstandingthatan
unqualifiedopinionwillbefilednolaterthantheclosingdateoftheoffering
ofthesecuritiescoveredbytheregistrationstatement.Anupdatedopinion
ofcounselwithrespecttothelegalityofthesecuritiesbeingofferedmaybe
filedinaForm8Kreportratherthanaposteffectiveamendmenttoa
FormS3shelfregistrationstatement.Thispositionislimitedtoopinionsof
counselregardingthelegalityofthesecuritiesbeingoffered,whichare
requiredtobefiledinconnectionwithshelftakedowns.[Aug.14,2009]
Question212.06
Question:Doestheexistenceofaneffectiveregistrationstatement
governedbyRule415automaticallyrequirethatsalesunderthat
registrationstatementbeintegratedwithsalesinaseparateofferingfor
whichanexemptionisclaimed?
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Answer:No.Theexistenceofaneffectiveshelfregistrationstatementdoes
not,inandofitself,raiseintegrationconcerns.However,atakedownoff
theshelfregistrationstatementmayraiseintegrationconcernsifthe
offeringismadeconcurrentlywithanotherofferingforwhichanexemption
isclaimed.PleaseseeSecuritiesActReleaseNo.8828(Aug.3,2007)for
guidanceonintegrationinthecontextofconcurrentpublicandprivate
offerings.[Jan.26,2009]
Question212.07
Question:MayacompanyupdateaFormS1foracontinuousofferingby
supplementingtheprospectuswithaForm10Q?
Answer:IftheForm10Qcontainsnodisclosurethatwouldconstitutea
fundamentalchangeintheinformationcontainedintheprospectus,thereis
noItem512(a)requirementtofileaposteffectiveamendment.Ifthe
companymustupdateforantifraudandRule159purposes,itmaydoso
byaprospectussupplement.[Jan.26,2009]
Question212.08
Question:PursuanttoRule461,mustthemanagingunderwritersjoinin
thewrittenrequestforaccelerationinconnectionwithashelfregistration
statementnamingpotentialunderwriters?
Question212.09
Question:MaythecombinedprospectustechniqueofRule429beusedin
thecontextofRule415,whenanamountofsecuritiesremainsunsoldon
anearliershelfregistrationstatementatthetimetheissuerfilesanew
shelfregistrationstatement?
Answer:Yes,providedthatthenewshelfregistrationstatementisnotan
automaticshelfregistrationstatementandcomplieswithRules415(a)(5)
and(6).OnceRule429isusedtocreateacombinedprospectus,the
prospectusthatisapartoftheearlierregistrationstatementgenerallymay
notbeusedbyitself.[Jan.26,2009]
Question212.10
Question:MayawellknownseasonedissuerrelyonRule429tocombine
aprospectusfromapriornonautomaticshelfregistrationstatementwith
theprospectusinanewlyfiledautomaticshelfregistrationstatement?
Answer:No.UnderRule429(b),aregistrationstatementcontaininga
combinedprospectusacts,uponeffectiveness,asaposteffective
amendmenttotheearlierregistrationstatementwhoseprospectusis
combinedinthelatestregistrationstatement.Becausearegistrantcannot
fileaposteffectiveamendmenttoconvertanonautomaticshelf
registrationstatementintoanautomaticshelfregistrationstatement,a
wellknownseasonedissuermaynotrelyonRule429tocombinea
prospectusfromapriornonautomaticshelfregistrationstatementwiththe
prospectusinanewlyfiledautomaticshelfregistrationstatement.Instead,
awellknownseasonedissuerwithunusedcapacityonapriornon
automaticshelfmayeitherutilizetheunusedfeesuponfilinganew
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automaticshelfregistrationstatement,inaccordancewithRule457(p),or
continuetoselloffoftheoldregistrationstatementuntilthecapacityis
usedup.[Jan.26,2009]
Question212.11
Question:WhenFormS1isusedforacontinuousofferingunderRule
415,isaposteffectiveamendmentnecessarytomeettherequirementsof
Section10(a)(3),toreflectfundamentalchanges,ortodisclosematerial
changesintheplanofdistribution?
Answer:Yes.Aposteffectiveamendmentisrequiredtoreflectthose
changesbecauseFormS1doesnotprovideforforwardincorporationby
referenceofExchangeActreportsfiledaftertheeffectivedate.Other
changesmaybemadebyprospectussupplementtotheextentpermitted
byRule424.[Jan.26,2009]
Question212.12
Question:WhenashelfregistrationstatementisfiledonFormS3for
offeringsofsecuritiesonadelayedbasisunderRule415(a)(1)(x)andthe
planofdistributionincludesunderwritingsonafirmcommitmentbasis,in
connectionwithashelftakedownoffering,isitpermissibleforthe
registranttonametheparticipatingunderwritersinaprospectus
supplementandfiletheunderwritingagreementasanexhibitundercover
ofForm8K?
Answer:Yes.SeeSecuritiesActReleaseNo.8591(July19,2005),atfn.
488.[Jan.26,2009]
Question212.13
Question:Rule301ofRegulationSXspecifiescertaintimeperiods
(dependingontheregistrantsacceleratedfilerstatus)inwhichafiling,
otherthanonForm10KorForm10,maybemadewithoutthebalance
sheetforthemostrecentfiscalyearend.Theruleisconditionedon(1)the
registrantsreasonableandgoodfaithexpectationthatitwillreportincome
forthemostrecentlycompletedfiscalyearand(2)theregistranthaving
reportedincomeforatleastoneofthelasttwofiscalyears.Maya
registrantsellsecuritiesfromaneffectiveFormS3registrationstatement
duringtherelevanttimeperiodandfileaprospectussupplementunder
Rule424toreflectthetakedown,ifthebalancesheetforthemostrecent
fiscalyearendhasnotbeenfiledandtheregistrantdoesnothavea
reasonableandgoodfaithexpectationthatitwillreportincomeforthe
mostrecentlycompletedfiscalyear?
Answer:Yes.Rule301doesnotpreventtheshelftakedownfrom
occurringandwouldnotapplytotheprospectussupplementasitisnotfor
thepurposeofupdatingtheprospectusunderSection10(a)(3).[Jan.26,
2009]
Question212.14
Question:MustaregistrationstatementonFormS8,coveredbyRule
415,includeallapplicableundertakingsinItem512ofRegulationSK,
includingspecificallythoseinItems512(a),(b)and(h)?
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Answer:Yes.However,theFormS8doesnothavetoincludethe
undertakingscontainedinItems512(a)(5)(i),512(a)(5)(ii),and512(a)(6).
[July3,2008]
Question212.15
Question:Mayparents,subsidiariesoraffiliatesoftheissuerrelyonRule
415(a)(1)(i)toregistersecondaryofferings?
Answer:Rule415(a)(1)(i)excludesfromtheconceptofsecondary
offeringssalesbyparentsorsubsidiariesoftheissuer.FormS3doesnot
specificallysostatehowever,asapracticalmatter,parentsandmost
subsidiariesofanissuerwouldhaveenoughofanidentityofinterestwith
theissuersoasnottobeabletomakesecondaryofferingsoftheissuers
securities.Asidefromparentsandsubsidiaries,affiliatesofissuersarenot
necessarilytreatedasbeingthealteregosoftheissuers.Underappropriate
circumstances,affiliatesmaymakeofferingswhicharedeemedtobe
genuinesecondaries.[Jan.26,2009]
Question212.16
Question:PursuanttoRule415(a)(2),securitiesregisteredinrelianceon
Rule415(a)(l)(ix)thatarenotregisteredonFormS3orFormF3and
securitiesregisteredinrelianceonRule415(a)(1)(viii)mayonlybe
registeredinanamountwhich,atthetimetheregistrationstatement
becomeseffective,isreasonablyexpectedtobeofferedandsoldwithintwo
yearsfromtheinitialeffectivedate.Ifunsoldsecuritiesremainattheend
ofthetwoyears,maytheregistrationstatementcontinuetobeused?
Answer:Atthetimeoftheinitialfiling,theregistrantmustmakeabona
fideestimateoftheamountofsecuritiesreasonablyexpectedtobeoffered
andsoldwithintwoyearsfromtheinitialeffectivedate.Thereisno
requirementthatanyunsoldsecuritiesbederegisteredattheendoftwo
years,andtheregistrationstatementmaycontinuetobeusedafterthat
time,totheextentpermittedbyRule415(a)(5).[Jan.26,2009]
Question212.17
Question:Howdoesacompanyregister,asaprimaryoffering(ratherthan
asaresaleregistrationinaprivateequitylinefinancing),theissuanceof
theputsecuritiesunderanequityline?
Answer:Anequitylinefinancingdoneasaprimaryofferinginwhichthe
putpriceisbasedonoratadiscounttotheunderlyingstocksmarketprice
atthetimeoftheputexerciseisanatthemarketofferingunderRule
415(a)(4)andmustcomplywiththerequirementsofthatrule.Further,to
registertheprimaryoffering,thecompanymustbeeligibletoregister
primaryofferingsonFormS3inrelianceonGeneralInstructionI.B.1or
GeneralInstructionI.B.6ofsuchformoronFormF3inrelianceon
GeneralInstructionI.B.1orGeneralInstructionI.B.5ofsuchform.In
addition,ifacompanyisrelyingonGeneralInstructionI.B.6ofFormS3or
onGeneralInstructionI.B.5ofFormF3,thetotalamountofsecurities
issuableundertheequitylineagreementmayrepresentnomorethanone
thirdofthecompanyspublicfloatatthetimeofexecutionoftheequity
lineagreement.[Nov.26,2008]
Question212.18
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Question:Whendoesanindenturerelatingtosecuritiestobeissuedunder
anautomaticshelfregistrationstatementneedtobequalifiedunderthe
TrustIndentureAct?
Answer:Theindenturecoveringsecuritiestobeissued,offeredandsold
pursuanttoaregistrationstatementmustbequalifiedatthetimethe
registrationstatementrelatingtothosesecuritiesbecomeseffective.The
indenturemaynotbequalifiedbyposteffectiveamendment.Underthe
automaticshelfregistrationprocessadoptedinSecuritiesActReleaseNo.
8591(July19,2005),awellknownseasonedissuerispermittedtoadd
securitiestoanautomaticshelfregistrationstatementbymeansofapost
effectiveamendment.Becausetheeffectivenessofaregistrationstatement
isdeemedthetimewhenregistrationbecomeseffectiveastosuch
security(ies),asthattermisusedinSection309(a)(1)oftheTrust
IndentureAct,thewellknownseasonedissuerwillsatisfySection309(a)
(1)iftheindentureisincludedasanexhibittotheregistrationstatementat
thetimethatposteffectiveamendmentbecomeseffective.SeeSecurities
ActReleaseNo.8591(July19,2005),atfn.527.[Jan.26,2009]
Question212.19
Question:Ifaregistrantintendstofileashelfregistrationstatementand
periodicallyoffermultipleseriesofdebt,whenistheindenturerequiredto
bequalifiedundertheTrustIndentureAct?
Answer:Thefollowingapproachhasbeentakenwithrespecttoshelf
registrationstatementsthatcontemplateaseriesofdebtofferingsunder
Rule415requiringanindenturetobequalifiedundertheTrustIndenture
Act.
(1)Theindenturethatisfiledwith,andqualifiedupontheeffectiveness
of,theregistrationstatementmaybeopenended(i.e.,itmay
provideageneric,nonspecificdescriptionofthesecurities,suchas
unsecureddebentures,notesorotherevidencesofindebtedness
whicharetobeissuedinseries).Forautomaticshelfregistration
statements,theopenendedindenturemustbefiledasanexhibitto
theregistrationstatementorasanexhibittoaposteffective
amendmenttotheregistrationstatementthatregistersthesecuritiesto
beissuedundertheindenture.
(2)Thedetailsofthesecuritiestobeofferedineachseriesunderthe
indenture(i.e.,typeofsecurities[notes,debentures,orother],interest
rates,andmaturities)mustbedisclosedbothinaprospectus
supplementandinasupplementalindentureatthetimesuchseriesis
tobeoffered.Foranautomaticshelfregistrationstatement,thebase
prospectusonlyneedstoincludeageneraldescriptionofthesecurities.
ThesupplementalindenturemaybefiledasanexhibittoaForm8K
(inthesamemannerasspecifiedforunderwritingagreements),orin
anautomaticallyeffective,exhibitsonly,posteffectiveamendment
filedpursuanttoRule462(d).Forautomaticshelfregistration
statements,theposteffectiveamendmentwouldbefiledpursuantto
Rule462(e).[Jan.26,2009]
Question212.20
Question:Howshouldaregistrantconductingacontinuousofferingon
FormS1updatetheprospectustoreflecttheinformationinits
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subsequentlyfiledExchangeActreports?
Answer:IfFormS1isusedforacontinuousoffering,theprospectusmay
havetoberevisedperiodicallytoreflectnewinformationsince,unlikeForm
S3,theformdoesnotprovideforincorporationbyreferenceofsubsequent
periodicreports.Forexample,inacontinuousofferingonaFormS1
pursuanttoRule415(a)(1)(ix),aregistrantwantstoupdatetheprospectus
toincludeExchangeActreportsfiledaftertheeffectivedateoftheFormS
1.Item512(a)(1)ofRegulationSKrequirescertainchanges,includinga
Section10(a)(3)update,tobereflectedinaposteffectiveamendment.
Otherchangesmaybemadeinaprospectussupplementfiledpursuantto
Rule424(b).Iftheregistrantfilesaposteffectiveamendment,itcould
incorporatebyreferencepreviouslyfiledExchangeActreportsifitsatisfied
theconditionsinFormS1allowingincorporationbyreference.[Apr.24,
2009]
Question212.21
Question:Foraregistrationstatementofferingsecuritiesimmediately
exchangeableattheoptionofthesecurityholderintosecuritiesofanother
issuer,musttherebearegistrationstatementtoregistertheofferandsale
ofthesecuritiesthatwouldbereceivedinexchangeandifso,what
provisionofRule415maybereliedontocoversuchexchange?
Answer:Theofferandsaleofsecuritiestobereceivedinexchangefor
registeredexchangeablesecuritiesmustberegistered,unlessanexemption
fromregistrationisavailable.Ifnoexemptionfromregistrationisavailable,
theofferandsaleofthesecuritiestobeissuedinexchangecouldbe
registeredasacontinuousofferinginrelianceonRule415(a)(1)(ix)oras
anofferingofsecuritiesuponconversionofoutstandingsecuritiespursuant
toRule415(a)(1)(iv).[June4,2010]
Question212.22
Question:WhendoesthethreeyearperiodspecifiedinRule415(a)(5)
expire?
Answer:ThethreeyearperiodinRule415(a)(5)beginsontheinitial
effectivedateoftheregistrationstatement,exceptthatforregistration
statementseffectivebeforeDecember1,2005,thethreeyearperiod
beginsonDecember1,2005andendsonNovember30,2008.After
November30,2008,anissuermayusearegistrationstatementthatwas
effectiveonorbeforeDecember1,2005toofferandsellsecuritiesonlyto
theextentpermittedbythegraceperiodprovisionsofRule415(a)(5).
[Nov.21,2008]
Question212.23
Question:Foraregistrationstatementthatwaseffectiveonorbefore
December1,2005,whenmustthereplacementregistrationstatementbe
filed?
Answer:AreplacementregistrationstatementfiledpursuanttoRule
415(a)(6)mustbefiledonorbeforetheexpirationdateoftheexpiring
registrationstatement.EDGARdoesnotacceptnewregistrationstatements
forfilingonSaturdaysorSundays.Therefore,withrespecttoregistration
statementseffectiveonorbeforeDecember1,2005,anyreplacement
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registrationstatementfiledpursuanttoRule415(a)(6)mustbefiledno
laterthanFriday,November28,2008.[Nov.21,2008]
Question212.24
Question:Howcananissuerincludesecuritiesthatremainunsoldonthe
expiringregistrationstatementasregisteredsecuritiesonthereplacement
registrationstatement,andwhenshouldtheissuerincludesuchunsold
securitiesonthereplacementregistrationstatement?
Answer:Rule415(a)(6)providesthatanissuermayincludeonits
replacementregistrationstatementanyunsoldsecuritiescoveredbythe
expiringregistrationstatementbyidentifyingonthefacingpageofthe
replacementregistrationstatement,orapreeffectiveamendmentthereto,
theamountoftheunsoldsecuritiesbeingincludedonthereplacement
registrationstatementandanyfilingfeepaidinconnectionwiththeunsold
securities,whichwillcontinuetobeappliedtosuchunsoldsecurities.The
issuershouldincludethefilenumberoftheexpiringregistrationstatement
aspartofthisdisclosure.Theissuerisnotrequiredtopayanyadditional
feewithrespecttosuchsecuritiesincludedinrelianceonRule415(a)(6),
becausetheunsoldsecurities(andassociatedfees)arebeingmovedfrom
theexpiringregistrationstatementtothereplacementregistration
statement.Afilingfeeisrequired,however,foranynewsecurities
registeredonthereplacementregistrationstatement.
AnissuermayonlyrelyonRule415(a)(6)toincludeonanewreplacement
registrationstatementsecuritiesthatremainunsoldonanexpiring
registrationstatement.Forexample,iftheexpiringregistrationstatement
hadaremainingcapacityof$1millionofcommonstock,Rule415(a)(6)
permitstheissuertoincludeonthereplacementregistrationstatement$1
millionofcommonstock.Rule415(a)(6)doesnot,however,permitthe
issuerinsteadtoincludeonthereplacementregistrationstatement$1
millioninpreferredstock.
Theinclusionofunsoldsecuritiesonthereplacementregistrationstatement
hasEDGARfilingimplications.WhencompletingtheEDGARheadertagsfor
areplacementregistrationstatement,oranypreeffectiveamendment
thereto,thatisnotanautomaticshelfregistrationstatement,thefilerwill
berequiredtospecifyaProposedMaximumAggregateOfferingPrice.This
EDGARheadertagshouldincludeonlynewlyregisteredsecuritiesforwhich
afeewillbepayableatthetimeoffilingthereplacementregistration
statement.
Exceptasnotedbelow,theamountofunsoldsecuritiesthatarebeing
includedonthereplacementregistrationstatementpursuanttoRule415(a)
(6)shouldnotbeincludedaspartoftheProposedMaximumAggregate
OfferingPriceEDGARheadertag.Iftheissueroptsnottoregisteranynew
securitiesandthereplacementregistrationstatementthereforewillcover
onlysecuritiesincludedfromtheexpiringregistrationstatementpursuant
toRule415(a)(6),thefilershouldenter$1intheProposedMaximum
AggregateOfferingPriceEDGARheadertag.Thefilershouldenter$0as
thefeepaid.ThisisnecessarybecausetheEDGARsystemwillnotaccepta
SecuritiesActregistrationstatement(otherthananautomaticshelf
registrationstatementusingthepayasyougofeeprovisionsofRule
456(b))unlessaProposedMaximumAggregateOfferingPriceisspecified
intheEDGARheadertag.The$1amountwillnotresultinafeeassessment
bytheEDGARsystemandwillallowtheacceptanceofthereplacement
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registrationstatementwithoutthefilingbeingblocked.[Nov.21,2008]
Question212.25
Question:Howdoesanissuerreflectinthereplacementregistration
statementanysalesfromtheexpiringregistrationstatementcompleted
duringthegraceperiodinRule415(a)(5)?
Answer:Rule415(a)(5)providesthatifanissuerhasfiledareplacement
registrationstatementpursuanttoRule415(a)(6)thatisnotanautomatic
shelfregistrationstatement,theissuermaycontinuetoofferandsell
securitiescoveredbytheexpiringregistrationstatementuntiltheearlierof
theeffectivedateofthereplacementregistrationstatementor180days
afterthethirdanniversaryoftheinitialeffectivedateoftheexpiring
registrationstatement.Acontinuousofferingofsecuritiescoveredbythe
expiringregistrationstatementthatcommencedwithinthreeyearsofthe
initialeffectivedatemaycontinueuntiltheeffectivedateofthe
replacementregistrationstatementifsuchofferingispermittedunderthe
replacementregistrationstatement.AnyCommissionfilings,suchas
prospectussupplementsorfreewritingprospectuses,relatedtoofferings
duringthegraceperiodshouldreflecttheexpiringregistrationstatement
filenumber.ToreflectsalescompletedduringtheRule415(a)(5)grace
period,theissuershouldpreeffectivelyamendthereplacement
registrationstatementsothat,ateffectiveness,theregistrationstatement
correctlyspecifiesonthebottomofthefacingpagetheamountof
securitiesthatwillactuallybeincludedinrelianceonRule415(a)(6).[Nov.
21,2008]
Question212.26
Question:HowcananissuerusethefilingfeeoffsetsunderRule457(p)as
ittransitionsfromtheexpiringregistrationstatementtothereplacement
registrationstatement,andhowwouldthatdifferfromincludingunsold
securitiesonthereplacementregistrationstatementinrelianceonRule
415(a)(6)?
Answer:IfanissuerusesRule415(a)(6)toincludesecuritiesona
replacementregistrationstatement,theofferingofsecuritiesonthe
expiringregistrationstatementwillnotbedeemedterminateduntilthe
replacementregistrationstatementiseffective.Asaresult,anysecurities
thatareidentifiedinthereplacementregistrationstatementasincluded
pursuanttoRule415(a)(6)maystillbeofferedandsoldfromtheexpiring
registrationstatementduringtheRule415(a)(5)graceperiodpriorto
effectivenessofthenewregistrationstatement.
If,insteadofincludingunsoldsecuritiesfromtheexpiringregistration
statement,anissuerdeterminestorelyontheprovisionsofRule457(p)to
offsetfeesowedupontheinitialfilingof,oranypreeffectiveamendment
to,thereplacementregistrationstatementrelatingtotheregistrationof
newsecurities,therelatedsecuritiesfromtheexpiringregistration
statementareimmediatelydeemedderegistereduponthefilingofthe
replacementregistrationstatement(oranypreeffectiveamendment
registeringthenewsecurities).Thesederegisteredsecuritiesmaynotbe
offeredorsoldduringtheRule415(a)(5)graceperiodofftheexpiring
registrationstatementorincludedasunsoldsecuritiesonthenew
registrationstatementinrelianceonRule415(a)(6).
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Withrespecttosecuritiesregisteredonanexpiringregistrationstatement,
anissuermaychoosetoincludeaportionofthepreviouslyregistered
unsoldsecuritiesunderRule415(a)(6)and,iftheconditionsofRule457(p)
aresatisfied,usethefeesalreadypaidattributabletothebalanceofthe
securitiesregisteredontheexpiringregistrationstatementasanoffset
againstanynewfeesdueinrespectofnewlyregisteredsecuritiesonthe
replacementregistrationstatement.Thecoverpageoftheregistration
statementshouldclearlyexplaintheamountofsecuritiesincluded(orthe
potentialthattheymaybeincluded)pursuanttoRule415(a)(6),the
amountoffeesoffsetpursuanttoRule457(p),andidentifytherelated
registrationstatements.Thespecificamountsofunsoldsecuritiesthatmay
beincludeddonotneedtobeidentifiedintheinitialfilingandmaybe
includedinapreeffectiveamendmenttothereplacementregistration
statement(suchasjustbeforeeffectivenessofthereplacementregistration
statement).
Forexample:underRule415(a)(6),anissuerfilesanewregistration
statementtoreplaceashelfregistrationstatementthatwenteffective
November1,2005andrelatestoa$2millioncontinuousofferingofdebt
and$8millionincommonstocktobeofferedonadelayedbasis.The
replacementregistrationstatementreflectsonthecoverpagetheexpiring
registrationstatementandstatesthattheissuerwillidentifyinapre
effectiveamendmentthesecuritiesincludedinthereplacementregistration
statementpursuanttoRule415(a)(6)andtheamountofanynew
securitiestoberegistered.Ifthereplacementregistrationstatementdoes
notinclude,atthattime,anynewsecuritiesbeingregistered,theissuer
wouldreflectintheProposedMaximumAggregateOfferingPriceEDGAR
headertaganamountof$1andafeepaidof$0.
Priortotheeffectivenessofthereplacementregistrationstatement,the
issuerthensells$1millionofdebtand$2millionofcommonstock,using
theexpiringregistrationstatementpursuanttoRule415(a)(5).Whenthe
issuerisreadytorequesteffectivenessofthereplacementregistration
statement,itwouldthenfileapreeffectiveamendmenttoreflectthatthe
newregistrationstatementisincludingtheunsoldsecuritiesfromthe
expiringregistrationstatementintheamountsof$1millionofdebtand$6
millionincommonstockpursuanttoRule415(a)(6).Iftheissuerdoesnot
registernewsecuritiesinthepreeffectiveamendment,itwillnotneedto
recordanyProposedMaximumAggregateOfferingPriceintheEDGAR
headertag.
Alternatively,insteadofincludingtheunsoldsecuritiesfromtheexpiring
registrationstatement,theissuermayelecttouseRule457(p)toutilize
thefeesrelatingtoalloraportionoftheunsoldsharesontheexpiring
registrationstatementasafeeoffset.Inthatcase,iftheconditionsofRule
457(p)aresatisfied,theissuermayoffsetfeespreviouslypaidin
connectionwithalloraportionofthe$1millionofdebtand$6millionof
commonstockthatremainunsoldontheexpiringregistrationstatement
againstthefeesdueforanysecuritiesnewlyregisteredonthepreeffective
amendment.Thesharescoveredbythefeesusedasoffsetswouldbe
deemedderegisteredfromtheexpiringregistrationstatementandcould
notbeofferedorsoldduringtheremainderoftheRule415(a)(5)grace
period.TheEDGARheaderforthepreeffectiveamendmentwouldreflect
astheProposedMaximumAggregateOfferingPricetheamountof
securitiestobeincludedonthereplacementregistrationstatementother
thanthosesecuritiesincludedinrelianceonRule415(a)(6).Theissuer
wouldalsoneedtocompletethefeeoffsetheadertagsinEDGARtoreflect
thefeeoffsetclaimedpursuanttoRule457(p).[Jan.26,2009]
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Question212.27
Question:Ifanissuerisnolongerawellknownseasonedissueratthe
timeitfilesareplacementregistrationstatementpursuanttoRule415(a)
(5),cantheissuercontinuetouseitsexpiringautomaticshelfregistration
statementforoffersandsalesduringtheRule415(a)(5)graceperiod?
Answer:Yes.Anissuerthatmustfileareplacementregistrationstatement
toanexpiringFormS3ASRonFormS3duetotheissuernotsatisfying
thedefinitionofwellknownseasonedissueratthetimethenewFormS3
isfiledmaycontinuetouseitsexpiringautomaticshelfforoffersandsales
duringtheRule415(a)(5)graceperiod.Aregistrationstatementfiledsolely
forpurposesofcomplyingwithRule415(a)(5)willnotbeconsidereda
reassessmentoftheissuersstatusasawellknownseasonedissuerfor
purposesofanyoutstandingFormS3ASRortheSecuritiesActexemptions
availabletoawellknownseasonedissuer.[Nov.21,2008]
Question212.28
Question:IfduringtheRule415(a)(5)graceperiodanissuerthatisno
longerawellknownseasonedissuerfilesaForm10Kthatactsasa
Section10(a)(3)updatetoitsFormS3ASR,maytheissuercontinueto
usetheFormS3ASRfortheremainderofthegraceperiod?
Answer:Theissuersstatusasawellknownseasonedissuerandits
continuedeligibilitytouseitsexpiringFormS3ASRwillberemeasuredat
thetimeofthefilingofaForm10KthatactsasaSection10(a)(3)update
totheFormS3ASRregistrationstatement.Iftheissuerisnotawell
knownseasonedissueratthetimeoftheSection10(a)(3)amendmentto
itsexpiringFormS3ASR,theissuermaynolongerusetheFormS3ASR
untilitposteffectivelyamendstheFormS3ASRtoaformthattheissuer
istheneligibletouse.
AFormS3ASRthatutilizesthepayasyougofeeprovisionsofRule
456(b)maynotbeconvertedtoanotherformviaaposteffective
amendmentbecausefeescannotbepaidtoregistersecuritiesviaapost
effectiveamendmentonanyformotherthananautomaticshelf
registrationstatement.Consequently,registrantsintendingtoconverta
FormS3ASR,inwhichpaymentoffeeshasbeendeferredpursuanttoRule
456(b),toanotherform,suchasaFormS3,shouldfileanautomatically
effectiveposteffectiveamendmenttotheFormS3ASRpriortothefilingof
theForm10Ktopayafeeforsecuritiesitintendstoofferandsellupon
subsequentconversiontothenewform.Thefilingofanautomatically
effectiveposteffectiveamendmentforthesepurposesdoesnotrequirea
remeasurementofformeligibilityasprovidedinRule401(c).[Nov.21,
2008]
Question212.29
Question:InanofferingrelyingonRule415(a)(1)(x)andRule430B,the
prospectusfiledaspartofaregistrationstatementcoveringa
delayed/continuousmediumtermnoteofferinggenerallywillcontainonly
agenericdescriptionofthesecurityterms.Whenthemediumtermnote
programbegins,thisbaseprospectusandaprospectussupplement
containingacompletedescriptionofthetermsofthenotesotherthan
price,specificmaturitydateandotherlimitedtermswillbedistributedto
interestedpersons.Whenthenotesarepriced,apricingsupplementthat
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containstheprice,specificmaturitydateandotherlimitedtermspreviously
omittedfromtheprospectussupplementisprepared.Foreachseriesof
notes,therewouldbeoneprospectussupplement,butnumerouspricing
supplementsreflectingpriceschangingfrequentlyinresponsetomarket
andeconomicfactors.Howshouldtheprospectussupplementandpricing
supplementsbefiled?
Answer:Underthisformofmediumtermnoteprogramoffering,the
prospectussupplementshouldbefiledunderRule424(b)(2)or,ifitalso
containsothersubstantivechanges,underRule424(b)(5).Thepricing
supplementsshouldbefiledunderRule424(b)(2).[Jan.26,2009]
Question212.30
Question:Mayaregistrantcontinuetouseanonautomaticshelf
registrationstatementthatregistersoffersandsalespursuanttoadividend
reinvestmentplan(DRIP)morethanthreeyearsaftertheinitialeffective
dateoftheregistrationstatementiftheDRIPalsopermitsnewinvestorsto
purchasesharesthroughtheplan?
Answer:Dividendreinvestmentandexistinginvestordirectstock
purchasesarecontinuousordelayedofferingsthatmaybemadeinreliance
onRule415(a)(1)(ii).Theregistrationoftheseoffersandsalesdoesnot
expirepursuanttoRule415(a)(5).Ontheotherhand,newinvestordirect
stockpurchasesmayonlybemadepursuanttoRule415(a)(1)(ix)orRule
415(a)(1)(x)becausetheydonotfitwithinthedefinitionof"dividendor
interestreinvestmentplan"inRule405.Consequently,theregistration
statementmaynotbeusedfornewinvestordirectstockpurchasesupon
expirationoftheRule415(a)(5)threeyearperiod.Iftheissuercontinues
tousetheregistrationstatementfordividendreinvestmentandexisting
investordirectstockpurchases,thentheprospectusshouldberevisedto
reflectthechangestotheoffering.[June4,2010]
Question212.31
Question:Ifanissuerregisterstheofferandsaleofsecuritiesimmediately
exchangeableattheoptionoftheissuerintoothersecuritiesofthatissuer,
doestheregistrationstatementalsohavetoregistertheofferingofthe
underlyingsecuritiesand,ifso,doesRule415applytotheofferingofthe
underlyingsecurities?
Answer:Becausetheexchangeisattheoptionoftheissueronly,the
investor'sdecisiontopurchasetheexchangeablesecurityisalso,ineffect,
adecisiontoaccepttheunderlyingsecuritywhenevertheexchangetakes
place.Accordingly,bothofferingsmustberegistered,andtheofferingof
theunderlyingsecuritiesisdeemedtobecompletedatthesametimeas
theofferingoftheexchangeablesecurities.Asthereisnocontinuousor
delayedofferingoftheunderlyingsecurities,Rule415wouldnotapply.
[June4,2010]
Section213.Rule416SecuritiestobeIssuedasaResultofStock
Splits,StockDividendsandAntiDilutionProvisionsandIntereststo
beIssuedPursuanttoCertainEmployeeBenefitPlans
Question213.01
Question:Howshouldacompanycomputethenumberofunderlying
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commonsharestoberegisteredinaprimaryofferingofimmediately
convertibledebentures,whentheconversionratioisbasedonfluctuating
marketpricesandtheinvestorspaynoadditionalconsiderationtoeffect
theconversion?
Answer:Althoughthecompanydoesnothavetopayanadditionalfeeto
registertheunderlyingcommonsharesunderRule457(i),thecompany
shouldregisteranamountofsharesbasedonareasonablegoodfaith
estimateofthemaximumamountofsharesitwillneedtocover
conversions.Ifthecompanyisrequiredtoissuemoresharesthanthe
estimateduetotheoperationoftheconversionratiodisclosedinthe
registrationstatement,thecompanywouldhavetofileanadditional
registrationstatementorrelyonanavailableexemptionfromregistration,
suchasSecuritiesActSection3(a)(9).Theseadditionalshareswouldnot
becoveredbyRule416(a).[Jan.26,2009]
Question213.02
Question:Mayacompanythathasconvertiblesecuritiesoutstandingwith
aconversionformulabasedonfluctuatingmarketpricesregisterforresale
agoodfaithestimateofthemaximumamountofsharesissuableupon
conversion,andrelyonRule416tocovertheresaleofanyadditional
sharesissuableduetotheoperationoftheconversionformula?
Answer:No.ThecompanymaynotrelyonRule416toregisterforresale
anindeterminatenumberofsharesofcommonstockthatitmayissue
underaconversionformulabasedonfluctuatingmarketprices.The
companymustregisterforresalethemaximumnumberofsharesthatit
thinksitmayissueonconversion,basedonagoodfaithestimateand,if
theestimateturnsouttobeinsufficient,thecompanymustfileanew
registrationstatementtoregistertheadditionalsharesforresale.If
available,Rule462(b)maybeusedinthiscontext.[Jan.26,2009]
Question213.03
Question:Whenaregistrantsplitsitsstockpriortothecompletionofthe
distributionofsecuritiesincludedinaregistrationstatement,andthe
registrationstatementdoesnotspecificallyrefertotheexistenceofanti
dilutionprovisionsforsuchsituations,musttheregistrantfileapost
effectiveamendmenttotheregistrationstatementtoreflectthechangein
theamountofsecuritiesregistered?
Answer:Yes.Inthissituation,theuseofRule416(b)ispremiseduponthe
filingofaposteffectiveamendment.Similarly,apreeffectiveamendment
wouldhavebeenrequiredtouseRule416(b)ifthesplithadoccurredprior
toeffectivenessandnomentionhadbeenmadeofantidilutionprovisions
intheregistrationstatement.Noadditionalfilingfeeisrequired.[Jan.26,
2009]
Section218.Rule421PresentationofInformationinProspectuses
Question218.01
Question:DotheplainEnglishrequirementsofRule421(d)applyto
formsusedundertheU.S./CanadianMultijurisdictionalDisclosureSystem
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(MJDS)?
Answer:No.TheprovisionsofRegulationCwouldapplyonlyiftheyare
specifiedontheparticularMJDSform.SinceRule421(d)isnotspecifiedon
theMJDSforms,itsplainEnglishrequirementsdonotapply.[Jan.26,
2009]
Section220.Rule424FilingofProspectuses,NumberofCopies
Question220.01
Question:Rule301ofRegulationSXspecifiescertaintimeperiods
(dependingontheregistrantsacceleratedfilerstatus)inwhichafiling,
otherthanonForm10KorForm10,maybemadewithoutthebalance
sheetforthemostrecentfiscalyearend.Theruleisconditionedon(1)the
registrantsreasonableandgoodfaithexpectationthatitwillreportincome
forthemostrecentlycompletedfiscalyearand(2)theregistranthaving
reportedincomeforatleastoneofthelasttwofiscalyears.Maya
registrantsellsecuritiesfromaneffectiveFormS3registrationstatement
duringtherelevanttimeperiodandfileaprospectussupplementunder
Rule424toreflectthetakedown,ifthebalancesheetforthemostrecent
fiscalyearendhasnotbeenfiledandtheregistrantdoesnothavea
reasonableandgoodfaithexpectationthatitwillreportincomeforthe
mostrecentlycompletedfiscalyear?
Answer:Yes.Rule301doesnotpreventtheshelftakedownfrom
occurringandwouldnotapplytotheprospectussupplementasitisnotfor
thepurposeofupdatingtheprospectusunderSection10(a)(3).[Jan.26,
2009]
Question220.02
Question:Aregistrantwishestocorrectanumberofnonsubstantive
typographicalerrorscontainedinapreliminaryprospectus.Mustitfilea
revisedpreliminaryprospectus?
Answer:No.Rule424(a)providesthatanypreliminaryprospectusthat
containssubstantivechangesfromthepreviouslyfiledprospectusmustbe
filedaspartofaformalpreeffectiveamendmenttotheregistration
statement.Ifthechangesarenonsubstantive,therevisedpreliminary
prospectusisnotrequiredtobefiled.[Jan.26,2009]
Question220.03
Question:AregistrantthatisnoteligibletouseRule430B(b)planstofile
aresaleregistrationstatementonbehalfofsellingsecurityholdersrelated
tosecuritiesissuedtosuchsellingsecurityholdersinatransactionthathas
alreadybeencompleted.Thesecuritiestobeofferedontheresale
registrationstatementarealreadyissuedandoutstanding.Theregistrant
sendsquestionnairestosellingsecurityholdersforthepurposeof
determiningthenamesandamountofsecuritiestobeincludedinthe
resaleregistrationstatementanddisclosedintheprospectus.However,a
fewquestionnaireswillnotbereturneduntilaftereffectiveness.Maythe
registrantregistertheresaleofthetotalamountofsecuritiesissuedinthe
initialtransactionandofferedforresale,butomitfromtheprospectusthe
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namesandspecificamountstobeofferedbytheunknownsellingsecurity
holders?
Answer:Yes.Inthiscase,theregistrantmayomitfromtheprospectusin
theresaleregistrationstatementatthetimeofeffectivenesstheidentities
of,andamountofsecuritiestobesoldby,thesesellingsecurityholdersin
accordancewithRule409astheinformationisunknownornotreasonably
availabletotheregistrantatthattime.Theprospectusintheregistration
statementatthetimeofeffectivenessshouldrefertoanyunnamedselling
securityholdersinagenericmannerbyidentifyingtheinitialoffering
transactioninwhichthesecuritiesweresold.Aposteffectiveamendment
mustbefiledinordertoaddtheformerlyunnamedsellingsecurityholders.
[Jan.26,2009]
Question220.04
Question:Howshouldregistrationstatementsforsecondaryofferings
reflecttheadditionofsellingshareholdersorthesubstitutionofnewselling
shareholdersforalreadynamedsellingshareholders?
Answer:IfthecompanyiseligibletorelyonRule430Bwhenthe
registrationstatementwasoriginallyfiled,thecompanymayaddor
substitutesellingshareholderstoaregistrationstatementrelatedtoa
specifictransactionbyprospectussupplement.Thesupplementisfiled
underRule424(b)(7).
IfthecompanyisnoteligibletorelyonRule430Bwhentheregistration
statementisinitiallyfiled,itmustfileaposteffectiveamendmenttoadd
sellingshareholderstoaregistrationstatementrelatedtoaspecific
transactionthatwascompletedpriortothefilingoftheresaleregistration
statement.ARule424(b)prospectussupplementmaybeusedtopost
effectivelyupdatethesellingshareholdertabletoreflectatransferfroma
previouslyidentifiedsellingshareholder.Thenewinvestorssharesmust
havebeenacquiredorreceivedfromasellingshareholderpreviously
namedintheresaleregistrationstatementandtheaggregatenumberof
securitiesordollaramountregisteredcannotchange.[Apr.24,2009]
Section224.Rule428DocumentsConstitutingaSection10(a)
ProspectusforFormS8RegistrationStatementRequirements
RelatingtoOfferingsofSecuritiesRegisteredonFormS8
Question224.01
Question:ShoulddocumentsconstitutingthecurrentFormS8
prospectus,asupdatedforSection10(a)(3)purposes,bedelivered
concurrentlytonewplanparticipants?
Answer:Yes.Forexample,iftheinformationtobeprovidedpursuantto
Items1and2oftheFormS8iscontainedinmorethanonedocument,
thosedocumentsshouldbedeliveredconcurrentlytonewplanparticipants.
[Jan.26,2009]
Question224.02
Question:DoestheRule428(b)(5)obligationtodelivercompanyproxy
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statementsandreportstoemployeesparticipatinginastockoptionplanor
planfundthatinvestsinthecompanyssecuritiesextendtoformer
employees,withinthescopeofGeneralInstructionA.1(a)(3)toFormS8,
whoparticipateinastockoptionplanorplanfundthatinvestsinthe
companyssecurities?
Section225.Rule429ProspectusRelatingtoSeveralRegistration
Statements
Question225.01
Question:MaythecombinedprospectustechniqueofRule429beusedin
thecontextofRule415,whenanamountofsecuritiesremainsunsoldon
anearliershelfregistrationstatementatthetimetheissuerfilesanew
shelfregistrationstatement?
Answer:Yes,providedthatthenewshelfregistrationstatementisnotan
automaticshelfregistrationstatementandcomplieswithRules415(a)(5)
and(6).OnceRule429isusedtocreateacombinedprospectus,the
prospectusthatisapartoftheearlierregistrationstatementgenerallymay
notbeusedbyitself.[Jan.26,2009]
Question225.02
Question:MayawellknownseasonedissuerrelyonRule429tocombine
aprospectusfromapriornonautomaticshelfregistrationstatementwith
theprospectusinanewlyfiledautomaticshelfregistrationstatement?
Answer:No.UnderRule429(b),aregistrationstatementcontaininga
combinedprospectusacts,uponeffectiveness,asaposteffective
amendmenttotheearlierregistrationstatementwhoseprospectusis
combinedinthelatestregistrationstatement.Becausearegistrantcannot
fileaposteffectiveamendmenttoconvertanonautomaticshelf
registrationstatementintoanautomaticshelfregistrationstatement,a
wellknownseasonedissuermaynotrelyonRule429tocombinea
prospectusfromapriornonautomaticshelfregistrationstatementwiththe
prospectusinanewlyfiledautomaticshelfregistrationstatement.Instead,
awellknownseasonedissuerwithunusedcapacityonapriornon
automaticshelfmayeitherutilizetheunusedfeesuponfilinganew
automaticshelfregistrationstatement,inaccordancewithRule457(p),or
continuetoselloffoftheoldregistrationstatementuntilthecapacityis
usedup.[Jan.26,2009]
Question225.03
Question:IsRule429availabletoforeigngovernmentsorsubdivisions
filingregistrationstatementsonScheduleB?
Answer:Yes.ScheduleBregistrantsmayuseRule429tothesameextent
asotherregistrantsundertheSecuritiesAct.[Jan.26,2009]
Section227.Rule430AProspectusinaRegistrationStatementat
theTimeofEffectiveness
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Question227.01
Question:ForpurposesoftheRule430A(a)(3)15businessdayfiling
requirement,areSaturdays,Sundaysandfederalholidayscountedas
businessdays?
Question227.02
Question:Mayaregistrantomittheprincipalamountofsecuritiestobe
offeredfromitsregistrationstatementinrelianceonRule430A?
Answer:No.Theprincipalamountofsecuritiestobeoffered(i.e.,volume)
isnotpricerelatedinformationoratermofthesecuritydependentupon
theofferingdate,andthereforesuchamountcannotbeomittedfromthe
registrationstatementinrelianceonRule430A(a).[Jan.26,2009]
Question227.03
Question:Aregistrantomitspricinginformationfromtheprospectusina
registrationstatementatthetimeofeffectivenessinrelianceonRule430A.
Isitrequiredtoreflectpricinginformationortheinclusionofadditional
securitiesinaposteffectiveamendment?
Answer:ThesecondsentenceoftheInstructiontoRule430Aprovidesthat
aRule424(b)prospectussupplementmaybeused,ratherthanapost
effectiveamendment,whenthe20%thresholdisnotexceeded,regardless
ofthematerialityornonmaterialityofresultingchangestotheregistration
statementdisclosurethatwouldbecontainedintheRule424(b)prospectus
supplement.Whenthereisachangeinofferingsizeordeviationfromthe
pricerangebeyondthe20%thresholdnotedinthesecondsentenceofthe
Instruction,aposteffectiveamendmentwouldberequiredonlyifsuch
changeordeviationmateriallychangesthepreviousdisclosure.Regardless
ofthesizeoftheincrease,inthecaseofaregistrationstatementthatis
notanautomaticshelfregistrationstatement,anewregistrationstatement
mustbefiledtoregisteranyadditionalsecuritiesthatareoffered.
Additionalsecuritiescannotberegisteredbyposteffectiveamendment
exceptonautomaticshelfregistrationstatements.[Jan.26,2009]
Question227.04
Question:IsitappropriatetofileaposteffectiveamendmentunderRule
462(c)iftheinformationcontainedthereinreflectschangesinpriceand
volumethatrepresentmorethana20%changeinthemaximumaggregate
offeringpricesetforthintheeffectiveregistrationstatement?
Answer:No.Rule462(c)providesamechanismforissuerstofileapost
effectiveamendmentthatbecomesautomaticallyeffective.Itallowsissuers
theflexibilityofautomaticeffectivenesswhenthesolepurposeofthepost
effectiveamendmentistorestartthe15businessdayperiodinwhich
pricingmustoccurunderRule430A(a)(3).Rule462(c)maynotbeusedif
theposteffectiveamendmentcontainsanysubstantivechangefrom,or
additionto,theprospectusintheeffectiveregistrationstatement,other
thanpricerelatedinformationomittedfromtheregistrationstatementin
relianceonRule430A.[Jan.26,2009]
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Section228.Rule430BProspectusinaRegistrationStatement
AfterEffectiveDate
Question228.01
Question:Cananissuerthathasaplanofdistributionthatdoesnot
includeatthemarketofferingsamendthatplanofdistributionby
prospectussupplementandthenconductatthemarketofferingsin
compliancewiththeprovisionsofRule415(a)(4)?
Answer:Yes.Anissuereligibletoengageinatthemarketofferingsunder
theprovisionsofRule415(a)(4)mayamendtheplanofdistributionbya
prospectussupplementthatisdeemedpartoftheregistrationstatementto
provideforatthemarketofferingsinaccordancewiththeprovisionsof
Rule415(a)(4).[Jan.26,2009]
Question228.02
Question:Forshelfregistrationofpreferredstocktobeissuedinseries,
mayaprospectussupplementbefiledunderRule424tosetforthmore
specificallythetermsofthepreferredstocknotinconsistentwiththemore
generaltermscontainedinthecoreprospectus?
Answer:Yes.Inaddition,iftheregistrationstatementisonFormS3,the
instrumentdefiningthespecifictermsofthepreferredstockmaybefiledas
anexhibittoaForm8K.[Jan.26,2009]
Question228.03
Question:UnderRule430B,mayaprimaryshelfeligibleissuerthatisnot
aWKSIfilearesaleregistrationstatementforadollaramountofcommon
stockandmakeageneralstatementthattheregistrationstatementcovers
commonstockpreviouslysoldbythecompanyinunregistered
transactions?
Answer:No.Thisissuermaynotregistertheresaleofunspecifiedcommon
sharesandthen,aftertheeffectivenessoftheregistrationstatement,
specifythecommonsharesregistered.Theinitialofferingtransactionofthe
securities,theresaleofwhicharebeingregisteredonbehalfoftheselling
securityholders,mustbecompleted,andtheresaleregistrationstatement
mustidentifytheinitialtransaction.Becausetheresaleregistration
statementmustregisterspecificsecurities,theissuercanincludethe
amountofsecuritiesintheregistrationstatementfeetablepursuantto
Rule457(a).[Mar.4,2011]
Question228.04
Question:Ifanissuerfilesanonautomaticshelfregistrationstatement
andisentitledtorelyonRule430B(b)toomitfromtheprospectusthe
identitiesofsellingsecurityholdersandamountsofsecuritiestobe
registeredontheirbehalfuntilaftereffectivenessoftheregistration
statement,maytheissueralsoomitfromtheprospectus,untilafter
effectiveness,theaggregatenumberofsharesbeingregisteredforresale?
Answer:No.Theprospectusforthenonautomaticshelfregistration
statementmustdisclosetheaggregatenumberofsharesbeingregistered
forresalebeforeeffectiveness,eveniftheissuerisentitledtorelyonRule
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430B(b)toomitinformationrequiredbyItem507ofRegulationSK
regardingspecificsellingsecurityholdersuntilaftereffectiveness.[May16,
2013]
Section229.Rule430CProspectusinaRegistrationStatement
PertainingtoanOfferingOtherThanPursuanttoRule430AorRule
430BAftertheEffectiveDate
Question229.01
Question:Mustaregistrationstatementforanofferingthatissubjectto
Rule430CincludetheundertakinginItem512(a)(5)(ii)ofRegulationSKif
theofferingisnotregisteredpursuanttoRule415?
Answer:Yes.AlthoughtheItem512(a)undertakingsrelatetoRule415
offerings,theundertakinginItem512(a)(5)(ii)isrequiredforall
registrationstatementssubjecttoRule430CbyRule430C(d).[Jan.26,
2009]
Section232.Rule433ConditionstoPermissiblePostFilingFree
WritingProspectuses
Question232.01
Question:Ifanofferingparticipant,otherthantheissuer,unintentionally
distributesafreewritingprospectusinabroad,unrestrictedmanner,must
thatofferingparticipantfilethefreewritingprospectus?
Answer:Yes.Rule433(d)(1)(ii)requiresanofferingparticipant,otherthan
theissuer,tofileanyfreewritingprospectusthatisusedorreferredtoby
thatofferingparticipantanddistributedbyoronbehalfofthatoffering
participantinamannerreasonablydesignedtoleadtoitsbroad
unrestricteddissemination.Thisfilingrequirementapplieswhetherornot
thedistributionisintentional.[Jan.26,2009]
Question232.02
Question:Ifanissuerusesafreewritingprospectusatatimewhen
EDGARdoesnotacceptfilings,whencantheissuerfilethefreewriting
prospectusandstillbeincompliancewithRule433?
Answer:TheissuershouldfilethefreewritingprospectusonEDGARwithin
thetimeframeprovidedintherule,evenifthefilingisnotacceptedby
EDGARuntilalatertime.Forexample,ifanissuerfirstusesafreewriting
prospectusat10:00p.m.onaMondaynight,theissuerisrequiredtofile
thefreewritingprospectusnolaterthanthatMonday,asRule433(d)(1)
requiresthefilingtobemadenolaterthanthedateoffirstuse.The
issuerinthisexamplewould,therefore,berequiredtofilethefreewriting
prospectusonEDGARnolaterthanthatMonday,eveniftheEDGARsystem
isclosedforacceptingfilingsforthatday.[Jan.26,2009]
Question232.03
Question:Ifanissuerfreewritingprospectuscontainsbothdescriptionsof
certaintermsofthesecuritiesandotherinformation,whenmusttheissuer
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filethefreewritingprospectus?
Answer:Theissuercanconsiderseparatelythefilingrequirementsforthe
termsofthesecuritiesandtheotherinformationthatiscontainedinthe
freewritingprospectus.
Withregardtotheotherinformation,theissuermustfiletheissuerfree
writingprospectus,otherthanthedescriptionofcertaintermsofthe
securities,nolaterthanthedateoffirstuse.Withregardtothetermsof
thesecurities,theissuermustfilethedescriptionofthetermsofthe
securitiesonlyifthatdescriptionrepresentsthefinaltermsofthe
securities.Ifthedescriptionrepresentsthefinaltermsofthesecurities,the
issuermustfilethatdescriptionofthefinaltermswithintwodaysafterthe
laterof:
thedateoffirstuseofthatdescriptionand
thedatethefinaltermshavebeenestablishedforallclassesof
securitiesintheoffering.[Jan.26,2009]
Question232.04
Question:Afterthefilingoftheregistrationstatementforanoffering,if
theissuersCEOparticipatesinaliveinterviewwithunaffiliatedand
uncompensatedmediathatisbroadcastonradioortelevision,wouldthat
interviewbeanissuerfreewritingprospectusthattheissuermustfile?
Answer:Yes,iftheinterviewconstitutesanoffer.Inthatcase,theCEOs
interviewonalivetelevisionorradioprogramconductedbyunaffiliatedand
uncompensatedmediawouldbeawrittenofferandwouldbetreatedthe
sameasanyotherunaffiliated,uncompensatedmediapublicationor
broadcast.Theissuerwouldhavetosatisfyitsfilingobligationwithregard
totheinterviewwithinfourbusinessdaysafterthebroadcast.[Jan.26,
2009]
Question232.05
Question:Afterthefilingoftheregistrationstatementforanoffering,if
theissuersCEOparticipatesinaninterviewwithunaffiliatedand
uncompensatedmediathatispublishedandthesubstanceofthe
informationintheinterviewiscontainedintheregistrationstatement,does
theissuerhavetofiletheinterviewasanissuerfreewritingprospectus?
Answer:No,eveniftheinterviewwiththeunaffiliatedanduncompensated
mediaconstitutesanoffer.IftheCEOinterviewisanoffer,itwillbean
issuerfreewritingprospectus,butitdoesnothavetobefiledasafree
writingprospectus.Rule433(f)(2)containsanexceptionfromthefiling
conditionsforunaffiliatedanduncompensatedmediapublicationsand
broadcastsifthesubstanceofthefreewritingprospectushasbeenfiled
previouslywiththeCommission.Ofcourse,theissuerwillberesponsible
fordeterminingwhetherthesubstanceoftheinformationhasbeenfiled
previously.[Jan.26,2009]
Question232.06
Question:Afterthefilingoftheregistrationstatementforanissuersinitial
publicoffering,butbeforethatregistrationstatementbecomeseffective,
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cantheissuersCEOparticipateinabroadcastthatisapaidinfomercial?
Answer:WhilethereisanexclusioninRule433(f)fromtherequirement
thatthestatutoryprospectusmustprecedeoraccompanyamedia
broadcastinaninitialpublicoffering,thatexclusionisavailableonlyifno
paymentismadeorconsiderationgivenbyoronbehalfoftheissueror
suchotherofferingparticipantforthewrittencommunicationorits
dissemination,andtheotherconditionstotheexclusionaresatisfied.
Becausethenopaymentconditionisnotsatisfiedforpaidinfomercials,
therequirementthatthestatutoryprospectusprecedeoraccompanythe
communicationappliesandcannotbesatisfiedforabroadcast.Therefore,
Rule164andRule433wouldnotbeavailableforthatcommunication.[Jan.
26,2009]
Question232.07
Question:Forissuerfreewritingprospectuses,mustthefreewriting
prospectusbefiledeveniftheinformationinthefreewritingprospectusis
containedintheprospectusinthefiledregistrationstatement?
Answer:Yes,unlesstheRule433(f)(2)exclusionformediapublicationsor
broadcastsapplies.Further,theRule433(d)(4)exceptionfromthe
conditionforanissuertofileissuerinformationwouldnotbeavailablein
thissituation,asthatexceptionappliesonlytofreewritingprospectusesof
offeringparticipantsotherthantheissuerwhentheinformationis
containedinapreviouslyfiledprospectusorfreewritingprospectusrelating
totheoffering.[Jan.26,2009]
Question232.08
Question:Forissuerfreewritingprospectuses,musttheissuerfilethefree
writingprospectusifthefreewritingprospectusdoesnotcontain
substantivechangesfromoradditionstoapreviouslyfiledfreewriting
prospectusthatrelatestotheoffering?
Answer:No.Rule433(d)(3)providesanexceptionfromthefiling
requirementinthissituation.[Jan.26,2009]
Question232.09
Question:Ifanissuerandunderwriteragreethattheunderwriterwillnot
useafreewritingprospectuswithouttheconsentoftheissuer,willthe
issuersconsenttothatunderwritersuseofafreewritingprospectusmean
thattheissuerhasauthorizedorapprovedthecommunicationforpurposes
ofdeterminingwhetheritisanissuerfreewritingprospectusasdefinedin
Rule433(h)(1)?
Answer:Theconsentgivenbytheissuertotheuseofanunderwriterfree
writingprospectusunderthesecircumstancesisnot,inandofitself,
authorizationorapproval.Inthisregard,authorize[d]orapprove[d]as
usedinRule433(h)(3)referstothesubstance,nottheuse,ofthefree
writingprospectus.Iftheissuersactionsamounttoadoptionofor
entanglementwiththefreewritingprospectus,thentheissuerwouldhave
approvedorauthorizedtheunderwriterfreewritingprospectus.[Jan.26,
2009]
Question232.10
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Question:Duringacompanysinitialpublicoffering,anunderwritersends
afreewritingprospectustoitsclients.Amemberofthemediathen
receivesthefreewritingprospectusfromaclientofthatfirmandnotfrom
theunderwriter,andwritesanarticlecontaininginformationderivedfrom
informationintheunderwritersfreewritingprospectus.Willthearticlebea
freewritingprospectusoftheunderwriter?
Answer:Themediaprovisionsofthefreewritingprospectusrulesapplyto
articlesbasedoninformationprovidedbyoronbehalfoftheissuerorother
offeringparticipantstothemedia.Ifafreewritingprospectus(orthe
informationcontainedtherein)isnotprovidedtothemediabyanissueror
otherofferingparticipantoranypersonactingonbehalfofeitherofthem,a
mediapublicationbasedonthatfreewritingprospectus(orinformation)
wouldnotbeafreewritingprospectusoftheissuerorotheroffering
participant.Thestaffmayrequestinformationabouttherole,ifany,that
theunderwriterorissuerplayedwithregardtotheprovisionofthefree
writingprospectus(orinformationcontainedtherein)orthepublication,at
leastincertaincircumstanceswhenitisnotclear.Iftheissueror
underwriter,orapersonactingontheirbehalf,provided,authorized,or
approvedthepublication,thefreewritingprospectusrulesmightapplyto
thepublication.[Jan.26,2009]
Question232.11
Question:Cananonreportingissuerthatisregisteringaninitialpublic
offeringofcommonequitypostatranscriptofanelectronicroadshowon
itswebsiteasabonafideelectronicroadshowinsteadofprovidingan
electronicpresentationconstitutingabonafideelectronicroadshow?
Answer:No.AbonafideelectronicroadshowisdefinedinRule433(h)as
aroadshowthatisawrittencommunicationtransmittedbygraphicmeans
thatcontainsapresentationbyoneormoreofficersofanissuerorother
personsinanissuersmanagementand,ifmorethanoneroadshowthat
isawrittencommunicationisbeingused,includesdiscussionofthesame
generalareasofinformationregardingtheissuer,suchmanagement,and
thesecuritiesbeingofferedassuchotherissuerroadshoworshowsforthe
sameofferingthatarewrittencommunications.Atranscriptofaroadshow
isnotapresentationwithinthemeaningoftheruleandwouldnotbe
consideredabonafideelectronicroadshow.Suchatranscriptwouldbe
anissuerfreewritingprospectusthatwouldhavetobefiledwiththe
CommissionpursuanttoRule433.[Jan.26,2009]
Question232.12
Question:Ifanissuerintendstodistributeasubscriptionagreementtoa
limitednumberofinstitutionalinvestorsinaregistereddirectedoffering
conductedthroughaplacementagent,andthesubscriptionagreementwill
notbewidelydisseminated,musttheissuerfilethesubscriptionagreement
asafreewritingprospectus?
Answer:Asubscriptionagreementthatcontainsprovisionsinadditionto
thefinaltermsofthesecuritieswouldnotqualifyfortheexclusionfrom
filinginRule433(d)(5)(i).Ifthesubscriptionagreementisnotfiledasan
annexorappendixtotheregistrationstatement,itwillbesubjecttoRule
433andmustbefiledasanissuerfreewritingprospectus.Themethodof
disseminationofthesubscriptionagreementisnotrelevantinanalyzingthe
filingconditionsofanissuerfreewritingprospectus.Theissuercould
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includethesubscriptionagreementintheFormS3asanannexor
appendixtosuchFormbyfilingitundercoverofForm8K.[Jan.26,2009]
Question232.13
Question:UnderRule433(f)(2)(i),anissuerorofferingparticipantdoes
nothavetofileafreewritingprospectusifthesubstanceofthatfree
writingprospectushas"previouslybeenfiled"withtheCommission.IsRule
433(f)(2)(i)availableifthesubstanceofthefreewritingprospectuswas
previouslydisclosedinadocumentthatisdeemedtobefurnished,not
filed,withtheCommission(e.g.,Item2.02Form8K)?
Answer:No.ForRule433(f)(2)(i)tobeavailable,thesubstanceofthe
freewritingprospectusmusthavepreviouslybeenfiled,notfurnished,with
theCommission.[Mar.4,2011]
Question232.14
Question:Anofficerparticipatesinaninterviewwithunaffiliatedand
uncompensatedmediaandprovides,aspartoftheinterview,apackageof
writtenmaterialsconsistingonlyoftheissuer'sCommissionfilingsfor
possibleuseinthemediapublication.Doesthepackageofwritten
materialsoracopyofthemediapublicationneedtobefiledasafree
writingprospectus?
Answer:No.PursuanttoRule433(f)(2)(i),theissuerisnotobligatedto
fileeitherthepackageofwrittenmaterialsorthemediapublicationasa
freewritingprospectussolongasthepackageofwrittenmaterialsincludes
onlyinformationthathaspreviouslybeenfiledwiththeCommission.[Mar.
4,2011]
Question232.15
Question:Withtheexceptionoffreewritingprospectusesthatcomplywith
Rule433(f)(1),afreewritingprospectusdistributedinrelianceonRule433
mustcontainthelegendrequiredbyRule433(c)(2)(i).Someelectronic
communicationplatforms,suchasthosemadeavailablethroughcertain
socialmediawebsites,limitthenumberofcharactersoramountoftext
thatcanbeincludedinthecommunication,effectivelyprecludingdisplayof
therequiredlegendtogetherwiththeotherinformation.Underwhat
circumstanceswouldtheuseofahyperlinktotherequiredlegendsatisfy
Rule433(c)(2)(i)?
socialmediatocommunicatewithsecurityholdersandpotentialinvestors,
thestaffwillnotobjecttotheuseofanactivehyperlinktosatisfythe
requirementsofRule433(c)(2)(i)inthefollowinglimitedcircumstances:
Includingtherequiredlegendinitsentirety,togetherwiththeother
information,wouldcausethecommunicationtoexceedthelimiton
thenumberofcharactersoramountoftextand
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legendandprominentlyconveys,throughintroductorylanguageor
otherwise,thatimportantorrequiredinformationisprovidedthrough
thehyperlink.
legend,alongwiththeotherinformation,withoutexceedingtheapplicable
limitonnumberofcharactersoramountoftext,theuseofahyperlinkto
therequiredlegendwouldbeinappropriate.[April21,2014]
Question232.16
Question:Someelectroniccommunicationplatforms,suchasthosemade
availablethroughcertainsocialmediawebsites,permituserstoretransmit
apostingormessagetheyreceivefromanotherparty.Whenanissuer
distributesanelectroniccommunicationincompliancewithRule134or
Rule433,musttheissuerensurecompliancewithRule134orRule433ofa
retransmissionofthatcommunicationbyathirdpartythatisnotan
offeringparticipant?
Answer:Ifthethirdpartyisneitheranofferingparticipantnoractingon
behalfoftheissueroranofferingparticipantandtheissuerhasno
involvementinthethirdpartysretransmissionbeyondhavinginitially
preparedanddistributedthecommunicationincompliancewitheitherRule
134orRule433,theretransmissionwouldnotbeattributabletothe
issuer.AsexplainedinSecuritiesActReleaseNo.338591(July19,2005),
[W]hetherinformationpreparedanddistributedbythirdpartiesthatare
notofferingparticipantsisattributabletoanissuerorotheroffering
participantdependsuponwhethertheissuerorotherofferingparticipant
hasinvolveditselfinthepreparationoftheinformationorexplicitlyor
implicitlyendorsedorapprovedtheinformation.[April21,2014]
Section233.Rule436ConsentsRequiredinSpecialCases
Question233.01
Question:Registrationstatementscoveringsecuritiesofferedandsoldin
businesscombinationsandreorganizationsoftendescribeorinclude
opinionsfrominvestmentbankersonthefinancialfairnessofthe
transactiontoprospectivepurchasersinthetransaction.Mustaconsentbe
filedunderSection7inregardtosuchopinions?
Answer:Yes.Section7andSecuritiesActRule436requirethatthe
bankersconsenttotheinclusionorsummaryoftheopinioninthe
registrationstatementbefiledasanexhibittothatregistrationstatement
inthesecircumstances.[Nov.26,2008]
Question233.02
Question:Aregistranthasengagedathirdpartyexperttoassistin
determiningthefairvaluesofcertainassetsorliabilitiesdisclosedinthe
registrantsSecuritiesActregistrationstatement.Musttheregistrant
discloseintheregistrationstatementthatitusedathirdpartyexpertfor
thispurpose?Inwhatcircumstancesmusttheregistrantdisclosethename
ofthethirdpartyexpertinitsregistrationstatementandobtainthethird
partysconsenttobenamed?
Answer:Theregistranthasnorequirementtomakereferencetoathird
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partyexpertsimplybecausetheregistrantusedorreliedonthethirdparty
expertsreportorvaluationoropinioninconnectionwiththepreparationof
aSecuritiesActregistrationstatement.Theconsentrequirementin
SecuritiesActSection7(a)appliesonlywhenareport,valuationoropinion
ofanexpertisincludedorsummarizedintheregistrationstatementand
attributedtothethirdpartyandthusbecomesexpertiseddisclosurefor
purposesofSecuritiesActSection11(a),withresultantSection11liability
fortheexpertandareductionintheduediligencedefenseburdenofproof
forotherSection11defendantswithrespecttosuchdisclosure,asprovided
inSecuritiesActSection11(b).
Iftheregistrantdeterminestomakereferencetoathirdpartyexpert,the
disclosureshouldmakeclearwhetheranyrelatedstatementincludedor
incorporatedinaregistrationstatementisastatementofthethirdparty
expertorastatementoftheregistrant.Ifthedisclosureattributesa
statementtoathirdpartyexpert,theregistrantmustcomplywiththe
requirementsofSecuritiesActRule436withrespecttosuchstatement.For
example,ifaregistrantdisclosespurchasepriceallocationfiguresinthe
notestoitsfinancialstatementsanddisclosesthatthesefiguresweretaken
fromorpreparedbasedonthereportofathirdpartyexpert,orprovides
similardisclosurethatattributesthepurchasepriceallocationfigurestothe
thirdpartyexpertandnottheregistrant,thentheregistrantshouldcomply
withRule436withrespecttothepurchasepriceallocationfigures.Onthe
otherhand,ifthedisclosurestatesthatmanagementortheboardprepared
thepurchasepriceallocationsandindoingsoconsideredorreliedinpart
uponareportofathirdpartyexpert,orprovidessimilardisclosurethat
attributesthepurchasepriceallocationfigurestotheregistrantandnotthe
thirdpartyexpert,thentherewouldbenorequirementtocomplywithRule
436withrespecttothepurchasepriceallocationfiguresasthepurchase
priceallocationfiguresareattributedtotheregistrant.
IndependentofSection7(a)considerations,aregistrantthatusesorrelies
onathirdpartyexpertreport,valuationoropinionshouldconsiderwhether
theinclusionorsummaryofthatreport,valuationoropinionisrequiredin
theregistrationstatementtocomplywithspecificdisclosurerequirements,
suchasItem1015ofRegulationMA,Item601(b)ofRegulationSKorthe
generaldisclosurerequirementofSecuritiesActRule408.[Nov.26,2008]
Question233.03
Question:Whentheconsentofcounselorofanexpert(otherthanan
accountant)hasbeenincludedasanexhibittoapriorfiling,isanupdated
consentgenerallyrequiredtobeincludedinanamendmenttothe
Answer:No.Absentachangeintheportionofthefilingexpertizedbythat
person,andassumingthefiledconsentisnotlimitedtothatparticular
amendment,anupdatedconsentisnotrequired.[Jan.26,2009]
Question233.04
Question:Whenwouldaconsentbyacreditratingagencyberequiredif
informationaboutcreditratingsisincludedin,orincorporatedbyreference
into,aSecuritiesActregistrationstatementoraSection10(a)prospectus?
Answer:Aconsentwouldberequirediftheissuerincludesthecredit
ratinginitsregistrationstatementorSection10(a)prospectus(directlyor
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throughincorporationbyreference),unlesstheratinginformationis
includedonlyforthepurposeofsatisfyingdisclosurerequirementsas
describedbelow.
ForanissuernotsubjecttoRegulationABdisclosurerequirements:Ifthe
disclosureofacreditratinginafilingwiththeCommissionisrelatedonlyto
changestoacreditrating,theliquidityoftheregistrant,thecostoffunds
foraregistrantorthetermsofagreementsthatrefertocreditratings
(issuerdisclosurerelatedratingsinformation),thenaconsentbythe
creditratingagencywouldnotberequired.Forexample,someissuersnote
theirratingsinthecontextofariskfactordiscussionregardingtheriskof
failuretomaintainacertainratingandthepotentialimpactachangein
creditratingwouldhaveontheregistrant.Anissueralsomayreferto,or
describe,itsratingsinthecontextofitsliquiditydiscussionin
ManagementsDiscussionandAnalysisofFinancialConditionandResultsof
Operations.Issuersmayalsoneedtodiscussratingswhentheydescribe
debtcovenants,interestordividendsthataretiedtocreditratingsor
potentialsupporttovariableinterestentities.SeeReleaseNo.339070
(Oct.7,2009)[74FR53086].
ForanissuersubjecttoRegulationABdisclosurerequirements:Thestaff
anticipatesthatitslettertoFordMotorCreditCompanyLLC(July22,2010)
shouldmakeitunnecessaryforABSissuerstoincludereferencestoratings
inABSregistrationstatementsorprospectusesassetforthinthatletter.
ABSissuerswithquestionsabouttheneedtoreferenceratingsintheir
registrationstatementsorprospectusesshouldcontactthestaff.[July27,
2010]
Question233.05
Question:Wouldaconsentbyacreditratingagencyberequiredifratings
information,otherthanissuerdisclosurerelatedratingsinformation,is
includedin,orincorporatedbyreferenceinto,aprospectusorprospectus
supplementfirstfiledonorafterJuly22,2010?
Answer:Yes.[July27,2010]
Question233.06
Question:Ifratingsinformationisincludedinafreewritingprospectus
thatcomplieswithSecuritiesActRule433orinatermsheetorpress
releasethatcomplieswithSecuritiesActRule134,isaconsentfroma
creditratingagencyrequired?
Answer:No.SecuritiesActRule436,whichrequiresthefilingofwritten
consentsbyexperts,appliesonlytoregistrationstatementsandto
prospectuses.ARule433freewritingprospectusisnotpartofa
registrationstatement,nor,asaSection10(b)prospectus,isitincludedin
thedefinitionofprospectusinSecuritiesActRule405.Communications
thatareincompliancewithRule134arenotprospectuses.Ifanyofthese
documentsarealsofiledasprospectusesunderRule424,aconsentwould
berequired.[July27,2010]
Question233.07
Question:AnissuerhasaregistrationstatementonFormS3orFormF3
thatwasdeclaredeffectivebeforeJuly22,2010andincludesor
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incorporatesbyreferenceratingsinformationthatisnotlimitedtoissuer
disclosurerelatedratingsinformation.Cantheissuercontinuetouseits
registrationstatementwithoutfilingaconsentbythecreditratingagency?
Answer:Yes.Inthisfactpattern,thestaffwouldnotobjecttoreliance
uponRule401(a)undertheSecuritiesActtoallowcontinueduseofthe
registrationstatementforthelimitedperiodpermittedunderRule401(a).
Thiswouldbeapplicableonlyuntilthenextposteffectiveamendmentto
suchregistrationstatementandonlyifnosubsequentlyincorporated
periodicorcurrentreportcontainsratingsinformationthatisnotlimitedto
issuerdisclosurerelatedratingsinformation.Notethatthefilingofthe
issuersnextannualreportonForms10K,20For40Fisdeemedtobe
theposteffectiveamendmentofsuchregistrationstatementforpurposes
ofSecuritiesActSection10(a)(3),sothatinaccordancewithRule401(a),
theregistrationstatementcouldnolongerbeusedaftertheannualreport
isfiledwithoutthefilingoftheconsent.[July27,2010]
Question233.08
Question:Ifaregistrationstatementorposteffectiveamendment
becomeseffectiveonorafterJuly22,2010andincludesorincorporatesby
referenceratingsinformationthatisnotlimitedtoissuerdisclosurerelated
ratingsinformation,isaconsentbyacreditratingagencyrequiredtobe
filedwiththeregistrationstatementorposteffectiveamendment?
Answer:Yes.[July27,2010]
Sections234to235.Rules437to437a[Reserved]
Section236.Rule438ConsentsofPersonsAbouttoBecome
Directors
Question236.01
Question:Theregistranthastwodirectorswhowillsigntheregistration
statement.Theregistrationstatementwillindicatethenamesoffourmore
personswhowillbecomedirectorsbeforetheregistrationstatement
becomeseffective.Thosepersonswillsignanyamendmentstothe
registrationstatement,butnottheoriginalfiling.ShouldRule438consents
beobtainedfromtheprospectivedirectorsinconnectionwiththeoriginal
filing?
Section239.Rule456DateofFilingTimingofFeePayment
Question239.01
Question:Ifawellknownseasonedissuerfilesaprospectussupplement
topayafilingfeeonitsautomaticshelfregistrationstatementinadvance
ofanofferingorsale,musttheissuerincludethecalculationofregistration
feetableinaprospectussupplementprovidedtoaninvestor?
Answer:No.Awellknownseasonedissuermayfileaprospectus
supplementpursuanttoRule424(b)solelyforthepurposeofpayingafiling
feeandthenfileanotherprospectussupplementthatisprovidedto
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investors.Theprospectussupplementusedtopayafilingfee(andwhich
includesthecalculationofregistrationfeetable)doesnothavetobethe
sameprospectussupplementusedtoreflectthetakedownofsecurities
fromanautomaticshelfregistrationstatement.[Jan.26,2009]
Section240.Rule457ComputationofFee
Question240.01
Question:Aftertheinitialfilingofaregistrationstatement,musta
companypayanadditionalfilingfeeifitspershareofferingpricechanges?
Answer:WhenregisteringpursuanttoRule457(a),thecompanyregisters
thenumberofsecuritiesoffered,notthedollaramount.Therefore,no
additionalfeeneedbepaidifthepersharepricerises.Ifthepershare
pricefalls,however,thecompanycannotincreasethenumberofsharesit
offerswithoutregistrationofadditionalsharesandpaymentofanadditional
registrationfee.UnderRule457(o),acompanyregistersthedollaramount
ofsecuritiesbeingoffered.Consequently,ifthepersharepriceincreasesso
thatthemaximumaggregateofferingpricewouldbegreaterthanthe
maximumaggregateofferingamountlistedinthecalculationofregistration
feetable,thecompanywouldberequiredtoregisteranadditionaldollar
amountandpayanadditionalregistrationfee,orreducethenumberof
sharesitoffers.Ifthepersharepricedecreases,additionalsharescouldbe
offeredwithoutfurtherregistrationsolongastheamountofsharesoffered
timesthepersharepricedoesnotexceedthemaximumaggregateoffering
amountlistedinthecalculationofregistrationfeetable.[Jan.26,2009]
Question240.02
Question:HowdoesonecalculatethefilingfeeunderSection6(b)fordebt
securitiessoldwithoriginalissuediscount?
Answer:Thepublicofferingpriceforasecurityisalwaysthebasisfor
calculatingthefilingfeeunderSection6(b).Asaresult,theprincipal
amountfordebtsecuritiessoldwithoriginalissuediscountwillnotbethe
amountonwhichthefeeiscalculated.Instead,thesubstantiallysmaller
amounttobepaidbypurchasersinthepublicofferingwilldeterminethe
fee.[Nov.26,2008]
Question240.03
Question:Howshouldacompanycomputethefilingfeeforaregistered
spinoff?
Answer:TheregistrantshouldlooktoRule457(f)forguidance.Although
theruledoesnotspecificallymentionspinoffs,itdoescontainprovisions,
suchasRule457(f)(1)and(2),thatmaybehelpfulindeterminingthe
properfee.ConsistentwithRule457(f)(1),thefilingfeeisbasedonthe
marketvalueofthesecuritiestobespunoff.Whentherehasbeenno
marketforthesharesbeingspunoff,consistentwithRule457(f)(2),the
filingfeemaybebasedonthebookvalueoftheassetsofthespunoff
subsidiary.[Jan.26,2009]
Question240.04
Question:InaFormS4registrationstatementregisteringboththe
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securitiesofferedinabusinesscombinationtransactionandtheresaleof
thosesecuritiesbyaffiliates,mustafilingfeebepaidwithrespecttoboth
thesecuritiesofferedinthebusinesscombinationtransactionandthe
subsequentresaleofthosesecurities?
Answer:No.UnderRule457(f)(5),ifafilingfeeispaidwithrespecttothe
securitiesofferedinthebusinesscombinationtransaction,noseparatefiling
feeisassessedfortheregistrationofresaletransactions.[Jan.26,2009]
Question240.05
Question:Whenanissuerisregisteringunitscomposedofcommonstock,
commonstockpurchasewarrants,andthecommonstockunderlyingthe
warrants,howistheregistrationfeecalculated?
Answer:Theregistrationfeeisbasedontheofferpriceoftheunitsand
theexercisepriceofthewarrants.[Jan.26,2009]
Question240.06
Question:Howshouldanissuercalculatethefeepayableinconnection
withthesimultaneousregistrationofwarrantsandthecommonstock
underlyingthewarrants?
Answer:Thefeepayableisbasedontheofferpriceplustheexerciseprice
ofthewarrants.ThisisanalogoustoRule457(i)whichprovidesthatthe
registrationfeeforthesimultaneousregistrationofaconvertiblesecurity
andtheunderlyingsecurityistheproposedofferingpriceoftheconvertible
securityplusanyadditionalconversionconsideration.Theentirefeeis
allocatedtothecommonstock,andnoseparatefeeisrecordedforthe
warrants.[Jan.26,2009]
Question240.07
Question:Acompanys401(k)planprovidesforanautomaticcompany
contributionof1%oftheemployeessalary,employeecontributionsupto
10%oftheemployeessalaryandamatchingcontributionbythecompany
oftheemployeecontributionsupto5%oftheemployeessalary.The
investmentoptionsforthe401(k)planaresuchthatSecuritiesAct
registrationisrequired.Forwhichofthesecontributionswouldthe
companyneedtopayaregistrationfee?
Answer:Thecompanywouldnothavetopayafeefortheautomatic
contributionsinceitismadewithoutregardtoemployeecontributions.A
feewouldbepaidwithrespecttotheemployeecontributionsandthe
matchingcontributions.[Jan.26,2009]
Question240.08
Question:Rule457(h)statesthatiftheexercisepriceoftheoptionsisnot
knowninthecaseofanemployeestockoptionplan,thefeeshouldbe
baseduponthepriceofthesecuritiesofthesameclass.Whatdoes
sameclassreferto?
Answer:SecuritiesActReleaseNo.6867(June6,1990)clarifiesthat
sameclassreferstothosesecuritiesunderlyingtheoptionsthatarebeing
registered.[Jan.26,2009]
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Question240.09
Question:Ifaregistrantaddsbyposteffectiveamendmentaresale
prospectuswithrespecttocontrolsecuritiesthatwerepreviouslyregistered
onFormS8,mustafilingfeebepaidfortheresaleofsuchcontrol
securities?
Answer:PursuanttoRule457(h)(3),noadditionalfeeneedbepaidfor
resaleswhenafeehasbeenpaidinconnectionwiththeregistrationofsuch
securitiesforsaletotheemployees.[Jan.26,2009]
Question240.10
Question:Aftersellingsecuritiesoffofaregistrationstatement,anissuer
filedaposteffectiveamendmenttoderegistertheremainingunsold
securities,andthatposteffectiveamendmentbecameeffective.Maythe
issuertransferthefeeassociatedwiththoseunsoldsecuritiestoa
registrationstatementthatitplanstofileinthefuture?
Answer:No.AsstatedinSecuritiesActReleaseNo.7943(Jan.26,2001),
atfootnote68,feetransfersarenotavailablefromunsoldsharesthatwere
deregisteredbeforethenewregistrationstatementisfiled.Whenapost
effectiveamendmenttoderegisterbecomeseffective,filingfeetransfer
fromthederegisteredsecuritiesbecomesunavailable.[Jan.26,2009]
Question240.11
Question:AnissuerhasaFormS8onfilethatregisterssharesof
commonstocktobeissuedupontheexerciseofoutstandingoptions.The
issuerhasdecidedtostopgrantingstockoptionsandbelievesthatithas
moresharesregisteredontheFormS8thanitwillneedtocoverthe
exerciseoftheoutstandingoptions.Maytheissuertransfertoanew
registrationstatementthefilingfeesassociatedwiththesecuritiesthatthe
issuerbelievesitwillnotneedtoissue,andcontinuetousetheFormS8
tocovertheexerciseoftheoutstandingoptions?
Answer:No.BecauseRule457(p)permitsfilingfeestobetransferredonly
aftertheregisteredofferinghasbeencompletedorterminatedorthe
registrationstatementhasbeenwithdrawn,theissuermaynottransferthe
feesassociatedwiththesecuritiesthatitbelievesitwillnotneedtoissue
untiltheissuercompletesorterminatestheofferingregisteredonFormS
8.[Jan.26,2009]
Question240.12
Question:IfawellknownseasonedissuerhasaneffectiveFormS3or
FormF3registrationstatement,canitchangethatregistrationstatement
toanautomaticshelfregistrationstatementbyfilingaposteffective
amendment?
Answer:No.IftheissuerhasaneffectiveFormS3orFormF3thatwas
notanautomaticshelfregistrationstatementwhenitbecameeffective,it
cannotamendthatregistrationstatementtobecomeanautomaticshelf
registrationstatement.Instead,theissuermustfileanewregistration
statementonFormS3orFormF3designatedasanautomaticshelf
registrationstatement.WhenpermittedbyRule415(a)(6),theissuermay
includeonthenewregistrationstatementanyunsoldsecuritiescoveredby
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theeffectiveFormS3orFormF3.Alternatively,theissuermayrelyon
Rule457(p)tocarryforwardunusedfilingfeesforunsoldsecuritiesfrom
theeffectiveregistrationstatementiftheautomaticshelfregistration
statementisfiledwithinfiveyearsoftheinitialfilingdateoftheeffective
registrationstatement.Thisapproachisnecessarybecauseautomaticshelf
registrationstatementsfiledonFormS3orFormF3andposteffective
amendmentstoautomaticshelfregistrationstatementsaredesignated
separatelyfromotherregistrationstatementsonFormS3orFormF3to
enablethemtobecomeeffectiveimmediately.[Jan.26,2009]
Question240.13
Question:CanacontinuousofferingregisteredonaneffectiveFormS3
(suchasadividendreinvestmentprogram,includingaprogramwitha
directstockpurchaseplan)betransitionedtoanautomaticshelf
Answer:Yes.Whenanissuerfilesanautomaticshelfregistration
statement,itcanregisteranyprimaryofferingsforcash,including
continuousofferingsthatwerepreviouslyregisteredonashelfregistration
statement.Thiswouldinclude,withoutlimitation,unallocatedshelf
offerings,dividendreinvestmentprogramswithdirectstockpurchaseplans,
andofferingsofsecuritiesbysellingsecurityholders.Theissuercannot
includebusinesscombinationtransactions,suchasacquisitionshelf
registrationstatements,ontheautomaticshelfregistrationstatement.
Whenanissuerincludesanongoingofferingthatwasregisteredonan
effectiveshelfregistrationonasubsequentlyfiledautomaticshelf
registrationstatement,itmayincludeonthenewregistrationstatement
anyunsoldsecuritiescoveredbytheeffectiveregistrationstatementinthe
mannerprovidedinRule415(a)(6).Alternatively,itmaycarryforwardthe
filingfeespaidforanyunsoldsecuritiesunderRule457(p)iftheautomatic
shelfregistrationstatementisfiledwithinfiveyearsoftheinitialfilingdate
oftheeffectiveregistrationstatement.[Jan.26,2009]
Question240.14
Question:Howshouldtheissuercompletethecalculationofregistration
feetableonthefaceofanautomaticshelfregistrationstatement?
Answer:Thecalculationofregistrationfeetableshouldlisteachtypeof
securitybeingregisteredandeitherstatewhetherafilingfeeisbeingpaid
withthefiling(inwhichcasethedollaramountofthefeeshouldbeset
forth,asinthecaseofanunallocatedshelfregistrationstatementtoday),
orindicate$0inthefilingfeetableandstatethatthefilingfeewillbe
paidsubsequentlyinadvanceoronapayasyougobasis.[Jan.26,2009]
Section243.Rule461AccelerationofEffectiveDate
Question243.01
Question:PursuanttoRule461,mustthemanagingunderwritersjoinin
thewrittenrequestforaccelerationinconnectionwithashelfregistration
statementnamingpotentialunderwriters?
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Question243.02
Question:Doesanunderwriterneedtojoinintheregistrantsrequestfor
accelerationwhentheregistrationstatementisadelayedofferingshelf
filing?
Section244.Rule462ImmediateEffectivenessofCertain
RegistrationStatementsandPostEffectiveAmendments
Question244.01
Question:Inordertorelyontheautomaticeffectivenessprovisionsof
Rules462and464thatapplytoaFormS3orFormF3foradividend
reinvestmentplan,musttheplansatisfytheRule405definitionof
dividendorinterestreinvestmentplan?
Answer:Yes.Inparticular,anyplanthatallowsanyperson(includingan
employee)tomakeaninitialpurchaseofthesecuritiesthroughtheplan
wouldnotbeadividendorreinvestmentplanunderRule405.[Jan.26,
2009]
Question244.02
Question:Whatinformationmayanabbreviatedregistrationstatement
filedpursuanttoRule462(b)contain?
Answer:OtherthanRule430Apricerelatedinformation,anabbreviated
registrationstatementfiledpursuanttoRule462(b)maynotcontainany
informationotherthanthecoverpage,thepageincorporatingtheearlier
registrationstatementbyreference,therequiredsignaturesandany
additionalopinionsandconsentsrequiredasexhibits.Rule462(b)
registrationstatementsarenotavailableasamechanismtomakeany
materialchangesrequiredtobemadetotheoriginaleffectiveregistration
Question244.03
Question:Howistheavailabledollaramountpermittedtoberegistered
underRule462(b)determinedforadelayedprimaryshelfregistration
statement?
Answer:Thedollaramountisbasedupontheamountremainingonthe
shelfimmediatelypriortothefinaltakedownfromtheshelfthatdepletes
allshelfregisteredsecurities.Thus,Rule462(b)canonlybeusedonceper
delayedshelfregistrationstatementandonlyatthetimeofthefinal
takedown.Similartreatmentisaffordedtoregistrationstatementsthatare
usedsolelyforthepurposeofcontinuousofferingsinconnectionwith
dividendreinvestmentplans.[Jan.26,2009]
Question244.04
Question:WhenmayRule462(b)beusedinconnectionwithacontinuous
primaryofferingoradelayedorcontinuoussecondaryofferingpursuantto
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Rule415?
Answer:Exceptforcontinuousofferingsinconnectionwithdividend
reinvestmentplans,Rule462(b)mayonlybeusedtoincreasethenumber
ofsharesregisteredpriortosendingtheconfirmationforthefirstsaleof
securitiesintheoffering.[Jan.26,2009]
Question244.05
Question:IsitappropriatetofileaposteffectiveamendmentunderRule
462(c)iftheinformationcontainedthereinreflectschangesinpriceand
volumethatrepresentmorethana20%changeinthemaximumaggregate
offeringpricesetforthintheeffectiveregistrationstatement?
Answer:No.Rule462(c)providesamechanismforissuerstofileapost
effectiveamendmentthatbecomesautomaticallyeffective.Itallowsissuers
theflexibilityofautomaticeffectivenesswhenthesolepurposeofthepost
effectiveamendmentistorestartthe15businessdayperiodinwhich
pricingmustoccurunderRule430A(a)(3).Rule462(c)maynotbeusedif
theposteffectiveamendmentcontainsanysubstantivechangefrom,or
additionto,theprospectusintheeffectiveregistrationstatement,other
thanpricerelatedinformationomittedfromtheregistrationstatementin
relianceonRule430A.[Jan.26,2009]
Question244.06
Question:IsRule462(b)availableforregistrationofadditionalsecuritiesif
theconditionsoftherulearesatisfied,notwithstandingthefactthatthe
financialstatementsintheoriginaleffectiveregistrationstatementforthe
offering,whichwerewithintheagelimitationsofRule312ofRegulationS
Xasoftheeffectivedate,arenolongerwithintheagelimitationssetby
Rule312atthefilingdateoftheRule462(b)registrationstatement?
Answer:Yes.Theregistrantshouldconsider,however,whethermore
currentfinancialinformationwouldberequiredtobedisclosedtoinvestors
tomaketheinformationintheregistrationstatementnotmisleading.[Jan.
26,2009]
Section246.Rule464EffectiveDateofPostEffective
AmendmentstoRegistrationStatementsFiledonFormS8andon
CertainFormsS3,S4,F2andF3
Question246.01
Question:Inordertorelyontheautomaticeffectivenessprovisionsof
Rules462and464thatapplytoaFormS3orFormF3foradividend
reinvestmentplan,musttheplansatisfytheRule405definitionof
dividendorinterestreinvestmentplan?
Answer:Yes.Inparticular,anyplanthatallowsanyperson(includingan
employee)tomakeaninitialpurchaseofthesecuritiesthroughtheplan
wouldnotbeadividendorinterestreinvestmentplanunderRule405.[Jan.
26,2009]
Section247.Rule466EffectiveDateofCertainRegistration
StatementsonFormF6
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Question247.01
Question:MayadepositaryrelyonRule466todesignateadateandtime
foraregistrationstatementonFormF6togoeffectivewhen,inadditionto
achangeintheratioofAmericanDepositaryReceiptstotheunderlying
foreignshares,theregistrationstatementcontainstermsofdepositthat
differfromthosedisclosedinapreviouslyfiledregistrationstatementon
FormF6?
Answer:No.Rule466maybeusedonlyforchangesintheratioofADRs
totheunderlyingforeignshares.Inallotherrespects,thetermsofdeposit
forthenewregistrationstatementonFormF6mustbeidenticaltoa
previouslyfiledregistrationstatementonFormF6.[Jan.26,2009]
Section249.Rule477WithdrawalofRegistrationStatementor
Amendment
Question249.01
Question:DoesthewithdrawalprocedurespecifiedinRule477applyonly
beforetheeffectivedateofaregistrationstatementand/orbeforeanysale
ismade?
Answer:Yes.AregistrationstatementmaybewithdrawnunderRule477
beforeeffectivenessoraftereffectivenessifnosecuritiesweresold.Once
anysecurityhasbeensoldunderaregistrationstatement,Rule477
withdrawalbecomesunavailable.Instead,theregistrationstatementcanbe
posteffectivelyamendedtoderegistertheremainingunsoldsecurities.
[Jan.26,2009]
Question249.02
Question:MayaregistrantfilinganinitialpublicofferingonFormS1
incorporatebyreferenceexhibitsitfiledwithapreviousSecuritiesAct
registrationstatementwhichwaswithdrawnpursuanttoRule477?
Answer:Yes.Thewithdrawnregistrationstatementremainsafiled
documentforpurposesofRule411(c)and,accordingly,theexhibitsmaybe
incorporatedbyreference.[Jan.26,2009]
Section254.RegulationDInterpretationsofGeneralApplicability
Question254.01
Question:IfanissuerreliesononeexemptioninRegulationD,butlater
realizesthatexemptionmaynothavebeenavailable,mayitrelyon
anotherexemptioninRegulationDafterthefact?
Answer:Yes,assumingtheofferingmettheconditionsofthenew
exemption.NooneexemptioninRegulationDisexclusiveofanother.[Jan.
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26,2009]
Question254.02
Question:MayforeignissuersuseRegulationD?
Answer:Yes.Disclosurerequirementsforforeignprivateissuersareset
forthinRule502(b)(2)(i)(C).[Jan.26,2009]
Question254.03
Question:IsRegulationDavailabletoanunderwriterforthesaleof
securitiesacquiredinafirmcommitmentoffering?
Answer:No.AsPreliminaryNote4indicates,RegulationDisavailableonly
totheissuerofthesecuritiesandnottoanyaffiliateofthatissuerortoany
otherpersonforresalesoftheissuerssecurities.SeealsoRule502(d),
whichlimitstheresaleofRegulationDsecurities.[Jan.26,2009]
Question254.04
Question:Acorporationproposestoimplementanemployeestockoption
planforkeyemployees.CantheissuerrelyonRegulationDforan
exemptionfromregistrationfortheissuanceofsecuritiesundertheplan?
Answer:ThecorporationmayuseRegulationDforthesaleofsecurities
undertheplantotheextentthatsuchofferingcomplieswithRegulationD.
Thecorporationmayalsowanttoexplorewhethertheexemptionfrom
registrationinSecuritiesActRule701isavailable.Rule701wasadopted
afterRegulationDandwasdesignedspecificallyforstockoptionandother
compensatoryemployeebenefitplans.Inatypicalplan,thegrantofthe
optionswillnotbedeemedasaleofasecurityforpurposesofthe
SecuritiesAct.Theissuer,therefore,willbeseekinganexemptionforthe
issuanceofthestockunderlyingtheoptions.Theofferingofthisstock
generallywillcommencewhentheoptionsbecomeexercisableandwill
continueuntiltheoptionsareexercisedorotherwiseterminated.Wherethe
keyemployeesinvolvedaredirectorsorexecutiveofficers,suchindividuals
willbeaccreditedinvestorsunderRule501(a)(4)ifthecorporationis
relyingonRegulationDandtheypurchasesecuritiesthroughtheexercise
oftheiroptions.Otherkeyemployeesmaybeaccreditedasaresultofnet
worthorincomeunderRules501(a)(5)or(a)(6).[Jan.26,2009]
Section255.Rule501DefinitionsandTermsUsedinRegulationD
Question255.01
Question:Adirectorofacorporateissuerpurchasessecuritiesoffered
underRule505.Twoweeksafterthepurchase,andpriortocompletionof
theoffering,thedirectorresignsduetoasuddenillness.Istheformer
directoranaccreditedinvestor?
Answer:Yes.ThepreliminarylanguagetoRule501(a)providesthatan
investorisaccreditediftheinvestorfallsintooneoftheenumerated
categoriesatthetimeofthesaleofsecuritiestothatperson.Onesuch
categoryincludesdirectorsoftheissuer.SeeRule501(a)(4).Theinvestor
inthiscasehadthatstatusatthetimeofthesaletohim.[Jan.26,2009]
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Question255.02
Question:Anationalbankpurchases$100,000ofsecuritiesfroma
RegulationDissueranddistributesthesecuritiesequallyamongtentrust
accountsforwhichitactsastrustee.Isthebankanaccreditedinvestor?
Answer:Yes.Rule501(a)(1)accreditsabankactinginafiduciary
capacity.[Jan.26,2009]
Question255.03
Question:AnERISAemployeebenefitplanwillpurchasesecuritiesbeing
offeredunderRegulationD.Theplanhaslessthan$5,000,000intotal
assetsanditsinvestmentdecisionsaremadebyaplantrusteethatisnota
bank,insurancecompany,orregisteredinvestmentadviser.Doestheplan
qualifyasanaccreditedinvestor?
Answer:TheplanwouldnotsatisfytherequirementsofRule501(a)(1),
whichaccreditsanERISAplanthathasaplanfiduciarythatisabank,
insurancecompany,orregisteredinvestmentadviserorthathastotal
assetsinexcessof$5,000,000.UnlessitsatisfiedanotherprovisionofRule
501(a)(1),itwouldnotbeanaccreditedinvestor.[Jan.26,2009]
Question255.04
Question:WouldanERISAplanqualifyasanaccreditedinvestorunder
Rule501(a)(1)ifithadlessthan$5millioninassetsbuthadan
arrangementthroughitstrusteewitharegisteredinvestmentadviserto
receiveinvestmentadvice,whentheultimateinvestmentdecisionismade
bythetrustee?
Answer:TheplanwouldnotqualifyasanaccreditedinvestorunderRule
501(a)(1)iftheultimateinvestmentdecisionismadebythetrustee.
However,ifthearrangementgavetheregisteredinvestmentadviserfull
discretiontomakeinvestmentdecisionsfortheplan,theplanwouldthen
qualifyasanaccreditedinvestor.Itshouldbenotedthatthefailureofa
plantoqualifyunderRule501(a)(1)wouldnotprecludeitfromattempting
toqualifyunderotherprovisionsofRule501(a)asanaccreditedinvestor.
[Jan.26,2009]
Question255.05
Question:AlthoughnotspecifiedinthelistoforganizationsinRule501(a)
(3),mayalimitedliabilitycompanybetreatedasanaccreditedinvestor
asdefinedinthatruleifitsatisfiestheotherrequirementsofthedefinition?
Answer:Yes.SeetheWolf,Block,SchorrandSolisCohennoactionletter
(Dec.11,1996)issuedbytheDivision.[Jan.26,2009]
Question255.06
Question:Rule501(a)(8)accreditsanyentityinwhichalloftheequity
ownersareaccreditedinvestors.Insomecases,anequityownerisitselfan
entityratherthananaturalperson.Iftheownerentitydoesnotqualifyon
itsownmeritsasanaccreditedinvestor,maytheissuerlookthroughthe
ownerentitytoitsnaturalpersonownerstodeterminewhethertheyareall
accreditedinvestors?
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Answer:Yes.Anissuercanlookthroughvariousformsofequityownership
tonaturalpersonsinjudgingaccreditationunderRule501(a)(8).[Jan.26,
2009]
Question255.07
Question:UnderRule501(a)(8),anentityisanaccreditedinvestorifall
itsequityownersareaccreditedinvestors.Ifonedirectorofacorporate
investorholdsonequalifyingshareoftheentitysstockandisnotan
accreditedinvestor,wouldthecorporateinvestorbeconsideredaccredited
underthisprovision?
Answer:No,thecorporateinvestorwouldnotbeconsideredaccredited.
Rule501(a)(8)requiresalloftheequityownerstobeaccredited
investors.Thedirectorisanequityownerandisnotaccredited.Notethat
thedirectorcannotbeaccreditedunderRule501(a)(4).Thatprovision
extendsaccreditationtoadirectoroftheissuer,notoftheinvestor.[Jan.
26,2009]
Question255.08
Question:Astaterun,notforprofithospitalhastotalassetsinexcessof
$5,000,000.Becauseitisastateagency,thehospitalisexemptfrom
federalincometaxation.Rule501(a)(3)accreditsanyorganization
describedinSection501(c)(3)oftheInternalRevenueCodethathastotal
assetsinexcessof$5,000,000.IsthehospitalaccreditedunderRule
501(a)(3)?
Answer:Yes.Thiscategorydoesnotrequirethattheinvestorhave
receivedarulingontaxstatusunderSection501(c)(3)oftheInternal
RevenueCode.Rather,Rule501(a)(3)accreditsaninvestorthatfallswithin
thesubstantivedescriptioninthatsection.SeetheVoluntaryHospitalsof
America,Inc.noactionletter(Nov.30,1982)issuedbytheDivision.[Jan.
26,2009]
Question255.09
Question:Anotforprofit,taxexempthospitalwithtotalassetsof
$3,000,000ispurchasingsecuritiesinaRegulationDoffering.Thehospital
controlsasubsidiarywithtotalassetsof$3,000,000.Undergenerally
acceptedaccountingprinciples,thehospitalmaycombineitsfinancial
statementswiththoseofitssubsidiary.Isthehospitalaccredited?Would
theresultbethesameifonehospitalwereaholdingcompanywith
financialstatementsthatarecombinedwiththoseofanaffiliatedhospital,
wheretheaffiliatedhospitalisnottechnicallyasubsidiary?
Answer:YestobothquestionsunderRule501(a)(3).Whenthefinancial
statementsofasubsidiaryoraffiliatemaybecombinedwiththoseofthe
investorundergenerallyacceptedaccountingprinciples,theassetsofthe
subsidiaryoraffiliatemaybeaddedtothoseoftheinvestorincomputing
totalassetsforpurposesofRule501(a)(3).[Jan.26,2009]
Question255.10
Question:Theexecutiveofficerofaparentofthecorporategeneral
partneroftheissuerisinvestingintheRegulationDoffering.Isthat
individualanaccreditedinvestor?
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Answer:Rule501(a)(4)accreditsonlythedirectorsandexecutiveofficers
ofthegeneralpartneritself.Unlesstheexecutiveofficeroftheparentcan
bedeemedanexecutiveofficerofthesubsidiary,thatindividualisnotan
accreditedinvestor.SeethePrometheusDevelopmentCo.,Inc.noaction
letter(Nov.6,1985)issuedbytheDivision.[Jan.26,2009]
Question255.11
Question:Mustpropertybeheldjointlybetweenspousestobeincludedin
thejointnetworthcalculationinRule501(a)(5),andmustthesecuritiesbe
purchasedjointlybyspousesfortheinvestortobeconsideredaccredited
underthejointnetworthstandard?
Answer:No.Jointnetworthcanbetheaggregatenetworthofaninvestor
andtheinvestorsspousesuchpropertyneednotbeheldjointlyandthe
purchaseneednotbemadejointlyforaninvestortoqualifyunderthejoint
networthstandard.[Jan.26,2009]
Question255.12
Question:Acorporationwithanetworthof$2,000,000purchases
securitiesinaRegulationDoffering.Isthecorporationanaccredited
investorunderRule501(a)(5)?
Answer:No.Rule501(a)(5)islimitedtonaturalpersons.[Jan.26,2009]
Question255.13
[withdrawn,July22,2010]
Question255.14
Question:Maythevalueofvestedemployeestockoptionsbeincludedina
personsnetworthunderthedefinitionofaccreditedinvestorinRule501(a)
(5)?
Answer:Yes.Networthissimplytheexcessofassetsoverliabilities.The
valueofvestedemployeestockoptionsmaybeincludedinthenetworth
calculationunderRule501(a)(5).[Jan.26,2009]
Question255.15
Question:ForpurposesoftheincometestinRule501(a)(6),maya
naturalpersonsatisfythetestfortherequisitethreeyearperiodby
satisfyingeithertheindividualincometestorthejointincometestineach
ofthethreeyearsandneitherofthetestsinallthreeyears?
Answer:Ifthepersonhashadthesamemaritalstatusforallthreeyears,
thenno.AnaturalpersonmustsatisfyRule501(a)(6)basedonthat
personssatisfyingthe$200,000individualincometestforallthreeyears
orthe$300,000jointincometestwiththatpersonsspouseforallthree
years.Ifapersonhasbeenmarriedforsomebutnotallofthethreeyears,
however,heorshemaysatisfytheruleonthebasisofthejointincome
testfortheyearsduringwhichthepersonwasmarriedandonthebasisof
theindividualincometestfortheotheryears.[Jan.26,2009]
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Question255.16
Question:DoesthetermincomeinRule501(a)(6)includeamounts
contributedontheparticipantsbehalftoaprofitsharingplanorpension
plantotheextentthataparticipantsrightstobenefitsattributabletosuch
contributionsarevested?
Answer:Yes.SeetheRaymond,James&Associates,Inc.noactionletter
(Nov.19,1984)issuedbytheDivision.[Jan.26,2009]
Question255.17
Question:Mayapurchaserincludeunrealizedcapitalappreciationin
calculatingincomeforpurposesofRule501(a)(6)?
Answer:Generally,no.SeeSecuritiesActReleaseNo.6455,QuestionNo.
23(Mar.3,1983).[Jan.26,2009]
Question255.18
Question:Whoaretheequityownersofalimitedpartnership?
Answer:Thelimitedpartners.[Jan.26,2009]
Question255.19
Question:MayatrustqualifyasanaccreditedinvestorunderRule501(a)
(1)?
Answer:Onlyindirectly.Althoughatruststandingalonecannotbe
accreditedunderRule501(a)(1),ifabankisitstrusteeandmakesthe
investmentonbehalfofthetrust,thetrustwillineffectbeaccreditedby
virtueoftheprovisioninRule501(a)(1)thataccreditsabankactingina
fiduciarycapacity.Furthermore,atrusthavingabankasacotrusteeisan
accreditedinvestorasinterpretedunderRule501(a)(1)solongasthebank
isactinginitsfiduciarycapacityonbehalfofthetrustinreferencetothe
investmentdecisionandthetrustfollowsthebanksdirection.Seethe
NemoCapitalPartnersL.P.noactionletter(Mar.11,1987)issuedbythe
Division.[Jan.26,2009]
Question255.20
Question:Atrusteeofatrusthasanetworthof$1,500,000.Isthe
trusteespurchaseofsecuritiesforthetrustthatofanaccreditedinvestor
underRule501(a)(5)?
Answer:No.Exceptwhereabankisatrustee,thetrustisdeemedthe
purchaser,notthetrustee.Thetrustisnotanaturalperson.[Jan.26,
2009]
Question255.21
Question:MayatrustbeaccreditedunderRule501(a)(8)ifallofits
beneficiariesareaccreditedinvestors?
Answer:Generally,no.Rule501(a)(8)accreditsanyentityifallofits
equityownersareaccreditedinvestors.Thisprovisiondoesnotapplyto
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thebeneficiariesofaconventionaltrust.Theresultmaybedifferent,
however,inthecaseofcertainnonconventionaltrustswhere,asaresult
ofpowersretainedbythegrantors,atrustasalegalentitywouldbe
deemednottoexist.Theresultalsowouldbedifferentinthecaseofa
businesstrust,arealestateinvestmenttrust,orothersimilarentities.
Thus,wherethegrantorsofarevocabletrustareaccreditedinvestors
underRule501(a)(5)(e.g.,thenetworthofeachexceeds$1,000,000)and
thetrustmaybeamendedorrevokedatanytimebythegrantors,the
trustasalegalentitywouldbedeemednottoexist,andthetrustwouldbe
deemedaccredited,becausethegrantorswouldbedeemedtheequity
ownersofthetrustsassets.SeetheLawrenceB.Rabkin,Esq.noaction
letter(July16,1982)issuedbytheDivision.[Jan.26,2009]
Question255.22
Question:IftheparticipantinanIndividualRetirementAccountisan
accreditedinvestor,istheaccountaccreditedunderRule501(a)(8)?
Question255.23
Question:Ifallparticipantsofanemployeebenefitorretirementplanare
accreditedinvestorsunderanyofthecategoriesofRule501exceptRule
501(a)(8),istheplandeemedaccredited?
Answer:Yes.SeetheThomasByrneSwartznoactionletter(June10,
1982)issuedbytheDivision.[Jan.26,2009]
Question255.24
Question:Aretherecircumstancesunderwhichthegrantorofan
irrevocabletrustwouldbeconsideredtheequityownerofthetrustunder
Rule501(a)(8)?
Answer:Thegrantorofanirrevocabletrustwiththefollowing
characteristicscouldbeconsideredtheequityownerofthetrust:
(1)Thetrustwasagrantortrustforfederaltaxpurposes.Thegrantor
wasthesolefundingsourceofthetrust.Thegrantorwouldbetaxedon
allincomeofthetrustduringatleastthefirst15yearsfollowingthe
investmentandwouldbetaxedonanysaleoftrustassetsduringthat
period.Duringthisperiod,alloftheassetsofthetrustwouldbe
includableinthegrantorsestateforfederalestatetaxpurposes.
(2)Thegrantorwasacotrusteeofthetrustandhadtotalinvestment
discretiononbehalfofthetrustatthetimetheinvestmentdecisionwas
made.
(3)Thetermsofthetrustprovidedthattheentireamountofthe
grantorscontributiontothetrustplusafixedrateofreturnonthe
contributionwouldbepaidtothegrantor(orhisestate)beforeany
paymentscouldbemadetothebeneficiariesofthetrust.
(4)Thetrustwasestablishedbythegrantorforfamilyestateplanning
purposestofacilitatethedistributionofhisestate.Inorderto
effectuatetheestateplanninggoals,thetrustwasirrevocable.
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(5)Creditorsofthegrantorwouldbeabletoreachthegrantors
interestinthetrustatalltimes.
SeetheHerbertS.Wandernoactionletter(Nov.25,1983)andthe
Herrick,FeinsteinLLPnoactionletter(Jan.5,2001)issuedbytheDivision.
[Jan.26,2009]
Question255.25
Question:Incomputingthevariousdollaramountceilingsforsalesunder
RegulationD,isasalethatwassubsequentlyrescinded(e.g.,becauseit
wasfoundthattheinvestorwasnotaccredited)requiredtobecounted?
Question255.26
Question:IncalculatingtheaggregateofferingpriceunderRule504or
505,shouldanissuerincludeanyadditionalcapitalcontributionsor
assessmentswhichinvestorswillbeobligatedtomeet,despitethefactthat
theissuermaynevermakesuchassessments?
Question255.27
Question:Inpurchasinginterestsinanoilandgaspartnership,investors
agreetopaymandatoryassessments.Theassessments,essentially
installmentpayments,arenoncontingentandinvestorswillbepersonally
liablefortheirpayment.Musttheissuerincludetheassessmentsinthe
aggregateofferingprice?
Answer:Yes.SeetheKimR.Clark,Esq.noactionletter(Nov.8,1982)
Question255.28
Question:Incomputingtheaggregateofferingpriceofanofferingunder
Rule504or505,isalimitedpartnershipissuerrequiredtoaggregatesales
byotherlimitedpartnershipssolelybecausetheotherpartnershipshave
thesamegeneralpartner?
Question255.29
Question:Incomputingtheaggregateofferingpricefortheceiling
limitationsofRules504and505,isalimitedpartnershipissuerrequiredto
includepaymentsbyactivegeneralpartnersforlimitedpartnership
interests?
Answer:No.Sincethegeneralpartnersareessentiallyinvestingintheir
ownefforts,andnotthoseofothers,anylimitedpartnershipinterestsso
purchasedarenotdeemedsecuritiesforpurposesofthiscomputation.
[Jan.26,2009]
Question255.30
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Question:Wheretheinvestorspayfortheirsecuritiesininstallmentsand
thesepaymentsincludeaninterestcomponent,musttheissuerinclude
interestpaymentsintheaggregateofferingprice?
Answer:No.Theinterestpaymentsarenotdeemedtobeconsiderationfor
theissuanceofthesecurities.[Jan.26,2009]
Question255.31
Question:Anofferingofinterestsinanoilandgaslimitedpartnership
providesforadditionalvoluntaryassessments.Theseassessments,
undeterminedatthetimeoftheoffering,maybecalledatthegeneral
partnersdiscretionfordevelopmentaldrillingactivities.Mustthe
assessmentsbeincludedintheaggregateofferingprice,and,ifso,inwhat
amount?
Answer:Becauseitisunclearthattheassessmentswilleverbecalled,and
becauseiftheyarecalled,itisunclearatwhatlevel,theissuerisnot
requiredtoincludetheassessmentsintheaggregateofferingprice.Infact,
theassessmentswillbeconsiderationreceivedfortheissuanceof
additionalsecuritiesinthelimitedpartnership.Theissuancewillneedtobe
consideredalongwiththeoriginalissuanceforpossibleintegration,or,if
notintegrated,mustberegisteredorfinditsownexemptionfrom
registration.[Jan.26,2009]
Question255.32
Question:Aspartoftheirpurchaseofsecurities,investorsdeliver
irrevocablelettersofcredit.Mustthelettersofcreditbeincludedinthe
aggregateofferingprice?
Answer:Yes.Iftheselettersofcreditweredrawnagainst,theamounts
involvedwouldbeconsideredpartoftheaggregateofferingprice.Forthis
reason,inplanningthetransaction,theissuershouldconsiderthefull
amountofthelettersofcreditincalculatingtheaggregateofferingprice.
[Jan.26,2009]
Question255.33
Question:DoforeigninvestorsneedtobecountedunderRule501(e)in
calculatingwhetheranissuerhasexceededthelimitof35nonaccredited
investorsinaRule505or506offeringunderRegulationD?
Answer:AsexplainedinPreliminaryNote7toRegulationD,iftheforeign
offeringmeetsthesafeharborconditionssetforthinRegulationSrelating
toofferingsmadeoutsidetheUnitedStates,thentheforeignofferingisnot
requiredtocomplywiththeconditionsofRegulationD,includingthose
limitingthenumberofinvestors.Butiftheissuerelectstorelyon
RegulationDforoffersandsalestoforeigninvestors,theissuermustcount
theforeigninvestorsincalculatingwhetheritmeetstheconditionsof
RegulationDlimitingthenumberofinvestors.[Jan.26,2009]
Question255.34
Question:Forpurposesofcalculatingthenumberofpurchasersinan
offeringunderRegulationD,mayanindividualandtheindividualsIRAbe
regardedasasinglepurchaser?
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Answer:Yes.Furthermore,ifanindividualpurchasesstockinanoffering
bothdirectlyandindirectlythroughaselfdirectedemployeesavingsplan,
theindividualwillcountasonlyonepurchaserifnonaccredited.Seethe
LaneEnterprises,Inc.noactionletter(Feb.9,1987)issuedbythe
Question255.35
Question:Agroupoftrustswithnocurrentbeneficiaries,separately
createdforestatetaxplanningpurposes,willhavethesamesetof
beneficiariesandthesametrustees.Maythegroupbetreatedasasingle
purchaserunderRegulationD?
Question255.36
Question:TwotrustspurchasesecuritiesinaRegulationDoffering.The
beneficiariesofthesetrustsarerelatedandsharethesameprincipal
residence.EventhoughRule501(e)(1),whichgovernsthecalculationof
thenumberofpurchasers,doesnotspecificallyexempteithertrustfrom
thecount,doesitspolicyofexemptingrelatedpurchaserswiththesame
residencejustifycountingthetrustsasonepurchaser?
Answer:Yes.Similarly,whereaparentandatrustbenefitingachildwho
sharestheparentsresidencepurchasesecuritiesinaRegulationDoffering,
theissuermaycountthesetwoinvestorsasonepurchaser.[Jan.26,2009]
Question255.37
Question:Rule501(e)(2)providesthatindeterminingthenumberof
purchasersinanofferingunderRegulationD,eachbeneficialownerof
equitysecuritiesorequityinterestsinacorporation,partnershiporother
entitythatwasorganizedforthespecificpurposeofacquiringthesecurities
offeredshallcountasaseparatepurchaserforallprovisionsofRegulation
D.Thismeansthattherulesforcountingindividualpurchaserswould
applytoeachsuchbeneficialowner.Wouldabeneficialownerwhoalso
happenstobeanaccreditedinvestor,forinstance,beexcludedfromthe
count?
Question255.38
Question:Wouldanotforprofitcorporationformedforthespecific
purposeofaninvestmentbecountedasasinglepurchaserunder
RegulationDwherethememberswerenotequityownersandcouldnot
regainanypartoftheirinvestmentorreceiveanyreturnthereon?
Question255.39
Question:OnepurchaserinaRule506offeringisanaccreditedinvestor.
Anotherisafirstcousinofthatinvestorsharingthesameprincipal
residence.Eachpurchaserismakinghisowninvestmentdecision.How
musttheissuercountthesepurchasersforpurposesofmeetingthe35
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purchaserlimitation?
Answer:Theissuerisnotrequiredtocounteitherinvestor.Theaccredited
investormaybeexcludedunderRule501(e)(1)(iv),andthefirstcousin
maythenbeexcludedunderRule501(e)(1)(i).Theissuermustsatisfyall
otherconditionsofRegulationD,however,withrespecttopurchasersthat
havebeenexcludedfromthecount.Thus,forinstance,theissuerwould
havetoensurethesophisticationofthefirstcousinunderRule506(b)(2)
(ii).[Jan.26,2009]
Question255.40
Question:AnaccreditedinvestorinaRule506offeringwillhavethe
securitiessheacquiresplacedinhernameandthatofherspouse.The
spousewillnotmakeaninvestmentdecisionwithrespecttotheacquisition.
Howmanypurchaserswillbeinvolved?
Answer:Theaccreditedinvestormaybeexcludedfromthecountunder
Rule501(e)(1)(iv)andthespousemaybeexcludedunderRule501(e)(1)
(i).Theissuermayalsotaketheposition,however,thatthespouseshould
notbedeemedapurchaseratallbecausehedidnotmakeanyinvestment
decision,andbecausetheplacementofthesecuritiesinjointnamemay
simplybeataxorestateplanningtechnique.[Jan.26,2009]
Question255.41
Question:AninvestorinaRule506offeringisaninvestmentpartnership
thatisnotaccreditedunderRule501(a)(8).Althoughthepartnershipwas
organizedtwoyearsearlierandhasmadeinvestmentsinanumberof
offerings,notallthepartnershaveparticipatedineachinvestment.With
eachproposedinvestmentbythepartnership,individualpartnershave
receivedacopyofthedisclosuredocumentandhavemadeadecision
whetherornottoparticipate.HowdotheprovisionsofRegulationDapply
tothepartnershipasaninvestor?
Answer:Thepartnershipmaynotbetreatedasasinglepurchaser.Rule
501(e)(2)providesthatifthepartnershipisorganizedforthespecific
purposeofacquiringthesecuritiesoffered,theneachbeneficialownerof
equityinterestsshouldbecountedasaseparatepurchaser.Becausethe
individualpartnerselectwhetherornottoparticipateineachinvestment,
thepartnershipisdeemedtobeorganizedforthespecificpurposeof
acquiringthesecuritiesineachinvestment.SeetheMadisonPartnersLtd.
19821noactionletter(Jan.18,1982)andtheKenaiOil&Gas,Inc.no
actionletter(Apr.27,1979)issuedbytheDivision.Thus,theissuermust
lookthroughthepartnershiptothepartnersparticipatinginthe
investment.TheissuermustsatisfytheconditionsofRule506astoeach
partner.[Jan.26,2009]
Question255.42
Question:ForpurposesofRegulationD,mayanexecutiveofficerofthe
parentoftheissuerbedeemedanexecutiveofficeroftheissuerifsuch
officermeetsthedefinitionofexecutiveofficersetforthinRule405?
Question255.43
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Question:IsamanagerofanLLCconsideredanexecutiveofficerunder
Rule501(f)andthereforeanaccreditedinvestor?
Answer:Yes,solongasthemanageroftheLLCperformsapolicymaking
functionfortheissuer,themanagerwillbeconsideredanexecutiveofficer
oftheissuerandthereforeanaccreditedinvestorunderRule501(a)(4).
[Jan.26,2009]
Question255.44
Question:Mayalawyerinthelawfirmrepresentingtheissuerserveasa
purchaserrepresentativeforaninvestorsolongasthatlawyerisnotan
affiliate,director,officer,employee,or10percentstockholderoftheissuer
andsolongasthelawyerdisclosestothepurchasersuchrelationshipand
anyothermaterialrelationshipwiththeissuer?
Question255.45
Question:Maytheofficerofacorporategeneralpartneroftheissuer
qualifyasapurchaserrepresentativeunderRule501(h)?
Answer:Notunlessthepurchaserhasarelationshipwiththeofficer
enumeratedinparagraph(i),(ii)or(iii)ofRule501(h)(1).Rule501(h)
providesthatanaffiliate,director,officerorotheremployeeoftheissuer
maynotbeapurchaserrepresentativeunlessthepurchaserhasoneof
thosethreeenumeratedrelationshipswiththerepresentative.Anofficeror
directorofacorporategeneralpartnercomeswithinthescopeofaffiliate,
director,officerorotheremployeeoftheissuer.[Jan.26,2009]
Question255.46
Question:MaytheissuerinaRegulationDofferingpaythefeesofthe
purchaserrepresentative?
Answer:Yes.NothinginRegulationDprohibitsthepaymentbytheissuer
ofthepurchaserrepresentativesfees.Rule501(h)(4),however,requires
thedisclosureofthisfact.Note3toRule501(h)pointsoutthatdisclosure
ofamaterialrelationshipbetweenthepurchaserrepresentativeandthe
issuerwillnotrelievethepurchaserrepresentativeoftheobligationtoact
intheinterestofthepurchaser.[Jan.26,2009]
Question255.47
[withdrawn,February27,2012]
Question255.48
Question:Ifapurchaser'sannualincomeisnotreportedinU.S.dollars,
whatexchangerateshouldanissuerusetodeterminewhetherthe
purchaser'sincomemeetstheincometestforqualifyingasanaccredited
investor?
Answer:Theissuermayuseeithertheexchangeratethatisineffecton
thelastdayoftheyearforwhichincomeisbeingdeterminedorthe
averageexchangerateforthatyear.[July3,2014]
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Question255.49
Question:Canassetsinanaccountorpropertyheldjointlywithanother
personwhoisnotthepurchaser'sspousebeincludedindetermining
whetherthepurchasersatisfiesthenetworthtestinRule501(a)(5)?
Answer:Yes,assetsinanaccountorpropertyheldjointlywithaperson
whoisnotthepurchaser'sspousemaybeincludedinthecalculationforthe
networthtest,butonlytotheextentofhisorherpercentageownershipof
theaccountorproperty.[July3,2014]
Section256.Rule502GeneralConditionstobeMet
Question256.01
Question:AnissuerconductsofferingAunderRule504thatconcludesin
January.SevenmonthslatertheissuercommencesofferingBunderRule
506.Duringthatsevenmonthperiod,theissuersonlyoffersorsalesof
securitiesaremadeinofferingCunderanemployeebenefitplanC.Must
theissuerintegrateAandB?
Answer:No.Rule502(a)specificallyprovidesthatAandBwillnotbe
integrated.Rule502(a),however,doesnotprovideasafeharbortothe
possibleintegrationofofferingCwitheitherofferingAorB.Inresolving
thatquestion,theissuershouldconsiderthefactorslistedintheNoteto
Rule502(a).[Jan.26,2009]
Question256.02
Question:Wouldsimultaneousofferingsbyaffiliatedissuers,suchasa
corporategeneralpartneranditslimitedpartnership,sellingtheirsecurities
asunitsinasingleplanoffinancingforthesamegeneralpurposebe
consideredtobeanintegratedoffering?
Answer:Yes.SeetheIntuitTelecomInc.noactionletter(Mar.24,1982)
Question256.03
Question:MaythereferenceinRule502(b)(2)(ii)(A)totheannualreport
toshareholdersforthemostrecentfiscalyearincludetheannualreport
preparedforthepreviousyear?
Answer:Yes,providedthatdeliveryoftheannualreportforthepresent
yearisnotyetrequiredunderExchangeActRules14a3or14c3,andthe
prioryearsreportmeetstherequirementsofRule14a3or14c3.[Jan.
26,2009]
Question256.04
Question:AreportingcompanywithafiscalyearendingonDecember31
ismakingaRegulationDofferinginFebruary.Thecompanyhasfiledallthe
materialrequiredtobefiledunderSections13,14and15(d)ofthe
ExchangeActinthelast12calendarmonths.Itdoesnothaveanannual
reporttoshareholders,anassociateddefinitiveproxystatement,oraForm
10Kforitsmostrecentlycompletedfiscalyear.Theissuerslast
registrationstatementwasfiledmorethantwoyearsago.Whatisthe
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appropriatedisclosureunderRegulationD?
Answer:Theissuermaybaseitsdisclosureonthemostrecently
completedfiscalyearforwhichanannualreporttoshareholdersorForm
10Kwastimelydistributedorfiled.Theissuershouldsupplementthe
informationinthereportusedwiththeinformationcontainedinanyreports
ordocumentsrequiredtobefiledunderSections13(a),14(a),14(c)and
15(d)oftheExchangeActsincethedistributionorfilingofthatreportand
withabriefdescriptionofthesecuritiesbeingoffered,theuseofthe
proceedsfromtheoffering,andanymaterialchangesintheissuersaffairs
thatarenotdisclosedinthedocumentsfurnished.SeeRule502(b)(2)(ii)
(C).[Jan.26,2009]
Question256.05
Question:IftheissuerissubjecttothereportingrequirementsofSection
13or15(d)oftheExchangeAct,whatinformationdoesRegulationD
requiretobedeliveredtononaccreditedinvestorsinaRule505or506
offering?
Answer:Inthesetypesofofferings,Rule502(b)(2)(ii)ofRegulationDsets
forthtwoalternativesfordisclosure:theissuermaydelivercertainrecent
ExchangeActreports(theannualreport,thedefinitiveproxystatement,
and,ifrequested,theForm10K)oritmayprovideadocumentcontaining
thesameinformationasintheForm10KorForm10undertheExchange
ActorinaFormS1orFormS11registrationstatementunderthe
SecuritiesAct.Ineithercase,therulecallsforthedeliveryofcertain
supplementalinformation.[Jan.26,2009]
Question256.06
Question:UnderRule502(b)(2)(iii),anissuerthatmustprovidea
disclosuredocument,whetheritisareportingornonreportingissuer,is
requiredtoidentifyandmakeavailablethoseexhibitsthatwould
accompanytheregistrationformorreportuponwhichthedisclosure
documentismodeled.DoesaRegulationDissuerhavetomakeavailable
anopinionofcounselastothelegalityofthesecuritiesbeingissuedand,if
therearerepresentationsmadeastomaterialtaxconsequences,a
supportingopinionofcounselregardingsuchtaxconsequences?
Question256.07
Question:InanofferingunderRegulationD,musttheopinionofcounsel
regardingthelegalityoftheissuanceofthesecuritiescontainanopinionas
towhethertheissuerhasavalidclaimtotheRegulationDexemption?
Question256.08
Question:WhattypeofinformationspecifiedinRule502(b)(2)isanissuer
requiredtofurnishforanycorporategeneralpartnerinaRegulationD
offeringwheretheissuerisalimitedpartnership?
Answer:Theissuershouldfurnishforanycorporategeneralpartneran
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auditedbalancesheetasofthemostrecentlycompletedfiscalyear.[Jan.
26,2009]
Question256.09
Question:UnderRule502(b)(2)(i)(B)(2)and(3),ifalimitedpartnership
issuercannotobtaintherequiredfinancialstatementsforaRegulationD
offeringwithoutunreasonableeffortorexpense,itmayprovidetaxbasis
financials.Dotheseprovisionsalsoapplytothefinancialstatements
requiredinaRegulationDofferingforgeneralpartnersaswellas
propertiestobeacquired?
Question256.10
Question:WhataretheinformationdeliveryrequirementsunderRule
502(b)foraninvestmentcompanyexcludedfromregistrationbyvirtueof
Section3(c)oftheInvestmentCompanyActof1940thatsellssecuritiesto
nonaccreditedinvestorsrelyingonRule506?
Answer:Suchacompanymustfurnishtononaccreditedinvestors,tothe
extentmaterialtoanunderstandingofthecompany,itsbusiness,andthe
securitiesbeingoffered:
thesamekindofnonfinancialinformationaswouldberequiredina
registrationstatementundertheSecuritiesActforaregistered
investmentcompanyonaformthatitwouldbeentitledtouseifit
wereregisteringtheofferingundertheSecuritiesAct,suchasa
registrationstatementonFormN1A,orFormN2and
financialstatementinformationequivalenttothatrequiredof
operatingcompaniesunderRule502(b)(2)(i)(B).[Jan.26,2009]
Question256.11
Question:Mayanissuerofsecuritiesprovidethedisclosurerequiredby
Rule502(b)bymeansofelectronicdelivery,suchasanemailmessagewith
electronicattachments?
Answer:Yes.Rule502(b)requiresonlythatthedisclosuresbefurnished.
Itcontainsnorequirementthatthedisclosuresbeprovidedordelivered
usingaparticularmedium.TheCommissionsviewsregardingtheuseof
electronicdeliveryareprovidedinSecuritiesActReleaseNo.7856(Apr.28,
2000).[Jan.26,2009]
Question256.12
Question:Anissuerfurnishespotentialinvestorsashortformoffering
memoranduminanticipationofactualsellingactivitiesandthedeliveryof
anexpandeddisclosuredocumentlater.DoesRegulationDpermitthe
deliveryofdisclosureintwoinstallments?
Answer:Solongasalltheinformationisdeliveredareasonableamountof
timebeforesale,theuseofafairandadequatesummaryfollowedbya
completedisclosuredocumentispermittedunderRegulationD.Disclosure
insuchamanner,however,shouldnotobscurematerialinformation.[Jan.
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26,2009]
Question256.13
Question:UnderRule502(b)(2)(i)(B),foranonreportingissuerthathas
beenformedwithminimalcapitalizationimmediatelybeforeaRegulationD
offering,musttheRegulationDdisclosuredocumentcontainanaudited
balancesheetfortheissuer?
Answer:Inanalyzingthisoranyotherdisclosurequestionunder
RegulationD,theissuerstartswiththegeneralrulethatitisobligatedto
furnishthespecifiedinformationtotheextentmaterialtoan
understandingoftheissuer,itsbusiness,andthesecuritiesbeingoffered.
Thus,inthisparticularcase,ifanauditedbalancesheetisnotmaterialto
theinvestorsunderstanding,thentheissuermayelecttopresentan
alternativetoitsauditedbalancesheet.[Jan.26,2009]
Question256.14
Question:Rule501(b)(2)(ii)(B)referstotheinformationcontainedina
registrationstatementonFormS1.Doesthisrequirementenvision
deliveryofPartsIandIIoftheFormS1?
Answer:No,onlyPartI.[Jan.26,2009]
Question256.15
Question:MayaCanadianissuerfilingundertheMJDSuseitsmostrecent
filingonForm40F,F9orF10tosatisfytheinformationrequirementsof
Rule502(b)?
Answer:Yes.AlthoughRule502(b)(2)(ii)(D)permitsaforeignprivate
issuertouseitsmostrecentForm20ForFormF1tomeetRule502s
informationrequirements,butdoesnotmentiontheMJDSforms,anMJDS
filermayuseitsmostrecentfilingonForm40F,F9orF10tosatisfyRule
502(b)sinformationrequirements.[Jan.26,2009]
Question256.16
Question:DoesRule502(c),whichprohibitsgeneralsolicitationand
generaladvertisinginconnectionwiththeofferandsaleofsecurities,bar
productadvertising?
Answer:Rule502(c)doesnotbarproductadvertising,althoughsuch
advertisingisnotpermittedundertherulewhenitinvolvesthesolicitation
ofanoffertobuyasecurity.Whetherornotparticularproductadvertising
constitutesasolicitationincontraventionofRule502(c)dependsonthe
factsandcircumstances.[Jan.26,2009]
Question256.17
Question:Areportingcompanyproposestooffersecuritiesunder
RegulationD.Becauseofthesizeandpriceoftheoffering,thecompany
feelscompelledbySection10(b)oftheExchangeActtoissueapress
releasediscussingtheoffering.Wouldsuchapressreleasebytheissuer
constitutegeneralsolicitationorgeneraladvertising,activitieswhichare
notpermittedbyRule502(c)inconnectionwithmostRegulationD
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offerings?
Answer:ThecompanyshouldrefertotheRule135csafeharborfor
reportingissuersgivingnoticeofproposedunregisteredofferings.[Jan.26,
2009]
Question256.18
Question:Ifasolicitationwerelimitedtoaccreditedinvestors,woulditbe
deemedincompliancewithRule502(c)?
Answer:Themerefactthatasolicitationisdirectedonlytoaccredited
investorswillnotmeanthatthesolicitationisincompliancewithRule
502(c).Rule502(c)relatestothenatureoftheoffering,notthenatureof
theofferees.[Jan.26,2009]
Question256.19
Question:AnissuerispreparingaprivateplacementinrelianceonRule
506.Theofferingwillrequiretheissuanceofmorethan20%ofthe
outstandingstockofthecorporation,triggeringanNYSEshareholder
approvalrequirement.Thus,theissuermustfileaproxystatementatthe
sametimeasthebeginningoftheoffering.Atthetimeoffilingtheproxy
statement,theofferingwillnotbesubscribed.Wouldtheinformationabout
theprivateplacementrequiredintheproxystatementbytheNYSErule
andItem11ofSchedule14AviolatethebanongeneralsolicitationinRule
502(c)?
Answer:TheissuermayseektorelyuponthesafeharborinRule135c
whenfilingtheproxystatementwiththeCommissionthatincludes
informationabouttheprivateplacementasrequiredbytheNYSEruleand
Item11ofSchedule14A.Iftheproxystatementdisclosureaboutthe
privateplacementdoesnotsatisfytherequirementsofRule135c(a),then
thedisclosurewillviolatethebanongeneralsolicitationinRule502(c).In
general,issuersshouldbemindfulthat,unlesstheclosingoftheoffering
andthesolicitationofshareholdervotesaretimedcorrectly,the
informationabouttheprivateplacementincludedintheproxystatement
couldbeviewedasconditioningthemarketforthesecuritiesofferedinthe
privateplacement.[Jan.26,2009]
Question256.20
Question:AninvestorinaRegulationDofferingwishestoresellthe
securitieswithinthreemonthsaftertheoffering.Theissuerhasagreedto
registerthesecuritiesforresale.Willtheproposedresaleunderthe
registrationstatementviolateRule502(d)?
Answer:No.ThefunctionofRule502(d)istorestricttheunregistered
resaleofsecurities.Wheretheresalewillberegistered,however,such
restrictionisunnecessary.[Jan.26,2009]
Question256.21
Question:A"private"moneymarketfundundertakestocomplywithRule
2a7undertheInvestmentCompanyActinordertopermitregistered
investmentcompaniestoinvestinthefundunderRule12d11underthe
InvestmentCompanyActinexcessofthelimitssetforthinSection12(d)
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oftheInvestmentCompanyAct.PursuanttoRule2a7(c)(12),a"private"
moneymarketfundisrequiredtopostmonthlyonitspubliclyavailableweb
sitespecificinformationaboutsecuritiesinitsportfolioaswellasthe
weightedaveragematurityandweightedaveragelifematurityofits
portfolio.Wouldcompliancewiththeconditionsofthiswebposting
requirementcausethefundtoviolatetheprohibitionongeneralsolicitation
andadvertisinginRule502(c)undertheSecuritiesAct?Thefundrelieson
theexceptionprovidedinSection3(c)(1)orSection3(c)(7)ofthe
InvestmentCompanyActtothedefinitionof"investmentcompany"in
Section3(a)ofthatAct.Sections3(c)(1)and3(c)(7)bothrequirethata
fundnotmakeorproposetomakeapublicofferingofitssecurities.
Answer:Thefundwillnotbedeemedtoviolatetheprohibitionongeneral
solicitationandadvertisingbypostinginformationonitswebsitein
compliancewithRule2a7forpurposesofpermittingregisteredinvestment
companiestoinvestinthefundunderRule12d11inexcessofthelimits
setforthinSection12(d)oftheInvestmentCompanyAct,solongasthe
fundpostsonlytheinformationrequiredbytheruleanddoesnotuseits
websitetoofferorsellsecuritiesorinamannerthatisdeemedtobe
generalsolicitationoradvertisingforoffersorsalesofitssecurities.[Aug.
11,2010]
Question256.22
Question:Ifanacquirorseekswrittenconsentsfromthetargets
shareholders,whichincludenonaccreditedinvestors,toapprovea
businesscombinationtransactioninvolvingtheissuanceofsecuritiesin
relianceonRule505or506ofRegulationD,whenmustthefinancial
statementandotherinformationspecifiedinRule502(b)(2)beprovidedto
thosetargetshareholdersthatarenonaccreditedinvestors?
Answer:Rule502(b)(1)requiressuchinformationtobedeliveredtonon
accreditedinvestorsinareasonableamountoftimepriortosale.The
deliveryofawrittenconsentconstitutesthesaleofsecuritiesinanoffer
conductedinrelianceonRule505or506.Accordingly,tocomplywiththe
timingrequirementsetforthinRule502(b)(1),anacquirorissuing
securitiesinaRule505orRule506offeringmustprovidethedisclosure
requiredbyRule502(b)(2)tononaccreditedinvestorsinareasonable
amountoftimepriortoobtaininganywrittenconsentsfromthem.[May
16,2013]
Section257.Rules503and503TFilingofNoticeofSales
Question257.01
Question:WheremustanissuersnoticetotheSECofanexemptoffering
onFormDbefiled?
Answer:OnSeptember15,2008,atransitionperiodofsixmonthsbegan
duringwhichfilershavetheoptionofmakingFormDfilingswiththeSECin
threedifferentways:
TheoldFormD(calledTemporaryFormD),onpaperattheSECs
mainoffice,100FStreet,N.E.,Washington,D.C.20549
ThenewFormD,onpaperattheaddressnotedaboveand
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ThenewFormD,electronically,throughtheInternet,ontheSECs
EDGARfilingsystem.
BeginningMarch16,2009,allfilerswillberequiredtofilethenewFormD
electronically,throughtheInternet,ontheSECsEDGARfilingsystem.
Additionally,beginningMarch16,2009,wheneveracompanyamendsa
FormDfilingregardlessofwhetheritwasoriginallysubmittedonpaper
orelectronically,oronTemporaryFormDoronnewFormDthe
companywillberequiredtosubmittheamendmentelectronicallyonthe
revisedFormD.[Jan.26,2009]
Question257.02
Question:WhenmustanissuerfiletheinitialFormDforanofferingwith
theSEC?
Answer:FormDisrequiredtobefiledwiththeSECwithin15daysafter
thefirstsaleofsecuritiessoldbasedonaclaimofexemptionunderRule
504,505or506ofRegulationDorSection4(6)oftheAct.Forthis
purpose,thedateoffirstsaleisthedateonwhichthefirstinvestoris
irrevocablycontractuallycommittedtoinvest,which,dependingonthe
termsandconditionsofthecontract,couldbethedateonwhichtheissuer
receivestheinvestorssubscriptionagreementorcheck.Ifthedateon
whichaFormDisrequiredtobefiledfallsonaSaturday,Sundayor
holiday,theduedateisthefirstbusinessdayfollowing.[Jan.26,2009]
Question257.03
Question:MaytheFormDbesignedbytheissuersattorney?
Answer:FormDmaybesignedonbehalfoftheissuerbyanyonewhois
dulyauthorizedtodoso.[Jan.26,2009]
Question257.04
Question:Inordertoavoidquestionsconcerningwhenthefirstsaleof
securitiesinanofferingunderRegulationDtakesplace,mayanissuerfile
itsFormDassoonastheofferingcommenceseventhoughnosaleshave
yetbeenmade?
Question257.05
Question:Rule503requiresanissuertofileaFormDnotlaterthan15
daysafterthefirstsaleinaRegulationDoffering.WhenshouldtheFormD
befiledinabesteffortsofferingwheresubscriptionsareheldinescrow
untilaminimumlevelisattained?
Answer:TheFormDshouldbefilednotlaterthan15daysafterthefirst
subscriptionisreceivedintoescrow.[Jan.26,2009]
Question257.06
Question:WhenRegulationDisusedinconnectionwithastockoption
plan,whenshouldtheFormDbefiled?
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Answer:WhenRegulationDisusedinconnectionwithastockoptionplan,
theFormDshouldbefilednotlaterthan15daysafterthefirstoption
exercise.[Jan.26,2009]
Question257.07
Question:IsthefilingofaFormDinconnectionwithanofferorsalea
conditiontotheavailabilityofaRegulationDexemptionforthatofferor
sale?
Answer:No.ThefilingofaFormDisarequirementofRule503(a),butit
isnotaconditiontotheavailabilityoftheexemptionsinRules504,505
and506ofRegulationD.Rule507statessomeofthepotential
consequencesofthefailuretocomplywithRule503.[Jan.26,2009]
Question257.08
Question:WillaRule506offeringlose"coveredsecurity"statusunder
Section18oftheSecuritiesActifanissuerfailstofileanoticeofthe
offeringwiththeSEC?
Answer:No.A"coveredsecurity"underSection18oftheSecuritiesActis
definedtoincludeasecuritywithrespecttoanofferingthatisexemptfrom
registrationundertheActpursuanttoSECrulesorregulationsissuedunder
Section4(2)oftheAct.Rule506wasissuedunderSection4(2)oftheAct.
Filinganoticeoftheofferingisnotaconditionthatmustbemettoqualify
fortheRule506exemption.[Sep.14,2009]
Section258.Rule504ExemptionforLimitedOfferingsandSales
ofSecuritiesNotExceeding$1,000,000
Question258.01
Question:MayaforeignissuerthatisnotsubjecttoSection15(d)and
whosesecuritiesareexemptfromSection12(g)underRule12g32(b)be
eligibletouseRule504?
Answer:Yes.Rule504isavailabletoanyissuerthatisnotsubjecttothe
reportingrequirementsofSection13or15(d)oftheExchangeAct.[Jan.
26,2009]
Question258.02
Question:TheexemptionsinRules504and505arenotavailabletoan
investmentcompany.Howistheterminvestmentcompanydefinedfor
purposesofRules504and505?
Answer:TheprovisionsinRules504and505thatbaraninvestment
companyfromusingtheexemptionsisconstruedtomeananinvestment
companyasthattermisdefinedinSection3oftheInvestmentCompany
Actof1940.[Jan.26,2009]
Question258.03
Question:AreRules504and505availabletoinvestmentcompanies?
Answer:BothRules504and505areunavailabletoinvestment
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companies.Section3(c)(1)oftheInvestmentCompanyActexemptsfrom
thedefinitionofinvestmentcompanyanyissuerwithnotmorethan100
stockholdersthatisnotmakinganddoesnotproposetomakeapublic
offering.ForpurposesofSection3(c)(1),offeringsunderRules504and
505couldbepublicornonpublicdependingonthefactsand
circumstances.[Jan.26,2009]
Question258.04
Question:MusttheaggregateofferingpriceofaRule504offeringunder
RegulationDbereducedbytheamountofasecondaryofferingmadeby
theissuersparentwithintheprior12monthsinrelianceonRegulationA?
Answer:Yes.SeeRule504(b)(2)ofRegulationD.[Jan.26,2009]
Section259.Rule505ExemptionforLimitedOffersandSalesof
SecuritiesNotExceeding$5,000,000
Question259.01
Question:Ifthecorporateparentofthegeneralpartnerinaproposed
limitedpartnershipofferinghasrecentlyundergonebankruptcy,wouldthe
bankruptcyproceedingdisqualifythelimitedpartnershipfromusingthe
Rule505exemptionofRegulationDunderRule505(b)(2)(iii)?
Answer:Inasmuchasthebankruptcyproceedingwouldnotdisqualifythe
limitedpartnershipfromusingRegulationAunderRule262,thelimited
partnershipwouldnotbedisqualifiedfromusingtheRule505exemptionof
RegulationDunderRule505(b)(2)(iii).[Jan.26,2009]
Question259.02
Question:Anissuerpreparingtoconductanofferingofequitysecurities
underRule505raised$2,000,000fromthesaleofdebtinstrumentsunder
Rule505eightmonthsearlier.Howmuchmaytheissuerraiseinthe
proposedequityoffering?
Answer:$3,000,000.AspecificconditiontotheavailabilityofRule505for
theproposedofferingisthatitsaggregateofferingpricenotexceed
$5,000,000lesstheproceedsforallsecuritiessoldunderSecuritiesAct
Section3(b)withinthelast12months.[Jan.26,2009]
Question259.03
Question:AnissuerisplanningaRule505offering.Tenmonthsearlier,
theissuerconductedaRule506offering.Musttheissuerconsiderthe
previousRule506offeringwhencalculatingtheallowableaggregate
offeringpricefortheproposedRule505offering?
Answer:No.TheCommissionissuedRule506underSecuritiesActSection
4(2),andRule505(b)(2)(i)requiresthattheaggregateofferingpricebe
reducedbyprevioussalesunderSecuritiesActSection3(b).Notethat
underRule502(a),theseofferingswillnothavetobeintegratedbecause
theyareseparatedbysixmonths.[Jan.26,2009]
Question259.04
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Question:Rules504and505containexamplesastothecalculationofthe
allowedaggregateofferingpriceforaparticularoffering.Dothese
examplescontemplateintegrationoftheofferingsdescribed?
Answer:No.Theexampleshavebeenprovidedtodemonstratethe
operationofthelimitationontheaggregateofferingpriceintheabsenceof
anyintegrationquestions.[Jan.26,2009]
Question259.05
Question:Note2toRule504isnotrestatedinRule505.Doesthe
principleofthenoteapplytoRule505?
Answer:Yes.Note2toRule504setsforthageneralprincipletothe
operationoftheruleonlimitingtheaggregateofferingprice,whichisthe
sameforbothRules504and505.Itprovidesthatif,asaresultofone
offering,anissuerexceedstheallowedaggregateofferingpriceina
subsequentunintegratedoffering,theexemptionforthefirstofferingwill
notbeaffected.[Jan.26,2009]
Section260.Rule506ExemptionforLimitedOffersandSales
WithoutRegardtoDollarAmountofOffering
Question260.01
Question:Mayanissuerofsecuritieswithaprojectedaggregateoffering
priceof$3,000,000relyonRule506?
Answer:Yes.TheavailabilityofRule506isnotdependentonthedollar
sizeofanoffering.[Jan.26,2009]
Question260.02
Question:Rule506requirestheissuertoreasonablybelievethateach
purchaserwhoisnotanaccreditedinvestoreitheraloneorwitha
purchaserrepresentativehassuchknowledgeandexperienceinfinancial
andbusinessmattersthatthepurchaseriscapableofevaluatingthemerits
andrisksoftheprospectiveinvestment.Rule506isnotanexclusivebasis
forsatisfyingtherequirementsoftheprivateofferingexemptioninSection
4(2).SeePreliminaryNote3toRegulationD.Whatistherelevanceofthe
natureoftheoffereesinanofferingthatreliesexclusivelyonSection4(2)
asitsbasisforexemptionfromregistration?
Answer:InanofferingrelyingexclusivelyonSection4(2)foran
exemptionfromregistration,alloffereeswhopurchasemustpossessthe
requisitelevelofsophistication.Thesophisticationofoffereeswhodonot
purchaseisnotafactthatinandofitselfshoulddeterminemechanically
theavailabilityoftheexemptionthenumberandthenatureofthe
offerees,however,arerelevantindeterminingwhetheranissuerhas
engagedinageneralsolicitationorgeneraladvertisingthatcouldpreclude
relianceontheexemptioninSection4(2).[Jan.26,2009]
Question260.03
Question:MustofferingsexemptunderRule506complywithstate
securitieslawrequirements?
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Answer:SecuritiesissuedinRule506exemptofferingsareconsidered
coveredsecuritiesunderSection18oftheSecuritiesActof1933.See
Section18(b)(4)(D).Section18(a)preemptsstateregistrationandreview
of,butnotstateantifraudauthoritywithrespectto,offeringsforthese
coveredsecurities.ForRule506exemptofferings,however,Section18
doesnotpreemptstaterequirementsthattheissuerfileanoticewiththe
statestogetherwithaconsenttoserviceofprocessandanyrequiredfee
withthestates.SeeSection18(b)(4)(D)andSection18(c)oftheSecurities
Act.[Jan.26,2009]
Question260.04
Question:Acompanyisconductingacontinuingprivateofferinginreliance
onRule506,whichlimitsthenumberofpurchasersto35.Therehavebeen
35purchasersofsecuritiesintheofferingascalculatedpursuanttoRule
501(e).Mayacompanysellsecuritiestoadditionalpurchasersinthe
offeringandrelyonRule506ifsomeoftheoriginal35purchasershave
nowredeemedtheirsecuritiessuchthattherearecurrentlylessthan35
holdersofthecompany'ssecurities?
Answer:No.Onceacompanysellsto35purchasers,ascalculated
pursuanttoRule501(e),thecompanyhasreachedthelimitationon
purchasersassetforthinRule506.Thefactthatapurchasersubsequently
transfersorredeemshersecuritiesdoesnotresetthenumberof
purchasersorenablethecompanytoselltoadditionalpurchasers.[Jan.26,
2009]
Question260.05
Question:AnissuercommencedanofferinginrelianceonRule506before
September23,2013,theeffectivedateofthenewRule506(c)exemption,
andfiledaFormDnoticefortheoffering.If,pursuanttothetransition
guidanceinSecuritiesActReleaseNo.9415(July10,2013),theissuer
decidestocontinuethatofferingafterSeptember23,2013inaccordance
withRule506(c),istheissuerrequiredtofileanamendmenttothe
previouslyfiledFormDtoindicatethattheissuerisnowrelyingonthe
Rule506(c)exemption?
Answer:Yes.AsthedecisiontocontinuetheofferinginrelianceonRule
506(c)representsachangeintheinformationprovidedinthepreviously
filedFormD,theissuermustfileanamendmenttotheFormDandcheck
theRule506(c)boxtoindicateitsrelianceonthisexemption.Iftheissuer
decidestocontinuetheofferinginrelianceonRule506(b),noamendment
tothepreviouslyfiledFormDisrequiredsolelytoreflectthisdecision.
[Nov.13,2013]
Question260.06
Question:Anissuertakesreasonablestepstoverifytheaccredited
investorstatusofapurchaserandformsareasonablebeliefthatthe
purchaserisanaccreditedinvestoratthetimeofthesaleofsecurities.
Subsequenttothesale,itbecomesknownthatthepurchaserdidnotmeet
thefinancialorothercriteriainthedefinitionofaccreditedinvestoratthe
timeofsale.AssumingthattheotherconditionsofRule506(c)weremet,
istheexemptionavailabletotheissuerfortheofferandsaletothe
purchaser?
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Answer:Yes.AnissuerdoesnotlosetheabilitytorelyonRule506(c)for
anofferingifapersonwhodoesnotmeetthecriteriaforanycategoryof
accreditedinvestorpurchasessecuritiesintheoffering,solongasthe
issuertookreasonablestepstoverifythatthepurchaserwasanaccredited
investorandhadareasonablebeliefthatsuchpurchaserwasanaccredited
investoratthetimeofthesaleofsecurities.[Nov.13,2013]
Question260.07
Question:AnissuerintendstoconductanofferingunderRule506(c).If
allofthepurchasersintheofferingmetthefinancialandothercriteriato
beaccreditedinvestorsbuttheissuerdidnottakereasonablestepsto
verifytheaccreditedinvestorstatusofthesepurchasers,maytheissuer
relyontheRule506(c)exemption?
Answer:No.TheverificationrequirementinRule506(c)isseparatefrom
andindependentoftherequirementthatsalesbelimitedtoaccredited
investors.Theverificationrequirementmustbesatisfiedevenifall
purchasershappentobeaccreditedinvestors.Undertheprinciplesbased
methodofverification,however,thedeterminationofwhatconstitutes
reasonablestepstoverifyisanobjectivedeterminationbasedonthe
particularfactsandcircumstancesofeachpurchaserandtransaction.
[Nov.13,2013]
Question260.08
Question:Anissuerchoosestoverifytheaccreditedinvestorstatusofa
purchaserinaRule506(c)offeringbyusingthenetworthverification
methodprovidedintheruleand,asrequiredunderthismethod,reviews
therelevantdocumentationdatedwithinthepriorthreemonths.If,atthe
timethepurchaserdecidestopurchasesecuritiesintheoffering,the
previouslysubmitteddocumentationisnotdatedwithinthepriorthree
monthsofthetimeofthesaleofsecurities,maytheissuercontinuetorely
onthenetworthverificationmethodprovidedintherule?
Answer:No.AnissuermaysatisfytheverificationrequirementofRule
506(c)byeitherusingtheprinciplesbasedmethodofverificationorrelying
upononeofthespecific,nonexclusiveverificationmethodslistedinthe
rule.Althoughuseofthenonexclusiveverificationmethodsisnot
required,anissuerthatchoosestouseoneofthemethodsmustsatisfythe
specificrequirementsofthatmethod.Inordertocomplywiththenet
worthverificationmethodprovidedintherulesnonexclusivelist,the
relevantdocumentationmustbedatedwithinthepriorthreemonthsofthe
saleofsecurities.Ifthedocumentationisolderthanthreemonths,the
issuermaynotrelyonthenetworthverificationmethod,butmayinstead
determinewhetherithastakenreasonablestepstoverifythepurchasers
accreditedinvestorstatusundertheprinciplesbasedmethodof
verification.[Nov.13,2013]
Question260.09
Question:Doesthethirdpartyverificationmethodinthenonexclusive
listofverificationmethodsinRule506(c)includewrittenconfirmations
fromanattorneyorcertifiedpublicaccountantwhoislicensedorduly
registered,asthecasemaybe,ingoodstandinginaforeignjurisdiction?
Answer:Yes.Thismethodofverificationisnotlimitedtowritten
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confirmationsfromattorneysandcertifiedpublicaccountantswhoare
licensedorregisteredinajurisdictionwithintheUnitedStates.[Nov.13,
2013]
Question260.10
Question:Doestheverificationmethodforexistinginvestorsinthenon
exclusivelistofverificationmethodsapplytonewissuersthathavethe
samesponsorastheissuerinwhichtheinvestorpurchasedsecuritiesina
priorRule506(b)offering(forexample,anewlimitedpartnership
organizedbyageneralpartnerwheretheinvestorpurchasedsecuritiesofa
priorlimitedpartnershipsponsoredbythesamegeneralpartner)?
Answer:No.Thisnonexclusivemethodofverificationis,byitsterms,
limitedtoverificationofexistinginvestorswhopurchasedsecuritiesinthe
sameissuersRule506(b)offeringasaccreditedinvestorspriorto
September23,2013andcontinuetoholdsuchsecurities.[Nov.13,2013]
Question260.11
Question:IfanissuercommencedanofferingintendingtorelyonRule
506(c)butdidnotengageinanyformofgeneralsolicitationinconnection
withtheoffering,maytheissuersubsequentlydeterminetorelyonRule
506(b)fortheoffering?
Answer:Yes,aslongastheconditionsofRule506(b)havebeensatisfied
withrespecttoallsalesofsecuritiesthathaveoccurredintheoffering.To
theextenttheissueralreadyfiledaFormDindicatingitsrelianceonRule
506(c),itmustamendtheFormDtoindicateitsrelianceonRule506(b)
instead,asthatdecisionrepresentsachangeintheinformationprovidedin
thepreviouslyfiledFormD.[Nov.13,2013]
Question260.12
Question:IfanissuercommencedanofferinginrelianceonRule506(b),
maytheissuerdetermine,priortoanysalesofsecuritiesintheoffering,to
relyonRule506(c)fortheoffering?
Answer:Yes,aslongastheconditionsofRule506(c)aresatisfiedwith
respecttoallsalesofsecuritiesintheoffering.Totheextenttheissuer
alreadyfiledaFormDindicatingitsrelianceonRule506(b),itmustamend
theFormDtoindicateitsrelianceonRule506(c)instead,asthatdecision
representsachangeintheinformationprovidedinthepreviouslyfiled
FormD.[Nov.13,2013]
Question260.13
Question:IftheconditionsofRule506(c)arenotmetinapurportedRule
506(c)offering,couldtheSecuritiesActSection4(a)(2)privateoffering
exemptionbeavailabletotheissuer?
Answer:Iftheissuerhasengagedingeneralsolicitation,no.Asstatedin
SecuritiesActReleaseNo.9415(July10,2013),themandateintheJOBS
ActtopermitgeneralsolicitationforasubsetofRule506offeringsaffects
onlyRule506andnotSection4(a)(2)offeringsingeneral.Theuseof
generalsolicitationcontinuestobeincompatiblewithaclaimofexemption
underSection4(a)(2).[Nov.13,2013]
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Question260.14
Question:Whenisanissuerrequiredtodeterminewhetherbadactor
disqualificationunderRule506(d)applies?
Answer:Rule506(d)disqualifiesanofferingofsecuritiesfromrelianceon
aRule506exemptionfromSecuritiesActregistration.Issuersmust
thereforedetermineiftheyaresubjecttobadactordisqualificationany
timetheyareofferingorsellingsecuritiesinrelianceonRule506.Anissuer
thatisnotofferingsecurities,suchasafundthatiswindingdownandis
closedtoinvestment,neednotdeterminewhetherRule506(d)applies
unlessanduntilitcommencesaRule506offering.Anissuermay
reasonablyrelyonacoveredpersonsagreementtoprovidenoticeofa
potentialoractualbadactortriggeringeventpursuantto,forexample,
contractualcovenants,bylawrequirements,oranundertakingina
questionnaireorcertification.However,ifanofferingiscontinuous,delayed
orlonglived,theissuermustupdateitsfactualinquiryperiodicallythrough
bringdownofrepresentations,questionnairesandcertifications,negative
consentletters,periodicrecheckingofpublicdatabases,andothersteps,
dependingonthecircumstances.[Dec.4,2013]
Question260.15
Question:Ifaplacementagentoroneofitscoveredcontrolpersons,such
asanexecutiveofficerormanagingmember,becomessubjecttoa
disqualifyingeventwhileanofferingisstillongoing,couldtheissuer
continuetorelyonRule506forthatoffering?
Answer:Yes,theissuercouldrelyonRule506forfuturesalesinthat
offeringiftheengagementwiththeplacementagentwasterminatedand
theplacementagentdidnotreceivecompensationforthefuturesales.
Alternatively,ifthetriggeringdisqualifyingeventaffectedonlythecovered
controlpersonsoftheplacementagent,theissuercouldcontinuetorelyon
Rule506forthatofferingifsuchpersonswereterminatedornolonger
performedroleswithrespecttotheplacementagentthatwouldcausethem
tobecoveredpersonsforpurposesofRule506(d).[Dec.4,2013]
Question260.16
Question:ForpurposesofRule506(d),doesanaffiliatedissuermean
everyaffiliateoftheissuerthathasissuedsecurities?
Answer:No.UnderRule506(d),anaffiliatedissueroftheissuerisan
affiliate(asdefinedinRule501(b)ofRegulationD)oftheissuerthatis
issuingsecuritiesinthesameoffering,includingofferingssubjectto
integrationpursuanttoRule502(a)ofRegulationD.SecuritiesActForms
C&DIs130.01and130.02provideexamplesofcoissuerormultipleissuer
offerings.[Dec.4,2013]
Question260.17
Question:Arecompensatedsolicitorslimitedtobrokers,asdefinedin
ExchangeActSection3(a)(4),whoaresubjecttoregistrationpursuantto
ExchangeActSection15(a)(1),andtheirassociatedpersons?
Answer:No.Allpersonswhohavebeenorwillbepaid,directlyor
indirectly,remunerationforsolicitationofpurchasersarecoveredbyRule
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506(d),regardlessofwhethertheyare,orarerequiredtobe,registered
underExchangeActSection15(a)(1)orareassociatedpersonsof
registeredbrokerdealers.ThedisclosurerequiredinItem12ofFormD
expresslycontemplatesthatcompensatedsolicitorsmaynotappearin
FINRAsCentralRegistrationDepository(CRD)ofbrokersandbrokerage
firms.[Dec.4,2013]
Question260.18
Question:Doesthetermparticipatingincludepersonswhosesole
involvementwithaRule506offeringisasmembersofacompensated
solicitorsdealortransactioncommitteethatisresponsibleforapproving
suchcompensatedsolicitorsparticipationintheoffering?
Answer:No.[Dec.4,2013]
Question260.19
Question:Areofficersofacompensatedsolicitordeemedtobe
participatinginaRule506offeringonlyiftheyareinvolvedwiththe
solicitationofinvestorsforthatoffering?
Answer:No.Participationinanofferingisnotlimitedtosolicitationof
investors.Examplesofparticipationinanofferingincludeparticipationor
involvementinduediligenceactivitiesorthepreparationofoffering
materials(includinganalystreportsusedtosolicitinvestors),providing
structuringorotheradvicetotheissuerinconnectionwiththeoffering,and
communicatingwiththeissuer,prospectiveinvestorsorotheroffering
participantsabouttheoffering.Toconstituteparticipationforpurposesof
therule,suchactivitiesmustbemorethantransitoryorincidental.
Administrativefunctions,suchasopeningbrokerageaccounts,wiringfunds,
andbookkeepingactivities,wouldgenerallynotbedeemedtobe
participatingintheoffering.[Dec.4,2013]
Question260.20
Question:IsdisqualificationunderRule506(d)triggeredbyactionstaken
injurisdictionsotherthantheUnitedStates,suchasconvictions,court
orders,orinjunctionsinaforeigncourt,orregulatoryordersissuedby
foreignregulatoryauthorities?
Answer:No.[Dec.4,2013]
Question260.21
Question:IsdisqualificationunderRule506(d)(1)(v)triggeredbyall
CommissionorderstoceaseanddesistfromviolationsofCommissionrules
promulgatedunderExchangeActSection10(b)?
Answer:No.Disqualificationistriggeredonlybyorderstoceaseanddesist
fromviolationsofscienterbasedprovisionsofthefederalsecuritieslaws,
includingscienterbasedrules.Anordertoceaseanddesistfromviolations
ofanonscienterbasedrulewouldnottriggerdisqualification,evenifthe
ruleispromulgatedunderascienterbasedprovisionoflaw.Forexample,
anordertoceaseanddesistfromviolationsofExchangeActRule105
wouldnottriggerdisqualification,eventhoughRule105ispromulgated
underExchangeActSection10(b).[Dec.4,2013]
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Question260.22
Question:Ifanorderissuedbyacourtorregulatorprovides,in
accordancewithRule506(d)(2)(iii),thatdisqualificationfromRule506
shouldnotariseasaresultoftheorder,isitnecessarytoseekawaiver
fromtheCommissionortotakeanyotheractiontoconfirmthatbadactor
disqualificationwillnotapplyasaresultoftheorder?
Answer:No.TheprovisionsofRule506(d)(2)(iii)areselfexecuting.[Dec.
4,2013]
Question260.23
Question:Doesthereasonablecareexceptiononlycovercircumstances
wheretheissuerhasidentifiedallcoveredpersonsbut,despitetheexercise
ofreasonablecare,wasunabletodiscovertheexistenceofadisqualifying
event?Orcoulditalsoapplywhere,despitetheexerciseofreasonable
care,theissuer(i)wasunabletodeterminethataparticularpersonwasa
coveredperson(forexample,anofficerofafinancialintermediarythatthe
issuerdidnotknowwasparticipatingintheoffering,despitetheexerciseof
reasonablecare)or(ii)initiallydeterminedthatthepersonwasnota
coveredpersonbutsubsequentlydeterminedthatthepersonshouldhave
beendeemedacoveredperson?
Answer:Thereasonablecareexceptionapplieswhenevertheissuercan
establishthatitdidnotknowand,despitetheexerciseofreasonablecare,
couldnothaveknownthatadisqualificationexistedunderRule506(d)(1).
Thismayoccurwhen,despitetheexerciseofreasonablecare,theissuer
wasunabletodeterminetheexistenceofadisqualifyingevent,wasunable
todeterminethataparticularpersonwasacoveredperson,orinitially
reasonablydeterminedthatthepersonwasnotacoveredpersonbut
subsequentlylearnedthatdeterminationwasincorrect.Issuerswillstill
needtoconsiderwhatstepsareappropriateupondiscoveryofRule506(d)
disqualifyingeventsandcoveredpersonsthroughoutthecourseofan
ongoingRule506offering.Anissuermayneedtoseekwaiversof
disqualification,terminatetherelationshipwithcoveredpersons,provide
Rule506(e)disclosure,ortakesuchotherremedialstepstoaddressthe
Rule506(d)disqualification.[Dec.4,2013]
Question260.24
Question:IsthereaprocedureprovidedinRule506(e)forissuerstoseek
awaiveroftheobligationtodisclosepasteventsthatwouldhavebeen
disqualifying,exceptthattheyoccurredbeforeSeptember23,2013(the
effectivedateofRule506(d))?
Answer:No.Thedisclosureobligationisnotsubjecttowaiver.[Dec.4,
2013]
Question260.25
Question:DoesRule506(e)requiredisclosureofpasteventsthatwould
nolongertriggerdisqualificationunderRule506(d),suchasacriminal
convictionthatoccurredmorethantenyearsbeforetheofferingoran
orderorbarthatisnolongerineffectatthetimeoftheoffering?
Answer:No.Rule506(e)requiresonlydisclosureofeventsthatwould
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havetriggereddisqualificationatthetimeoftheofferinghadRule506(d)
beenapplicable.Becauseeventsoutsidetheapplicablelookbackperiod
andordersthatdonothavecontinuingeffectwouldnottrigger
disqualification,Rule506(e)doesnotmandatedisclosureofsuchmattersin
orderfortheissuertobeabletorelyonRule506.[Dec.4,2013]
Question260.26
Question:Inanofferinginwhichtheissuerusesmultipleplacement
agentsorothercompensatedsolicitors,istheissuerrequiredtoprovide
investorswithdisclosureunderRule506(e)onlywithrespecttothe
particularcompensatedsolicitororplacementagentthatsolicitedthose
investorsanditscoveredcontrolpersons(i.e.,generalpartners,managing
members,directors,executiveofficers,andotherofficersparticipatingin
theoffering)?
Answer:No.IssuersarerequiredtoprovideallinvestorswiththeRule
506(e)disclosureforallcompensatedsolicitorswhoareinvolvedwiththe
offeringatthetimeofsaleandtheircoveredcontrolpersons.[Dec.4,
2013]
Question260.27
Question:Inacontinuousoffering,istheissuerrequiredtoprovide
disclosureunderRule506(e)forallsolicitorsthatwereeverinvolvedduring
thecourseoftheoffering?
Answer:No.Areasonabletimepriortothesaleofsecuritiesinrelianceon
Rule506,theissuermustprovidetherequireddisclosurewithrespecttoall
compensatedsolicitorsthatareinvolvedatthetimeofsale.Disclosurewith
respecttocompensatedsolicitorswhoarenolongerinvolvedwiththe
offeringneednotbeprovidedunderRule506(e)inorderfortheissuerto
beabletorelyonRule506.[Dec.4,2013]
Question260.28
Question:Isashareholderthatbecomesa20%beneficialownerby
purchasingsecuritiesinanofferingacoveredpersonwithrespecttothat
offering?
Answer:Rule506(d)lookstothetimeofeachsaleofsecurities,and
providesthatnoexemptionwillbeavailableforthesaleifanycovered
personissubjecttoabadactortriggeringeventatthattime.A
shareholderthatbecomesa20%beneficialowneruponcompletionofa
saleofsecuritiesisnota20%beneficialowneratthetimeofthesale.
However,itwouldbeacoveredpersonwithrespecttoanysalesof
securitiesintheofferingthatweremadewhileitwasa20%beneficial
owner.[Jan.3,2014]
Question260.29
Question:IsthetermbeneficialownerinRule506(d)interpretedthe
samewayasunderExchangeActRule13d3?
Answer:Yes,beneficialownerunderRule506(d)meansanyperson
who,directlyorindirectly,throughanycontract,arrangement,
understanding,relationshiporotherwise,underExchangeActRule13d3
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hasorshares,orisdeemedtohaveorshare:(1)votingpower,which
includesthepowertovote,ortodirectthevotingof,suchsecurityand/or
(2)investmentpower,whichincludesthepowertodispose,ortodirectthe
dispositionof,suchsecurity.[Jan.3,2014]
Question260.30
Question:Forpurposesofdetermining20%beneficialownersunderRule
506(d),isitnecessarytolookthroughentitiestotheircontrolling
persons?
Answer:Beneficialownershipincludesbothdirectandindirectinterests,
determinedasunderExchangeActRule13d3.[Jan.3,2014]
Question260.31
Question:SomeoftheshareholdersofaRule506issuerhaveenteredinto
avotingagreementunderwhicheachshareholderagreestovoteitsshares
ofvotingequitysecuritiesinfavorofdirectorcandidatesdesignatedbyone
ormoreoftheotherparties.Arethepartiestotheagreementrequiredto
aggregatetheirholdingsforpurposesofdeterminingwhethertheyasa
groupare,oranysinglepartyis,a20%beneficialowneroftheissuerand,
therefore,acoveredpersonunderRule506(d)?
Answer:Beneficialownershipofgroupmembersandgroupsshouldbe
analyzedthesameasunderExchangeActRules13d3and13d5(b).
Underthatanalysis,theshareholdershaveformedagroup,andthegroup
beneficiallyownsthesharesbeneficiallyownedbyitsmembers.In
addition,thepartiestothevotingagreementthathaveorsharethepower
tovoteordirectthevoteofsharesbeneficiallyownedbyotherpartiesto
theagreement(through,forexample,thereceiptofanirrevocableproxyor
therighttodesignatedirectornomineesforwhomtheotherpartieshave
agreedtovote)willbeneficiallyownsuchshares.Partiesthatdonothave
orsharethepowertovoteordirectthevoteofotherpartiesshareswould
notbeneficiallyownsuchsharessolelyasaresultofenteringintothe
votingagreement.SeeExchangeActSections13(d)and13(g)and
Regulation13DGBeneficialOwnershipReportingCDI105.06.Ifthegroup
isa20%beneficialowner,thendisqualificationordisclosureobligations
wouldarisefromcourtorders,injunctions,regulatoryordersorother
triggeringeventsagainstthegroupitself.Ifapartytothevoting
agreementbecomesa20%beneficialownerbecausesharesofother
partiesareaddedtoitsbeneficialownership,disqualificationordisclosure
obligationswouldarisefromtriggeringeventsagainstthatparty.[Jan.3,
2014]
Question260.32
Question:Doesanorderissuedbyacourtorregulator,inaccordancewith
Rule506(d)(2)(iii),waivethedisclosureobligationsetforthinRule506(e)?
Answer:No.ThedisclosureobligationinRule506(e)pertainstoan
issuersobligationtoprovideinvestorsdisclosureofdisqualifyingevents
thatwouldhavetriggereddisqualification,exceptthattheseevents
occurredbeforeSeptember23,2013.Rule506(d)(2)(iii)permitsissuersto
relyontheselfexecutingstatementofaregulatoryauthoritytoavoidRule
506disqualificationwhenthatregulatoryauthorityadvisestheCommission
inwritingorinitsorder,decreeorjudgment,thatRule506disqualification
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shouldnotariseaconsequenceofadisqualifyingeventthatoccurredonor
afterSeptember23,2013.
Aregulatoryauthoritysuchasastatesecuritiescommissionmay,however,
determinethatanorderenteredbeforeSeptember23,2013wouldnot
havetriggereddisqualificationunderRule506(d)(1)becausetheviolation
wasnotafinalorderbasedonaviolationofanylaworregulationthat
prohibitsfraudulent,manipulative,ordeceptiveconductenteredwithinten
yearsbeforesuchsale.[Jan.3,2014]
Question260.33
Question:AnissuercommencedanofferinginrelianceonRule506before
September23,2013,theeffectivedateofthenewRule506(c)exemption.
Theissuerdecides,atsomepointafterSeptember23,2013,tocontinue
thatofferingasaRule506(c)offeringunderthetransitionguidancein
SecuritiesActReleaseNo.9415(July10,2013).Insuchcircumstances,is
theissuerrequiredtotakereasonablestepstoverifytheaccredited
investorstatusofinvestorswhopurchasedsecuritiesintheofferingbefore
theissuerconductedtheofferinginrelianceonRule506(c)?
Answer:No.ForanofferingthatcommencedbeforeSeptember23,2013
andthat,pursuanttotheCommissionstransitionguidance,theissuer
continuesinaccordancewithRule506(c)afterthatdate,theissuermust
takereasonablestepstoverifytheaccreditedinvestorstatusofonly
investorswhopurchasesecuritiesintheofferingaftertheissuerbeginsto
makeoffersandsalesinrelianceonRule506(c).Theissuermustamend
anypreviouslyfiledFormDtoindicateitsrelianceontheRule506(c)
exemptionforitsoffering.SeeSecuritiesActRulesC&DI260.05.[Jan.23,
2014]
Question260.34
Question:AnissuercommencedaRule506offeringbeforeSeptember23,
2013andmadesaleseitherbeforeorafterthatdateinrelianceonthe
exemptionthat,asaresultofSecuritiesActReleaseNo.9415(July10,
2013),becameRule506(b).Theissuernowwishestocontinuetheoffering
inrelianceonRule506(c).Cantheissuerrelyonthetransitionguidancein
SecuritiesActReleaseNo.9415thatpermitsswitchingfromRule506(b)to
Rule506(c)ifitalreadysoldsecuritiestononaccreditedinvestorsbefore
relyingontheRule506(c)exemption?
Answer:Yes,aslongasallsalesofsecuritiesintheofferingafterthe
issuerbeginstoofferandsellinrelianceonRule506(c)arelimitedto
accreditedinvestorsandtheissuertakesreasonablestepstoverifythe
accreditedinvestorstatusofthosepurchasers.[Jan.23,2014]
Question260.35
Question:Rule506(c)(2)(ii)(A)setsforthanonexclusivemethodof
verifyingthatapurchaserisanaccreditedinvestorby,amongotherthings,
reviewinganyInternalRevenueServiceformthatreportsthepurchaser's
incomeforthe"twomostrecentyears."IfsuchanInternalRevenue
Serviceformisnotyetavailablefortherecentlycompletedyear(e.g.,
2013),cantheissuerstillrelyonthisverificationmethodbyreviewingthe
InternalRevenueServiceformsforthetwoprioryearsthatareavailable
(e.g.,2012and2011)?
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Answer:No,theverificationsafeharborprovidedinRule506(c)(2)(ii)(A)
wouldnotbeavailableunderthesecircumstances.Webelieve,however,
thatanissuercouldreasonablyconcludethatapurchaserisanaccredited
investorandsatisfytheverificationrequirementofRule506(c)underthe
principlesbasedverificationmethodby:
reviewingtheInternalRevenueServiceformsthatreportincomefor
thetwoyearsprecedingtherecentlycompletedyearand
obtainingwrittenrepresentationsfromthepurchaserthat(i)an
InternalRevenueServiceformthatreportsthepurchaser'sincome
fortherecentlycompletedyearisnotavailable,(ii)specifythe
amountofincomethepurchaserreceivedfortherecentlycompleted
yearandthatsuchamountreachedthelevelneededtoqualifyasan
accreditedinvestor,and(iii)thepurchaserhasareasonable
expectationofreachingtherequisiteincomelevelforthecurrent
year.
Wheretheissuerhasreasontoquestionthepurchaser'sclaimtobean
accreditedinvestorafterreviewingthesedocuments,itmusttakeadditional
verificationmeasuresinordertoestablishthatithastakenreasonable
stepstoverifythatthepurchaserisanaccreditedinvestor.Forexample,if,
basedonthisreview,thepurchaser'sincomeforthemostrecently
completedyearbarelyexceededthethresholdrequired,theforegoing
proceduresmightnotconstitutesufficientverificationandmorediligence
mightbenecessary.[July3,2014]
Question260.36
Question:ApurchaserisnotaU.S.taxpayerandthereforecannotprovide
anInternalRevenueServiceformthatreportsincome.Cananissuer
reviewcomparabletaxformsfromaforeignjurisdictioninordertorelyon
theverificationmethodprovidedinRule506(c)(2)(ii)(A)?
Answer:No,theverificationsafeharborprovidedinRule506(c)(2)(ii)(A)
wouldnotbeavailableunderthesecircumstances.Inadoptingthissafe
harbor,theCommissionnotedthatthereare"numerouspenaltiesfor
falselyreportinginformation"inInternalRevenueServiceforms.See
SecuritiesActReleaseNo.339415(July10,2013).Althoughthesafe
harborisnotavailablefortaxformsfromforeignjurisdictions,webelieve
thatanissuercouldreasonablyconcludethatapurchaserisanaccredited
investorandsatisfytheverificationrequirementofRule506(c)underthe
principlesbasedverificationmethodbyreviewingfiledtaxformsthatreport
incomewheretheforeignjurisdictionimposescomparablepenaltiesfor
falselyreportedinformation.
Wheretheissuerhasreasontoquestionthereliabilityoftheinformation
aboutthepurchaser'sincomeafterreviewingthesedocuments,itmust
takeadditionalverificationmeasuresinordertoestablishthatithastaken
reasonablestepstoverifythatthepurchaserisanaccreditedinvestor.[July
3,2014]
Question260.37
Question:UnderthenonexclusiveverificationmethodsetforthinRule
506(c)(2)(ii)(B),anissuercanverifythatapurchaserisanaccredited
investoronthebasisofnetworthbyreviewingcertaindocumentationof
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thepurchaser'sassetsandliabilities"datedwithinthepriorthreemonths."
Taxassessments,whichareoneofthetypesofdocumentationlistedinthis
provisionoftherule,areoftenpreparedannually.Wouldanissuerbeable
torelyonthisnonexclusiveverificationmethodifitreviewedthemost
recenttaxassessmentthatisavailable,evenifitisdatedmorethanthree
months?
Answer:No,theverificationsafeharborprovidedinRule506(c)(2)(ii)(B)
wouldnotbeavailableunderthesecircumstances.Althoughthesafeharbor
isnotavailable,webelievethatanissuercouldreasonablyconcludethata
purchaserisanaccreditedinvestorandsatisfytheverificationrequirement
ofRule506(c)undertheprinciplesbasedverificationmethodifitusesthe
mostrecentlyavailabletaxassessmentwhendeterminingwhetherthe
purchaserhastherequisitenetworth.Forexample,ifthemostrecenttax
assessmentshowsavaluethat,afterdeductingthepurchaser'sliabilities
resultsinanetworthsubstantiallyinexcessof$1million,itmaybe
sufficientverificationthatthepurchaserhasmetthenetworthtest.
Wheretheissuerhasreasontoquestionwhethertheassessment
reasonablyreflectsthevalueofthepurchaser'sassets,itmusttake
additionalverificationmeasuresinordertoestablishthatithastaken
reasonablestepstoverifythatthepurchaserisanaccreditedinvestor.[July
3,2014]
Question260.38
Question:UnderthenonexclusiveverificationmethodsetforthinRule
506(c)(2)(ii)(B),anissuermustreviewaconsumerreportfromoneofthe
"nationwideconsumerreportingagencies"todeterminethepurchaser's
liabilities.WouldaconsumerreportfromanonU.S.consumerreporting
agencythatperformssimilarfunctionsasaU.S.nationwideconsumer
reportingagencybesufficientforpurposesofthisverificationmethod?
Answer:No,suchaconsumerreportwouldnotsatisfytherequirementsof
theverificationsafeharborinRule506(c)(2)(ii)(B).Althoughthesafe
harborisnotavailable,webelievethatanissuercouldreasonablyconclude
thatapurchaserisanaccreditedinvestorandsatisfytheverification
requirementofRule506(c)undertheprinciplesbasedverificationmethod
byreviewingthisreportandtakinganyotherstepsnecessarytodetermine
thepurchaser'sliabilities(suchasawrittenrepresentationfromthe
purchaserthatallliabilitieshavebeendisclosed)indeterminingwhether
thepurchaserhastherequisitenetworth.
Wheretheissuerhasreasontoquestiontheextentofthepurchaser's
liabilitiesafterreviewingthesedocuments,itmusttakeadditional
verificationmeasuresinordertoestablishthatithastakenreasonable
stepstoverifythatthepurchaserisanaccreditedinvestor.[July3,2014]
Section271.Rule701ExemptionforOffersandSalesof
SecuritiesPursuanttoCertainCompensatoryBenefitPlansand
ContractsRelatingtoCompensation
Question271.01
Question:Aretermsusedin(butnotdefinedin)Rule701interpretedto
havethesamemeaningsasthesametermsdefinedinRule405?
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Answer:Yes.Examplesofsuchtermsincludeaffiliate,majorityowned
subsidiary,parent,andsubsidiary.[Jan.26,2009]
Question271.02
Question:IsacompanythatfilesExchangeActreportsonavoluntary
basis,orinaccordancewithacontractualobligation,eligibletouseRule
701?
Question271.03
Question:AreforeignprivateissuersthatarenotsubjecttotheExchange
ActsreportingrequirementseligibletouseRule701,whetherornotthey
publishtheirnonU.S.disclosuredocumentsinaccordancewithExchange
ActRule12g32(b)?
Question271.04
Question:Acompanythatisnotsubjecttothereportingrequirementsof
ExchangeActSection13or15(d)issuedoptionsinrelianceonRule701.
Thiscompanyisacquiredbyanothercompany,whichissubjecttothe
reportingrequirementsofExchangeActSection13(a)or15(d)and
assumestheprivatecompanysoutstandingoptionssothattheybecome
exercisableforsharesoftheacquiringcompany.Maytheacquiring
companyrelyonRule701(b)(2)toexempttheirexercise?
Question271.05
Question:Aresecuritiesanalystsexcludedfromreceivingsecuritiesissued
underRule701orregisteredonFormS8asconsultantsoradvisors
becausetheirservices,assecuritiesindustryprofessionals,areinherently
capitalraisingorpromoteormaintainamarketfortheissuerssecurities?
Question271.06
Question:Mustanissuerusearollingperiodconsistingofthe12months
immediatelyprecedingthedateofthetransactioninquestionfor
determiningwhetherithasexceededthesalesceilinginRule701(d)(2)and
whetheritmustcomplywiththeadditionaldisclosurerequirementsunder
Rule701(e)ormaytheissuerelectafixed12monthperiodsuchasthe
calendaryearoritsfiscalyear?
Answer:TheissuermaychoosetocalculateitssalesunderRule701(d)(2)
and701(e)onthebasisofeitherafixedperiodorarolling12month
periodbutmustcontinueusingthechosencalculationmethodconsistently.
[Jan.26,2009]
Question271.07
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Question:IfanissuersellssharesinexcessoftheRule701(d)limits,does
itlosetheRule701exemptionforallsharessoldintheapplicable12
monthperiodorjustfortheexcessshares?Maytheissuerrelyonanother
availableexemptionfromSecuritiesActregistrationforsalesofexcess
sharesforwhichRule701isnotavailable?
Answer:TheRule701exemptionwouldnotbeavailableforsalesofshares
thatexceedtheRule701(d)limits.Rule701(f)provides,however,that
salesunderRule701arenotsubjecttointegrationwithothersalesthatare
otherwiseexemptfromtheregistrationrequirementsoftheSecuritiesAct.
Therefore,anissuermayrelyonanavailablealternativeexemptionsuchas
alimitedofferingexemptionunderRule504ofRegulationDoraprivate
placementexemptionunderRule506ofRegulationDorSection4(2)for
thesalesinexcessoftheRule701(d)limits,andrelyonRule701forsales
thatdonotexceedtheRule701(d)limits.[Jan.26,2009]
Question271.08
Question:Mayanissuersell$1,000,000ofsecuritiesunderRule701(d)(2)
(i)duringanyconsecutive12monthperiod,regardlessofthecalculations
inRules701(d)(2)(ii)and(iii)?
Answer:Yes.Rule701(d)limitstheamountthatmaybesoldtothe
greatestof$1,000,000,15%oftotalassets,or15%oftheoutstanding
amountoftheclassofsecuritiesbeingoffered.[Jan.26,2009]
Question271.09
Question:Tocalculatethe15%ofassetsandthe15%ofsecuritiestests
underRule701(d)(2)(ii)and(iii),mayanissueruseeitheritsbalance
sheetasofthelastdayofitsmostrecentlyendedfiscalyearoramore
recentbalancesheet?
Answer:Yes,anissuerispermittedtochooseeitherbalancesheet.See
theAmericanBarAssociationnoactionletter(Dec.7,2000)issuedbythe
Question271.10
Question:Within12monthsofanoriginaloptiongrant,theissuerreprices
theoptiongrantatalowerexerciseprice,which,inturn,lowersthe
aggregatesalespriceoramountofsecuritiessoldduringthe12month
period.Maytheissuerexcludetheoriginalgrantindeterminingtheamount
ofsecuritiesthatmaybesoldandwhetherithasanobligationunderRule
701todelivertheadditionaldisclosurecalledforwhenitsissuancelevel
exceeds$5million?
Answer:Yes,buttheissuermustcounttherepricedoptionsasanewsale,
andincludethemindeterminingitsaggregatesalespriceoramountof
securitiessoldwithinanyconsecutive12monthperiodthatincludesthe
repricingdate.[Jan.26,2009]
Question271.11
Question:Mayanissuerdisregardoptionsthatarecancelledorforfeited
whenapplyingtheRule701(d)and(e)limits?
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Answer:Yes.Onceoptionsareforfeitedorcancelled,thoseoptionsneed
notbecountedforpurposesoftheRule701(d)and(e)limits.[Jan.26,
2009]
Question271.12
Question:Rule701(e)prescribesadditionaldisclosurethatmustbe
deliveredareasonabletimebeforesaleiftheaggregatesalespriceor
amountofsecuritiessoldduringanyconsecutive12monthperiodexceeds
$5million.MustthisdisclosurebeprovidedtoallinvestorsintheRule701
offering,oronlytothoseinvestorswhopurchasesecuritiesaftertheissuer
exceedsthe$5millionthreshold?Whataretheconsequencesofnon
compliance?
Answer:TheRule701(e)disclosuremustbeprovidedtoallinvestorsin
theRule701offeringiftheissuerbelievesthatsaleswillexceedthe$5
millionthresholdinthecoming12monthperiod,notonlytothosewho
purchasesecuritiesaftertheissuerexceedsthe$5millionthreshold.As
statedinSecuritiesActReleaseNo.7645(Feb.25,1999):
Thisrequirementwillobligateissuerstoprovidedisclosuretoall
investorsiftheissuerbelievesthatsaleswillexceedthe$5million
thresholdinthecoming12monthperiod.Ifthedisclosurehasnotbeen
providedtoallinvestorsbeforesale,theissuerwilllosetheexemption
fortheentireofferingwhensalesexceedthe$5millionthreshold.
[Jan.26,2009]
Question271.13
Question:Aprivateissuerhasabroadbasedemployeestockpurchase
planthatreliesontheRule701exemption.Employeessignupforpayroll
deductionsatthestartofayear,andthepayrolldeductionsaccumulated
overthecourseoftheyearareappliedtopurchasesharesonasingle
purchasedateattheendoftheyear.Employeeshavetherighttowithdraw
fromtheplanandhavetheirpayrolldeductionsrefundedatanytime
duringtheyearuntilshortlybeforethesinglepurchasedate.Maythe
privateissuerprovidetheRule701(e)disclosureshortlybeforethesingle
purchasedate?
Question271.14
Question:AforeignissuerintendstoconductaRule701offering
exceedingthe$5millionthresholdinRule701(e).Istheissuerrequired
underRule701(e)(4)todelivertoinvestorsfinancialstatementsthatare
nomorethan180daysold,orcantheissuerdeliveritsannualandinterim
financialstatementsonlyatthefrequencyrequiredofforeignissuersthat
areExchangeActreportingcompanies?
Answer:Theissuermustfollowthe180dayrequirement,regardlessof
whetheritfurnishesfinancialstatementsreconciledtoU.S.GAAPor
preparedinaccordancewithInternationalFinancialReportingStandardsas
issuedbytheInternationalAccountingStandardsBoard,bothofwhichare
allowedunderRule701(e)(4).The180dayrequirementeffectivelymeans
thatthefinancialstatementsmustbeavailableonatleastaquarterlybasis
unlesssalesofsecuritiesarelimitedtoparticulartimesoftheyear.[Jan.
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26,2009]
Question271.15
Question:Mayanissuerofsecuritiesprovidethedisclosurerequiredby
Rule701(e)bymeansofelectronicdelivery,suchasanemailwith
attachments?
Answer:Yes.Rule701(e)requiresonlythatthedisclosuresbeprovided
anddelivered.Itcontainsnorequirementthatthedisclosuresbeprovided
ordeliveredusingaparticularmedium.Ingeneral,thefederalsecurities
lawsdonotprescribethemediumtobeusedforprovidinginformationto
investorsbyoronbehalfofissuersofsecurities.Forguidanceonusing
electronicdeliverytoprovidedisclosureunderthefederalsecuritieslaws,
seeSecuritiesActReleaseNo.7856(Apr.28,2000).[Jan.26,2009]
Question271.16
Question:AcompanyisnolongerrequiredtofilereportsunderExchange
ActSections13(a)or15(d).Withrespecttoemployeestockoptionsthat
areoutstandinguponthesuspensionorterminationofthecompany's
ExchangeActreportingobligationsandforwhichunderlyingshares
previouslyregisteredonFormS8havebeenremovedfromregistrationby
posteffectiveamendment(the"OutstandingStockOptions"),istheRule
701exemptionavailabletothecompanyfortheexerciseofthe
OutstandingStockOptions?IstheRule701exemptionavailableforthe
exerciseofstockoptionsthatthecompanygrantsinthefuture?
Answer:Rule701isavailabletoacompanyuponsuspensionor
terminationofitsExchangeActreportingobligations.Withrespecttothe
OutstandingStockOptions,iftheaggregateexercisepriceofthoseoptions
exceeds$5million,thecompanymustdeliverthedisclosurerequiredby
Rule701(e)inareasonableperiodoftimebeforetheoptionsareexercised
inordertorelyontheRule701exemptionforthesaleoftheunderlying
sharesuponexerciseoftheoptions.Withrespecttofuturegrants,the
companyisconsideredtostartwithacleanslateunderRule701upon
suspendingorterminatingitsExchangeActreportingobligations.Shares
underlyingtheOutstandingStockOptionsarenotincludedforpurposesof
determiningcompliancewiththe12monthsaleslimitationrequirementsin
Rule701(d)andthedisclosurerequirementsinRule701(e).[June4,2010]
Section277.Rule903OffersorSalesofSecuritiesbytheIssuer,
aDistributor,AnyoftheirRespectiveAffiliates,orAnyPerson
ActingonBehalfofAnyoftheForegoingConditionsRelatingto
SpecificSecurities
Question277.01
Question:Whenmustaforeignprivateissuerdeterminetheparticular
categoryoftheRegulationSsafeharborforanofferingofsecuritiesoutside
theUnitedStates?
Answer:Anissuermustdeterminetheparticularcategoryofthe
RegulationSsafeharboruponwhichitwillrelyatthetimeitmakesthe
offshoreoffering.If,aftertheofferingismade,changesoccurinthe
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issuerscircumstancesthatwouldpermitittoqualifyforadifferent
categoryofthesafeharborinthefuture,therewillbenochangeinthe
distributioncomplianceperiodfortheoutstandingsecuritiesissuedunder
thepriorcategory.[Jan.26,2009]
Section279.Rule905ResaleLimitations
Question279.01
Question:Rule905providesthatanyrestrictedsecuritiesunderRule
144thatareequitysecuritiesofadomesticissuerwillcontinuetobe
deemedtoberestrictedsecuritiesnotwithstandingthattheywereacquired
inaresaletransactionpursuanttoRule901or904.Mayaholderof
restrictedsecurities,whichwereoriginallyacquiredfromaforeignprivate
issuerinatransactiondescribedinRule144(a)(3)(otherthanRule144(a)
(3)(v)),resellthosesecuritiesoffshorepursuanttoRule904andwithout
regardtoRule905,iftheissuernolongerqualifiesasaforeignprivate
issueratthetimeofresale?
Answer:Yes.Rule905onlyappliestoequitysecuritiesthat,atthetimeof
issuance,werethoseofadomesticissuer.[Jan.23,2015]
INTERPRETIVERESPONSESREGARDINGPARTICULARSITUATIONS
Section510.Rule134CommunicationsNotDeemedaProspectus
510.01Rule134doesnotauthorizetheinclusionintombstoneadsof
photographsofinvestmentpropertiesordescriptionsofthetaxbenefitsof
investments.[Jan.26,2009]
510.02AtombstoneadpreparedpursuanttoRule134forusein
connectionwitharegisteredpublicofferinggenerallycanbeprovidedto
existingshareholdersalongwitharegularlyprovidedquarterlyreport
duringthepreeffectiveperiod.[Jan.26,2009]
510.03Abrokerdealerparticipatinginaregisteredpublicofferingmay
senditsclientsasmallreplycard,alongwithacopyofatombstone
advertisement,toassistcustomerswhowishtorequestacopyofthe
prospectus.[Jan.26,2009]
510.04Althoughsuitabilityrequirementsarenotpermittedunderaliteral
readingofRule134,Rule134(a)(16)doespermittheinclusionofany
statementorlegendrequiredbyanystatelaworadministrativeauthority.
InlightofthepositionbytheCaliforniaDepartmentofCorporationsthat
advertisementsfordirectparticipationprograms(limitedpartnerships)
mustincludesuitabilityrequirements,issuersmayusesuitability
requirementsinRule134advertisementsdistributedinCaliforniawhen
theyareincludedtocomplywiththeDepartmentsposition.[Jan.26,2009]
510.05Tombstoneadsmaycontainastatementthatthesecuritieswould
besubjecttoearlyredemptionorcouldbecalledbytheissuer.[Jan.26,
2009]
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510.06Acommodityfundwasadvisedthateventhoughitbearssome
resemblancetoaninvestmentcompany,thisfactdoesnotautomatically
entitleittoincludeinitsRule134noticealloftheinformationaboutits
businessthatinvestmentcompaniesarepermittedtoincludepursuantto
Rule482.ThefundwasremindedthatRule134permitsonlyabrief
indicationofanissuersbusiness.[Jan.26,2009]
Sections511to512.Rules134ato134b[Reserved]
Section513.Rule135NoticeofProposedRegisteredOfferings
513.01ApressreleaseissuedpursuanttoRule135inconnectionwithan
initialpublicofferingmaystatethatthesharestobeofferedhavenotyet
beenauthorizedandthereforetheirissuanceissubjecttoshareholder
approval.[Jan.26,2009]
513.02Alettertobesenttoholdersoflimitedpartnershipunitsinvarious
oilandgasprograms,forthepurposeofdeterminingtheirinterestin
convertingthesmallerprogramsintoonenewlargeprogram,mayinvolve
theofferofasecurityofthenewprogramwithinthemeaningofSecurities
ActSections2(a)(3)and5.Anysuchcommunication,ifitisanoffer,would
eitherhavetoberegisteredundertheSecuritiesActorexemptfrom
SecuritiesActregistration.Forregisteredofferings,Rule135wouldpermit
asimplenoticedescribingthepurposeandtermsofsuchanoffering,but
wouldnotallowthesolicitationofindicationsofinterest.[Jan.26,2009]
513.03AcashoutmergerofCompanyAbyCompanyBhasbeen
approvedbyCompanyBsshareholders.Priortoconsummationofthe
merger,CompanyBintendstomakearegisteredpublicofferingand
proposestosendaRule135noticetoCompanyAsshareholders.Sucha
noticewouldcomewithinthetermpublishe[d]throughanymediumin
Rule135andthusispermissible.[Jan.26,2009]
Section522.Rule139PublicationsorDistributionsofResearch
ReportsbyBrokersorDealersDistributingSecurities
522.01Rule139definesofferforsaleinrelationtocertaindealer
publications,andprovideslimitedrelieffromtheapplicationofSection5to
suchpublicationswhenusedinconnectionwithregisteredofferingsby
reportingcompaniesorcertainforeignprivateissuerswithoffshoretrading
historiesorthathavea$700millionworldwidepublicfloat.Therulecannot
beextendedbyanalogytoofferingsofothernonreportingcompanies,
sincethepublicavailabilityoftheinformationcontainedinExchangeAct
reportsisafundamentalbasisoftherule.[Jan.26,2009]
522.02AreportingcompanyfiledaregistrationstatementonFormS4for
aRule145mergertransaction.Shareholdershadvotedtoapprovethe
transactionandnofurthershareholdervoteregardingvaluation
contingencieswasrequired.Theapprovalofaregulatoryauthoritywas
neededbeforethetransactioncouldbeclosed.Onthesefactsthesaleof
thesharesoccurredwhenshareholdersvotedtoapprovethemerger
accordingly,theregisteredofferinghadbeencompletedforpurposesof
Rule139.[Jan.26,2009]
522.03Thebrokerdealerthatactedasunderwriterinaninitialpublic
offeringnowhasasmalllongpositionintheunderwrittenstockinits
investmentaccountasaresultofbadorders.Theissueotherwisesoldout.
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Onthesefacts,thedistributionwasconcludedforpurposesoftheRule139
safeharborprovisions,notwithstandingthestockheldintheinvestment
account.Asaresult,thebrokerdealercouldmakerecommendations
regardingtheissuerssecuritieswithoutconcernthatthose
recommendationswouldbedeemedtobeoffersorsales.[Jan.26,2009]
Section523.Rules139a[Reserved]
Section524.Rule140DefinitionofDistributioninSection2(a)
(11)forCertainTransactions
524.01Alimitedliabilitycompanysoughttoissuetoitsemployeesthe
stockofitsfinancingmember,whichhasthesolepurposeofissuingstock
tothepublicandinvestingtheproceedsthereofintheLLCssecurities.
Becauseofthisrelationship,Rule140requirestheLLCtoregisterasco
issueronanySecuritiesActregistrationstatementfiledbythefinancing
memberforthesaleofthefinancingmembersstock.Accordingly,theLLC
wouldbeincludedasaregistrantonanyFormS8filedbythefinancing
member.Itisthereforenotnecessarytoanalyzewhetherthefinancing
memberisasubsidiaryoftheLLCforpurposesofdeterminingwhether
thefinancemembermayregisteritsstockonFormS8forsaleto
employeesofitsparent.[Jan.26,2009]
Section528.Rule144PersonsDeemedNottobeEngagedina
DistributionandthereforeNotUnderwritersGeneralGuidance
528.01Rule144isnotavailableforsalesofanissuerssecuritiesbyits
subsidiary,sinceaparentissuermaynotdoindirectlythroughasubsidiary
whatitmaynotdodirectlyunderRule144.SeeSecuritiesActReleaseNo.
5306(Sept.26,1972).Forexample,asubsidiary,whichisnotabankor
trustcompany,thatactsastrusteeforitsparentsemployeebenefitplan
wouldnotbepermittedtorelyonRule144forsalesofitsparents
securitiesinconnectiontherewith.[Jan.26,2009]
528.02Unregisteredresalesofrestrictedsecuritiesmaybemadein
marketsoutsidetheUnitedStates,includingforeignexchanges,inreliance
onRule144orthesafeharborprovisionsofRegulationS.Anyarrangement
toreturntherestrictedsecuritiestoU.S.marketsmayindicate,as
suggestedbySecuritiesActReleaseNo.7190(June27,1995),anevasive
schemetoavoidregistration,whichwouldinvalidateanysafeharborclaim.
[Jan.26,2009]
528.03Apersonholdsonlyrestrictedsecuritiesandhasheldthemforless
thantherequisiteRule144(d)holdingperiod.Suchpersoncannoteffecta
shortsaleofsecuritiesofthatclass,andthencoverwithsuchpersons
restrictedsecurities(eventhoughtherestrictedsecuritiesarenoweligible
forsale)sincetheinitialshortsaledidnotqualifyunderRule144.See
SecuritiesActReleaseNo.6099,Question82(Aug.2,1979).[Jan.26,
2009]
528.04Rule144isnotavailableforthesaleofsecuritiesacquiredbyan
underwriterorfinderascompensationforservicesrenderedinconnection
witharegisteredpublicoffering.Thesecuritiesheldbytheunderwriteror
finderarenotconsideredrestrictedsecuritiesbecausetheywerenot
acquiredinatransactionorchainoftransactionsnotinvolvinganypublic
offering.Assuch,Rule144maynotberelieduponfortheirsale.However,
Rule144maybeappliedconstructivelyfortheresaleofsuchsharesinthe
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followingmanner:
(1)providedthatsixmonthshaselapsedsincethelastsaleunderthe
registrationstatement,anunderwriterorfindermayresellthesharesin
accordancewiththeprovisionsofRule144(c),(e),and(f),exceptfor
thenoticerequirement.SeeSecuritiesActReleaseNo.6099,Question
10(Aug.2,1979)
(2)apurchaserofthesharesfromanunderwriterorfinderreceives
restrictedsecuritiesunlessthesaleismadewithanappropriate,
currentprospectus,orunlessthesaleismadepursuanttothe
conditionscontainedin(a)above
(3)apurchaserofthesharesfromanunderwriterorfinderwho
receivesrestrictedsecuritiesmayincludetheunderwritersorfinders
holdingperiod,providedthattheunderwriterorfinderisnotanaffiliate
oftheissuerand
(4)ifanunderwriterorfindertransfersthesharestoitsemployees,the
employeesmaytackthefirmsholdingperiodforpurposesofRule
144(d),buttheymustaggregatesalesofthedistributedshareswith
thoseofotheremployees,aswellasthoseoftheunderwriterorfinder,
forasixmonthperiodfromthedateofthetransfertotheemployees.
[Jan.26,2009]
528.05Acompanyinbankruptcyproposestoissuestocktoanunrelated
partyfortheacquisitionofanotherbusiness.Althoughtheissuancewillbe
partofthecourtapprovedreorganizationplan,itwillnotmeetthe
requirementsfortheSecuritiesActexemptionaffordedbySection1145(a)
oftheBankruptcyCodebecausetheissuancewillnotbeinexchangefora
bankruptcyclaimoradministrativeexpense.Thecompanywillrelyon
SecuritiesActSection4(2)foritsregistrationexemption.Becausetheoffer
andsaleofthesecuritiesundertheplanofreorganizationarenotexempt
underSection1145,thesecuritiesarerestrictedsecuritiesunderRule
144(a)(3)andmaybepubliclyresoldunderRule144orregisteredpriorto
resale.[Jan.26,2009]
528.06Thecessationofaffiliatestatusisafactsandcircumstances
determination,andcounselshouldnotassumethatitceasesinstantly
when,forexample,theformeraffiliateresignsfromhisorherpositionat
thecompany.[Jan.26,2009]
528.07AcompanyissuedsecuritiesunderSecuritiesActSection3(a)(6)
buthaslostitseligibilitytousethatexemptioninthefuture.Sharesheld
byaffiliatesofthecompanymayberesoldpursuanttotheprovisionsof
Rule144(exceptfortheholdingperiodprovisions).[Jan.26,2009]
528.08Aprivatepurchaserwishestoinvestdirectlyinanissuerbutwants
toacquireunrestrictedsecurities.Througharrangementsand
understandingswiththeissuer,anexistingshareholderwithsharesthatare
eitherrestrictedsecuritiescurrentlyeligibleforsaleunderRule144or
unrestrictedsecuritiessellsthesharestotheprivatepurchaser.Atabout
thesametime,theissuersellsanequivalentnumberofsharestothe
existingshareholder.TheDivisionsviewisthatthesharestakenbythe
privatepurchaserfromtheexistingshareholderwillberestrictedsecurities
withinthemeaningofRule144(a)(3).Theholdingperiodwilldatetothe
privateacquisition.Apublicresaleofthesharesacquiredfromtheexisting
shareholderwithoutregardtotheconditionsofRule144wouldraise
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seriousissuesunderSecuritiesActSection5forallpartiestothe
transactions.[Jan.26,2009]
Section529.Rule144(a)Definitions
529.01Anaffiliatesettlortransfersunrestrictedsharestoacharitable
remaindertrust.Thecontrolsecuritiesaretheonlyassetofthetrust.The
entireincomeinterestinthetrustisheldbytheaffiliateandtheaffiliates
familymemberssharingthesameresidence.Incomedistributionsaremade
annually.WhetherthetrustisanaffiliateoftheissuerunderRule144(a)
(1)andwhetherthetrustandthesettlorarethesamepersonunderRule
144(a)(2)areseparatequestionstoberesolvedundertheseparate
standardsofRules144(a)(1)and(a)(2),respectively.Further,theaffiliate
statusofthetrustisnotnecessarilychangedbytheuseofanindependent
trustee.[Jan.26,2009]
529.02Anaffiliatepurchasedcommonstockofitscompanyinaprivate
transactionfromanonaffiliatewhoacquiredthesharesintheopen
market.Sincesuchsharesarenotrestrictedsecuritieswithinthemeaning
ofRule144(a)(3),theRule144(d)(1)holdingperiodrequirementdoesnot
applytoresalesofthesesharesbytheaffiliate.However,alloftheother
requirementsoftherulewouldhavetobecompliedwithbytheaffiliatefor
anyofitssalesofthesharesundertherule.[Jan.26,2009]
529.03Securitieswereinadvertentlysoldtoacompanysemployeesunder
astaleFormS8registrationstatement.Forpurposesofresalebythe
purchasingemployees,thesecuritieswouldbetreatedasiftheywere
unrestrictedsoasnottopenalizeinnocentpurchasersunderthestale
FormS8.[Jan.26,2009]
529.04Anaffiliatetransferssecuritiesacquiredintheopenmarkettoher
spouse(anonaffiliate)pursuantto,andonorsubsequenttothedateof,a
courtapproveddivorcesettlementagreement.Thenonaffiliatespouse
neednotconsidersuchsecuritiesrestrictedbecausethesecuritieswerenot
soldtothespousebytheaffiliate.[Jan.26,2009]
529.05Anunderwriterreceives,ascompensationformanaginganexempt
industrialdevelopmentbondoffering,warrantstopurchasesecuritiesofthe
corporationusingtheindustrialdevelopmentbondfinancedfacility.Such
warrantswillbedeemedrestrictedsecuritiesforpurposesofRule144.
[Jan.26,2009]
Section530.Rule144(b)ConditionstobeMet
530.01Whereanonaffiliateacquiredsecuritiesinaprivatetransaction
underRule144(b)(1),thefactthatitexecutedaninvestmentletterforthe
acquiredsecuritieswouldnotpreventitfromresellingthesecuritieswithout
anyrestrictionsunderRule144.[Jan.26,2009]
530.02AnaffiliatepledgesrestrictedsecuritiesofanExchangeAct
reportingissuer(anissuerthatis,andhasbeenforatleastthe90day
periodimmediatelybeforethesale,subjecttothereportingrequirements
ofExchangeActSection13or15(d))toanonaffiliatepledgeeonanon
recoursebasis.Thenonaffiliatepledgeereceivesthoserestrictedsecurities
aftertheaffiliatepledgordefaults.Thenonaffiliatepledgee(whohasnot
beenanaffiliateduringtheprecedingthreemonths)mayutilizeRule
144(b)(1)(i)tosellthesecurities,providedsixmonthshaveelapsedfrom
thetimeofthepledgeandtheRule144(c)(1)conditionissatisfiedas
requiredunderRule144(b)(1)(i).If,however,thepledgehadbeenmade
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withrecourse,thepledgeecouldtackthepledgorsholdingperiodtoits
ownforpurposesofsatisfyingthesixmonthholdingperiodrequirementof
Rule144(d)(1)(i).[Jan.26,2009]
530.03Providedthatthedonoranddoneehaveheldthestockfora
combinedperiodofsixmonthsandthattheRule144(c)(1)conditionis
satisfiedasrequiredunderRule144(b)(1)(i),anonaffiliatedonee(who
hasnotbeenanaffiliateduringtheprecedingthreemonths)whoreceives
stockofanExchangeActreportingissuer(anissuerthatis,andhasbeen
foratleastthe90dayperiodimmediatelybeforethesale,subjecttothe
reportingrequirementsofExchangeActSection13or15(d))froman
affiliatedonormayresellthestockunderRule144(b)(1)(i)withoutathree
monthwaitingperiodbecausethedonorandthedoneearenotthesame
personasdefinedinRule144(a)(2).[Jan.26,2009]
530.04AnonaffiliateestatemayutilizeRule144(b)(1),eventhoughthe
decedentwasanaffiliate.[Jan.26,2009]
530.05Apersonwhoentersintoabindingcontractforthesaleof
restrictedsecuritieswithinthreemonthsafterceasingtobeanaffiliateof
theissuerofsuchsecuritiesmaynotutilizeRule144(b)(1),eventhough
thedeliveryofthesecuritiestakesplacemorethanthreemonthsaftersuch
personlosesaffiliatestatus.[Jan.26,2009]
530.06Thesettlorofatrustforthebenefitofthesettlorschildren(who
arepasttheageofmajorityanddonotlivewiththesettlor)isanaffiliate
oftheissuer,andthetrustholdsrestrictedsecurities.Neitherthe
independenttrusteenorthebeneficiariesareaffiliatesorhavebeen
affiliatesduringtheprecedingthreemonths.Thetrusteemaysellthe
restrictedsecuritiesunderRule144(b)(1).[Jan.26,2009]
530.07Apersonowns20%ofnewlyformedCompanyAandhasheld
restrictedsecuritiesofCompanyBformorethanoneyear.Theperson,who
isnotanaffiliateofCompanyBandhasnotbeenanaffiliateduringthe
precedingthreemonths,effectsanegotiatedsaleoftherestricted
securitiestoCompanyA,inaccordancewithalloftheapplicable
requirementsofRule144(b)(1).Asaresult,CompanyAnowowns
unrestrictedsecuritiesofCompanyB.[Jan.26,2009]
Section531.Rule144(c)CurrentPublicInformation
531.01Acorporationhadaregisteredpublicofferingin2000.Sincethen,
ithascontinuouslyfiledperiodicreportsunderSection15(d)ofthe
ExchangeAct,eventhoughithasalwayshadfewerthan300record
holders.Thecorporationhasjusthadasecondpublicoffering.Inviewof
thehistoryofvoluntaryreporting,theDivisionstaffwasoftheviewthat
holdersofrestrictedsecuritiesneednotwait90daysfromtheeffective
dateoftheregistrationstatementbeforecommencingsalesofsuch
securitiespursuanttoRule144,assumingtheissueriscurrentinits
voluntaryreporting.[Jan.26,2009]
531.02AnissuerwasrequiredtofileaForm10KonFebruary14,2005.
BecauseitsexecutiveofficeshadburneddowninearlyFebruary,theissuer
filedaForm12b25foranextensionoftime,extendingtheduedatefor
theForm10KtoMarch1.TheissuerwasunabletofileonMarch1,and
therebybecamedelinquent.AdirectorsoldtheissuersstockonMarch4
pursuanttoRule144.Beforethesalewasmade,thedirectorsbroker
checkedwiththeDivisionsstaff,andwastoldthattheissuerwascurrent
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initsExchangeActfilings.Thisinformationwasincorrect.Theissuers
attorneywasadvisedthatRule144wasnotavailableforthesalebythe
director,becausethedirectorsrelationshiptotheissuerwassuchthatthe
directorhadreasontobelievethattheissuerwasnotcurrentinreporting.
ItshouldbenotedthatasellerunderRule144maynotrelyonaverbal
representationbyanyDivisionstaffmemberastothecurrentreporting
statusofanissuer,andDivisionstaffmembersthereforewilldeclineto
answerinquiriesonsuchmatters.[Jan.26,2009]
531.03Aparenthasguaranteedtheoutstandingdebtsecurities(allof
whichareunlisted)ofitswhollyownedsubsidiaryandfurnishes
summarizeddisclosurewithrespecttothesubsidiaryinitsExchangeAct
reports.ThesubsidiarydoesnotfileExchangeActreports.Inthese
circumstances,thesubsidiarywillbedeemedtosatisfythepublic
informationrequirementofRule144(c)(1)withrespecttotheguaranteed
debtsecuritiessolongasitsparentsatisfiesthatrequirementwithrespect
toitselfandcontinuestoprovidesummarizeddisclosureconcerningthe
subsidiaryinaccordancewithRule310ofRegulationSX.Restricteddebt
securitiesofthesubsidiarycouldbesoldinaccordancewiththeprovisions
oftherule.[Jan.26,2009]
Section532.Rule144(d)HoldingPeriodforRestrictedSecurities
532.01Apledgorwhoisanaffiliatedefaultsonaloanthatissecured,
eitherwithorwithoutrecourse,byabonafidepledgeofcompanystock
acquiredintheopenmarket(i.e.,thesesecuritiesarenotrestricted
securitiesinthepledgorshands).Inthepledgeeshands,thesesecurities
arerestrictedsecuritiesbecausetheyhavebeenacquireddirectlyor
indirectlyfromtheissuer,orfromanaffiliateoftheissuer,inatransaction
orchainoftransactionsnotinvolvinganypublicoffering.Ifthepledgeeis
anonaffiliateandhasnotbeenanaffiliateduringtheprecedingthree
months,thepledgeemayresellsuchsecuritiespursuanttoRule144(b)(1)
withoutregardtotheholdingperiodrequirementinRule144(d)butsubject
tothecurrentpublicinformationrequirementinRule144(c)(1),as
applicable.NootherrequirementsinRule144areapplicabletothe
pledgeesresale.[May16,2013]
532.02Ifapreferredstockholdertenderssharestotheissuerandreceives
inreturncashplusanewseriesofpreferred,thestockholdermaytackits
holdingperiodfortheoldpreferredtothatforthenewseries.[Jan.26,
2009]
532.03Newinvestorsinacloselyheldinvestmentpartnership,and
existingpartnerstowhomassetshavebeenredistributeduponwithdrawal
ofotherpartners,mayrelyonthepositionontackingsetforthinQuestion
34(a)inSecuritiesActReleaseNo.6099(Aug.2,1979),providedthe
fundamentalcharacterofthepartnershipisnotchanged.[Jan.26,2009]
532.04Inastockforstockacquisition,theclosingwillbedelayeduntilthe
acquiredcorporationsyearendrevenueshavebeendetermined,givingthe
acquiringcorporationanoutifsuchrevenuesdonotreachapre
determinedlevel.TheRule144holdingperiodforrecipientsofthe
acquiringcorporationsstockwillnotbeginuntiltheclosingbecausethe
recipientswillnotbeateconomicriskuntilthattime.[Jan.26,2009]
532.05Acloselyheldcorporationdistributesrestrictedsecuritiesofan
issuerprorataandwithoutconsiderationtoitsshareholders,whichare
threelimitedpartnerships.Eachoftheselimitedpartnerships,inturn,
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distributestherestrictedsecuritiesprorataandwithoutconsiderationtoits
partners(about10peopleineachinstance).Tackingofholdingperiods
fromcorporationtopartnerships,andfrompartnershiptopartners,is
permittedforpurposesofRule144(d).[Jan.26,2009]
532.06Question22ofSecuritiesActReleaseNo.6099(Aug.2,1979),
dealingwiththeholdingperiodunderRule144(d)forrestrictedsecurities
underanemployeebenefitplan,doesnotapplywhererestrictedsecurities
areissuedtoanemployeeinconnectionwithanindividuallynegotiated
employmentagreement.Theemployeesholdingperiodbeginstorunatthe
timethesecuritiesvest,assuminganyconditions,suchascontinued
employment,havebeenfulfilled.[Jan.26,2009]
532.07Prorataredemptionsofpartnershipinterestsinacloselyheld
investmentpartnershipwithpartnersreceivingdistributionsofrestricted
securitiesinkind,as,forexample,inliquidation,wouldallowpartnersto
tackthepartnershipholdingperiodforpurposesofRule144(d).[Jan.26,
2009]
532.08Anaffiliatetransfersrestrictedstocktoacorporationofwhichthe
affiliateowns84%.Thecorporationintendstoselltherestrictedstockand
conveytotheaffiliateaninterestinthecorporationequaltotheproceeds
ofthesale.Tackingbythecorporationoftheaffiliatesholdingperiodwould
notbepermittedforpurposesofRule144becausethetransfertothe
corporationisdeemedtobeaprivatesalewhichcommencesanewholding
periodforthepurchaser.[Jan.26,2009]
532.09InvestorApurchased100sharesofrestrictedstockofareporting
companybyexecutingapromissorynotewhichdidnotmeetthe
requirementofRule144(d)(2).Sincethisobligationisnotconsideredtobe
fullpaymentofthepurchasepriceundertherule,InvestorAsholding
periodcommencesonlyatsuchtimeortimesasInvestorAactuallymakes
paymentonthenote.InvestorApaidoffhalftheamountofthenoteover
sixmonthsagoand,accordingly,theholdingperiodrequirementfor50
shares(halfthetotalof100)hasbeenmet.InvestorArecentlysold50
sharesoftherestrictedstockinaregisteredoffering.Thequestion
presentedwaswhetherthesharessoldintheregisteredofferingmustbe
regardedasthesharesastowhichtheholdingperiodhadrun.Although
Rule144doesnotestablishaguideforthissituation,itwasdecidedthat
InvestorAcoulddeemtheregistrationstatementtorelatesolelytothe
sharesforwhichtheholdingperiodrequirementhadnotbeensatisfied.As
aresult,InvestorAmaynowsellalloftheremaining50sharesunderRule
144,assumingRule144(c)issatisfied.[Jan.26,2009]
532.10Securitieshavebeenescrowedbyanissuerasacontingent
paymentinconnectionwithanacquisition.Theescrowagreementgivesthe
intendedbeneficiarytherighttosellthesecuritiesduringthelifeofthe
escrow,onconditionthatthesaleproceedsarereturnedtotheescrow
account.Rule144(d)(3)(iii)providesthatsecuritiesacquiredasa
contingentpaymentinconnectionwiththesaleofabusinessshallbe
deemedtohavebeenacquiredatthetimeofthesale,forpurposesofthe
holdingperiodrequirementofRule144(d).Thisprovision,however,applies
onlytothosesecuritiesthathaveactuallybeenacquiredinsatisfactionofa
contingency.Sincethesharesinthiscasearestillsubjecttoacontingency
andhavenotbeenformallyacquired,thebeneficiarymaynotrelyonRule
144(d)(3)(iii)tosatisfytheholdingperiodrequirementoftheruleforsales
madeduringtheperiodtheescrowarrangementisineffect.[Jan.26,
2009]
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532.11Acorporationdistributestoitsemployeesasabonusrestricted
securitiesofanaffiliatedissuerwhichitacquiredatanearlierdate.For
purposesoftheholdingperiodprovisionsofRule144(d),theemployees
wouldnotbeabletotackthecorporationsholdingperiodtotheirown.The
employeremployeerelationshipofthepartiessuggeststhatthedistribution
isbeingmadeasaformofcompensationforservicesrendered,ratherthan
asagift(forwhichtackingwouldbepermitted).[Jan.26,2009]
532.12Anemployeeacquiresrestrictedstockpursuanttoapricehook
plan,wherebytheemployeepaysonlyaportionofthepurchasepricewhen
acquiringthestockfromthecompany.Theremainderistobepaidwhen
thestockisresold.ThestockmaynotberesoldunderRule144,because
theholdingperiodrequirementcannotbemetunderthisarrangement,as
thestockwillnotbefullypaidforuntilthetimeofsale.[Jan.26,2009]
532.13Convertiblenoteswithaccruedbutunpaidinterestareexchanged
forsharesoftheissuer.Theholdingperiodforthenotescanbetackedto
theholdingperiodonthesharesunderRule144(d)(3)(ii)onlyifthe
exchangeconsist[s]solelyofothersecuritiesofthesameissuer.Although
therighttoreceivepaymentfortheaccruedinterestcouldbeconstruedas
additionalconsiderationthatisinconsistentwithRule144(d)(3)(ii),the
holdingperiodfortheconvertiblenotescanbetackedtotheholdingperiod
forallofthesharesreceivedintheexchange.Thispositionisconsistent
withSecuritiesActSection3(a)(9),whichexemptscertainexchanges
wheresecuritiesofthesameissueraretheonlyconsideration.[Jan.26,
2009]
532.14Aprivateofferingismadeonaminimum/maximumbasis(i.e.,
sharesarenotissuedandproceedsnotdeliveredtothecompanyfroman
escrowaccountunlessaminimumamountissold).TheRule144holding
periodforsharesacquiredinsuchanofferingwouldbeginatthetimea
shareholderpaysforitssharesanditspaymentisdepositedintheescrow
account.Atthattime,theshareholderisatriskforpurposesofRule
144(d),sinceitiscommittedtoparticipatingintheofferingiftheminimum
amountissold.[Jan.26,2009]
532.15ANevadacorporationthatholdsrestrictedsecuritiesofanother
issuereffectsamergertochangeitsdomiciletoDelaware.Therestricted
securitiesbecomethepropertyoftheDelawaresuccessorasaresultofthe
merger.BecauseoftheexceptionformigratorytransactionsinRule145(a)
(2),themergerisnotasalewithinthemeaningoftheSecuritiesAct.The
holdingperiodoftheNevadapredecessorfortherestrictedsecuritiesisnot
disturbedbythesuccession.[Jan.26,2009]
532.16Theholderofrestrictedsecuritiesofaforeignprivateissuer
exchangesthemforanequivalentnumberofAmericanDepositaryReceipts
(ADR)withthedepositary.TheADRwillbearestrictedsecurityitselfwith
aholdingperiodidenticaltothatontheunderlyingsecurity.TheADRmay
besoldinrelianceonRule144tothesameextenttheunderlyingsecurity
couldhavebeensold.NotethatFormF6,whichrelatestotheissuanceof
depositarysharesevidencedbyAmericanDepositaryReceipts,requiresthat
thedepositedsecuritiesbeofferedandsoldintransactionsregisteredunder
theSecuritiesActorexemptfromregistration.SeeGeneralInstruction
I.A(2)ofFormF6.[Jan.26,2009]
532.17Anaffiliateholderofrestrictedsecuritiesbonafidepledgesthe
securitiestoabanktosecurepaymentofaloan.Intheeventofdefault,
thebankisrequiredtoexhaustthecollateralbeforeproceedingagainstthe
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pledgorpersonally.ForpurposesofRule144(d)(3)(iv),thepledgeisa
recoursearrangement,sothatthebankwillhavethebenefitofthe
pledgorsholdingperiod.[Jan.26,2009]
532.18Apromissorynote,securedbytherestrictedsecuritiespurchased
withthenote,willmeetthecollateralstandardofRule144(d)(2)(ii)ifthe
noteisalsosecuredbyotherpropertywithindependentfairmarketvalue
atleastequaltothepurchasepriceoftherestrictedsecurities.[Jan.26,
2009]
532.19Anofficerpurchasessecuritiesfromanissuerpayingthefull
purchasepriceincash.Thereafter,theofficerpurchasesanequalnumber
ofsharesthroughtheuseofapromissorynote,securingthenotewiththe
officersfirstpurchaseofsecurities.Theuseofsuchcollateraltosecurethe
promissorynoteiswithintherequirementsofRule144(d)(2)(ii),andthe
holdingperiodforthesecondpurchasewouldbeginwhenthenoteisgiven
totheissuer.[Jan.26,2009]
532.20Acompanysoldsharestoitsemployeespursuanttoaprivate
placement.Theemployeescouldborrowtheentirepurchasepricefroma
nonaffiliatebank,givinganoteguaranteedbythecompanyandplacing
thesharesinescrow.Ifthecompanyhadtorepaythenote,itcould
repurchasethesharesatbookvalue.Thisarrangement,insubstance,is
thesameasgivinganotetothecompanyinpaymentfortheshares,and
therefore,pursuanttoRule144(d)(2),fullpaymentofthepurchaseprice
hasnotbeensatisfied.[Jan.26,2009]
532.21Anonaffiliateacquiredwarrantsfromanissuermorethantwo
yearsagoinpartialconsiderationforthesaleofasubsidiary.Thenon
affiliatewantedtopaytheexercisepricewithsharesoftheissuerthatit
plannedtopurchasejustpriortotheexercise(fortaxreasons)andthen
tacktheholdingperiodofthewarrantstotheholdingperiodfortheshares
receiveduponexercise.Theholdingperiodofwarrantsthatareturnedin
forthespreadsworthofsharesunderlyingthewarrants(acashless
exercise)canbetackedtotheholdingperiodforthesharesreceived.
However,underthesefacts,becausetheproposedtransactionwouldallow
thenonaffiliatetodoindirectlywhatthenonaffiliatecouldnotdodirectly
(paytheexercisepriceincashandtacktheholdingperiodofthewarrants
totheholdingperiodofthesharesreceiveduponexercise),tackingwould
notbepermittedunderRule144.Apersonusingsecuritiestoexercise
restrictedstockpurchasewarrantsshouldusetheshorteroftheholding
periodonthewarrantsorontheothersecuritiesusedinpaymenttofind
theholdingperiodforthesharesreceivedonexercise.[Jan.26,2009]
532.22Whereasellersurrenderedasecuredpromissorynoteoftheissuer
asconsiderationforthecashlessexerciseofawarrantfromthesame
issuer,theDivisionstaffwasoftheviewthattheholdingperiodofthenote
couldnotbetackedtothecommonstockreceivedupontheexerciseofthe
warrant.Undertheparticularfacts,thenotedidnotappeartobea
securityunderthestandardsenunciatedinRevesv.Ernst&Young,494
U.S.56(1990),andtherefore,itwouldnotqualifyasasecurityofthe
issuerforpurposesoftackingunderRule144(d)(3)(ii).[Jan.26,2009]
532.23Anaffiliateofanissuersecuresaloanwithrestrictedsecurities.
Therestrictedsecuritiesarehypothecatedtothelender,ratherthan
pledged,andanirrevocablestockpowerisgranted.Onadefaultunderthe
loan,thelendercouldusethetwoinstrumentstocauselegaltitletobe
transferredtoitself.Forpurposesofthelendersholdingperiodcalculation,
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thehypothecationagreementandtheirrevocablestockpowermaybe
construedastheequivalentofapledge.Subjecttotherequirementsfor
goodfaithandrecourseagainsttheborrower,thelenderwouldbeableto
usetheborrowersholdingperiodunderRule144(d)(3)(iv).[Jan.26,2009]
532.24Acompanyissuesaconvertiblenotewithinterestpayablein
sharesofthecompany.Thedecisiontopaytheinterestontheconvertible
noteintheformofsharesissolelyatthediscretionofthecompany.In
determiningwhethertheRule144(d)(1)holdingperiodrequirementhas
beensatisfiedinregardtosuchsharesreceivedasinterest,theholding
periodofthenotemaybetackedtotheholdingperiodoftheshares.[Apr.
24,2009]
Section533.Rule144(e)LimitationonAmountofSecuritiesSold
533.01Acompanyscommonstocktradesbothonanindividualshare
basisandinunits,witheachunitconsistingofoneshareofcommonstock
togetherwithadetachablewarrant.ForpurposesofRule144,thevolume
limitationforthecommonstockmaybecomputedonthebasisofall
commonsharestraded,includingthosetradedaspartofaunit,sincethe
commonsharesintheunitsareseparablefromthewarrants.[Jan.26,
2009]
533.02HtransfersstocktoWinconnectionwithadivorcesettlement.H
andWneednotaggregatesalesunderRule144oncetheyarenolonger
married.Moreover,theywillnotbedeemedtobesellinginconcertmerely
becauseofthesettlementarrangement.[Jan.26,2009]
533.03Anaffiliatesellsbothrestrictedconvertiblenotesandrestricted
shares.Thesharesattributabletothenotessoldplusthesharessold
separatelyamounttolessthanonepercentoftheoutstandingstock.Such
saleswouldbewithinthevolumelimitationsofRule144(e).SeeSecurities
ActReleaseNo.6099(Aug.2,1979),atQuestion46.[Jan.26,2009]
533.04Anaffiliateofanissueristhegeneralpartnerofthreelimited
partnershipswhichholdrestrictedsecuritiesoftheissuer.Ifsuchlimited
partnershipstransfertherestrictedsecuritiestoallthepartners,the
affiliatemust,forpurposesofdeterminingitsvolumelimitunderRule
144(e),aggregateitsRule144salesofthedistributedsecuritieswith(1)
theRule144salesofthedistributedsecuritiesbytheotherpartnerswho
areaffiliatesoftheissuerand(2)theRule144salesofthesameclassof
securitiesbythelimitedpartnerships,foraperiodofsixmonthsfollowing
thedistribution(iftheissuerhadbeensubjecttothereporting
requirementsofExchangeActSection13or15(d)foraperiodofatleast
90daysimmediatelybeforethedistribution)oroneyearfollowingthe
distribution.Furtheraggregationmayalsoberequirediftheaffiliateis
"actinginconcert"withotherpersonsunderRule144(e)(3)(vi).Absent
"actinginconcert,"theaffiliatepartnersandthelimitedpartnershipsneed
notaggregatetheirsalesofthedistributedshareswiththesalesofthe
distributedsharesbypartnerswhoarenotaffiliatesoftheissuer.Thenon
affiliatepartnersarenotsubjecttothevolumelimitationunderRule
144(e).[Jan.26,2009]
533.05AcloselyheldinvestmentpartnershipisanaffiliateofABCCo.The
partnershipdistributedallofitsrestrictedsecuritiesofABCCo.heldinits
portfoliotoallofitspartnersonaproratabasisandwithoutconsideration
fromitspartners.ThepartnerswhoareaffiliatesofABCCo.must
aggregatetheirRule144salesofthedistributedsharesofABCCo.with(1)
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theRule144salesofthedistributedsharesbyallotherpartnerswhoare
affiliatesofABCCo.and(2)theRule144salesofthesameclassof
securitiesbythepartnership,foraperiodofsixmonthsfollowingthe
distribution(ifABCCo.hadbeensubjecttothereportingrequirementsof
ExchangeActSection13or15(d)foraperiodofatleast90days
immediatelybeforethedistribution)orforaperiodofoneyearfollowing
thedistribution.Aggregationmayalsoberequiredifthepartnersare
"actinginconcert"underRule144(e)(3)(vi).Absent"actinginconcert,"the
partnershipandthepartnerswhoareaffiliatesofABCCo.neednot
aggregatetheirsalesofthedistributedshareswiththesalesofthe
distributedsharesbypartnerswhoarenotaffiliatesofABCCo.Thenon
affiliatepartnersarenotsubjecttothevolumelimitationunderRule
144(e).[Jan.26,2009]
533.06Warrantsoriginallyissuedintandemwithcommonsharesarenow
tradingseparately.Holdersofthewarrantswhowishtosellratherthan
exercisethewarrantsmustconsiderthewarrantsaclassofsecurities
separatefromthecommonstockforpurposesofcomplyingwiththe
volumelimitationsofRule144(e).[Jan.26,2009]
533.07Acompanyhasnotifieditstransferagentoftheissuanceof
additionalcommonstock.Nootherannouncementhasbeenmade.Rule
144(e)(1)(i)permitsthesaleofonepercentofthesharesoutstandingas
shownbythemostrecentreportorstatementpublishedbytheissuer.
Thenoticetothetransferagentisinsufficientpublicationtoallowuseofthe
increasednumberofsharesforpurposesofthealternativeonepercent
volumelimitofRule144(e)(1)(i).[Jan.26,2009]
533.08AnaffiliatewishingtosellsharespursuanttoRule144discovered
thatabrokerdealerhadexecuted,duringthelastweekofthefourweek
period,a100,000sharetradeintheissuersstockthathadnotbeen
reportedintheaverageweeklyreportingvolumeoftradingofsuch
securitiesonallnationalsecuritiesexchangesand/orreportedthroughthe
automatedquotationsystemofaregisteredsecuritiesassociation.The
Divisionstaffadvisedthattheaffiliatewouldhavetorelysolelyonthe
reportedvolume.[Jan.26,2009]
533.09Nonaffiliatespledgedunrestrictedbankholdingcompanysecurities
totheholdingcompanysaffiliatedbankascollateralforloansmadebythe
affiliatedbankintheordinarycourseofitsbusiness.Followingdefault,the
affiliatedbankforeclosedandsoughttoselltheholdingcompanysecurities.
TheDivisionstafftookthepositionthatsalesofpledgedsecuritiesbythe
affiliatedbankcouldbeeffectedpursuanttoRule144sincethebankwas
effectingthesaleasapledgeeinabonafideloansituationanditsdecision
tosellwasoccasionedsolelybytheborrowersdefault.Forpurposesof
Rule144(e),theDivisionstaffalsotookthepositionthatsuchsaleswould
havetobeaggregatedwithanyothersalesbythebankaspledgee,butnot
withothersalesbythepledgors.Thelatterconclusionwasbasedonthe
factthathadthepledgorssoldthesecuritiesthemselves,theywouldnot
havebeensubjecttoRule144.[Jan.26,2009]
533.10[withdrawn]
Sections534to535.Rules144(f)to144(g)[Reserved]
Section536.Rule144(h)NoticeofProposedSale
536.01Anaffiliatedistributeefromapartnershipwhoisrequiredto
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aggregateitssaleswiththoseofotheraffiliatedistributeesneednotfilea
Form144ifsuchaffiliatedistributeesellsnomorethan5,000sharesor
shareswithamarketvaluenotexceeding$50,000inanythreemonth
period,notwithstandingsalesmadebyotherdistributees.[Jan.26,2009]
536.02Asubsidiarybank,actinginitsfiduciarycapacity,sellsunrestricted
sharesofitsholdingcompanyparentforanunaffiliatedtrustaccount.Form
144neednotbefiledsolelybecauseofthebanksinvolvement,because
thebankisnotmakingasaleforitsownaccount.[Jan.26,2009]
536.03AnaffiliateoftheissuerfilesanoticeonForm144reportingthe
proposedsaleoflessthanthefullamountofsecuritiesthatcouldbesold
underthevolumetestsofRule144(e).Duringthesamethreemonth
period,theaffiliatewishestomakeadditionalRule144salesinanamount
that,takentogetherwiththeoriginalsales,wouldnotexceedthemaximum
numberofsecuritiesthatcouldhavebeensoldatthetimeofthenotice.
TheaffiliatemaynotfileanamendedForm144toaccomplishadditional
salesbecauseaForm144mustrepresenttheaffiliatesintentatthetimeof
itsfiling.TheaffiliatemayfileanewForm144toselladditionalsecurities,
solongasthesenewsalessatisfythevolumelimitationsexistingwhenthe
newForm144isfiled.[Jan.26,2009]
536.04AForm144,filedonbehalfofanaffiliateoftheissuerbyan
attorneyinfact,shouldbeaccompaniedbyasignedcopyofthepowerof
attorney.AftersuchpowerofattorneyisattachedtotheForm144,itdoes
nothavetoberefiledasanattachmenttosubsequentlyfiledForms144
whileitremainsineffect.[Jan.26,2009]
536.05AnaffiliateoftheissuerproposestomakeRule144salesofboth
commonstockandsecuritiesconvertibleintocommonstock.Forpurposes
ofdeterminingwhetherthe5,000sharesor$50,000conditiontofiling
Form144hasbeenmet,theconvertiblesecuritiesshouldberegardedas
havingbeenconvertedintothecommonstockinthesamemanneras
providedbyRule144(e)(3)(i).[Jan.26,2009]
536.06AfteranaffiliatefilesaForm144,theissuerdeclaresastocksplit.
Nonewfilingisrequiredwithinthethreemonthperiodtoselltheentire
numberofshares,onapostsplitbasis,forwhichthesellerhadoriginally
filed.[Jan.26,2009]
Sections537to538.Rules144(i)to144A[Reserved]
Section539.Rule145ReclassificationofSecurities,Mergers,
ConsolidationsandAcquisitionsofAssets
539.01Aholdingcompanyreorganizationwastobecarriedoutpursuant
toSection251(g)oftheDelawareGeneralCorporationLawandwouldnot
triggerashareholdervoteorappraisalrights.Thereorganizationwaslinked
toanacquisitiontransactionwithathirdparty(i.e.,itsconsummationwas
aconditiontoclosingwithrespecttotheacquisitionagreement).The
purposeofthereorganizationwastoobtainmorefavorabletaxtreatment
fortheacquisition.Whenviewedtogetherwiththeacquisition,theoverall
transactionchangedthenatureoftheshareholdersinvestment.Therefore
thereorganizationwouldinvolveasaleoroffertosellforthepurposes
ofSecuritiesActSection2(a)(3)andRule145.[Jan.26,2009]
539.02Achangefrombusinesstruststatusinonestatetocorporate
statusinanotherstatewouldnotbewithinthechangeofdomicile
exceptionofRule145(a)(2)becauseofthesignificantchangein
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organizationalstructurethatwilloccur.[Jan.26,2009]
539.03Statutorymergersbymeansofsecurityholdersvotearedefined
byRule145(a)(2),forpurposesofSection2(a)(3),aseventsofsale.The
ruleexcludesfromthisdefinitionmergersforthesolepurposeofchanging
theissuer'sstateofincorporation.Theexclusionitselfislimitedto
migratorytransactionsoccurringexclusivelywithintheUnitedStates,from
onestatetoanother.Despitetherulesexpressdomesticlimitation,similar
transactionschangingaforeignissuersdomicilefromonepolitical
subdivisionofacountrytoanother(suchasreincorporationfromone
Canadianprovincetoanother)likewiseshouldnotbetreatedasasale.
However,ifanonU.S.corporationundertakesamergertoincorporate
withintheUnitedStates,themigratorytransactionisaneventofsalethat
mustberegisteredwiththeCommissionorexemptfromregistration.[Nov.
26,2008]
539.04Item17(b)(7)ofFormS4statesgenerallythatthefinancial
statementsofacquiredcompaniesthatwerenotpreviouslyExchangeAct
reportingcompaniesneedbeauditedonlytotheextentpracticable,unless
theFormS4prospectusistobeusedforresalesbyanypersondeemedan
underwriterwithinthemeaningofRule145(c),inwhichcasesuchfinancial
statementsmustbeaudited.TheDivisionstaffwasaskedwhetheraresale
pursuanttoRule145(d),inlieuoftheFormS4prospectus,wouldrequire
thefinancialstatementstobeaudited.TheDivisionstaffnotedthatRule
145(d)isnotincludedintheInstructiontoItem9.01ofForm8Kregarding
salespursuanttoRule144duringthe71dayextensionperiodforfiling
financialstatements.Astheauditedfinancialstatementsfortheacquired
companywouldberequiredpursuanttoItem9.01ofForm8K,aresale
pursuanttoRule145(d)wouldnotbepermitteduntiltheyarefiled.[April
2,2008]
539.05AproposedRule145mergerissubmittedforavoteof
shareholdersatanannualmeetingatwhichdirectorsarealsotobeelected.
Incumbentdirectorswouldbedeemedunderwriterswithrespecttothe
securitiesissuableinthemergertransactionforpurposesofparagraph(c)
ofRule145,eventhoughtheyarenotcandidatesforreelection.[Jan.26,
2009]
539.06Aformeraffiliateofashellcompanythatwasacquiredina
registeredRule145transactionreceivedfourpercentoftheoutstanding
sharesoftheacquiringcompany.AlthoughRule145(d)(2)(i)wouldpermit
theformeraffiliatetosellpubliclyonepercentoftheoutstandingshares
everythreemonths,theformeraffiliatewishestoselltheentirefour
percentinasingletransaction.Theformeraffiliate(whoisnotanaffiliate
oftheacquiringcompany)wasadvisedthatRule145(d)didnotprecludea
privatesaleoftheentireamount,butthebuyerinanysuchprivate
transactionwouldhavetostepintotheshoesofthesellerandcomplywith
Rule145(d)inmakingpublicresalesofthesecurities.[Jan.26,2009]
539.07ApersonsubjecttoRule145(c)convertspreferredstockreceived
inaRule145transactionintocommonstock.Suchpersonmaytackthe
holdingperiodforthepreferredtothatofthecommonindetermining
eligibilitytouseRule145(d)(2)totheextentpermittedbyRule144(d).
[Jan.26,2009]
539.08ApartnershipdistributesrestrictedsharesofshellcompanyAtoits
partners,XandY.XandYholdenoughsharesofAtobedeemedtobe
affiliates.Consequently,whencorporationBlateracquiresshellcompanyA,
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andthesharesofAareexchangedforsharesofB,thetwopartnersmust
selltheirsharesofBpursuanttoRule145(d),asRule145(c)applies
becauseAisashellcompany.However,theyneednotaggregatetheir
salesforpurposesofthevolumelimitationofparagraph(e)ofRule144,
excepttotheextentthattheyareactinginconcertorarethesameperson
forpurposesofRule144.[Jan.26,2009]
539.09AnaffiliateofcompanyAacquiressecuritiesofcompanyBina
Rule145transaction.Theaffiliategivessomeofthosesecuritiestoa
charity,andthensometimelaterbecomesanaffiliateofB.Although
suchaffiliatemustnowsellBsharespursuanttoalltheprovisionsofRule
144sincesuchpersonisanaffiliateofB,thecharitycancontinuetosell
pursuanttotheprovisionsofRule145(d),totheextentRule145(c)
applies.[Jan.26,2009]
539.10XacquiresstockinaregisteredRule145offering,butissubjectto
theresalerestrictionsofRule145(d)becauseXisanaffiliateofthe
acquiredcompanyandRule145(c)applies.Pursuanttoandonor
subsequenttothedateofacourtapproveddivorcesettlement,Xtransfers
someofthesharestospouseYwhoisnotanaffiliate.Thesharesarenot
subjecttoresalerestrictionsinYshandsbecauseYisnotsubjecttothe
Rule145(d)restrictionsandtheresalestatusofaspousereceiving
securitiesinadivorceproceedingunderthesecircumstanceswillbe
determinedbythestatusofYandnotbythestatusofX.[Jan.26,2009]
539.11LessthansixmonthsafteraRule145transaction,aperson
deemedtobeanunderwriterbyRule145(c)dies.Theestateofthe145(c)
underwritermayingeneralsellpubliclyinthesamemannerthedecedent
couldhave,thatis,underparagraphs(c),(e),(f),and(g)ofRule144,
whichapplyduetoRule145(d)(2)(i).Iftheestateisnotanaffiliateofthe
issuer,itwillbeabletosellsubjectonlytothecurrentpublicinformation
requirementinRule144(c)becauseofthereliefprovidedtounaffiliated
estatesbyRule144(e)andRule144(f).[Jan.26,2009]
Section541.Rule147PartofanIssue,PersonResident,and
DoingBusinessWithinforPurposesofSection3(a)(11)
541.01Alocalbank,whosesharesareheldonlybyTexasresidents,is
planningtoformabankholdingcompanyandexchangeshareswithits
shareholdersunderRule147.Ifshareholdersmoveoutofstateduringthe
timerequiredtoobtainregulatoryapprovals,suchshareholdersmaybe
cashedouttoretaintheRule147exemption,assumingcashingoutis
permittedundertheapplicablestatelaw.[Jan.26,2009]
541.02AfamilytrustislocatedinastatewhereaRule147offeringisto
bemade.Abeneficiarywithahalfinterestinthetrustresidesinanother
state.Thetrustmaynotbeofferedsecuritiesorpurchasesecuritiesinthe
Rule147offering.[Jan.26,2009]
Section573.Rule174DeliveryofProspectusbyDealers
ExemptionsUnderSection4(3)oftheAct
573.01Aregistrantsinitialpublicofferinghasbeenconsummated,butthe
Rule174prospectusdeliveryperiodisstillapplicable.Theregistrantis
consideringmakingamaterialacquisitionthatitconsidersprobable.The
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registrantwouldneedtosupplementtheprospectusasappropriatesothat
theprospectuscomplieswithSecuritiesActSection10(a)atthetimeofany
deliveryrequiredpursuanttoRule174.[Jan.26,2009]
573.02CompanyA,whichisnotanExchangeActreportingcompany,
proposestouseFormS3toissuedebtsecuritiesthatwouldbeguaranteed
byitsExchangeActreportingparent.CompanyAisawhollyowned
subsidiaryofparentandtheguaranteeisfullandunconditional.The
exemptionfromprospectusdeliveryrequirementsprovidedbyRule174(b)
wouldbeavailableforthisofferingbecausetheparentwouldbesubjectto
theExchangeActreportingrequirementsimmediatelypriortothetimeof
filingtheregistrationstatement,CompanyAwouldbewhollyownedby
parent,andparentwouldfullyandunconditionallyguaranteethedebt
securities.[Jan.26,2009]
573.03Ifanexchangehasapprovedanissuefortradingasoftheearlier
oftheeffectivedateorthedaytheofferingcommences,butactualtrading
cannotcommenceuntilclosing,withwhenissuedtradingoccurringinthe
interim,Rule174(d)wouldbeavailableforthewhenissuedtrading.[Jan.
26,2009]
573.04TheprospectusdeliveryrequirementsofRule174(d)applyinthe
contextofsavingsandloanconversions,whenasubscriptionofferingto
existingdepositorsataspecifiedpricerangeisfollowedbyanofferingto
thegeneralpublicatafixedprice.Thecommencementofthesubscription
offerwouldbethecommencementofabonafidepublicofferingfor
purposesofRule174(d).Althoughthesecuritywouldnotcommence
tradinguntilclosing,if,asofcommencementoftheoffering,thesecurityis
authorizedforinclusioninanelectronicinterdealerquotationsystem
sponsoredandgovernedbytherulesofaregisteredsecuritiesassociation,
the25dayprospectusdeliveryperiodofRule174(d)wouldbeavailable.
[Jan.26,2009]
573.05Rule174shortensto25daystheprospectusdeliveryperiodfor
initialpublicofferingsthatareimmediatelylistedfortradingonan
exchangeoreligibleforquotationonanautomatedquotationsystemofa
nationalsecuritiesassociation.However,ExchangeActRule15c28(d)
providesthatbrokerdealersmustcontinuetodeliverthesame
prospectuses,uponrequest,forthefull90dayperiod.WhileRule174(d)
relievesbrokerdealersofanobligationtodeliverprospectusesin
connectionwitheverydealduringthefull90dayperiod,itdoesnotchange
brokerdealersobligationstodeliverprospectusesuponrequestduringthat
time.[Jan.26,2009]
Section598.Rule401RequirementsastoProperForm
598.01AssetforthinRule401,aregistrationstatementmustmeetthe
formrequirementsatthetimeitisfirstfiled,andalsoatthetimeofany
Section10(a)(3)posteffectiveamendment.Aregistrationstatementon
oneformmaybechangedtoanyotherformforwhichitistheneligibleby
preeffectiveorposteffectiveamendment,withoneexception.Anissuer
maynotfileapreeffectiveorposteffectiveamendmenttochangea
registrationstatementthatisnotanautomaticshelfregistrationstatement
toanautomaticshelfregistrationstatement.Instead,theissuermustfilea
newregistrationstatementonFormS3orFormF3,designatedasan
automaticshelfregistrationstatement.Exceptforregistrationstatements
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andposteffectiveamendmentsdescribedinRule401(g),oncea
registrationstatementisdeclaredeffective,itisdeemedtobeonthe
properform.[Apr.24,2009]
598.02PursuanttoInstruction3tothesignaturerequirementsforFormS
3,acorporationmaysignandfilearegistrationstatementonFormS3for
anofferingofnonconvertibledebtorpreferredsecuritiesifithasa
reasonablebasistobelievethattheinvestmentratingofsuchsecuritiesat
thetimeofsalewillpermituseoftheform.Ifaninvestmentgraderatingis
notreceived,aposteffectiveamendmentwouldberequiredwhenthe
issuercannotsatisfyFormS3eligibilityrequirementswithoutsucha
rating.[Jan.26,2009]
598.03AregistranthasaneffectiveFormS3forasecondaryoffering.At
thetimeoffiling,allrequirementsforuseoftheformweremet.Now,three
monthslater,itappearsthatadividendpaymentoncertainpreferredstock
maybemissed.TheregistrantmaycontinuetousetheeffectiveFormS3
solongasthereisnoneedtoupdatetheregistrationstatementfor
purposesofSecuritiesActSection10(a)(3).Atthetimethatupdatingis
necessary,Rule401wouldrequiretheuseofwhateverformisavailableto
theregistrantatthattime.[Jan.26,2009]
Section603.Rule405DefinitionofTerms
603.01UnderRule405,thedefinitionofdividendorinterestreinvestment
planwouldcoveraplanwherebylimitedpartnerscouldreinvestcashflow
distributionsintothepartnershipforadditionalpartnershipinterests.[Jan.
26,2009]
603.02AcompanywithaDecember31fiscalyearendemergedfrom
bankruptcyinmidJanuaryof2008.InMarch2008,thecompanyfileda
Form10Kwithauditedfinancialstatementsforthefiscalyearended
December31,2007.TheForm10Kdidnotincludeauditedfinancial
statementsfortheperiodinthebeginningofJanuarypriortothe
companysemergencefrombankruptcy.Thecompanywillremainan
ineligibleissuerpursuanttosubparagraph(1)(iv)(B)ofthedefinitionof
ineligibleissuerinRule405untilitfilesauditedfinancialstatementsfora
periodendingsubsequenttoitsemergencefrombankruptcy.[Jan.26,
2009]
603.03Awellknownseasonedissuerwithaneffectiveautomaticshelf
registrationstatementfiledaForm10KpriortotheForm10Kduedate.
BecausetheForm10Kfailedtoincludeauditedfinancialstatementsand
wasthereforemateriallydeficient,theissuerplannedtoamendtheForm
10K,andaskedwhethereligibilityasawellknownseasonedissuerwould
bereassessedatthetimeoftheamendment.Rule405requiresanissuer
toreassessitswellknownseasonedissuerstatusatthetimeitfilesaForm
10KtoupdateashelfregistrationstatementforSection10(a)(3)
purposes.Underthesefacts,astheoriginallyfiledForm10Kwasso
materiallydeficientthatitwouldnotbeconsideredfiledforpurposesof
assessingformeligibility,theissuerwouldneedtoreassessitswellknown
seasonedissuerstatusatthetimeitfilesitsamendedForm10K.Ifthe
amendedForm10KisnotfiledbytheForm10Kduedate,theissuer
wouldnotbeeligibleasawellknownseasonedissueronorafterthatdue
date,becauseitwouldnotbetimelyinitsExchangeActfilings.[Jan.26,
2009]
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Section609.Rule412ModifiedorSupersededDocuments
609.01Acalendaryearcompanyproposedtofilearegistrationstatement
onFormS3onFebruary1,2006.Theregistrantwouldincludefinancial
statementsfortheyearendedDecember31,2005,andincorporateits
Form10KfortheyearendedDecember31,2004.Theregistrantwas
concernedbecausethefinancialstatementsinthe2004Form10Kwould
becomeoutofdate.Rule412(a),however,hastheeffectinthese
circumstancesofautomaticallysupersedingtheDecember31,2004
financialstatementsforpurposesoftheFormS3filing.Intheeventthe
registrantwishedtoremovealldoubtaboutoutdatedfinancialstatements
intheForm10KbeingsupersededbylaterfinancialsincludedintheForm
S3,Rule412(b)permitsittoincludeaspecificstatementintheFormS3
onthesubject.[Jan.26,2009]
Section610.Rule413RegistrationofAdditionalSecuritiesand
AdditionalClassesofSecurities
610.01AnissuerfiledaregistrationstatementonFormS4foramerger.
Inadvertently,thenumberofsharesregisteredwasnotsufficienttocover
certainsharesissuableupontheexerciseofoptionsduringtheperiodafter
theeffectivedateoftheregistrationstatementbutpriortothe
consummationofthemerger.Rule413(a)doesnotpermittheregistration
ofadditionalsharesbyposteffectiveamendment.Counselwasinformed
that:(1)itcouldrelyonRule462(b)toprepareandfileashortform
registrationstatementprovidedtheamounttoberegisteredwaswithinthe
20%limitandtheotherconditionsweremetor(2)itcouldfileanew
registrationstatementthatcouldbecombinedwiththeearlierregistration
statementpursuanttoRule429.[Jan.26,2009]
610.02InitseffectiveFormS8,acompanyregistered500,000sharesfor
salebythecompanypursuanttoanoptionplan,and1,000previously
unregisteredsharesforresaleonaresaleprospectuspursuanttoGeneral
InstructionCtoFormS8.ThecompanymaynotrelyonGeneral
InstructionC.3.(a)(whichappliesonlytocontrolsecuritiesandallowsthe
additionofpersonstotheresaleprospectuslistofsellingshareholdersby
meansofaposteffectiveamendmentorRule424(b)prospectus
supplement)toshiftanyofthe500,000sharesregisteredontheprimary
portiontotheresaleprospectussincetodosowouldamounttoregistering
additionalsecuritiesbymeansofaposteffectiveamendmentin
contraventionofRule413.[Jan.26,2009]
Section611.Rule414RegistrationbyCertainSuccessorIssuers
611.01ACaliforniacorporationmergedwithaDelawarecorporationfor
thepurposeofchangingitsdomicile.Rule414permitstheDelaware
corporationtousetheregistrationstatementsoftheCaliforniacorporation
byfilinganamendmentexpresslyadoptingthestatementsofthe
predecessor.Becausethemergerentailstheissuanceofsecuritiesofa
corporationdifferentfromtheoriginalregistrant,theamendmentshould
containanewopinionofcounselonthelegalityoftheissuanceand
counselsconsent.[Jan.26,2009]
611.02InorderforRule414toeffectregistrationofasuccessorissuer,
paragraph(c)requiresthatthesuccessionbeapprovedbythe
predecessorssecurityholdersatameetingforwhichproxiesweresolicited
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pursuanttoExchangeActSection14(a)orinformationwasfurnishedto
securityholderspursuanttoExchangeActSection14(c).Whenthe
predecessorisanExchangeActSection15(d)companyratherthana
Section12company,andthusnotsubjecttoSection14,therequirements
ofRule414(c)willbemetwhentheproxyorinformationstatementis
preparedandvotesaresolicitedsubstantiallyinaccordancewithSection
14.[Jan.26,2009]
611.03AFormS4registrationstatementwillbefiledtoconvertan
existingcorporationintoatrustthatwillhavethesameassetsand
managementasitspredecessor.Becauseofapplicabletaxlaworstatelaw
provisions,thenewtrustwillnotbecreateduntilaftertheFormS4has
becomeeffective.Thecompanysoughtadviceastowhowouldbethe
registrantfortheFormS4andwhoshouldsigntheregistrationstatement.
UsingRule414asamodel,theexistingcompanymayexecuteandfilethe
registrationstatement.Atthetimethetrustisformed,itshouldfileapost
effectiveamendmentadoptingtheregistrationstatement.[Jan.26,2009]
Section612.Rule415DelayedorContinuousOfferingandSaleof
Securities
612.01Rule415(a)(1)(vii)permitsadelayedorcontinuousofferinginthe
caseofmortgagerelatedsecurities.AlthoughtheSecuritiesActandthe
rulesthereunderdonotdefinemortgagerelatedsecurities,theExchange
ActwasamendedtoprovidesuchadefinitioninSection3(a)(41).Because
theterminRule415wasintendedtohavethesamemeaningasultimately
decideduponbyCongress,asecuritymeetingthedefinitioninExchange
ActSection3(a)(41)willalsobedeemedtobeamortgagerelatedsecurity
forpurposesofRule415.Inthecaseofatraditionalmortgagerelated
securitiesofferingwhichdoesnotfallwithinthedefinition,consideration
shouldbegiventowhetheranothersubsectionofRule415(a)(1)is
available,forexample,Rule415(a)(1)(ix)or(x).Securitiesofferings
registeredinrelianceonRule415(a)(i)(ix),unlikethoseregisteredin
relianceonsubsections(vii)and(x),aresubjecttothetwoyearlimitation
ofRule415(a)(2),unlessregisteredonFormS3orFormF3.[Jan.26,
2009]
612.02Aninsurancecompanyacquired55%ofthecommonstockofa
companyinaprivatetransaction.Itnowholdstheserestrictedsecuritiesas
areserveagainstclaims.Astheresultofanannualstateinspection,the
insurancecompanyhasbeenquestionedregardingthesufficiencyofits
reserves.Inordertoenhancethevalueoftherestrictedsecurities,it
wishestohavethemregistered.Anyregistrationstatementfiledforthis
purposewouldbegovernedbyRule415becausetheinsurancecompany
maynotintendtosellthesecuritiesimmediately.Sincetheissuerwouldbe
deemedasubsidiaryoftheinsurancecompany,itwouldbeunabletorely
uponRule415(a)(1)(i).Therefore,anotherparagraphofRule415(a)(1)
wouldhavetobeavailableinordertoregistertheofferingonadelayedor
continuousbasis.[Jan.26,2009]
612.03Anissuerthatisnoteligibletoregisteradelayedprimaryoffering
onFormS3pursuanttoInstructionI.B.1.oftheformintendstoconducta
rightsofferingfor30days.Followingthattime,thesharesnotsubscribed
forwillbesoldinafirmcommitmentunderwriting.Theofferingmaybe
madeinrelianceonRule415(a)(1)(ix).Item512(c)ofRegulationSK
contemplatesthisresult.[Jan.26,2009]
612.04Inthecaseofaregistrationstatementpertainingtoanofferingof
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convertibledebenturesandthecommonstockunderlyingthedebentures,
Rule415typicallyisnotapplicabletothecontinuousofferingofthe
underlyingcommonstockbecausethatofferingisexemptfromregistration
pursuanttoSection3(a)(9).IncaseswhentheSection3(a)(9)exemption
isunavailable(forexample,whensecuritiesareconvertibleintosecurities
ofanotherissuer,whenconversiontermsrequirethattheshareholderpay
considerationatthetimeofconversion,orwhenconversionarrangements
involvethepaymentofcompensationforsolicitingtheexchange),absent
anotherexemption,Rule415(a)(1)(iv)isapplicable.Rule415appliesto
registeredofferingsmadeonadelayedorcontinuousbasis.[Jan.26,2009]
612.05AregistrantfilesaFormS3shelfregistrationstatementforthe
delayedsaleofdebentures.Dependinguponthelevelofinterestratesat
thetimetheofferingactuallytakesplace,theregistrantmayseekan
opinionofCaliforniacounseltotheeffectthattheofferingdoesnotviolate
theCaliforniausurylaws.Suchanopinionmaybefiledasanexhibittoa
Form8K,sincesuchformsareautomaticallyincorporatedbyreference
intoFormS3registrationstatements.[Jan.26,2009]
612.06Anissuerwithaneffectiveacquisitionshelfregistrationstatement
mayfollowtheproceduresdescribedinSecuritiesActReleaseNo.6578
(Apr.23,1985)andtheServiceCorporationInternationalinterpretiveletter
(Oct.31,1985)issuedbytheDivisiontoupdatetheregistrationstatement
foruseinsubsequentacquisitions.[Jan.26,2009]
612.07QuestionshavearisenconcerningtheapplicationofRule415to
mediumtermnoteofferings.Manyoftheseofferingsbeginpromptlyand
aremadeonacontinuousbasisinrelianceonRule415(a)(1)(ix).Others,
however,aremadeonadelayedbasisinrelianceonRule415(a)(1)(x)
sincetheydonotbeginpromptlyaftereffectiveness,butarecontinuousin
natureoncebegun.AnissuereligibletorelyonRule415(a)(1)(x)mayfile
oneregistrationstatementthatcoversseveralimmediate,continuousor
delayedofferings,eachadifferentprogramforanewseriesofnotes.[Jan.
26,2009]
612.08ARule415offeringprovidesthatpurchaserswithinthefirst60
dayswillreceiveasecuritywithahigheryieldthanthattobereceivedby
subsequentpurchasers.Theregistrantwishedtoextendthepreferential
purchaseperiodforanadditional30days.TheDivisionstaffhastakenthe
positionthatsuchanextensionisamaterialchangeintheplanof
distribution,whichaccordingtotheItem512(a)(iii)undertakingwould
requireaposteffectiveamendment(or,forregistrationstatementson
FormS3orF3,compliancewithoneofthemethodsinItem512(a)(1)
(B)).[July3,2008]
612.09Itisimportanttoidentifywhetherapurportedsecondaryofferingis
reallyaprimaryoffering,i.e.,thesellingshareholdersareactually
underwriterssellingonbehalfofanissuer.Underwriterstatusmayinvolve
additionaldisclosure,includinganacknowledgmentofthesellers
prospectusdeliveryrequirements.InanofferinginvolvingRule415orForm
S3,iftheofferingisdeemedtobeonbehalfoftheissuer,theRuleand
Forminsomecaseswillbeunavailable(e.g.,becauseoftheFormS3
publicfloattestforaprimaryoffering,orbecauseRule415(a)(1)(i)is
availableforsecondaryofferings,butprimaryofferingsmustmeetthe
requirementsofoneoftheothersubsectionsofRule415).Thequestionof
whetheranofferingstyledasecondaryoneisreallyonbehalfoftheissuer
isadifficultfactualone,notmerelyaquestionofwhoreceivesthe
proceeds.Considerationshouldbegiventohowlongtheselling
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shareholdershaveheldtheshares,thecircumstancesunderwhichthey
receivedthem,theirrelationshiptotheissuer,theamountofshares
involved,whetherthesellersareinthebusinessofunderwritingsecurities,
andfinally,whetherunderallthecircumstancesitappearsthattheselleris
actingasaconduitfortheissuer.[Jan.26,2009]
612.10TheregistrantfiledaregistrationstatementonFormS11relating
toashelfofferingofmortgagebackedbondstobeissuedinseries.The
registrantwasinformedthatitwouldnotbenecessarytofileposteffective
amendmentsandsupplementalindentureseachtimeanewseriesofbonds
wastobeissued.Theresponsewasconditionedupontwofactors:
1.Abasicformofsupplementalindentureincludingeverythingbutthe
collateralforaparticularseriesisfiledatthetimetheregistrationis
declaredeffectiveandthebasicindentureisqualifiedand
2.Theregistrantfilesaprospectussupplementinsupplementform
describingtheissuanceoftheseriesandthecollateraltherefor.
ThispositionisconsistentwithInstruction1toItem601(a)ofRegulation
SK.Whenaregistrantdoesnotsatisfytheseconditions,supplemental
indenturesandamendedunderwritingagreementsmaybefiledonlyby
posteffectiveamendmentandnotasexhibitstoaForm8K.Thereasonis
thatFormS11doesnotpermitincorporationbyreferencetosubsequently
filedExchangeActreports,suchasaForm8K.[Jan.26,2009]
612.11Securitiestobeissuedinconnectionwithbusinesscombinations
mayberegisteredfortheshelfpursuanttoRule415(a)(1)(viii).Whilethis
ruledoesnotlimittheSecuritiesActregistrationformused,notallforms
areavailableforbusinesscombinations.Inparticular,FormS3isnot
availableforbusinesscombinationsofanykind.Theforcashprovisoin
GeneralInstructionI.B.1ofFormS3isinterpretedasprohibitingtheuse
oftheformnotonlyforthirdpartyexchangeoffersbutalsoforanyother
businesscombination,howeverstructured.SeeSecuritiesActReleaseNo.
6534(May9,1984),atfn.14.FormS3maybeusedforasecondary
offeringofshareswhichwereoriginallyreceivedfromtheissuerin
connectionwithabusinesscombination,assumingitisagenuinesecondary
offering.[Jan.26,2009]
612.12Acontrollingpersonofanissuerownsa73%block.Thatperson
willselltheblockinaregisteredatthemarketequityoffering.Rule
415(a)(4)appliesonlytoofferingsbyoronbehalfoftheregistrant.A
secondaryofferingbyacontrolpersonthatisnotdeemedtobebyoron
behalfoftheregistrantisnotrestrictedbyRule415(a)(4).[Jan.26,2009]
612.13Pursuanttoashelfregistrationstatement,fromtimetotimea
companyissuessecuritiesthroughafirmcommitmentunderwritingata
fixedpricebasedonthepriordaysclosingprice.Thesefirmcommitment
takedownswouldnotbeconsideredatthemarketofferingsbecausethey
areatafixedprice.However,salesintoanexistingtradingmarketof
securitiesofthesameclassmadebybrokerdealerfirmswhobuysecurities
insuchtakedownsmaybedeemedindirectprimaryofferingsmadeatthe
marketwithinthemeaningofRule415(a)(4),therebytriggering
registrationandprospectusdeliveryrequirements.[Jan.26,2009]
612.14Inexchangeforconsultingservices,aprivateoperatingcompany
intendedtosellabout13percentofitsstocktoapubliccompanywhose
solebusinesswasprovidingconsultingservices.Theconsultingservices
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involvedpreparingaregistrationstatement,applyingforlisting,obtaining
marketmakersandseveralotherservicesrelatedtodevelopingamarket
orraisingcapital.Thepubliccompanyintendedtodistributeabouthalfof
the13percentoftheoperatingcompanystockitwouldreceivetoits
stockholdersasadividendthroughaspinoff.Italsowantedtoregister
therestofthestockitwouldreceiveforresalepursuanttoRule415(a)(1)
(i).Thetransactionisaprimaryofferingoftheoperatingcompanythrough
thepubliccompanyanditsshareholdersandtheregistrationstatement
wouldneedtocovertheentiredistributionofthesesharesandthedividend
shares,includingtheirfurtherdistributiontothepublic.Theregistration
statementwouldneedtonamethepubliccompanyanditsshareholdersas
underwritersandincludeappropriatedisclosureaboutthem,suchasthe
informationdescribedinItem507ofRegulationSK.Inaddition,because
theoperatingcompanywasnoteligibletodoanatthemarketofferingona
primarybasispursuanttoRule415(a)(4),thesecuritiesofferedandsold
pursuanttotheregistrationstatementwouldhavetobeofferedandsoldat
afixedpriceforthedurationoftheoffering.[Jan.26,2009]
612.15Acompanywithminimaloperations(parentcompany)andabout
750shareholdersintendedtocreateasubsidiarywithnosignificant
operationsandspinitofftoitsshareholders,immediatelyafterwhichthe
subsidiarywouldmergewithaprivateoperatingcompanythathasabout
20shareholders.Afterthemerger,about95percentoftheequityofthe
mergedentitywouldbeownedbyformershareholdersoftheoperating
company,aboutfourpercentwouldbeownedbytheshareholdersofthe
parentcompany,andaboutonepercentwouldbyownedbysomeinsiders
oftheparentcompanywhowouldreceivestockintheoperatingcompany
asafindersfeeinconnectionwithstructuringthetransaction.Itwas
contemplatedthatSecuritiesActregistrationstatementscoveringthe
sharestobeissuedinthespinoffandthemergerwouldbefiled.In
addition,afterthemergersomeinsidersoftheparentcompanywouldsell
sharesofthemergedentitythattheywouldreceiveduetothespinoffand
duetotheexchangeofthefindersfeesharesinthemerger.
Basedonthesefacts,thetransactionisaprimaryofferingoftheoperating
companythroughtheparentcompanyanditsshareholders.Assuch,rather
thanregisteringpartsofthistransaction(i.e.,thespinoffandmerger),the
entiredistributionoftheoperatingcompanysharestothepublicwould
needtoberegisteredasaprimaryoffering.Theregistrationstatement
wouldhavetonametheparentcompanyanditsshareholdersas
underwriters,andincludeappropriatedisclosureaboutthem,suchasthe
informationdescribedinItem507ofRegulationSK.Inaddition,because
theoperatingcompanywasnoteligibletodoanatthemarketofferingona
primarybasispursuanttoRule415(a)(4),theregistrationstatementwould
havetoincludeafixedpriceforthedurationoftheoffering.[Jan.26,
2009]
612.16ArealestateinvestmenttrustutilizesanUPREITstructurewhereby
theREITisthegeneralpartnerofalimitedpartnershipthatholdsallofthe
REITsproperties.Limitedpartnersofthelimitedpartnershipmayelectto
converttheirlimitedpartnershipunitsintocommonsharesoftheREITona
oneforonebasishowever,theREITmayelecttopaycashinsteadof
sharesuponconversion.TheREITmayregistertheissuanceofcommon
sharesunderlyingoutstandinglimitedpartnershipunitspursuanttoRule
415(a)(1)(iv).IftheREITsatisfiestheregistranteligibilityrequirementsin
InstructionI.AofFormS3,itmayregistertheofferingonFormS3
pursuanttoInstructionI.B.4oftheform.[Jan.26,2009]
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612.17Plansoffinancingcaninvolveperiodicadjustmentsofinterestor
dividendrates,rolloversofsecurities,andplanstobuybackandremarket
securities,sometimescoupledwithputsorguarantees(whichthemselves
aresecurities).FilingsinvolvingsuchplansrequireananalysisofSection5
andRule415issueswithrespecttoallsecuritiesinvolvedintheofferings.
Evenaftertheoriginalofferingofthesecuritieshasterminated,the
registrantmaystillbeengagedinacontinuousordelayedofferingwith
respecttothefutureperiodicissuanceormodificationofsecurities.These
subsequenttransactionsmayinvolveprimaryofferingsoftheissuers
securitiestotheextenttheissuerpaysaremarketingorauctionagentor
otherwiseisinvolvedinsubsequentsalessuchasintheremarketingsor
auctions.[Nov.26,2008]
Section613.Rule416SecuritiestobeIssuedasaResultofStock
Splits,StockDividendsandAntiDilutionProvisionsandIntereststo
beIssuedPursuanttoCertainEmployeeBenefitPlans
613.01Aregistrationstatementforwarrantsandtheunderlyingcommon
stockwasdeclaredeffective.Thetermsofthewarrantsincludedananti
dilutionclause,providingforachangeintheamountofsecuritiestobe
issuedtopreventdilutionresultingfromstocksplitsorstockdividends.
Subsequenttoeffectiveness,theissuerdeclaredapreferredstockdividend
onitscommonstock.Underthetermsoftheantidilutionprovision,
warrantholders,uponexercise,wouldreceivesharesofcommonstockand
acorrespondingnumberofsharesofpreferredstock.Assumingasaleof
preferredstocktothewarrantholdersisinvolvedintheexerciseofthe
warrant,theregistrationstatementwouldnot,underRule416,bedeemed
tocoverthesharesofpreferredstocktobeissuedinconnectionwiththe
antidilutionprovision,sincethesesharesareofadifferentclassfromthose
registered.[Jan.26,2009]
613.02Whenaregistranthasastocksplitpriortothecompletionofa
registereddistributionthatisnotcoveredbyantidilutionprovisions,Rule
416(b)providesthattheregistrationstatementmaybedeemedtocover
theadditionalsecuritiesifaposteffectiveamendmentisfiledtoreflectthe
increaseintheamountofsecuritiesregistered.Acompanywithsecurities
registeredonFormS3maynotincreasethenumberofsharesregistered
byfilingaForm8K.Instead,aposteffectiveamendmentisrequired.The
posteffectiveamendmentcouldbelimitedtothefacingpage,an
explanatorynoteandthePartIIinformation,unlessadditionalchangesare
beingmadetotheprospectus.[Jan.26,2009]
Section616.Rule419OfferingsbyBlankCheckCompanies
616.01Inablankcheckoffering,ifaconsummatedacquisitionmeeting
therequirementsofRule419hasnotoccurredbyadate18monthsafter
theeffectivedateoftheinitialregistrationstatement,fundsheldinthe
escrowortrustaccountmustbereturnedtoinvestorspursuanttoRule
419(e)(2)(iv)andescrowedsecuritiesmustbereturnedtotheregistrant.
Insum,thetransactionmustbeunwound.Forexample,whenthe
securitiesofablankcheckcompanyareallgiftedtocharitiesandnocashis
actuallypaid,ifaftertheexpirationofthe18monthperiodnoacquisition
hasbeenconsummated,suchescrowedsharesmustbereturnedtothe
registrant.[Jan.26,2009]
616.02Whenablankcheckcompanyfilesaregistrationstatement
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coveringtheresaleofsecuritiesbysellingshareholders,theissueris
requiredtocomplywithRule419ifthesecuritiesofferedunderthe
registrationstatementarepennystock.Rule419appliestoallregistered
offeringsofsecuritiesbyblankcheckcompanieswhenthesecuritiesare
pennystock,asdefinedinExchangeActRule3a511.[Jan.26,2009]
Section620.Rule424FilingofProspectuses,NumberofCopies
620.01ForEDGARheaderpurposes,whenfilingaRule424(b)prospectus
supplementinconnectionwithanofferingthatinvolvesaninitialeffective
registrationstatementandasecondregistrationstatementregistering
additionalsecuritiesunderRule462(b),theRule424(b)supplementmust
befiledundertheregistrationnumber(33or333)fortheinitial
registrationstatement.ThecoverpageoftheRule424(b)supplement
should,however,setforththeregistrationnumbersofboththeinitial
registrationstatementandtheRule462(b)registrationstatement.[Jan.
26,2009]
620.02Whenasupplementtoaprospectusisused,theSecuritiesAct
prospectusdeliveryrequirementsarenotsatisfiedbydeliveryto
broker/dealersofasupplementunattachedtotheprospectus.The
supplementmustbeattachedtotheprospectuseitherphysicallyor
electronicallysothattheprospectusbeingdeliveredincludesboththe
supplementandtheprospectus.SeeSecuritiesActReleaseNo.6714(May
27,1987).TheexceptionstothispositioninvolveFormS8anddividend
reinvestmentplansfiledonFormS3.Inthosecases,updatingofthe
existingregistrationstatement,withoutincludingthefullprospectus,is
accomplishedthroughtheuseofRule424supplementsthataredistributed
toplanparticipantswhohavepreviouslyreceivedaprospectus,or,inthe
caseofFormS8,throughcompliancewithRule428.Suchsupplements
mustincludealegendindicatingthatafullprospectuswillbeprovidedupon
request.[Jan.26,2009]
620.03Achangeincurrencyinwhichsecuritiesmaybeissuedisnota
fundamentalchangeandmaybeaccomplishedbyprospectussupplement
underRule424(c).[Jan.26,2009]
620.04Areductionofthecommissionpaidtotheunderwriterorselling
agentmaybeaccomplishedbyprospectussupplementwhenthepriceof
thesecuritiesisnotchanged.[Jan.26,2009]
Section624.Rule428DocumentsConstitutingaSection10(a)
ProspectusforFormS8RegistrationStatementRequirements
RelatingtoOfferingsofSecuritiesRegisteredonFormS8
624.01Rule428(b)(2)requirestheregistranttodeliver,alongwiththe
documentscontainingtheinformationrequiredbyPartIofFormS8,one
of:thelatestRule14a3(b)annualreport,thelatestForm10K,thelatest
Rule424(b)prospectus,oraneffectiveForm10.Anissuerthatchangedits
fiscalyearfiledasixmonthtransitionreportonForm10Ksubsequentto
itslatestannualreportonForm10K.Whensuchissuerisrelyingonthe
Rule428(b)Form10Kdeliveryalternative,itmustdeliverboththelatest
annualreportonForm10KandthetransitionreportonForm10Kinorder
tosatisfytheRule428(b)requirement.[Jan.26,2009]
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Section625.Rule429ProspectusRelatingtoSeveralRegistration
Statements
Section627.Rule430AProspectusinaRegistrationStatementat
theTimeofEffectiveness
627.01Theinstructiontoparagraph(a)ofRule430Aprovidesthat
changesinvolumeandpricerepresentingnomorethana20%changein
themaximumofferingpricesetforthintheregistrationstatementfeetable
maybemadepursuanttoaRule424(b)(1)prospectussupplement.The
20%thresholdmaybecalculatedusingthehighendoftherangeinthe
prospectusatthetimeofeffectivenessandmaybemeasuredfromeither
thehighend(inthecaseofanincreaseintheofferingprice)orlowend(in
thecaseofadecreaseintheofferingprice)ofthatrange.[Apr.24,2009]
627.02[Reserved]
627.03Aregistrationstatementwenteffectivelisting$800millionofdebt
genericallyinitsfeetableandcontainingaprospectusspecifyingthree
classesofdebt.Theprospectusstatesthat$300millionwouldbeofferedof
eachofthefirsttwoclassesofdebtand$200millionofthethirdclass
wouldbeoffered.Theregistrantwishestochangetheallocationofthe
$800millionamongthe3classesaftertheeffectivedate.Instructionto
paragraph(a)ofRule430Awouldallowtheregistrant,withoutfilingapost
effectiveamendment,toincreaseaclassorclassesofdebtbyupto$160
million(20%of$800million)withacorrespondingreductionoftheother
classorclassesby$160million.Thedecreaseandincreasearenoteach
countedasa20%change(andtherebyequatingtoa40%change)since
theyaremadeinparallelasonereallocation.[Jan.26,2009]
Section628.Rule430BProspectusinaRegistrationStatement
AfterEffectiveDate
628.01Anissuerthatwaseligibletoconductaprimaryofferingof
securitiespursuanttoGeneralInstructionI.B.1ofFormS3plannedtofile
anunallocatedshelfregistrationstatementandconductanimmediate
takedownfollowingeffectiveness.Theissuerwouldincludeabase
prospectusintheFormS3andaskedwhetheraprospectussupplementfor
theimmediatetakedownwouldalsoneedtobefiledaspartofthe
registrationstatementpriortoeffectiveness.Withregardtotheimmediate
takedown,theissuerwasnotrequiredtoincludeaprospectussupplement
preeffectivelytodisclosetheinformationabouttheimmediatetakedown
thatwouldbeknownatthetimeofeffectivenessbecauseRule415(a)(1)(x)
permitsimmediatetakedownsandtheprospectussupplementforsuch
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takedownwouldbecomepartoftheregistrationstatementandthefiling
wouldcauseaneweffectivedateoftheregistrationstatement.[Jan.26,
2009]
Sections629to631.Rules430Cto432[Reserved]
Section632.Rule433ConditionstoPermissiblePostFilingFree
WritingProspectuses
632.01Rule433(d)(4)doesnotprovideanexceptionfromthefiling
requirementsofRule433(d)(1)(i)(C).Accordingly,ifafreewriting
prospectusisusedbytheissueroranyofferingparticipantthatincludesthe
finaltermsofthesecuritiesoroftheoffering,theissuermustfilea
descriptionofthefinaltermsregardlessofwhethertheissuerhas
previouslyfiledafinalprospectussupplementthatincludesthefinalterms
ofthesecuritiesunderRule424.[Jan.26,2009]
632.02Anunderwriterdistributedafreewritingprospectusthrougha
widelyusedsubscriptionnewsandfinancialdataserviceandthefree
writingprospectuswasavailabletoallsubscribersoftheservice.Inthis
case,thefreewritingprospectuswasdistributed...inamanner
reasonablydesignedtoleadtoitsbroadunrestricteddisseminationfor
purposesofRule433(d)(1)notwithstandingthefactthatthenewsand
financialdataservicewasasubscriptionservice.[Jan.26,2009]
Section633.Rule436ConsentsRequiredinSpecialCases
633.01AregistrantfilingonFormS8incorporatedaForm10Kthat
containedits2007financialstatementscertifiedbyoneaccountingfirm,
andits2005and2006financialstatementscertifiedbyadifferent
accountingfirm.Rule436wouldrequirethefilingoftheconsentsofboth
accountingfirmsforpurposesoftheFormS8registrationstatement.[Jan.
26,2009]
Section639.Rule456DateofFilingTimingofFeePayment
639.01AfterfilingaFormS3ASRthatreliedonthepayasyougo
provisionsinRule456(b),anissuerfiledaRule424prospectussupplement
toreflectacompletedtakedown.Thefeetableincludedintheprospectus
supplementfailedtoincludeanumberofshares(oraggregateoffering
amount)thatwerelatersoldpursuanttotheunderwritersoverallotment
optionandtheissuerdidnotpayafeeforthoseshareswithinthecure
periodpermittedbyRule456(b)(1)(i).Althoughfailingtoidentifytheover
allotmentsharesinthefeetableandpaythefeeconstitutedaSection6
violation,Rule456(b)(2)providesthatsuchfailuresdonotcausethe
registranttoviolateSection5becausetheregistrantreliedonthepayas
yougoprovisionsandtheclassofsecuritiessoldpursuanttotheover
allotmentoptionwasidentifiedintheFormS3ASRatthetimeitwasfiled.
TheissuerwasadvisedthatitshouldaddressitsSection6violationbyfiling
anadditionalprospectussupplementundereitherRule424(b)(2)or(b)(5)
andunderRule424(b)(8)withafeetablereflectingtheoverallotment
sharesandpayingtheassociatedfilingfeeatthattime.[Jan.26,2009]
639.02WellknownseasonedissuersthatrelyonRule456(b)todefer
paymentoffilingfeesarerequiredtopaythefeeswithinthetimerequired
tofiletheprospectussupplementpursuanttoRule424(b)...forthe
offering.Whenanissuerplanstousebothapreliminaryandafinal
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prospectus,therequiredfeemustbepaidwithinthetimerequiredtofile
thefinalprospectussupplement,astheissuermaynotknowtheactual
amountofferedatthetimethepreliminaryprospectusisfiled.[Jan.26,
2009]
Section640.Rule457ComputationofFee
640.01Whenaregistranthasfiledaregistrationstatementfortwo
separatesecuritiesandthenwishestoincreasetheamountofonesecurity
anddecreasetheother,theregistrantcanfileapreeffectiveamendment
toreflectsuchincreaseanddecreaseinthecalculationofregistrationfee
tableandreallocatethefeesalreadypaidundertheregistrationstatement
betweenthetwosecurities.[Jan.26,2009]
640.02AregistrantusingRule457(a)canincreasethenumberofshares
coveredbyaregistrationstatementbyaddingtheminthepricing
amendmentpriortoeffectiveness.Theregistrationfeefortheadditional
sharesshouldbebasedontheactualofferingprice,ratherthanthe
estimatedofferingpriceusedfortheinitialfiling.[Jan.26,2009]
640.03Aregistrationstatementfor1,000,000sharesofpreferredstock
wenteffectivewithanestimatedofferingpriceof$15pershare.Thefee
wascalculatedandpaidinrelianceonRule457(a).Aftertheeffectivedate,
butpriortothecommencementofsales,theregistrantsoughttoincrease
thenumberofsharesto1,150,000andincreasetheofferingpriceto
$17.50pershare.Becausemoresharesaregoingtobesoldthanwere
registered,theregistrantmustfileanewregistrationstatementtoregister
theadditional150,000sharesat$17.50pershare.Ashortform
registrationstatementunderRule462(b)wouldbepossiblesincethe
numberofadditionalshares(150,000)timesthenewprice($17.50)isless
than20%oftheaggregatedollaramountinthecalculationofregistration
feetableintheoriginaleffectiveregistrationstatement($15,000,000)
provided,however,thatnoconfirmationsmaybesentpriortothefilingof
theRule462(b)registrationstatement.[Jan.26,2009]
640.04Aregistrationstatementwenteffectiveregistering$15,000,000of
preferredstockunderRule457(o).Theprospectusindicatedthat1,000,000
shareswerebeingoffered.Aftertheeffectivedate,butpriortothe
commencementofsales,theregistrantsoughttoincreasethepricefrom
theintended$15maximumto$17.50,withoutchangingthenumberof
sharesintheoffering.Becauseregistrationwasdonebydollaramount
(Rule457(o)),notbynumberofshares(Rule457(a)),andsuchdollar
amountisincreasing,theregistrantmustfileanewregistrationstatement
toregistertheadditional$2,500,000ofpreferredstock.Ashortform
$2,500,000islessthan20%oftheaggregatedollaramountregisteredin
thecalculationofregistrationfeetableintheoriginaleffectiveregistration
statement($15,000,000)provided,however,thatnoconfirmationsmay
besentpriortothefilingoftheRule462(b)registrationstatement.[Jan.
26,2009]
commencementofsales,theregistrantsoughttoincreasethenumberof
sharesintheofferingto1,300,000anddecreasethepricefromthe
intended$15to$11.50.Becausethenewaggregateofferingamount
(1,300,000x$11.50)doesnotexceedthe$15,000,000registered,nonew
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registrationstatementneedbefiled.[Jan.26,2009]
640.06CompanyAplannedtoregisteritssecuritiesforissuancein
connectionwiththepurchaseofcompanyBsassets.CompanyBwouldnot
beliquidatedaftercompletionofthetransaction.Incalculatingthefiling
fee,CompanyAshouldlooktoRule457(d)andbasethefeeonthemarket
valueoftheassetstobereceived.[Jan.26,2009]
640.07Rule457(f)providesthatthefilingfeeforanacquisition
registrationstatementisdeterminedonthebasisofthevalueoftheshares
oftheacquiredcompany.However,thismethoddoesnotworkfora
registrationstatementfiledforanacquisitionshelf,sincetheentitiestobe
acquiredarenotyetknown.Thefilingfeeforsuchashelfregistration
statementshouldthereforebebasedonthemarketvalueoftheregistrants
sharesasprovidedinRule457(c).[Jan.26,2009]
640.08Acompanywasregisteringsharesissuableonexerciseofstock
options.Atthetimeoffiling,thecompanyhadnotyetissuedoptionsso
thattherewasnooptionexerciseprice.Thecompanyonlyhadpublicdebt
outstandingandtherewasnomarketforitscommonstock.Thecompany
hadanegativebookvalue.Thecompanywasadvisedtocalculatethefiling
fee,forpurposesofRule457(h),basedonagoodfaithestimateofthe
valueofthesecuritiesunderlyingtheoptions.[Jan.26,2009]
640.09Aquestionwasraisedastothefilingfeeforaletterofcredit
guaranteebackingmunicipalbonds.Becausetheletterofcreditwasissued
byacorporationratherthanabank,ithadtoberegisteredeventhough
theunderlyingsecuritieswereexempt.Ifthefilingfeewerebasedonthe
amountofmunicipalsecuritiescoveredbytheguaranteethefeewouldbe
overstated.Theentireamountoftheofferingneednotbeallocatedtothe
guaranteeandthefilingfeemaybebasedontheamountchargedbythe
corporationforissuingtheletterofcreditbyanalogytoRule457(k)and(l).
[Jan.26,2009]
640.10Anissuerproposedtoregisterredeemablenotesinaseriesof
registrationstatements.90%ofthenotestobeissuedundereach
registrationstatementwasexpectedtoredeemedwithin30daysof
issuance.Becausemostofthesecuritiesbeingregisteredwouldbe
outstandingforonlyabriefperiodoftime,theissuersoughtrelieffromthe
filingfeerequirements.TheissuercitedRule457(m),whichprovidesrelief
incertaincircumstanceswhenexemptcommercialpaperisbeingregistered
alongwithnonexemptcommercialpaper.Sincethenotesinquestionwere
notcommercialpaper,thefullfilingfeewaspayable.[Jan.26,2009]
640.11AcompanyfiledaregistrationstatementonOctober1,2003,
payinga$50,000filingfee.Onlyhalfofthesecuritiessoregisteredwere
sold.OnMarch1,2008,thecompanyfiledadifferentregistration
statementforwhichitowedafilingfeeof$15,000.Thecompanywasable
tooffsetthisfeebytransferring$25,000oftheearlier$50,000filingfee.
The$25,000representedtheentirefilingfeepaidonallunsoldsharesfrom
theOctober1,2003registrationstatement.Forpurposesoffuture
transfersunderRule457(p),the$25,000sotransferredwasconsidered
paidonMarch1,2008.AssumingtheotherconditionsofRule457(p)were
satisfied,the$10,000thatwastransferredinexcessofthefeedueforthe
secondregistrationstatement,aswellasanyportionofthe$15,000fee
thatremainedunusedaftercompletionorterminationoftheofferingwould
beavailablefortransfertoanotherregistrationstatementinitiallyfiled
beforeMarch1,2013.[Jan.26,2009]
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640.12Anassetbackedissuerinquiredwhetheritcouldoffsetfeespaidby
anotherregistrant/depositorifbothregistrant/depositorswerewholly
ownedsubsidiariesofthesameparentcompany.Thesebrothersister
entitiesmayusethefeeoffsetprovisionsofRule457(p)tooffsetfeespaid
bytheotherbrothersisterentity.[Jan.26,2009]
Section643.Rule461AccelerationofEffectiveDate
643.01Writtennotificationthattheissuerandtheunderwriterwillbe
makingoralaccelerationrequestsmaybemadebycounselfortheissueror
theunderwriterinitscoverletteraccompanyingtheregistrationstatement
oranamendmentthereto.Oralaccelerationrequestsshouldnotsimplybe
leftonvoicemailofaDivisionstaffmember.[Jan.26,2009]
Section644.Rule462ImmediateEffectivenessofCertain
RegistrationStatementsandPostEffectiveAmendments
644.01PursuanttoRule457(a),acompanyregistered2,300,000shares
at$22.6875pershareforanaggregateofferingpriceof$52,181,250.After
effectiveness,theshareswerepricedat$31.Thathigherpricewasnever
reflectedinthecalculationofregistrationfeetableonthecoverpageofthe
registrationstatement.Thecompanywishestoincreasethesizeofthe
offeringusingRule462(b).Itmustregistertheadditionalsharesatthe$31
price.Thus,thecompanymayregisterupto336,653additionalsharesat
$31underRule462(b)(calculatedbytaking20%of$52,181,250and
dividingitby$31).[Jan.26,2009]
644.02InasingleofferingnotrelyingonRule415thatisbothprimary
andsecondary,the20%increaseintheofferingsizeavailableunderRule
462(b)iscalculatedonthetotalaggregatedollaramountoftheoffering
andmaybeallocatedbetweentheprimaryandsecondarysellersinany
mannerdesired.Forexample,anofferingof$100millioninsecurities
$80millionprimaryand$20millionsecondarycouldbeincreasedby$20
millionunderRule462(b)andall$20millioncouldbeallocatedtothe
previouslyidentifiedsecondaryseller(s).[Jan.26,2009]
644.03PursuanttoRule457(a),acompanyincludedinthecalculationof
registrationfeetableonitsinitiallyfiledversionofFormS31,000,000
sharesofcommonstockat$20pershareforanaggregateofferingpriceof
$20,000,000.Beforeeffectiveness,thecompanyincludedasupplemental
feetableinanamendmenttotheS3toregister200,000moresharesof
commonstockatthenewhigherbonafideestimateof$25pershare(for
anincreaseintheaggregateofferingof$5,000,000).Aftereffectiveness
andpricingat$26pershare,thecompanywishestoregisteradditional
sharesunderRule462(b).TheRule462(b)limitforregisteringadditional
sharesiscalculatedbytaking20%of$25,000,000(derivedbyaddingthe
$20,000,000andthe$5,000,000)anddividingitbythe$26actualpriceto
permitregistrationunderRule462(b)ofnomorethan192,307shares.
[Jan.26,2009]
644.04Aregistrationstatementfor1,000,000sharesofpreferredstock
underRule457(a)wenteffectivewithanofferingpriceof$15pershare.
Aftertheeffectivedate,butpriortothecommencementofsales,the
registrantsoughttoincreasethenumberofsharesto1,150,000and
increasetheofferingpriceto$17.50pershare.Becausemoresharesare
goingtobesoldthanwereregistered,theregistrantmustfileanew
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registrationstatementtoregistertheadditional150,000sharesat$17.50
pershare.AshortformregistrationstatementunderRule462(b)wouldbe
possiblesincethenumberofadditionalshares(150,000)timesthenew
price($17.50)islessthan20%oftheaggregatedollaramountinthe
calculationofregistrationfeetableintheoriginaleffectiveregistration
26,2009]
commencementofsales,theregistrantsoughttoincreasethepricefrom
theintended$15maximumto$17.50,withoutchangingthenumberof
sharesintheoffering.Becauseregistrationwasdonebydollaramount
(Rule457(o)),notbynumberofshares(Rule457(a)),andsuchdollar
amountisincreasing,theregistrantmustfileanewregistrationstatement
toregistertheadditional$2,500,000ofpreferredstock.Ashortform
$2,500,000islessthan20%oftheaggregatedollaramountregisteredin
thecalculationofregistrationfeetableintheoriginaleffectiveregistration
26,2009]
644.06ForEDGARheaderpurposes,whenfilingaRule424(b)prospectus
supplementinconnectionwithanofferingthatinvolvesaninitialeffective
registrationstatementandasecondregistrationstatementregistering
additionalsecuritiesunderRule462(b),theRule424(b)supplementmust
befiledundertheregistrationnumber(33or333)fortheinitial
registrationstatement.ThecoverpageoftheRule424(b)supplement
should,however,setforththeregistrationnumbersofboththeinitial
registrationstatementandtheRule462(b)registrationstatement.[Jan.
26,2009]
644.07Aregistranthasaneffectiveshelfregistrationstatementwith$500
millionofunusedcapacity.TheregistrantwantedtouseRule462(b)to
increasetheshelfcapacityby20%to$600million,andthen
simultaneouslytakedown$200millionincommonstockand$400millionin
convertibledebt,inseparateofferings.However,Rule462(b)wasnot
availableinthissituation,asitcanonlybeusedonceperdelayedshelf
offeringandonlyatthetimeoffinaltakedown.Theregistrantcould
takedown$200millionincommonstockandthenincreasetheconvertible
debtcapacityfrom$300millionto$360millioninconnectionwithafinal
takedownofconvertibledebtthatwoulddepletetheshelf.[Jan.26,2009]
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Section645.Rule463ReportofOfferingofSecuritiesandUseof
ProceedsTherefrom
645.01Rule463requiresperiodicdisclosureofsalesofsecuritiesanduse
ofproceedsduringanissuersfirstregisteredoffering.Iftheofferingisa
shelfofferingofassetbackedsecurities,theRule463reportingobligation
isdeemedsatisfiedbyareportattheendofthefirsttakedown.However,if
newissuersareformedinconnectionwithsubsequenttakedowns,for
example,aseriesofsinglepurposecorporations,eachtakedownbyanew
issuerwillgiverisetoanewForm10DorForm10KRule463reporting
obligation.[Jan.26,2009]
645.02Sincearegisteredspinofftransactiontypicallydoesnotgenerate
anyproceedsfortheissuer,Item701(f)ofRegulationSKdisclosure
pursuanttoRule463isnotrequired.[Jan.26,2009]
645.03Securitiesofaonebankholdingcompanyareissuedpursuantto
anautomaticallyeffectiveregistrationstatementfiledinrelianceonGeneral
InstructionGtoFormS4.Atalaterdate,thecompanyfilesaregistration
statementonFormS1coveringanofferingforcash.Thereporting
obligationofRule463isconditionedontheeffectivenessoftheissuers
firstregistrationstatementand,accordinglyRegulationSKItem701(f)
disclosureneednotbeprovidedwithrespecttotheofferingregisteredon
FormS1.[Jan.26,2009]
645.04Whenaregistrationstatementcontemplatesseparateclosingsof
limitedpartnershipstobeformedinaseries,theclosingofeach
partnershipintheserieswillbeconsideredaneffectivedateforpurposes
oftriggeringanobligationtoprovidedisclosurepursuanttoRule463.[Jan.
26,2009]
645.05IfaregistrantsfirstfilingundertheSecuritiesActisasecondary
offering,nodisclosureneedbeprovidedinresponsetoItem701(f)of
RegulationSKsincethereisnouseofproceeds.However,sucha
secondaryofferingwouldnotconstitutethefirstregistrationstatement
filedundertheActbyanissuerforpurposesofRule463.Accordingly,the
firstprimarySecuritiesActofferingbythatregistrantwouldnecessitate
disclosureunderItem701(f).[July3,2008]
645.06Useofproceedsdisclosureisrequiredintheissuersfirstperiodic
reportfiledfollowingtheeffectivedateofitsfirstregistrationstatement
filedundertheSecuritiesAct,eveniftheregistrationstatementcovereda
besteffortsofferingthathasnotclosedontheduedateofthatperiodic
report.[July3,2008]
645.07Onthesameregistrationstatement,initsinitialpublicoffering,a
companyregisteredXsharesforsaletothepublicandYsharesfor
issuancepursuanttoemployeebenefitplans.TheDivisionstaffagreedwith
thecompanysanalysisthatitneedreporttheuseofproceedsasrequired
byRule463andItem701(f)ofRegulationSKonlyforthesharessoldto
thepublic,andcouldomittheinformationrelatingtotheemployeebenefit
plansharesinrelianceonRule463(d)(3).TheDivisionstaffsresponseis
premisedontherepresentationthattheemployeebenefitplanshareswere
originallyregisteredforthatpurposehaditbeenamatterofconverting
sharesoriginallyregisteredforsaletothepublicthatremainedunsoldto
theemployeebenefitpurpose,thispositionwouldnotapply.[July3,2008]
135/136
6/25/2015
Section655.Rule501DefinitionsandTermsUsedinRegulationD
655.01InaRegulationDoffering,anownerofaminingpropertyisselling
interestsinthepropertytoinvestorsforcash.Theownerisretaininga
royaltyinterestinthepropertyprovidingtheownertherighttoshareina
percentageofproduction.Incomputingtheaggregateofferingpriceunder
Rule501(c),onlythepurchasepriceshouldbeconsidered,whichmay
includetheinitialcashpayment,plusanysubsequentpaymentsthatare
fixedatthetransactiondate.Thispositionreflectsthefactthattheroyalty
paymentsthatwillbemadetothesellerofthepropertyasasharein
futureproductionaretreatedasoperatingexpenses,ratherthancapitalized
costsfortheproperty.SeeSecuritiesActReleaseNo.6455,QuestionNo.
32(Mar.3,1983).[Jan.26,2009]
Section656.Rule502GeneralConditionstobeMet
656.01Apromotionalbrochurethatsolicitsinvestorsforaproposed
RegulationDofferingisintendedtobemailedtothemembersofthe
ThoroughbredOwnersandBreedersAssociation,tobedistributedatasale
ofhorses,andtoberunasanadvertisementinatradejournal.These
activitieswouldconstituteageneralsolicitationinconnectionwiththeoffer
orsaleofasecurity,andthereforewouldrenderthoseaspectsof
RegulationDsubjecttoRule502(c)unavailable.[Jan.26,2009]
656.02AcorporationthathaspurchasedsecuritiesinaRegulationD
offeringcommencesdissolutionproceedingsbeforeithasreceivedthe
actualstockcertificates.Thecorporationrequeststheissuertoissuethe
certificatesinthenameofthecorporationsthreeshareholderstowhom
thecorporationisdistributingallofitsassets.TheRegulationDissuermay
dothiswithoutviolatingthelimitationsonresaleinRule502(d).[Jan.26,
2009]
Section659.Rule505ExemptionforLimitedOffersandSalesof
SecuritiesNotExceeding$5,000,000
659.01Rule505isnotavailabletoanyissuerthatfallswithinanyofthe
disqualificationsfortheuseofRegulationA.SeeRule505(b)(2)(iii).One
suchdisqualificationariseswheretheissueroranyofitsdirectors,officers,
generalpartners,orunderwritersissubjecttoanorderoftheCommission
enteredunderSection15(b)oftheExchangeAct,whichdealswith
broker/dealerregistrationandregulation.SeeRule262(b)(3).Theissuerin
thecasepresentedwasabroker/dealerthatwascensuredfouryearsago
pursuanttoaCommissionorder.Becausethatcensurehasnocontinuing
force,theissuerisnotsubjecttoanorderoftheCommissionandisthus
notdisqualifiedfromusingRule505.[Jan.26,2009]
http://www.sec.gov/divisions/corpfin/guidance/securitiesactrules
interps.htm
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Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules

Compliance and Disclosure Interpretations: Securities Act Rules