Last Update: January 23, 2015

These Compliance and Disclosure Interpretations (C&DIs) comprise the Divisions interpretations of the rules adopted under the Securities Act. Some of these C&DIs were first published in prior Division publications and have been revised in some cases. The bracketed date following each C&DI is the latest date of publication or revision.

QUESTIONS AND ANSWERS OF GENERAL APPLICABILITY

Sections 101 to 109. Rules 100 to 133 [Reserved]

Section 110. Rule 134 Communications Not Deemed a Prospectus

Question 110.01

Question: A communication made in reliance on Rule 134 must contain the statement required by Rule 134(b)(1) and information required by Rule 134(b)(2), unless the conditions of Rule 134(c) are met. In addition, if the communication solicits from the recipient an offer to buy the security or requests the recipient to indicate whether he or she might be interested in the security, it must include the statement required by Rule 134(d).

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 required statements together with the other information. Under what circumstances would the use of a hyperlink to the required statements satisfy the Rule 134(b) or Rule 134(d) requirements?

Answer: Recognizing the growing interest in using technologies such as social media to communicate with security holders and potential investors, the staff will not object to the use of an active hyperlink to satisfy the requirements of Rule 134(b) or Rule 134(d) 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;

Where an electronic communication is capable of including 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. [April 21, 2014]

Question 110.02

Question: Some electronic communication platforms, such as those made available through certain social media websites, permit users to re-transmit a posting or message they receive from another party. When an issuer distributes an electronic communication in compliance with Rule 134 or Rule 433, must the issuer ensure compliance with Rule 134 or Rule 433 of a re-transmission of that communication by a third party that is not an offering participant?

Answer: If the third party is neither an offering participant nor acting on behalf of the issuer or an offering participant and the issuer has no involvement in the third partys re-transmission beyond having initially prepared and distributed the communication in compliance with either Rule 134 or Rule 433, the re-transmission would not be attributable to the issuer. As explained in Securities Act Release No. 33-8591 (July 19, 2005), [W]hether information prepared and distributed by third parties that are not offering participants is attributable to an issuer or other offering participant depends upon whether the issuer or other offering participant has involved itself in the preparation of the information or explicitly or implicitly endorsed or approved the information. [April 21, 2014]

Sections 111 to 127. Rules 135 to 143 [Reserved]

Section 128. Rule 144 Persons Deemed Not to be Engaged in a Distribution and Therefore Not Underwriters General Guidance

Question 128.01

Question: Is Rule 144 available to the issuer of the securities?

Answer: No. Rule 144 is not available to the issuer of the securities. See Securities Act Release No. 5306 (Sept. 26, 1972). [Jan. 26, 2009]

Question 128.02

Question: How long must an underwriter wait before it resells the unsold portion of a sticky public offering as if it were compensation?

Answer: An underwriter may resell the unsold portion of a sticky public offering as if it were compensation wait six months from the last sale under the registration statement and follow Rule 144 except for filing the form. [Jan. 26, 2009]

Question 128.03

Question: Are securities that are received pursuant to Section 1145(a) of the Bankruptcy Code deemed restricted securities?

Answer: No. Securities received pursuant to a Bankruptcy Code proceeding under the circumstances described in Section 1145(a) of the Bankruptcy Code would not be deemed restricted securities because they would have been received in a public offering under Section 1145(c) of the Code. [Jan. 26, 2009]

Question 128.04

Question: If an institutional purchaser buys a block of shelf-registered securities directly from the issuer, will the securities be deemed restricted securities?

Answer: When there is a sale of a block of shelf-registered securities directly by the issuer to an institutional purchaser, the securities will not be deemed to be restricted securities that are acquired directly or indirectly from the issuer. in a transaction. not involving any public offering. However, the purchaser of the securities will still have to determine whether it may be deemed an underwriter in connection with resales of such securities; such a determination will depend upon the facts and circumstances of the particular case. [Jan. 26, 2009]

Question 128.05

Question: May restricted securities be tendered in connection with a tender offer without compliance with Rule 144?

Answer: Yes. Restricted securities may be tendered in connection with a tender offer without compliance with Rule 144. The rule is not the exclusive means for reselling restricted securities. [Jan. 26, 2009]

Section 129. Rule 144(a) Definitions

Question 129.01

Question: What is a circumstance under which securities issued under stock option plans and excess compensation plans for directors will constitute restricted securities?

Answer: Securities often are issued under employee benefit plans where the basis for non-registration of the distribution is other than a no-sale theory under Securities Act Section 2(a)(3). Such plans include stock option plans and excess compensation plans for directors where the securities are issued pursuant to the Securities Act Section 4(2) private offering exemption or Regulation D. [Jan. 26, 2009]

Question 129.02

Question: Are shares acquired in a private transaction from the spouse of an affiliate deemed restricted securities?

Answer: Yes, if the spouse has the same home as the affiliate, as they would then be regarded as the same person under Rule 144(a)(2)(i). [Jan. 26, 2009]

Question 129.03

Question: An affiliate donor transfers, by bona fide gift, company stock acquired in the open market (i.e.. the securities are not restricted securities in the affiliates hands) to a donee in a non-public transaction. What is the status of these securities in the donees hands, and what requirements in Rule 144 are applicable to a donee who is a non-affiliate when he or she resells these securities?

Answer: In the donees hands, these securities are restricted securities because they have been acquired directly or indirectly from the issuer, or from an affiliate of the issuer, in a transaction or chain of transactions not involving any public offering. As these securities were not subject to any holding period requirement in the affiliate donors hands, however, the donee need not comply with the holding period requirement in Rule 144(d) for subsequent sales. If the donee is a non-affiliate and has not been an affiliate during the preceding three months, then the donee may resell the securities pursuant to Rule 144(b)(1) subject only to the current public information requirement in Rule 144(c)(1), as applicable. [May 16, 2013]

Section 130. Rule 144(b) Conditions To Be Met

Question 130.01

Question: May the tacking provisions in Rule 144(d)(3) be applied in determining whether, under Rule 144(b)(1)(i), the Rule 144(c)(1) condition has been met for the one-year period?

Answer: Yes. [Jan. 26, 2009]

Section 131. Rule 144(c) Current Public Information

Question 131.01

Question: If securities are sold pursuant to Rule 144 at various times over a three-month period, at which time(s) must the issuer satisfy the current public information requirement?

Answer. When the current public information requirement must be met in order for the security holder to sell securities under the Rule 144 safe harbor, the issuer must continue to satisfy this requirement at the time each sale is made. [Jan. 26, 2009]

Question 131.02

Question: When the conditions of Rule 144(c)(1) must be satisfied in selling securities under the Rule 144 safe harbor, may sales continue during the Rule 12b-25 extension period?

Answer. There is a risk in selling under Rule 144 during the 5-day or 15-day period following the filing of the Form 12b-25 because, if the missing report or portion thereof is not filed during that period, the issuer may be deemed not current until it is filed. [Sept. 30, 2008]

Question 131.03

Question: When you have an effective Form S-1 registration statement followed by a registration statement pursuant to Exchange Act Section 12(g), when does the 90-day reporting period required by Rule 144(c)(1) begin?

Answer: The 90-day reporting period commences with the effective date of the Form S-1. [Jan. 26, 2009]

Question 131.04

Question: Do reports filed under Section 30(a) of the Investment Company Act satisfy the current public information requirement of Rule 144(c)(1)?

Answer. Yes. [Jan. 26, 2009]

Question 131.05

Question: Does the information standard of Exchange Act Rule 15c2-11 require that the information be current?

Answer. Yes. The public information standard of Rule 15c2-11 relating to issuers not subject to Section 13(a) or 15(d) is met only if the Rule 15c2-11 information is current. It is irrelevant that broker-dealers may publish quotes on the issuers securities piggy-backing from their prior quotes based on Rule 15c2-11 information which was current at the time such quotations were initiated. [Jan. 26, 2009]

Question 131.06

Question: Do the financial statements of non-reporting issuers need to be audited or prepared in compliance with Regulation S-X in order to satisfy the current public information requirement of Rule 144(c)(2)?

Answer. No. The current public information requirement of Rule 144(c)(2) does not require the financial statements of non-reporting issuers to be either audited or prepared in compliance with Regulation S-X, as that is not required by clauses (xii) and (xiii) of Exchange Act Rule 15c2-11(a)(5), to which Rule 144(c)(2) refers. [Jan. 26, 2009]

Question 131.07

Question: Is the current public information requirement in Rule 144(c)(1) applicable to an issuer that submits Exchange Act reports on a voluntary basis?

Answer: No. Rule 144(c)(1) applies only to issuers that are, and have been for at least 90 days immediately before the sale, subject to the reporting requirements of Exchange Act Section 13 or 15(d). 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. Accordingly, the current public information requirement in Rule 144(c)(2) is applicable to voluntary filers. [Jan. 26, 2009]

Section 132. Rule 144(d) Holding Period for Restricted Securities

Question 132.01

Question: To whom does the phrase without recourse in Rule 144(d)(3)(iv) refer?

Answer: The phrase without recourse appearing in Rule 144(d)(3)(iv) refers to recourse against the pledgor personally in the usual situation in which the pledgor and borrower are the same person. This interpretation would not apply, however, if the pledgor and borrower were different persons, because Rule 144(d)(3)(iv) requires recourse only against the borrower under the note. [Jan. 26, 2009]

Question 132.02

Question: May closely-held entities make in-kind distributions of restricted securities of an affiliated issuer without disturbing the holding period of the restricted securities?

Answer. The transfer of the restricted securities from the portfolio of the closely-held entity to its equity holders will not disturb the holding period if the distribution is made ratably and without the payment of consideration for the transfer. See Securities Act Release No. 6099 (Aug. 2, 1979), at Question 34, and the Hale and Dorr interpretive letter (June 12, 1991) issued by the Division. [Jan. 26, 2009]

Question 132.03

Question: After the Supreme Courts decision in Rubin v. United States. 449 U.S. 424 (1981), do the provisions of Rule 144(d) still permit the tacking of holding periods of a pledgor and pledgee?

Answer. Yes. Notwithstanding the Supreme Courts decision in Rubin that a pledge may be a sale for determining application of the anti-fraud provisions of the federal securities laws, it is the Divisions view that the provisions of Rule 144(d) expressly permitting the tacking of holding periods of a pledgor and pledgee continue to apply. [Jan. 26, 2009]

Question 132.04

Question: Does Rule 144(d)(3)(vii) apply only to securities owned by the decedent?

Answer. Yes. Paragraph (d)(3)(vii) of Rule 144, which provides an exemption from the Rule 144(d) holding period requirement for sales of restricted securities by a non-affiliate estate, applies only to securities owned by the decedent. It does not exempt a non-affiliate estate from the holding period requirement in the case of securities acquired by the estate upon the exercise of stock options held by the decedent. [Jan. 26, 2009]

Question 132.05

Question: May a person transfer restricted securities into his or her individual retirement account without interrupting the Rule 144(d) holding period for the securities?

Answer. Yes. [Jan. 26, 2009]

Question 132.06

Question: An individual acquires shares pursuant to anti-dilution rights attaching to restricted securities. Are these newly acquired shares restricted securities?

Answer. For purposes of Rule 144, shares acquired pursuant to anti-dilution rights attaching to restricted securities are restricted securities themselves but their holding period dates back to the original placement of shares, not the exercise of the anti-dilution provisions. [Jan. 26, 2009]

Question 132.07

Question: When does the holding period begin for restricted securities acquired pursuant to a subscription agreement?

Answer. The holding period for restricted securities acquired pursuant to a subscription agreement begins at the time the agreement is accepted by the issuer, rather than the date it is signed by the purchaser or the date the shares are issued, assuming that the full purchase price has been paid. [Jan. 26, 2009]

Question 132.08

Question: What is the restricted security and holding period status of securities exchanged for other securities of the issuer under Securities Act Section 3(a)(9)?

Answer. When securities are exchanged for other securities of the issuer under Section 3(a)(9), the securities received assume the character of the exchanged securities. Thus, for example, if restricted securities are exchanged, the new securities are deemed restricted and tacking of the holding period of the former securities is permitted. [Jan. 26, 2009]

Question 132.09

Question: Does the one-year holding period requirement in Rule 144(d)(1)(ii) apply to the restricted securities of an issuer that submits Exchange Act reports on a voluntary basis?

Answer. Yes. The six-month holding period requirement in Rule 144(d)(1)(i) is applicable only to the restricted securities of an issuer that is, and has been for at least 90 days immediately before the sale, subject to the reporting requirements of Exchange Act Section 13 or 15(d). 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. Consequently, the one-year holding period requirement in Rule 144(d)(1)(ii) applies to the restricted securities of a voluntary filer. [Jan. 26, 2009]

Question 132.10

Question: How is the six-month holding period computed under Rule 144(d)(1)(i)?

Answer. Under Rule 144(d)(1)(i), a minimum of six months must elapse between the date of acquisition of the restricted securities from an issuer or from an affiliate of the issuer, whichever is later, and any resale of such securities under Rule 144. This period covers the six months immediately preceding the date of sale under the rule. For example, on May 15, X acquires restricted securities in a transaction not involving any public offering from an issuer. Assuming that the six-month holding period did not restart at any point since May 15 and that the other applicable conditions of Rule 144 would be met at the time of sale, X may sell the securities under Rule 144 on November 15, provided that the issuer is, and has been for at least the immediately preceding 90 days, subject to the reporting requirements of Exchange Act Section 13 or 15(d) at such time. [Jan. 26, 2009]

Question 132.11

Question: On what date does the holding period begin for restricted securities acquired under an employee stock option?

Answer. The holding period for restricted securities acquired under an employee stock option always begins on the exercise of the option and full payment to the issuer of the exercise price. The date of the options grant may never be used for this purpose, even if the exercise involves no payment of cash or other consideration to the issuer. Because the option is issued to the employee without any payment for the grant, the optionee holds no investment risk in the issuer before the exercise. [Jan. 26, 2009]

Question 132.12

Question: Does a change in the legal form of enterprise restart the holding period for restricted securities of the issuer?

Answer. A change in the legal form of an enterprise from a partnership or a limited liability company to a corporation normally will restart the holding period for restricted securities of the issuer. However, a holder may tack holding periods in this context if the following conditions are satisfied:

(1) the controlling agreement entered into at the time of the partnership or limited liability companys formation specifically contemplated the change of form;

(2) the partners or members seeking to tack had no veto or voting rights over the reorganization;

(3) the reorganization does not result in a change in the business or operations of the surviving entity;

(4) the proportionate equity interests in the successor are the same as the interests in the predecessor entity; and

(5) the equity holders provide no additional consideration for the securities they receive in exchange for their equity interests in the predecessor entity. [Jan. 26, 2009]

Question 132.13

Question: Does the payment of even a de minimis amount of cash upon a warrant exercise preclude the holder from tacking the holding period of the warrant to that of the common stock under Rule 144(d)(3)(x)?

Answer. Yes. The payment of even a de minimis amount of cash upon a warrant exercise would preclude the holder from tacking the holding period of the common stock to the warrant under Rule 144(d)(3)(x). The warrant exercise must be cashless (similar to the analysis under Section 3(a)(9)) in order to tack the holding period of the common stock to the warrant. [Jan. 26, 2009]

Question 132.14

Question: Is the applicable length of the Rule 144(d) holding period requirement for restricted securities (i.e. whether it is six months under Rule 144(d)(1)(i) or one year under Rule 144(d)(1)(ii)) determined as of (1) the date of the acquisition of the securities from the issuer or an affiliate of the issuer, or (2) the time of the proposed sale under Rule 144?

Answer: The applicable length of the Rule 144(d) holding period requirement is determined as of the time of the proposed Rule 144 sale.

For example, on March 5, 2008, a non-reporting issuer sold shares of its common stock to an investor pursuant to a private placement. Three weeks later, the issuer filed a registration statement on Form 10 to register its common stock under Exchange Act Section 12(g). On October 1, 2008, the investor wished to resell the shares he had acquired on March 5 from the issuer. The applicable holding period requirement for such shares as of October 1 would be the six-month holding period under Rule 144(d)(1)(i), since the issuer was, and had been for at least the immediately preceding 90 days, subject to the reporting requirements of Exchange Act Section 13 or 15(d) on such date.

Conversely, if the issuer had been an Exchange Act reporting issuer on March 5, 2008, but was not subject to the reporting requirements of Exchange Act Section 13 or 15(d) (or had not been for at least the immediately preceding 90 days) as of October 1, 2008, the one-year holding period under Rule 144(d)(1)(ii) would be applicable to such securities as of October 1. Hence, the investor would not have satisfied the Rule 144(d) holding period requirement as of that date. [Jan. 26, 2009]

Question 132.15

Question: A pledgor who is an affiliate defaults on a loan that had been secured, in a bona fide pledge situation, by restricted securities. What conditions of Rule 144 apply to a non-affiliate pledgee who is selling such restricted securities under Rule 144?

Answer: A non-affiliate pledgee (who has not been an affiliate during the preceding three months) may resell the restricted securities pursuant to the Rule 144 safe harbor by complying with the applicable conditions in Rule 144(b)(1). Depending on the circumstances, tacking pursuant to Rule 144(d)(3)(iv) may be permitted in determining whether the holding period requirement in Rule 144(d) has been satisfied. [Jan. 26, 2009]

Question 132.16

Question: After receiving a gift of restricted securities from an affiliate donor, what conditions of Rule 144 apply to a non-affiliate donee who is selling such restricted securities under Rule 144?

Answer: A non-affiliate donee (who has not been an affiliate during the preceding three months) may resell the restricted securities pursuant to the Rule 144 safe harbor by complying with the applicable conditions in Rule 144(b)(1). Tacking pursuant to Rule 144(d)(3)(v) may be permitted in determining whether the holding period requirement in Rule 144(d) has been satisfied. [Jan. 26, 2009]

Question 132.17

Question: Is tacking under Rule 144(d)(3)(ii) available when the securities to be sold were acquired in an exchange transaction that was exempt under Securities Act Section 4(2) instead of Section 3(a)(9)?

Answer: Yes, provided that the conditions in Rule 144(d)(3)(ii) are satisfied. [June 4, 2010]

Question 132.18

Question: Company A sells mandatorily exchangeable Notes to an investor in a private placement transaction. Under the terms of the Notes, the Notes can be exchanged for a fixed number of shares of Company B, an affiliate of Company A, either at Company A’s option or upon the occurrence of certain events outside the investor’s control. If such an exchange takes place, when does the holding period for the Company B Shares begin to run for purposes of Rule 144(d)(1)?

Answer: When Company A sells the Notes, there is deemed to be a concurrent private offering of the underlying Company B Shares, and the investor has no subsequent investment decision to make because the exchange is either at Company A’s option or occurs automatically upon the occurrence of certain events outside the investor’s control. Accordingly, the investor’s Rule 144(d) holding period for the Company B Shares would begin at the time the investor originally acquired the Notes from Company A, and not when the investor later receives the Company B Shares in exchange for the Notes.

If the Notes also include a provision allowing the exchange to occur at the investor’s option and the investor decides to exchange the Notes for Company B Shares, then the holding period for the Company B Shares would begin on the date of the exchange. If the Notes also include this provision but the exchange occurs not because of the investor’s decision but because of either Company A’s decision or the occurrence of certain events outside the investor’s control, then the holding period for the Company B Shares would begin at the time the investor originally acquired the Notes from Company A. [Mar. 4, 2011]

Section 133. Rule 144(e) Limitation on Amount of Securities Sold

Question 133.01

Question: What exchanges are encompassed by the term national securities exchanges in Rule 144(e)?

Answer. The term national securities exchanges, as used in Rule 144(e), encompasses only exchanges that are registered with the Commission pursuant to Section 6(a) of the Exchange Act. Because Canadian exchanges are not so registered, the volume of securities traded on such an exchange may not be taken into account when computing the volume limitation under Rule 144. [Jan. 26, 2009]

Question 133.02

Question: Is the OTC Bulletin Board an automated quotation system for purposes of Rule 144(e)?

Answer. No. Consequently, the market-based volume limitation that the rule allows for is unavailable for securities quoted only over the OTC Bulletin Board. [Jan. 26, 2009]

Question 133.03

Question: What effect(s) do stock splits and reverse stock splits have on available volume under Rule 144(e)?

Answer. Stock splits and reverse stock splits, which are not events of sale under the Securities Act, have no real effect on available volume under Rule 144(e) because the split or reverse split should not change the proportion of the issuers securities that an affiliate is permitted to sell during the rules three-month measuring period. To calculate available volume after a split or reverse split, an affiliate should give effect to the split or reverse split throughout the whole three-month period, as though it had occurred on the first day of the period, even though the record and effective dates were later. This method may be used for the rules one-percent measurement or the market-based alternative for securities listed on an exchange. [Jan. 26, 2009]

Question 133.04

Question: In determining the amount of securities that an individual may sell pursuant to General Instruction C.2(b) of Form S-8, does the individual need to aggregate the amount of securities that the individual has sold pursuant to Rule 144?

Answer. No. General Instruction C.2(b) to Form S-8 provides that if the registrant, at the time of filing, does not satisfy the registrant requirements for use of Form S-3 or Form F-3, the amount of both control and restricted securities to be reoffered by means of the reoffer prospectus by each person, and any other person with whom such person is acting in concert for the purpose of selling securities of the registrant, shall be limited during any three-month period to the amount specified in Rule 144(e). This limitation is strictly a limitation on the number of securities to be resold pursuant to the registration statement, and does not require aggregation of such securities with securities to be sold by the same person pursuant to Rule 144. The application of this instruction is reassessed each time the Form S-8 is updated pursuant to Securities Act Section 10(a)(3). [Jan. 26, 2009]

Question 133.05

Question: Is a public offering included in the volume computation when computing the average weekly trading volume of the issuer during the four-week period?

Answer. In computing average weekly trading volume where there is a public offering of shares by the issuer during the four-week period, the public offering is not included in the volume computation; however, increased volume in the aftermarket as a result of the offering can be included for purposes of the rule. [Jan. 26, 2009]

Question 133.06

Question: How is the four-week period for computing the average weekly trading volume computed?

Answer. For purposes of computing volume limitations under Rule 144(e)(l)(ii) and (iii), the four calendar weeks preceding the filing of notice on Form 144 are the four weeks preceding the week in which the form is transmitted for filing in accordance with Rule 144(h). See Securities Act Release No. 6099 (Aug. 2, 1979), at Question 38. [Jan. 26, 2009]

Question 133.07

Question: Are an affiliates sales of securities back to the issuer in a non-public transaction excludable when calculating the amount of securities that may be sold by the affiliate under Rule 144?

Answer. Yes. Under Rule 144(e)(3)(vii)(C), securities sold in a transaction that is exempt pursuant to Securities Act Section 4 and does not involve any public offering need not be included in determining the amount of securities that may be sold under Rule 144. This would include an affiliates non-public sales of securities back to the issuer. [May 16, 2013]

Section 134. Rule 144(f) Manner of Sale

Question 134.01

Question: Can a principal of a brokerage firm use that firm to effect ordinary brokers transactions for the principals personal account under Rule 144(f)?

Answer. Yes. A principal of a brokerage firm may use that firm to effect ordinary brokers transactions for the principals personal account under Rule 144(f). [Jan. 26, 2009]

Question 134.02

Question: Does the publication of a customer limit order in accordance with Exchange Act Rule 11Ac1-4 constitute the solicitation or arrangement for the solicitation of orders to buy securities within the meaning of Rule 144(f)(2)?

Answer. No. The publication of a customer limit order in accordance with Exchange Act Rule 11Ac1-4 would not constitute the solicitation or arrangement for the solicitation of orders to buy securities within the meaning of Rule 144(f)(2). See the Goldman, Sachs & Co. no-action letter (Dec. 6, 1996) issued by the Division. [Jan. 26, 2009]

Section 135. Rule 144(g) [Reserved]

Section 136. Rule 144(h) Notice of Proposed Sale

Question 136.01

Question: Does an amendment to Form 144 need to be filed in the event that a person does not sell the securities referred to in the Form?

Answer. No. If a person who has filed a Form 144 does not sell the securities referred to therein, no amendment reflecting this fact need be filed. [Jan. 26, 2009]

Question 136.02

Question: Does an amended Form 144 need to be filed to reflect a companys listing on a national securities exchange or a stock split?

Answer. No. A Form 144 need not be amended to reflect: (1) a companys listing on a national securities exchange; or (2) a stock split. [Jan. 26, 2009]

Question 136.03

Question: If a person intends to use two brokers, must the person allocate a specific number of shares to each broker on the Form 144?

Answer. A person who files a Form 144 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. [Jan. 26, 2009]

Question 136.04

Question: Does the de minimis exemption of Rule 144(h) apply to each individual seller who is required to file a Form 144 when sales are required to be aggregated under Rule 144(e)?

Answer. Yes. In a situation in which sales under Rule 144 are required to be aggregated for purposes of Rule 144(e), the de minimis exemption of Rule 144(h) (for filing Form 144), nonetheless, applies to each individual seller who is required to file a Form 144. [Jan. 26, 2009]

Question 136.05

Question: When a Form 144 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?

Answer. When a person is required to file a Form 144, no 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. [Jan. 26, 2009]

Question 136.06

Question: Should a Form 144 be amended to reflect a change in broker?

Answer. Yes. A Form 144 should be amended to reflect a change in broker. However, amending Form 144 to reflect a change in the broker does not permit the calculation of a new volume limitation based on trading. [Jan. 26, 2009]

Question 136.07

Question: What is the effect of an amended Form 144 that is filed to correct inaccuracies?

Answer. An amended Form 144 may be filed to correct inaccuracies in the original Form 144 at the time of, or subsequent to, its filing. However, the filing of an amended Form 144 does not cure any deficiencies with regard to sales made after filing the initial Form 144 and prior to the filing of the amended Form 144. [Jan. 26, 2009]

Question 136.08

Question: Under what circumstances does a sell order that is placed with a broker at above the current market price contravene the requirement in Rule 144(h) that the person filing a Form 144 have a bona fide intention to sell the securities referred to in the Form 144 within a reasonable time?

Answer. 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 144(h), unless the price reflected in the sell order was not consistent with a bona fide intention to sell within a reasonable time. [Jan. 26, 2009]

Question 136.09

Question: Rule 144(h) provides that the Form 144 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 144 should be transmitted for filing on the same day as the placing of a sale order or the execution of the sale?

Answer: Yes. For example, if a person is filing a Form 144 by mail, he or she meets the requirements of Rule 144(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. [Mar. 4, 2011]

Section 137. Rule 144(i) Unavailability to Securities of Issuers with No or Nominal Operations and No or Nominal Non-Cash Assets

Question 137.01

Question: If an issuer had previously been a shell company but is an operating company at the time that it issues securities, is the Rule 144 safe harbor available for the resale of such securities if all of the conditions in Rule 144(i)(2) are not satisfied at the time of the proposed sale?

Answer: No. Rule 144(i)(1) states that the Rule 144 safe harbor is not available for the resale of securities initially issued by a shell company (other than a business combination related shell company) or an issuer that has at any time previously been a shell company (other than a business combination related shell company). Consequently, the Rule 144 safe harbor is not available for the resale of such securities unless and until all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale. [Jan. 26, 2009]

Question 137.02

Question: Does Rule 144(i) apply to securities issued before February 15, 2008, which was the effective date of the amendments to Rule 144 in which the Commission adopted Rule 144(i)?

Answer: Yes. [Jan. 26, 2009]

Section 138. Rule 144A Private Resales of Securities to Institutions

Question 138.01

Question: May affiliates of an issuer make resales of the issuers eligible securities under Rule 144A?

Answer: Yes. Affiliates of the issuer may make resales of eligible securities under Rule 144A. The rule is available to any person other than the issuer. Issuer, as used in Rule 144A(b), has only the meaning given by Securities Act Section 2(a)(4). (The control clause of Securities Act Section 2(a)(11) equates the issuer and its affiliates solely for the purpose of identifying intermediaries to the public market who are underwriters within the statutes meaning. By definition, sales effected under Rule 144A are not made to the public market.) [Jan. 26, 2009]

Question 138.02

Question: When determining its status as a qualified institutional buyer eligible to participate in an offering eligible for resale under Rule 144A, may a buyer include the amount of securities expected to be purchased in such offering?

Answer: No. 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. [Jan. 26, 2009]

Question 138.03

Question: Under Rule 144A, 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?

Answer: No. In Rule 144A 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. [Nov. 13, 2013]

Question 138.04

Question: Did the amendments to Rule 144A permitting the use of general solicitation change how directed selling efforts under Regulation S are analyzed in concurrent Rule 144A and Regulation S offerings?

Answer: No. [Nov. 13, 2013]

Section 139. Rule 145 Reclassification of Securities, Mergers, Consolidations and Acquisitions of Assets

Question 139.01

Question: Can an issuer that plans to register a Rule 145 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 145 transaction, and incorporating the S-1 prospectus by reference into its proxy statement?

Answer: Yes. [Jan. 26, 2009]

Question 139.02

Question: Must a person subject to Rule 145(c) who is selling both Rule 145 shares and shares not subject to Rule 144(e) take into account the sales of the shares not subject to Rule 144(e) in determining whether the volume limitation of Rule 145(d) has been exceeded?

Answer: No. [Jan. 26, 2009]

Question 139.03

Question: 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 145(a)(2)?

Answer: No. The exception from Rule 145 provided by Rule 145(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. [Jan. 26, 2009]

Question 139.04

Question: If a corporation determines to sell its assets for a promissory note issued by another corporation, but will not distribute interests in the note to its shareholders, is the transaction a transfer of assets within the meaning of Rule 145(a)(3)?

Answer: No. [Jan. 26, 2009]

Question 139.05

Question: Can sales be made in reliance on Rule 145(d) before the one-year period in Rule 144(i)(2) is met?

Answer: No. [Jan. 26, 2009]

Question 139.06

Question: In determining the Rule 145(d)(2) holding period, can the holding period for restricted securities surrendered in the Rule 145 transaction be tacked to the holding period for the shares received?

Answer: No. See Rule 144(d)(3)(viii). [Jan. 26, 2009]

Question 139.07

Question: 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?

Answer: No. Although this solicitation is not subject to Regulation 14A, it nevertheless will involve a sale under Rule 145, which cannot be consummated without an effective registration statement. Accordingly, a proxy card can be sent only with the Rule 424(b) prospectus, not with the red herring. [Jan. 26, 2009]

Section 140. Rule 146 [Reserved]

Section 141. Rule 147 Part of an Issue, Person Resident, and Doing Business Within for Purposes of Section 3(a)(11)

Question 141.01

Question: May an issuer rely on Rule 147 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?

Answer: Yes. [Jan. 26, 2009]

Question 141.02

Question: May a broker-dealer distribute securities in an intrastate offering made in reliance on Rule 147 without jeopardizing the exemption available under that rule?

Answer: Yes. [Jan. 26, 2009]

Question 141.03

Question: If an issuer plans to conduct an intrastate offering pursuant to the Section 3(a)(11) exemption, may the issuer engage in general advertising or a general solicitation?

Answer: Securities Act Rule 147 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 Rule 147 be made only to persons resident within the state or territory of which the issuer is a resident. [April 10, 2014]

Question 141.04

Question: 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 Rule 147, could it rely on Rule 147 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?

Answer: Use of the Internet would not be incompatible with a claim of exemption under Rule 147 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 147 for the offering also would have to meet all the other conditions of Rule 147. [April 10, 2014]

Question 141.05

Question: Can an issuer use its own website or social media presence to offer securities in a manner consistent with Rule 147?

Answer: 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 Rule 147, including that sales may only be made to residents of the same state as the issuer. [October 2, 2014]

Sections 142 to 149. Rules 148 to 152a [Reserved]

Section 150. Rules 153, 153a and 153b

Question 150.01

Question: An issuer has registered an at the market offering of its common stock in reliance on Rule 415(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 153 to satisfy such prospectus delivery obligation? Also, does the broker dealer have an obligation to provide a Rule 173 notice and, if so, to whom?

Answer: 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 153 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 153 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 172) and similarly may have an obligation to provide a notice pursuant to Rule 173. Rule 173 excludes transactions solely between brokers or dealers in reliance on Rule 153, but not as to other purchasers of the issuer’s securities under the registration statement. [Aug. 14, 2009]

Section 151. Rule 154 [Reserved]

Section 152. Rule 155 Integration of Abandoned Offerings

Question 152.01

Question: Can an issuer rely on Rule 155(b) for an abandoned private offering followed by a shelf takedown if the shelf registration statement was filed prior to the private offering?

Answer: Yes, provided that the takedown is not done until after the time provided in Rule 155(b). [Jan. 26, 2009]

Question 152.02

Question: If an issuer is unsuccessful in completing an offering as a takedown from an existing shelf registration statement, may it rely on Rule 155(c) to complete the offering privately?

Answer: Yes. In a shelf offering, the filing of a prospectus supplement disclosing the termination of the offering is deemed to satisfy the Rule 155(c)(2) requirement to withdraw the registration statement. [Jan. 26, 2009]

Question 152.03

Question: Rule 155(c)(5) requires any written disclosure document used in the subsequent private offering to disclose any changes in the issuers business or financial condition that occurred after the issuer filed the registration statement and are material to the investment decision in the private offering. Does this requirement apply whether the written disclosure is provided on a mandatory (Rule 502(b)(1)) or voluntary basis?

Answer: Yes. [Jan. 26, 2009]

Sections 153 to 160. Rules 156 to 162 [Reserved]

Section 161. Rule 163 Exemption from Section 5(c) of the Act for Certain Communications by or on Behalf of Well-Known Seasoned Issuers

Question 161.01

Question: If an issuer has not previously filed any shelf registration statement and at the date of its last Form 10-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 163 for pre-filing offers?

Answer: No. 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 163 is not one of those events. Therefore, if there is no shelf registration statement on file and the issuer did not satisfy the definition of well-known seasoned issuer at the time it filed its most recent Form 10-K, the issuers status would not change until it either files a shelf registration statement or files its next Form 10-K. [Jan. 26, 2009]

Question 161.02

Question: May Rule 163 be used for communications by an underwriter if the issuer previously authorized the communication?

Answer: No. Rule 163 is not available for use by an underwriter. [Jan. 26, 2009]

Sections 162 to 163. Rules 163A to 164 [Reserved]

Section 164. Rule 165 Offers Made in Connection With a Business Combination Transaction

Question 164.01

Question: May an issuer contemplating a registered exchange offer subject to Exchange Act Rule 13e-4 rely on Rules 165 and 166 to communicate with its security holders before and after the first public announcement of the offering?

Answer: Yes, so long as the issuer satisfies the conditions set forth in Rules 165 and 166. In particular, the primary purpose or effect of the communication must be to convey information concerning a business combination transaction, as defined in Rule 165(f), and not to condition the market for a capital raising or resale transaction. Rules 165 and 166 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-4. [June 4, 2010]

Question 164.02

Question: An electronic communication relying on the exemption in Rule 165 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 165(c)(1) requirement?

Answer: 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 165(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;