SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

Release Nos. 33-7376; 34-38068; IC-22413; File No. S7-12-96

RIN 3235-AG78

Odd-lot Tender Offers by Issuers

AGENCY:  Securities and Exchange Commission.

ACTION:  Final Rule.

SUMMARY:  The Securities and Exchange Commission ("Commission")

is adopting an amendment to Rule 13e-4 under the Securities

Exchange Act of 1934 ("Exchange Act").  The amendment removes the

rule's requirement that an issuer cash tender offer made to odd-

lot holders specify a record date of ownership for eligibility to

tender into the offer.  The amendment enables issuers to conduct

continuous, periodic, or extended odd-lot offers for their equity

securities.  The Commission also is granting a class exemption

from Rule 10b-13, and a temporary class exemption from Rule 10b-

6, under the Exchange Act to permit issuers to conduct odd-lot

offers, to "round-up" odd-lots on behalf of odd-lot holders, and

to make purchases of their securities otherwise than pursuant to

the odd-lot offer.

EFFECTIVE DATE:  [Insert date of publication in the Federal

Register.]

FOR FURTHER INFORMATION CONTACT:  Lauren C. Mullen, Attorney,

Office of Risk Management and Control, Division of Market

Regulation, Securities and Exchange Commission, 450 Fifth Street,

N.W., Stop 5-1, Washington, D.C. 20549, at (202) 942-0772.
==========================================START OF PAGE 2======
SUPPLEMENTARY INFORMATION:

I.   EXECUTIVE SUMMARY

     The Commission is adopting an amendment to paragraph (h)(5)

of Rule 13e-4 ("Rule 13e-4" or "Rule") -[1]- under the

Exchange Act, -[2]- and is granting a class exemption from

Rule 10b-13, -[3]- and a temporary class exemption from Rule

10b-6, -[4]- under the Exchange Act in connection with

issuers' odd-lot tender offers.  The amendment, which was

published for comment on April 25, 1996 ("Proposing Release"),

-[5]- and the class exemptions permit issuers to conduct

continuous, periodic, or extended odd-lot offers for their equity

securities without seeking exemptions from Rules 10b-6, 10b-13,

and 13e-4 from the Commission. 

II.  DISCUSSION OF THE AMENDMENT

     Rule 13e-4 governs cash tender and exchange offers by

issuers for their equity securities.  Paragraph (h)(5) of Rule

13e-4 excepts issuers' odd-lot offers from the provisions of the

Rule, other than the "all holders" and "best price" provisions of






---------FOOTNOTES----------
     -[1]-     17 CFR 240.13e-4.

     -[2]-     15 U.S.C. 78a et seq.

     -[3]-     17 CFR 240.10b-13.

     -[4]-     17 CFR 240.10b-6.

     -[5]-     Securities Exchange  Act Release No.  37132 (April
               25, 1996), 61 FR 18306. 
==========================================START OF PAGE 3======
paragraphs (f)(8)(i) and (f)(8)(ii), respectively. -[6]-  In

an odd-lot offer, the offer to purchase is limited to

securityholders who own fewer than 100 shares of the subject

security.

     Prior to this amendment, paragraph (h)(5) of Rule 13e-4

required an issuer making an odd-lot offer to set a record date

prior to the offer's announcement for the purpose of determining

a securityholder's eligibility to participate in the offer.  As

discussed in the Proposing Release, the record date requirement

was imposed to prevent certain perceived abuses. -[7]-  The

Commission's experience with odd-lot offers, and the two comments

received in response to the Proposing Release, indicate that such

abuses rarely, if ever, occur.  Therefore, to reduce the

regulatory burdens for issuers conducting odd-lot offers, and to

eliminate the need for the Commission to grant exemptions from

Rule 13e-4 on a case-by-case basis for extended odd-lot offers,

---------FOOTNOTES----------
     -[6]-     17  CFR  240.13e-4(h)(5); see  Securities Exchange
               Act Release No. 19988 (July 21, 1983), 48 FR 34251
               ("Release No. 34-19988")  (adopting the  paragraph
               now  designated  as (h)(5)  of  Rule 13e-4,  which
               excepts   odd-lot   offers    from   the    Rule's
               requirements). 

     Rule 13e-4(f)(8)(i)  requires that the tender  offer be open
     to all securityholders of the class of securities subject to
     the  tender offer.   17 CFR  240.13e-4(f)(8)(i).   Rule 13e-
     4(f)(8)(ii)   requires  that   consideration  paid   to  any
     securityholder  pursuant to  an issuer  tender offer  be the
     highest  consideration  paid  to any  other  security holder
     during such tender offer.  17 CFR 240.13e-4(f)(8)(ii).

     -[7]-     See  Securities  Exchange  Act  Release  No. 19246
               (November 17, 1982), 47  FR 53398, 53400 ("Release
               34-19246")  (proposing  adoption of  the paragraph
               now designated as (h)(5) of Rule 13e-4).
==========================================START OF PAGE 4======
the Commission proposed amending Rule 13e-4 to delete the record

date requirement from paragraph (h)(5).  The amendment was

proposed to permit issuers to conduct odd-lot offers on a

continuous, extended, or periodic basis, and also to enable odd-

lot holders who obtain their holdings prior to or during the odd-

lot offer to participate in the offer.    

     The Commission has determined to adopt the amendment to Rule

13e-4(h)(5) as proposed, with a minor modification. -[8]- 

In order to provide issuers with flexibility, the rule as amended

permits, but does not require, an issuer to set a record date for

eligibility to participate in an odd-lot offer.

     One commenter requested clarification regarding the

appropriate procedures under the Rule for notifying beneficial

holders of odd-lots about the offer.  As previously noted,

paragraph (h)(5) of Rule 13e-4 excepts issuers from the Rule's

requirements other than the "all holders" and "best price"

provisions.  Nonetheless, in proposing paragraph (h)(5), the

Commission noted an issuer's affirmative duty under the Exchange

Act, and various rules promulgated thereunder, to disclose

material information to its shareholders as well as its own

---------FOOTNOTES----------
     -[8]-     One commenter suggested that the Commission exempt
               issuers  that  conduct  odd-lot  offers  from  the
               broker-dealer   registration   requirements  under
               Section 15(a) of the Exchange Act.  The Commission
               notes   that   this   commenter's  concerns   were
               specifically  addressed by  the  staff  in  Letter
               regarding  Shareholder Communications  Corporation
               (July  25, 1996),  1996  SEC. No-Act.  LEXIS  610.
               This letter discusses the  extent to which issuers
               may  participate  in   an  odd-lot  offer  without
               requiring registration as a broker-dealer.
==========================================START OF PAGE 5======
interest in the success of an odd-lot offer. -[9]-  In

adopting the odd-lot exception, the Commission further stated

that odd-lot offers are required to be extended equally to

beneficial holders and record holders. -[10]-

     The ability to participate equally means that beneficial

holders should have the same access to information about the

offer as record holders. -[11]-  Accordingly, while Rule

13e-4(h)(5) does not contain dissemination requirements, an

issuer or its agent must take reasonable steps to disseminate

information about an odd-lot offer to beneficial holders in a

manner comparable to the dissemination to record holders.  

     The same commenter also suggested excepting issuer tender

offers made to a class of shareholders owning, in the aggregate,

less than five percent of the issuer's outstanding securities;

this commenter also suggested redefining the term "odd-lot" to

include more than 99 shares.  The Commission believes that the

odd-lot exception to Rule 13e-4 is meant to cover an offer for

economically de minimis holdings, e.g., an amount of securities

for which high transaction costs create a disincentive for

trading the shares and which also is too small to warrant

servicing by the issuer.  Moreover, increasing the exception's


---------FOOTNOTES----------
     -[9]-     Release No. 34-19246, 47 FR at 53399 n. 18.

     -[10]-    Release No. 34-19988, 48 FR at 34252.

     -[11]-    Cf.  paragraph (e)(1)(ii)  of  Rule 13e-4,  17 CFR
               240.13e-4(e)(1)(ii), and paragraph (a)(2)  of Rule
               14a-7  under  the Exchange  Act,  17 CFR  240.14a-
               7(a)(2), respectively.
==========================================START OF PAGE 6======
threshold to an amount greater than 99 shares would raise various

concerns under the Rule, including the "all-holders" provisions. 

Nevertheless, the Commission recognizes that the odd-lot

exception is intended to allow issuers to reduce the number of

small shareholdings where the costs to issuers of servicing small

shareholders, and the costs to shareholders of selling small

holdings, are disproportionate to the value of the security. 

Accordingly, the Commission will consider, on a case-by-case

basis, issuer offers involving tenders of more than 99 shares

from each holder, where such offers involve a number of

securities that represent a de minimis proportion of the value of

the issuer's outstanding securities. -[12]-

III. CLASS EXEMPTION FROM RULE 10b-13 AND TEMPORARY CLASS
     EXEMPTION FROM RULE 10b-6

     As discussed in the Proposing Release, odd-lot offers also

raise issues under Rule 10b-13, which prohibits an issuer

conducting a cash tender or exchange offer from purchasing the

same security that is the subject of the offer (or any other

security which is immediately convertible into or exchangeable

for such security) otherwise than pursuant to the offer.  Rule

10b-13 is designed, inter alia, to prevent larger shareholders

from demanding greater or different consideration for the tender


---------FOOTNOTES----------
     -[12]-    The Commission,  through  its Division  of  Market
               Regulation, will consider requests  regarding such
               programs.  Such requests should be directed to the
               Office of Risk Management and Control, Division of
               Market   Regulation,   Securities   and   Exchange
               Commission,  450  Fifth  Street, N.W.,  Stop  5-1,
               Washington, D.C. 20549 at (202) 942-0772.
==========================================START OF PAGE 7======
of their shares than that which is paid pursuant to the tender

offer.  Larger shareholders are ineligible to participate in odd-

lot offers because, by definition, an odd-lot offer is available

only to shareholders owning 99 or fewer shares of the issuer's

securities.  Accordingly, the Commission believes that purchases

of an issuer's securities otherwise than pursuant to an odd-lot

offer do not raise the concerns that Rule 10b-13 is designed to

address.

     The Commission, therefore, hereby grants an exemption from

Rule 10b-13 to permit any issuer or agent acting on behalf of an

issuer in connection with an odd-lot offer to purchase or arrange

to purchase the security that is the subject of the offer (or any

other security which is immediately convertible into or

exchangeable for such security) otherwise than pursuant to the

odd-lot offer from the time that the odd-lot offer is publicly

announced or otherwise made known to odd-lot holders, until the

offer's expiration.  Among other things, this will allow the

issuer or its agent to purchase the issuer's securities to

satisfy requests of odd-lot holders to "round-up" their holdings

to 100 shares. 

     Also, the Commission today is adopting Regulation M under

the Exchange Act, the Securities Act of 1933, -[13]- and

the Investment Company Act of 1940, -[14]- and is



---------FOOTNOTES----------
     -[13]-    15 U.S.C. 77a et seq.

     -[14]-    15 U.S.C. 80a-1 et seq.
==========================================START OF PAGE 8======
rescinding Rule 10b-6 under the Exchange Act, among other rules.

-[15]-  Rule 102 of Regulation M, which along with Rule 101

replaces Rule 10b-6, contains an exception that permits issuers

to purchase odd-lots while engaged in a distribution of the same

or related securities.  This exception allows issuers to conduct

odd-lot tender offers, including continuous, periodic, or

extended odd-lot offers, during a distribution of the same or

related securities.  The exception also allows issuers to

purchase securities on behalf of odd-lot holders who wish to

"round-up" their holdings to a round lot (i.e., 100 shares).

-[16]-  The exceptions for odd-lot transactions under

Regulation M will accomplish the same relief intended by the

class exemption from Rule 10b-6 that was discussed in the

Proposing Release. -[17]-  The exception for odd-lot

transactions from Rule 102 of Regulation M, and a similar

exception from Rule 101 for distribution participants and their

affiliated purchasers, will be effective as of 60 days from

publication of Regulation M in the Federal Register.  

     To accommodate odd-lot offers in the interim, the Commission


---------FOOTNOTES----------
     -[15]-    Securities   Exchange   Act   Release  No.   38067
               (December 20, 1996).

     -[16]-    Additionally, the Commission  notes that sales  of
               tendered  odd-lots  into the  open market  are not
               subject to Rules  101 and 102 of  Regulation M (or
               Rule 10b-6)  where such  sales do not  satisfy the
               magnitude and special  selling efforts and selling
               methods elements of a distribution for purposes of
               those provisions.

     -[17]-    Proposing Release, 61 FR at 18307.
==========================================START OF PAGE 9======
hereby grants an exemption from Rule 10b-6 on a temporary basis

to permit an issuer, or an agent acting on behalf of the issuer,

to bid for or purchase odd-lots, or to effect transactions to

allow odd-lot holders to "round-up" their holdings to 100 shares

during an odd-lot offer conducted pursuant to Rule 13e-4(h)(5),

during a distribution for the purposes of Rule 10b-6.  This class

exemption will terminate as of the effective date of Regulation

M.  

IV.  REGULATORY FLEXIBILITY ACT ANALYSIS

     The Chairman of the Securities and Exchange Commission

certified in connection with the Proposing Release that the

proposed amendment to Rule 13e-4 and the proposed class

exemptions from Rules 10b-6 and 10b-13, if adopted, would not

have a significant impact on a substantial number of small

entities.  None of the comments addressed the certification.

V.   EFFECTS ON COMPETITION AND OTHER FINDINGS

     Section 23(a)(2) of the Exchange Act -[18]- requires

the Commission, in adopting rules under the Exchange Act, to

consider the anti-competitive effects of such rules, if any, and

to balance any impact against regulatory benefits gained in terms

of furthering the purposes of the Exchange Act.  Furthermore,

Section 2 of the Securities Act of 1933 -[19]- and Section

3 of the Exchange Act, -[20]- as amended by the recently

---------FOOTNOTES----------
     -[18]-    15 U.S.C. 78w(a)(2).

     -[19]-    15 U.S.C. 77b.

     -[20]-    15 U.S.C. 78c.
==========================================START OF PAGE 10======
enacted National Securities Markets Improvement Act of 1996

("Markets Improvement Act"), -[21]- 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

action will promote efficiency, competition, and capital

formation.     The Commission has considered the amendment to

Rule 13e-4 and the class exemption from Rule 10b-13 in light of

the standards cited in Sections 3 and 23(a)(2) of the Exchange

Act and believes that, for the reasons stated herein, the

adoption of the amendment and the granting of the class exemption

will promote efficiency for issuers conducting odd-lot offers,

will have no adverse affect on capital formation, and will not

impose any burden on competition not necessary or appropriate in

furtherance of the Exchange Act.  

     The Commission finds, in accordance with the Administrative

Procedure Act, -[22]- that the adoption of the amendment to

Rule 13e-4 and the class exemptions from Rules 10b-6 and 10b-13

relieve mandatory restrictions and are exemptive in nature. 

Accordingly, the foregoing action becomes effective immediately.

VI.  STATUTORY BASIS 

     Pursuant to Sections 3(b), 9(a)(6), 10(b), 13(e), 14(e), and


---------FOOTNOTES----------
     -[21]-    Pub. L. No. 104-290,  106, 110 Stat. 3416 (1996).

     -[22]-    5 U.S.C. 553(d).
==========================================START OF PAGE 11======
23(a) of the Exchange Act; 15 U.S.C. 78c(b), 78i(a)(6), 78j(b),

78m(e), 78n(e), and 78w(a); the Commission amends Rule 13e-4 in

Chapter II of Title 17 of the Code of Federal Regulations by

amending paragraph (h)(5) of  240.13e-4.

List of Subjects in 17 CFR Part 240

     Brokers, Confidential business information, Fraud, Reporting

and recordkeeping requirements, Securities.

TEXT OF THE PROPOSED AMENDMENT

     For the reasons set out in the preamble, the Commission

amends Title 17, Chapter II of the Code of Federal Regulations as

follows:
==========================================START OF PAGE 12======
PART 240 -     GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE

               ACT OF 1934

     1.   The authority citation for part 240 continues to read,

in part, as follows:

     Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,

77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1, 78l,

78m, 78n, 78o, 78p, 78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-

20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless

otherwise noted.

* * * * *

     2.   Section 240.13e-4 is amended by revising paragraph

(h)(5) to read as follows:

240.13e-4     Tender offers by issuers.

* * * * * 

     (h) * * *

     (5) Offers to purchase from security holders who own an

aggregate of not more than a specified number of shares that is

less than one hundred:  Provided, however,  That:  

     (i) The offer complies with paragraph (f)(8)(i) of this

section with respect to security holders who own a number of

shares equal to or less than the specified number of shares,

except that an issuer can elect to exclude participants in an

issuer's plan, as that term is defined in 242.100 of Regulation

M, or to exclude security holders who do not own their shares as

of a specified date determined by the issuer; and 

     (ii) The offer complies with paragraph (f)(8)(ii) of this
==========================================START OF PAGE 13======
section or the consideration paid pursuant to the offer is

determined on the basis of a uniformly applied formula based on

the market price of the subject security;

* * * * *

     By the Commission.




                                        Jonathan G. Katz
                                        Secretary


December 20, 1996