Sec interpretive release prior relationship

sec interpretive release prior relationship

that the amount of the commission is reasonable in relation to the value of the In , the Commission issued an interpretive release concerning the Prompted by an increased industry focus on soft dollar practices, over the past eighteen. The second interpretive position in Release No. Section (3) thus imposes a prior consent requirement on any adviser that acts as as broker (that is, an agent) in connection with a transaction for, or on behalf of, a client. SEC Interpretive Release if the short sale occurred during the period 5 days prior to pricing until pricing or the period from filing the These married transactions have been used in connection with various trading strategies.

It does not address the operation of all provisions that apply to short sales, such as general anti-fraud and anti-manipulation provisions, e. In addition, Rule 3b-3 provides that a person has a "long" position in a security if he holds convertible securities, options, rights, or warrants, and has tendered for conversion or exchange the convertible securities or exercised the options, rights, or warrants. Rule 3b-3 defines the term "short sale" as any sale of a security that the seller does not own or any sale that is consummated by the delivery of a security borrowed by, or for the account of, the seller.

Rule 10a-1 commonly referred as the "short sale rule" or "tick test" prohibits, subject to certain narrow exceptions, short sales of any security registered on or admitted to unlisted trading privileges on a national securities exchange on minus or zero-minus ticks. Generally, the short sale rule is designed to prevent short selling from accelerating a declining market. Rule prevents persons from covering short sales with offering securities purchased from an underwriter, broker, or dealer participating in the offering if the short sale was effected during the Rule's restricted period, which is typically five days prior to pricing and ending with pricing " restricted period".

Rule is designed to ensure that "secondary" and "repeat" offering prices are based on open market prices determined by supply and demand rather than influenced by artificial forces, and to prevent artificial depression of trading markets that may reduce an issuer's offering proceeds. Rule does not apply to offerings filed under Rule of the Securities Act of i. The interpretive guidance we are issuing today on calculating a "net long" position applies regardless of whether the Commission adopts Regulation SHO.

Several different terms have been used in the industry to describe various strategies involving married put transactions including, but not limited to, "bullets," "ghost bullets," "bullet trades," and "slam dunks.

Although an NASD rule, a trader must calculate his "net long" position pursuant to Commission Rule 3b-3 in order to comply with Rule Rule provides that with respect to trades executed on or reported to Nasdaq no member shall effect a short sale, for the account of a customer or for its own account, in a Nasdaq NMS security at or below the current best inside bid displayed in the Nasdaq National Market Execution System when the current best inside bid is below the preceding best inside bid in the security.

With respect to trades executed on or reported to the Alternative Display Facility, Rule provides that no member shall effect a short sale, for the account of a customer or for its own account, in a NMS Security at or below the current national best inside bid when the current national best inside bid is below the preceding national best inside bid in the security. As part of an effort to avoid aggregation, day-trading firms may use married put transactions to execute sales in a stock in a coordinated attempt to maintain a firm-wide "net long" position.

See Exchange Act Release No. We noted that such strategies often involve the purchase of a married put just prior to, or simultaneous with, the sale of stock associated with the married put transaction.

This type of strategy may present a heightened potential for manipulation. A "secondary" offering is an offering of securities held by shareholders. If a person who has filed a Form does not sell the securities referred to therein, no amendment reflecting this fact need be filed.

sec interpretive release prior relationship

A Form need not be amended to reflect: If a person intends to use two brokers, must the person allocate a specific number of shares to each broker on the Form ?

A person who files a Form indicating that it may sell shares through either of two brokers need not allocate a specific number of shares to each broker on the form. Does the de minimis exemption of Rule h apply to each individual seller who is required to file a Form when sales are required to be aggregated under Rule e?

In a situation in which sales under Rule are required to be aggregated for purposes of Rule ethe de minimis exemption of Rule h for filing Formnonetheless, applies to each individual seller who is required to file a Form When a Form is required to be filed, is a waiting period required between the time the person places an order with a broker and the time the broker executes the order?

When a person is required to file a Formno waiting period is required between the time the person places an order with a broker and the time the broker executes the order so long as the person concurrently, with giving the order, transmits the form to the Commission and the principal exchange on which the securities are listed.

Should a Form be amended to reflect a change in broker? A Form should be amended to reflect a change in broker. However, amending Form to reflect a change in the broker does not permit the calculation of a new volume limitation based on trading. What is the effect of an amended Form that is filed to correct inaccuracies? An amended Form may be filed to correct inaccuracies in the original Form at the time of, or subsequent to, its filing.

However, the filing of an amended Form does not cure any deficiencies with regard to sales made after filing the initial Form and prior to the filing of the amended Form Under what circumstances does a sell order that is placed with a broker at above the current market price contravene the requirement in Rule h that the person filing a Form have a bona fide intention to sell the securities referred to in the Form within a reasonable time?

sec interpretive release prior relationship

The fact that a sell order is placed with a broker at a price above the current market price does not contravene this requirement in Rule hunless the price reflected in the sell order was not consistent with a bona fide intention to sell within a reasonable time.

Rule h provides that the Form shall be transmitted for filing "concurrently" with either the placing of a sale order with a broker or the execution of the sale directly with a market maker. Does "concurrently" mean that the Form should be transmitted for filing on the same day as the placing of a sale order or the execution of the sale? For example, if a person is filing a Form by mail, he or she meets the requirements of Rule h if the Form is mailed on the same day as the placing of a sale order or the execution of the sale.

The envelope should be addressed to the Commission's Office of the Secretary.

Compliance and Disclosure Interpretations: Securities Act Rules

If an issuer had previously been a shell company but is an operating company at the time that it issues securities, is the Rule safe harbor available for the resale of such securities if all of the conditions in Rule i 2 are not satisfied at the time of the proposed sale? Consequently, the Rule safe harbor is not available for the resale of such securities unless and until all of the conditions in Rule i 2 are satisfied at the time of the proposed sale.

Does Rule i apply to securities issued before February 15,which was the effective date of the amendments to Rule in which the Commission adopted Rule i? Affiliates of the issuer may make resales of eligible securities under Rule A.

Securities Act Rules

The rule is available to any person other than the issuer. By definition, sales effected under Rule A are not made to the public market. When determining its status as a qualified institutional buyer eligible to participate in an offering eligible for resale under Rule A, may a buyer include the amount of securities expected to be purchased in such offering?

A buyer may not include the amount of securities expected to be purchased in the offering when calculating the amount of securities it owns or invests on a discretionary basis for the purpose of determining its status as a qualified institutional buyer eligible to participate in the offering. Under Rule A, securities may be offered to persons other than qualified institutional buyers by means of general solicitation.

Does the rule require that the general solicitation be conducted by only the issuer? In Rule A offerings in which the securities were initially sold to financial intermediaries in transactions exempt under Securities Act Section 4 a 2 or Regulation S, the general solicitation may be conducted by the issuer as well as initial purchasers involved in the Section 4 a 2 or Regulation S transaction and other distribution participants.

Did the amendments to Rule A permitting the use of general solicitation change how directed selling efforts under Regulation S are analyzed in concurrent Rule A and Regulation S offerings? The fact that securities were purchased or are held on margin does not mean they are not owned by the entity. Therefore, the securities may be included in calculating whether the entity meets the threshold, so long as they are not subject to a repurchase agreement.

See Rule A a 2. The fact that the entity may lend out securities does not mean they are not owned by the entity and thus may be included in calculating whether it meets the threshold. Borrowed securities are not owned by the entity and thus may not be included in calculating whether it meets the threshold. Short positions do not represent ownership of securities but rather sales of securities and thus may not be included in calculating whether the entity meets the threshold.

An investment company that is not registered under the Investment Company Act of is part of a family of funds, some of which may or may not be registered investment companies. When determining its status as a qualified institutional buyer under Rule A, may the non-registered investment company aggregate investments by the other funds that are part of the family in the manner described under Rule A a 1 iv?

No, only registered investment companies may use the aggregation method permitted under Rule A a 1 iv. When determining its status as a qualified institutional buyer under Rule A, Rule A a 1 v provides that an entity will be deemed a qualified institutional buyer if all of its equity owners are qualified institutional buyers.

sec interpretive release prior relationship

Who are the equity owners of a limited partnership for purposes of Rule a 1 v? The limited partners are the equity owners of a limited partnership. The general partner, unless that person is also a limited partner, need not be considered in determining whether a limited partnership is a qualified institutional buyer for purposes of Rule a 1 v.

Can an issuer that plans to register a Rule transaction, and whose proxy statement will necessarily contain unrelated items such as election of directors, avoid Securities Act liability for the unrelated items by filing a Form S-1 registration statement dealing solely with the Rule transaction, and incorporating the S-1 prospectus by reference into its proxy statement?

Must a person subject to Rule c who is selling both Rule shares and shares not subject to Rule e take into account the sales of the shares not subject to Rule e in determining whether the volume limitation of Rule d has been exceeded?

Would a merger by Company A with a new holding company formed by Company A in another state qualify for the change in domicile exception in Rule a 2? The exception from Rule provided by Rule a 2 for a change in domicile is not available when, in addition to a change in domicile, a new organizational structure is created, such as a new holding company.

Can sales be made in reliance on Rule d before the one-year period in Rule i 2 is met? In determining the Rule d 2 holding period, can the holding period for restricted securities surrendered in the Rule transaction be tacked to the holding period for the shares received? See Rule d 3 viii. A registration statement on Form S-4 is filed to register stock to be issued in the acquisition of a non-reporting company by a reporting company. Only the non-reporting company will solicit proxies.

Can a proxy card be sent with the red herring prospectus? Accordingly, a proxy card can be sent only with the Rule b prospectus, not with the red herring.

Rule [Reserved] Section Rule — Intrastate offers and sales Question May an issuer rely on Rule to offer or sell securities within a single state to a person whose principal residence is in such state but who resides temporarily out of the state? May a broker-dealer distribute securities in an intrastate offering made in reliance on Rule without jeopardizing the exemption available under that rule? If an issuer plans to conduct an intrastate offering pursuant to Rulemay the issuer engage in general advertising or a general solicitation?

Securities Act Rule does not prohibit general advertising or general solicitation. Any such general advertising or solicitation, however, must be conducted in a manner consistent with the requirement that offers made in reliance on Section 3 a 11 and pursuant to its Rule safe harbor be made only to persons resident within the state or territory of which the issuer is a resident.

An issuer plans to use a third-party Internet portal to promote an offering to residents of a single state in accordance with a state statute or regulation intended to enable securities crowdfunding within that state. Assuming the issuer met the other conditions of Rulecould it rely on Rule for an exemption from Securities Act registration for the offering, or would use of an Internet portal necessarily entail making offers to persons outside the relevant state or territory?

Use of the Internet would not be incompatible with a claim of exemption under Rule if the portal implements adequate measures so that offers of securities are made only to persons resident in the relevant state or territory. In the context of an offering conducted in accordance with state crowdfunding requirements, such measures would include, at a minimum, disclaimers and restrictive legends making it clear that the offering is limited to residents of the relevant state under applicable law, and limiting access to information about specific investment opportunities to persons who confirm they are residents of the relevant state for example, by providing a representation as to residence or in-state residence information, such as a zip code or residence address.

Of course, any issuer seeking to rely on Rule for the offering also would have to meet all the other conditions of Rule Can an issuer use its own website or social media presence to offer securities in a manner consistent with Rule ?

Issuers generally use their websites and social media presence to advertise their market presence in a broad and open manner so that information is widely disseminated to any member of the general public. Although whether a particular communication is an "offer" of securities will depend on all of the facts and circumstances, using such established Internet presence to convey information about specific investment opportunities would likely involve offers to residents outside the particular state in which the issuer did business.

We believe, however, that issuers could implement technological measures to limit communications that are offers only to those persons whose Internet Protocol, or IP, address originates from a particular state or territory and prevent any offers to be made to persons whose IP address originates in other states or territories.

Offers should include disclaimers and restrictive legends making it clear that the offering is limited to residents of the relevant state under applicable law.

Issuers must comply with all other conditions of Ruleincluding that sales may only be made to residents of the same state as the issuer. Would an issuer making ongoing offers and sales pursuant to Rule be able to transition to offers and sales in reliance on Rule A?

Under Rule A g 1offers and sales made in reliance on Rule A will not be integrated with prior offers and sales of securities. An issuer, however, must comply with all applicable state securities law requirements. Rules to a [Reserved] Section Rulesa and b Question An issuer has registered an "at the market" offering of its common stock in reliance on Rule a 4 and has engaged a broker dealer to sell the securities into the existing trading market.

Does the broker dealer have a prospectus delivery obligation with respect to the primary offering of the issuer's securities into the trading market and, if so, may the broker dealer rely on Rule to satisfy such prospectus delivery obligation? Also, does the broker dealer have an obligation to provide a Rule notice and, if so, to whom? An "at the market" offering of securities by a broker dealer on behalf of an issuer is a primary offering of the issuer's securities.

There is a prospectus delivery obligation as to such primary offering. The provisions of Rule apply only to transactions between brokers, as it covers the requirement of a broker or dealer to deliver a prospectus to a broker or dealer. Rule does not affect a broker's delivery obligation to purchasers other than brokers or dealers. As a consequence, brokers or dealers effecting transactions in the issuer's securities under the registration statement may have a prospectus delivery obligation to their clients who acquired those securities which may be satisfied in reliance on Rule and similarly may have an obligation to provide a notice pursuant to Rule Rule excludes transactions solely between brokers or dealers in reliance on Rulebut not as to other purchasers of the issuer's securities under the registration statement.

Rule — Integration of Abandoned Offerings Question Can an issuer rely on Rule b for an abandoned private offering followed by a shelf takedown if the shelf registration statement was filed prior to the private offering? Yes, provided that the takedown is not done until after the time provided in Rule b.

sec interpretive release prior relationship

If an issuer is unsuccessful in completing an offering as a takedown from an existing shelf registration statement, may it rely on Rule c to complete the offering privately?

In a shelf offering, the filing of a prospectus supplement disclosing the termination of the offering is deemed to satisfy the Rule c 2 requirement to withdraw the registration statement. Does this requirement apply whether the written disclosure is provided on a mandatory Rule b 1 or voluntary basis? If an issuer has not previously filed any shelf registration statement and at the date of its last Form K did not qualify as a well-known seasoned issuer, would it be able to determine its status as a well-known seasoned issuer at the time it wants to rely on Rule for pre-filing offers?

The definition of well-known seasoned issuer permits an issuer to evaluate its status as a well-known seasoned issuer only upon specified events; the date of intended reliance on Rule is not one of those events. May Rule be used for communications by an underwriter if the issuer previously authorized the communication? Rule is not available for use by an underwriter. Rules A to [Reserved] Section May an issuer contemplating a registered exchange offer subject to Exchange Act Rule 13e-4 rely on Rules and to communicate with its security holders before and after the first public announcement of the offering?

Yes, so long as the issuer satisfies the conditions set forth in Rules and In particular, the primary purpose or effect of the communication must be to convey information concerning a business combination transaction, as defined in Rule fand not to condition the market for a capital raising or resale transaction. Rules and are intended to apply to communications relating to exchange offers made in accordance with the applicable tender offer rules, including offers subject to Exchange Act Rule 13e An electronic communication relying on the exemption in Rule must contain the legend required by paragraph c 1 of that rule.

Some electronic communication platforms, such as those made available through certain social media websites, limit the number of characters or amount of text that can be included in the communication, effectively precluding display of the legend together with the other information.

Under what circumstances would the use of a hyperlink to the legend satisfy the Rule c 1 requirement? Recognizing the growing interest in using technologies such as social media to communicate with security holders, the staff will not object to the use of an active hyperlink to satisfy the requirements of Rule c 1 in the following limited circumstances: The electronic communication is distributed through a platform that has technological limitations on the number of characters or amount of text that may be included in the communication; Including the legend in its entirety, together with the other information, would cause the communication to exceed the limit on the number of characters or amount of text; and The communication contains an active hyperlink to the required legend and prominently conveys, through introductory language or otherwise, that important or required information is provided through the hyperlink.

Where an electronic communication is capable of including the required legend, along with the other information, without exceeding the applicable limit on number of characters or amount of text, the use of a hyperlink to the required legend would be inappropriate.

This position also applies to written communications that constitute solicitations made in reliance on Exchange Act Rule 14a and pre-commencement written communications subject to Exchange Act Rules 13e-4 c14d-2 b and 14d-9 a. Rule — Delivery of Prospectuses Question Are the provisions of Rule available to dealers that are participants in the underwriting as well as to those dealers that are not participants in the underwriting?

Rule is available to dealers that participate in the underwriting, including selling an unsold allotment, as well as to dealers that do not participate. A dealer may not rely on Rule to not deliver a prospectus when the dealer is participating in the offering or is selling an unsold allotment. When Section 4 3 requires delivery of a prospectus, the dealer may rely on Rule to satisfy its delivery obligation, except in the case of offerings of blank check companies.

Rule provides that a final Section 10 a prospectus will be deemed to precede or accompany the carrying or delivery of a security for sale for purposes of Securities Act Section 5 b 2 and provides a conditional exemption from Securities Act Section 5 b 1 for written confirmations and notices of allocations. Can special purpose acquisition companies SPACs rely on Rule to satisfy their prospectus delivery obligations following their initial public offerings?

Is Rule available to satisfy prospectus delivery obligations of selling security holders if the requirements of the rule are met? Selling security holders with a prospectus delivery obligation may rely on Rule Rule — Notice of Registration Question Rule provides a safe harbor for forward-looking statements made by or on behalf of an issuer that are contained in 1 a document filed with the Commission, 2 Part I of a Form Q or 3 an annual report to security holders meeting the requirements of Exchange Act Rule 14a-3 b and c or Rule 14c-3 a and b.

The rationale for the forward-looking statements safe harbor applies with equal force to statements in Form 6-K reports as it does to statements in annual reports and Form Q reports.

Rule provides an exemption from Securities Act registration for the aggregation of fractional shares in connection with certain transactions.

The rule requires that specified information be furnished to the Commission at least 10 days prior to the offering. Is there a specific Securities Act form for this information? A letter should be sent to the Commission that specifies the nature of the submission. No fee is applicable. Rules to Question Where an issuer elects to non-publicly submit a draft offering statement for staff review pursuant to Rule d of Regulation A before publicly filing its Form 1-A, Item 15 Additional Exhibits of Part III Exhibits to Form 1-A requires issuers to file as an exhibit to the publicly-filed offering statement: If, at the time it first files the offering statement publicly, the issuer makes public on the EDGARLink submissions page all prior non-public, draft offering statements, the offering statements will no longer be non-public and the issuer will not be required to file them as exhibits.

The issuer is still required to file as an exhibit any related, non-public correspondence submitted by or on behalf of the issuer regarding non-public draft offering statements submitted pursuant to Rule d. If an issuer elects to submit a draft offering statement for non-public staff review before public filing pursuant to Rule dand, as part of that process, submits correspondence relating to its offering statement, what must it do if it wants to protect portions of that correspondence from public release?

During the review of the draft offering statement, the issuer would request confidential treatment of any information in the related correspondence pursuant to Rule 83, in the same manner it would during a typical review of a registered offering. It would submit a redacted copy of the correspondence via EDGAR, with the appropriate legend indicating that it was being submitted pursuant to a confidential treatment request under Rule At the same time, it would submit an unredacted paper version to the SEC, in the manner required by that rule.

When the issuer makes its public filing of the offering statement, it will be required to file as an exhibit to the electronically filed offering statement any previously submitted non-public correspondence related to the non-public review.

sec interpretive release prior relationship

The staff will consider and act on that application in the same manner it would with any other application under Rule for other types of filed exhibits.

As with registered offerings, the review staff will act on Rule confidential treatment applications before the offering statement is qualified. For the requirements a registrant must satisfy when requesting confidential treatment, see Division of Corporation Finance Staff Legal Bulletin No. Is a company that was previously required to file reports with the Commission under Section 15 d of the Exchange Act, but that has since suspended its Exchange Act reporting obligation, an eligible issuer under Rule b 2 of Regulation A?

A company that has suspended its Exchange Act reporting obligation by satisfying the statutory provisions for suspension in Section 15 d of the Exchange Act or the requirements of Exchange Act Rule 12h-3 is not considered to be subject to Section 13 or 15 d of the Exchange Act for purposes of Rule b 2 of Regulation A.

Is a voluntary filer under the Exchange Act an eligible issuer for purposes of Rule b 2 of Regulation A? A voluntary filer is not subject to Exchange Act Section 13 or 15 d because it is not obligated to file Exchange Act reports pursuant to either of those provisions.

Is a private wholly-owned subsidiary of an Exchange Act reporting company parent eligible to sell securities pursuant to Regulation A? Yes, although the Exchange Act reporting company parent could not be a guarantor or co-issuer of the securities of the private wholly-owned subsidiary.

Can Regulation A be relied upon by an issuer for business combination transactions, such as a merger or acquisition? May a recently created entity choose to provide a balance sheet as of its inception date? Yes, as long as the inception date is within nine months before the date of filing or qualification and the date of filing or qualification is not more than three months after the entity reached its first annual balance sheet date.

The staff will not object to the use of an active hyperlink to satisfy the requirements of Rule in the following limited circumstances: The electronic communication is distributed through a platform that has technological limitations on the number of characters or amount of text that may be included in the communication; Including the required statements in their entirety, together with the other information, would cause the communication to exceed the limit on the number of characters or amount of text; and The communication contains an active hyperlink to the required statements that otherwise satisfy Rule and, where possible, prominently conveys, through introductory language or otherwise, that important or required information is provided through the hyperlink.

Where an electronic communication is capable of including the entirety of the required statements, along with the other information, without exceeding the applicable limit on number of characters or amount of text, the use of a hyperlink to the required statements would be inappropriate. Are state securities law registration and qualification requirements preempted with respect to resales of securities purchased in a Tier 2 offering?

State securities law registration and qualification requirements are only preempted with respect to primary offerings of securities by the issuer or secondary offerings by selling securityholders that are qualified pursuant to Regulation A and offered or sold to qualified purchasers pursuant to a Tier 2 offering. Resales of securities purchased in a Tier 2 offering must be registered, or offered or sold pursuant to an exemption from registration, with state securities regulators.

When is an issuer required to engage the services of a registered transfer agent before being able to avail itself of the conditional exemption from mandatory registration under Section 12 g of the Exchange Act described in Exchange Act Rule 12g a 7?