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SECURITIES AND EXCHANGE COMMISSION
17 CFR PARTS 228, 229, 239, 240, and 242
Release Nos. 33-7400; 34-38363; IC-22540; International Series
Release No. 1061; File No. S7-11-96
RIN 3235-AF54
Anti-manipulation Rules Concerning Securities Offerings;
Corrections
AGENCY: Securities and Exchange Commission.
ACTION: Corrections to final regulations.
SUMMARY: This document contains technical amendments to correct
the final rules for Regulation M and related amendments published
in the Federal Register on January 3, 1997 (62 FR 520). In
addition, the market notification requirement of 242.104(h)(1)
and (2) is postponed until April 1, 1997.
EFFECTIVE DATE: March 4, 1997. The market notification
requirements of 242.104(h)(1) and (2) are effective on April 1,
1997.
FOR FURTHER INFORMATION CONTACT: Nancy J. Sanow, M. Blair
Corkran, or Alan J. Reed in the Office of Risk Management and
Control, Division of Market Regulation, Securities and Exchange
Commission, 450 Fifth Street, N.W., Mail Stop 5-1, Washington,
D.C. 20549, at 202-942-0772.
SUPPLEMENTARY INFORMATION: The Commission is announcing
technical amendments to Rule 100 -[1]- under Regulation M,
Rule 104 -[2]- under Regulation M, Rule 10b-18 -[3]-
under the Securities Exchange Act of 1934 ("Exchange Act"),
-[4]- Rule 13e-4 -[5]- under the Exchange Act, Item 508
under Regulation S-B, -[6]- Item 508 under Regulation S-K,
-[7]- and Forms F-7, -[8]- F-8, -[9]- F-9,
-[10]- and F-10 -[11]- under the Securities Act of
---------FOOTNOTES----------
-[1]- 17 CFR 242.100.
-[2]- 17 CFR 242.104.
-[3]- 17 CFR 240.10b-18.
-[4]- 15 U.S.C. 78a et seq.
-[5]- 17 CFR 240.13e-4.
-[6]- 17 CFR 228.508.
-[7]- 17 CFR 229.508.
-[8]- 17 CFR 239.37.
-[9]- 17 CFR 239.38.
-[10]- 17 CFR 239.39. ==========================================START OF PAGE 2======
1933 ("Securities Act"). -[12]- These amendments correct
drafting errors in the rule text published in the release
adopting Regulation M ("Adopting Release"). -[13]- The
Commission also is announcing that the market notice requirements
of Rule 104(h) -[14]- will be effective on April 1, 1997.
I. Technical Amendments to Definitions in Rule 100
A. Business Day
In both the Adopting Release and the release proposing
Regulation M ("Proposing Release"), -[15]- the Commission
stated that it intended Regulation M to require restricted
periods commencing either one or five business days prior to the
day of pricing. -[16]- The Proposing Release defined
"business day" as "a twenty-four hour period determined with
reference to the principal market for the securities to be
distributed, and that includes a complete trading session for
that market." -[17]-
The Commission adopted the definition of business day with a
minor change: the business day was to commence at midnight and
run 24 hours. This revision was intended to make the definition
applicable to Rule 104, as well as Rules 101 and 102. Since
publication of the Adopting Release, it has become apparent that
the definition of business day as adopted had the potential
effect of extending the restricted periods beyond the one or five
days intended, where offerings are priced after the close of the
principal market. This result, which would occur if the
calculation of business day commenced at midnight, was not
intended by the Commission.
Therefore, the definition of business day is amended by
revising it to parallel the definition set forth in the Proposing
Release. This correction eliminates the requirement that the 24
hour period begin at midnight.
B. Agent Independent of the Issuer
The text of the Adopting Release and the Proposing Release
both indicated that a plan agent would not be deemed independent
---------FOOTNOTES----------
-[11]-(...continued)
-[11]- 17 CFR 239.40.
-[12]- 15 U.S.C. 77a et seq.
-[13]- Securities Exchange Act Release No. 38067
(December 20, 1996), 62 FR 520.
-[14]- 17 CFR 242.104(h).
-[15]- Securities Exchange Act Release No. 37094 (April
11, 1996), 61 FR 17108.
-[16]- See Adopting Release, 62 FR at 525; Proposing
Release, 61 FR at 17113.
-[17]- Adopting Release, 62 FR at 545.
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from the issuer where the issuer changed the source of shares to
be distributed through the plan more frequently than once every
three months. -[18]- However, the definition of "agent
independent of the issuer" in Rule 100 under Regulation M, as
adopted, did not expressly include this limitation. This result
was not intended by the Commission.
Accordingly, the definition is amended by adding the phrase
"the source of the shares for the plan" to the proviso in
paragraph (2). This amendment clarifies that an agent will not
be deemed independent if the issuer changes the source of shares
to fund the plan more often than once every three months.
II. Other Technical Amendments
A. Rule 102
Paragraph (b)(7)(ii) of Rule 102 incorrectly refers to
paragraph (b)(6)(i) rather than to paragraph (b)(7)(i). The
amendment corrects this error.
B. Rule 104
Paragraph (f)(2)(i) of Rule 104 is amended by replacing the
phrase "preceding business day" with "most recent prior day of
trading in the principal market".
Paragraph (j)(2)(ii) incorrectly refers to paragraph (j)(1)
rather than to paragraph (j)(2)(i). The amendment corrects this
error.
C. Rule 10b-18
The Commission is amending the punctuation in paragraph
(a)(3)(i) of Rule 10b-18 to correct the grammatical structure of
the paragraph.
D. Rule 13e-4
Paragraph (h)(5)(i) of Rule 13e-4 is corrected to use the
term "plan" rather than "issuer's plan" and to cite 242.100 of
this chapter, rather than Regulation M.
E. Item 508 of Regulations S-B and S-K
Item 508 of Regulations S-B and S-K was amended in the
Adopting Release to include disclosure regarding syndicate short
covering transactions and penalty bids. These activities
invariably occur after the offer and sale phase of an offering.
-[19]- As adopted, Item 508 requires disclosure of these
activities "during the offering." -[20]- This language may
be misconstrued to limit the disclosure to only activities
conducted during the offer and sale period of an offering.
Therefore, this phrase is replaced with "in connection with the
offering".
F. Forms F-7, F-8, F-9, and F-10
---------FOOTNOTES----------
-[18]- Adopting Release, 62 FR at 533; Proposing Release,
61 FR at 17121.
-[19]- See Adopting Release, 62 FR at 535; Proposing
Release, 61 FR at 17124-17125.
-[20]- Adopting Release, 62 FR at 543.
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Securities Act Forms F-7, F-8, F-9, and F-10 are corrected
to reference Regulation M.
III. Change of Effective Date of Rule 104(h)
The effective date of Rule 104(h)(1) and (2) under
Regulation M is changed from March 4, 1997 to April 1, 1997.
This change applies only to the provisions requiring prior notice
to the market on which stabilizing, syndicate covering
transactions, or penalty bids will be effected. Thus, this
change does not affect a person's obligation to disclose that a
bid is for the purpose of stabilizing to the person with whom the
bid is placed, as required pursuant to Rule 104(h)(1). This
change will provide self-regulatory organizations with the
opportunity to implement procedures for receiving notification.
IV. Certain Findings
Under Section 553(b), notice of proposed rulemaking is not
required when the agency for good cause finds that notice and
public procedure thereon are "impracticable, unnecessary, or
contrary to the public interest." Because the amendments adopted
today are technical corrections to clarify the application of
Regulation M, the Commission finds that publishing the amendments
for comment would be unnecessary. The rules being amended were
adopted after notice and the opportunity for public comment. The
changes are responsive to concerns raised with the staff relating
to ambiguity in the current language of the rules. Furthermore,
if the changes were delayed so as to allow notice and the
opportunity for comment, there is the danger of confusion
regarding the obligations of underwriters and other market
participants, with the possibility of some disruption of the
process of capital raising.
Under Section 553(d), publication of a substantive rule not
less than 30 days before its effective date is required except as
otherwise provided by the agency for good cause. For the same
reasons as described above with respect to notice and opportunity
for comment, the Commission finds that there is good cause for
having the rules become effective on March 4, 1997.
Pursuant to Section 605(b) of the Regulatory Flexibility
Act, 5 U.S.C. 605(b), the Chairman of the Commission has
certified that the amendments adopted in this release would not
have a significant economic impact on a substantial number of
small entities. This certification, including a statement of the
factual basis therefor, is attached to this release as Appendix
A.
The Paperwork Reduction Act of 1995 -[21]- does not
apply to this rulemaking since these correcting amendments do not
require any "collection of information."
Section 23(a)(2) of the Exchange Act -[22]- requires
the Commission to consider the anti-competitive effects of any
---------FOOTNOTES----------
-[21]- 44 U.S.C. 3501 et seq.
-[22]- 15 U.S.C. 78w(a)(2).
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rules it adopts thereunder, and to balance them against the
benefits that further the purposes of the Act. Furthermore,
Section 2 of the Securities Act -[23]- and Section 3 of the
Exchange Act, -[24]- as amended by the recently enacted
National Securities Markets Improvements Act of 1996,
-[25]- provide that whenever the Commission is engaged in
rulemaking and is required to consider or determine whether an
action is necessary or appropriate in the public interest, the
Commission also shall consider, in addition to the protection of
investors, whether the act will promote efficiency, competition,
and capital formation. Because the amendments here do not effect
any substantive change in the rules they do not have any anti-
competitive effects. Because they correct mistakes or clarify
ambiguity present in the Commission's rules, they serve to
promote efficiency, competition, and capital formation, and are
therefore in the public interest.
V. Statutory Authority
The necessary nomenclature amendments to Securities Act
Forms F-7, F-8, F-9, and F-10 and Exchange Act Rule 13e-4,
reflecting the removal of Rules 10b-6, 10b-6A, 10b-7, and 10b-8
under the Exchange Act and the adoption of Regulation M, and the
amendment to Exchange Act Rule 10b-18, are adopted under the
Exchange Act, 15 U.S.C. 78a et seq., particularly Sections 2, 3,
9(a)(6), 10(a), 10(b), 13(e), 15(c), 17(a), and 23(a), 15 U.S.C.
78b, 78c, 78i(a)(6), 78j(a), 78j(b), 78m(e), 78o(c), 78q(a), and
78w(a), and with respect to Forms F-7, F-8, F-9, and F-10, also
under the Securities Act, particularly Sections 7, 10, and 19(a),
15 U.S.C. 77g, 77j, and 77s(a). The amendments to Item 508 of
Regulations S-B and S-K are adopted under the Securities Act, 15
U.S.C. 77a et seq., particularly Sections 6, 7, 8, 10, and 19(a),
15 U.S.C. 77f, 77g, 77h, 77j, and 77s(a); the Exchange Act, 15
U.S.C. 78a et seq., particularly Sections 3, 4, 10, 12, 13, 14,
15, 16, and 23, 15 U.S.C. 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78p,
and 78w; and the Investment Company Act, 15 U.S.C. 80a-1 et seq.,
particularly Sections 8 and 38(a), 15 U.S.C. 80a-8 and 80a-37(a).
Regulation M is adopted under the Securities Act, 15 U.S.C. 77a
et seq., particularly Sections 7, 17(a), 19(a), 15 U.S.C. 77g,
77q(a), and 77s(a); the Exchange Act, 15 U.S.C. 78a et seq.,
particularly Sections 2, 3, 9(a), 10, 11A(c), 12, 13, 14, 15(c),
15(g), 17(a), 23(a), and 30, 15 U.S.C. 78b, 78c, 78i(a), 78j,
78k-1(c), 78l, 78m, 78n, 78o(c), 78o(g), 78q(a), 78w(a), and
78dd-1; and the Investment Company Act, 15 U.S.C. 80a-1 et seq.,
particularly Sections 23, 30, and 38, 15 U.S.C. 80a-23, 80a-29,
and 80a-37.
VI. Correction of Publication
---------FOOTNOTES----------
-[23]- 15 U.S.C. 77b.
-[24]- 15 U.S.C. 78c.
-[25]- Pub. L. No. 104-290, 106, 110 Stat. 3416 (1996).
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Accordingly, the publication on January 3, 1997 of the final
regulations, which were the subject of FR Doc. No. 97-1, is
corrected as follows:
228.508 [Corrected]
1. On page 543, in the first column, in 228.508,
paragraph (j), on the sixth line, the phrase "during the
offering" is corrected to read "in connection with the offering".
229.508 [Corrected]
2. On page 543, in the second column, in 229.508,
paragraph (l), on the sixth line, the phrase "during the
offering" is corrected to read "in connection with the offering".
239.37 [Amended]
3. Form F-7 (referenced in 239.37) is amended by removing
the phrase "Rules 10b-6, 10b-7 and 10b-8 under the Exchange Act"
from General Instruction III.A. and adding, in its place, the
phrase "Regulation M (17 CFR 242.100 through 242.105)".
Note: Form F-7 does not appear in the Code of Federal
Regulations.
239.38 [Amended]
4. Form F-8 (referenced in 239.38) is amended by
removing the phrase "Rules 10b-6, 10b-7 and 10b-13 under the
Exchange Act. [See Exchange Act Release No. 29355 (June 21,
1991) containing exemptions from Rules 10b-6 and 10b-13.]" from
General Instruction V.A. and adding, in its place, the phrase
"Regulation M (17 CFR 242.100 through 242.105) and Rule 10b-13
under the Exchange Act [See Exchange Act Release No. 29355 (June
21, 1991) containing an exemption from Rule 10b-13.]".
Note: Form F-8 does not appear in the Code of Federal
Regulations.
239.39 [Amended]
5. Form F-9 (referenced in 239.39) is amended by removing
the phrase "Rules 10b-6 and 10b-7 under the Exchange Act" from
General Instruction III.A. and adding, in its place, the phrase
"Regulation M (17 CFR 242.100 through 242.105)".
Note: Form F-9 does not appear in the Code of Federal
Regulations.
239.40 [Amended]
6. Form F-10 (referenced in 239.40) is amended by
removing the phrase "Rules 10b-6 and 10b-7 under the Exchange
Act" from General Instruction III.A. and adding, in its place,
the phrase "Regulation M (17 CFR 242.100 through 242.105)".
Note: Form F-10 does not appear in the Code of Federal
Regulations.
240.10b-18 [Corrected]
7. On page 543, in the third column, in 240.10b-18,
paragraph (a)(3)(i), the third line is corrected by inserting a
comma between the words "chapter" and "during" and, in the fifth
line, the phrase "common stock, or during a distribution" is
corrected to read "common stock or a distribution".
240.13e-4 [Corrected]
8. On page 544, in the first column, in 240.13e-4,
instruction 19 is revised to read:
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Section 240.13e-4 is amended by removing the phrase "an
issuer's plan, as that term is defined in 242.100 of Regulation
M" from paragraph (h)(5)(i) and adding, in its place, the phrase
"a plan as that term is defined in 242.100 of this chapter".
242.100 [Corrected]
9. On page 545, in the second column, in the sixth
paragraph, the 15th line is corrected by inserting the phrase
"the source of the shares to fund the plan," after the word
"period" and before the phrase "the basis".
10. On page 545, in the second column, in the sixth
paragraph, the 16th line is corrected by inserting a comma after
the word "plan" and before the word "or".
11. On page 545, in the second column, in the ninth
paragraph commencing "Business day", the paragraph is revised to
read as follows:
"Business day refers to a 24 hour period determined with
reference to the principal market for the securities to be
distributed, and that includes a complete trading session for
that market."
242.102 [Corrected]
12. On page 547, in the third column, in the seventh
paragraph, in the fifth line, the phrase "paragraph (b)(6)(i)" is
corrected to read "paragraph (b)(7)(i)".
242.104 [Corrected]
13. On page 549, in the first column, in paragraph (2)(i),
in the 11th line, the phrase "preceding business day" is
corrected to read "most recent prior day of trading in the
principal market".
14. On page 550, in the second column, in paragraph
(j)(2)(ii), in the fifth line, the phrase "paragraph (j)(1)" is
corrected to read "paragraph (j)(2)(i)".
By the Commission,
Jonathan G. Katz
Secretary
Date: March 4, 1997
Note: Appendix A to the Preamble will not appear in the Code
of Federal Regulations.
APPENDIX A
REGULATORY FLEXIBILITY ACT CERTIFICATION
I, Arthur Levitt, Chairman of the Securities and Exchange
Commission, hereby certify pursuant to 5 U.S.C. 605(b) that:
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amendments to Rule 100 under Regulation M, Rule 104 under
Regulation M, Rule 10b-18 under the Securities Exchange Act of
1934 ("Exchange Act"), Rule 13e-4 under the Exchange Act, Item
508 under Regulation S-B, Item 508 under Regulation S-K, and
Forms F-7, F-8, F-9, and F-10 under the Securities Act of 1933
("Securities Act"), when promulgated, will not have a significant
economic impact on a substantial number of small entities.
The amendments noted above are intended to correct mistakes
or oversights in the drafting of Regulation M and amendments to
related rules and regulations. They are technical changes that
do not affect the application of the rules to small entities.
Furthermore, these amendments do not affect the Final Regulatory
Flexibility Act analysis prepared in conjunction with the
adoption of Regulation M and amendments to related rules,
available in Public File No. S7-11-96.
Arthur Levitt, Chairman
Dated: March 4, 1997