[Federal Register Volume 62, Number 48 (Wednesday, March 12, 1997)]
[Rules and Regulations]
[Pages 11321-11323]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5837]
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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.
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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 Sec. 242.104(h) (1) and (2) is
postponed until April 1, 1997.
DATES: The second sentence of the Effective Date for the rule published
at 62 FR 520 is corrected to read as follows: ``The requirements of
Sec. 242.104(h) (1) and (2) and Sec. 242.104(i) and the amendments to
Sec. 240.17a-2 are effective on April 1, 1997.''
The corrections published in this document are effective March 4,
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 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.
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\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.
\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).
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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
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\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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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 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.
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\18\ Adopting Release, 62 FR at 533; Proposing Release, 61 FR at
17121.
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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.
[[Page 11322]]
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 Sec. 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''.
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\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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F. Forms F-7, F-8, F-9, and F-10
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.''
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\21\ 44 U.S.C. 3501 et seq.
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Section 23(a)(2) of the Exchange Act 22 requires the
Commission to consider the anti-competitive effects of any 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.
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\22\ 15 U.S.C. 78w(a)(2).
\23\ 15 U.S.C. 77b.
\24\ 15 U.S.C. 78c.
\25\ Pub. L. No. 104-290, Sec. 106, 110 Stat. 3416 (1996).
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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
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:
[[Page 11323]]
Sec. 228.508 [Corrected]
1. On page 543, in the first column, in Sec. 228.508, paragraph
(j), on the sixth line, the phrase ``during the offering'' is corrected
to read ``in connection with the offering''.
Sec. 229.508 [Corrected]
2. On page 543, in the second column, in Sec. 229.508, paragraph
(l), on the sixth line, the phrase ``during the offering'' is corrected
to read ``in connection with the offering''.
Sec. 239.37 [Amended]
3. Form F-7 (referenced in Sec. 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.
Sec. 239.38 [Amended]
4. Form F-8 (referenced in Sec. 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.
Sec. 239.39 [Amended]
5. Form F-9 (referenced in Sec. 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.
Sec. 239.40 [Amended]
6. Form F-10 (referenced in Sec. 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.
Sec. 240.10b-18 [Corrected]
7. On page 543, in the third column, in Sec. 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''.
Sec. 240.13e-4 [Corrected]
8. On page 544, in the first column, in Sec. 240.13e-4, instruction
19 is revised to read:
Section 240.13e-4 is amended by removing the phrase ``an issuer's
plan, as that term is defined in Sec. 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 Sec. 242.100 of this chapter''.
Sec. 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.''
Sec. 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)''.
Sec. 242.104 [Corrected]
13. On page 549, in the first column, in paragraph (j)(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,
Dated: March 4, 1997.
Margaret H. McFarland,
Deputy Secretary.
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:
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.
Dated: March 4, 1997.
Arthur Levitt,
Chairman.
[FR Doc. 97-5837 Filed 3-11-97; 8:45 am]
BILLING CODE 8010-01-P
